That's truly terrible. All right. Okay, good. All right, yeah, good morning. I'm Steve Baxter, the healthcare services analyst at Wells Fargo. We're really pleased to have McKesson with us today. As I'm sure you know, McKesson is the largest drug distributor in the United States, also operates, you know, pharma services business in addition to a medical distribution business. You know, from the company, we have CFO, Britt Vitalone. Thanks again for being here. Did you wanna make any opening remarks, or should we just go right to the questions?
First of all, thank you for having us.
Yeah.
Appreciate being here. We're happy to talk about our business today.
Yeah.
and give you some more insight on some of the segments.
Great. Okay, so yeah, maybe we could start with, you know, kind of the acquisition activity. So last week, you went out the deal in Florida to acquire, you know, the business and administration services organization for Florida Cancer Specialists. Can you help us understand this business a little bit better and what you're acquiring in terms of the earnings stream, and maybe compare and contrast that to the existing U.S. Oncology economic model?
Yeah, well, first of all, we're pleased to have been able to sign that, that deal, and make a couple of comments. First of all, as we think about capital deployment, we've talked about doing acquisitions to enhance our growth, being right on strategy and having good financial returns.
And the Florida Cancer Specialists signing is right on strategy for us. It adds about 530 providers across 100 sites in Florida, so it's certainly adding scale from a clinical perspective. It's adding drug distribution scale. It'll add scale to our GPO services. It'll put more providers on our iKnowMed EHR platform, which will give us more capabilities to provide data, not only for clinical purposes, but back upstream to manufacturers for commercial purposes within our data business. And then we have a growing clinical trials and clinical trial management business, and so we'll have more capabilities to grow that as well. So it's a platform that reinforces itself. As we look at buying, acquiring this business, it enhances and accelerates the business and administration services to support oncologists, as well as providing more drug distribution, more data capability.
So it's right on strategy for us. It is subject to regulatory clearance.
Yeah.
So we'll go through that process, but we're pleased to have been able to announce the signing of that.
Okay, that's great, and then obviously, this is, you know, an acquisition, a large acquisition, versus adding provider groups, maybe more on an organic basis. How does the company approach making those type of decisions, prioritizing maybe organic growth versus acquisitions? Like, why did an acquisition make sense here?
Yeah, so when we think about capital deployment, our first priority is to grow the business, and we want to grow the business. We could do that either through internal development, whether that be capital expenditures, creating more automation capabilities, or certainly through acquisitions. When we do acquisitions, we're looking to do these acquisitions that are on strategy, so oncology or pharma services, or acquisitions that are gonna advance strong leading positions we have within our core businesses.
This one happens to be right on strategy for us. The second component to this is we remain very disciplined to financial returns that are better than other places that we could deploy the capital.
Yeah.
And in this case, this fits that profile of advancing our strategy, as well as having appropriate financial return. When we think about just capital deployment, though, if we are unable to find those opportunities to grow the business on strategy-
Mm.
With good financial returns, we're gonna continue to return capital to our shareholders through a growing dividend. So we've been growing the dividend now seven straight years. We announced a 15% increase in July, as well as through share buybacks, and we've done a significant amount of share buybacks over the last few years. We think that that's been a good return for our shareholders. Our board authorized an increase to our share authorization program in July of $4 billion. We've guided this year to do share repurchases of $2.8 billion. And again, we will continue to look for growth opportunities, but we wanna make sure that we're also returning capital to our shareholders.
Okay. And you mentioned, you know, appropriate returns. I guess, any color you can give on, you know, the expected accretion for the transaction and maybe how that could pace over a couple of years as you integrate the business?
Yeah, we haven't got to that point yet. That, that time will come.
Yeah.
You know, we're really focused right now on completing the signing and then getting through the regulatory approval process. So we believe that this is a good financial return, and it's a financial return that is appropriate to allocate this amount of capital to it.
Yeah.
More accretion guidance will come at a later point.
Okay. And then, you know, you had another announcement on, you know, the divestiture front this morning. You announced the sale of Rexall and, an online business in California. You're keeping the Canadian distribution in biopharma businesses. What makes this the right way to move forward in the Canadian market?
Yeah, great question. So we announced that this morning. Again, it all starts with strategy for us. And, you know, owning retail facilities in Canada, owning retail operations, just generally is not a strategy for us. And in terms of Well.ca, you know, online health and wellness is also not on strategy for us. As we think about that, you know, not being on strategy, having returns that we believe we can deploy capital elsewhere-
Yeah
... to advance our strategies, that's a better opportunity for us. We have growing distribution and biopharma capabilities in Canada. We want to continue to allocate time and treasure to that. We think that there's a better owner and operator for the Rexall and Well.ca businesses, and we certainly look forward to them to have the opportunity to grow with another owner.
Okay. And then, you know, as you think about the distribution relationship that I assume you'll continue to maintain with Rexall, just any color on, you know, the magnitude of how long, you know, you might be contracted with them through? And any sense broadly of the materiality of the transaction you expect to have on the P&L, maybe this year or next couple?
... Yeah, so we have a long-term distribution and sourcing arrangement, as well as private label and branded product sourcing services. So it's long range, and, you know, I won't get into it from there, on terms that are substantially similar to the way we operated the business previously. This business is not gonna have a material impact on our operations in Canada or the enterprise in fiscal 2025, so it's really fairly immaterial from an economic perspective to the enterprise.
Okay. And then to pivot, you know, kind of, to the more of the fundamental side, you know, on the U.S. pharmaceutical business, and obviously, your end markets have been, you know, really strong, like, firing on all cylinders, has been great, underlying utilization, a lot of growth in your oncology businesses. I guess, as you think about the environment we're in today versus the environment we've been over the past several quarters, like, how are you feeling about the sustainability of fundamentals in the U.S. pharmacy business?
We're really pleased with the performance of the business, and, you know, our first quarter is a reflection of, you know, hitting on the expectations that we had for the business. You know, it all starts with good customer relationships, long-term customer relationships. We've done a nice job of continuing to build our customer relationships over time. We've done a nice job of renewing our customers over the long term at very high rates. Distribution, in terms of utilization as a building block, continues to be solid and growing. That's a core fundamental. Our customers continue to win and continue to grow-
Yeah
In the areas of specialty, in the areas of generics, and we have a very strong generics program. So we're investing in the areas that create value for our customers, like a generics program, like a biosimilars program, and we're pleased with the consistent growth that we've had over the last several years. I think what we're really happy about with inside the U.S. pharmaceutical segment is the continued growth of our oncology business.
Yeah.
We added over 200 providers last year to the oncology platform. This year, we added fifty-eight in the first quarter. We just announced Illinois Cancer Specialists recently here-
Yeah
which is another set of providers. So we continue to add scale to that platform. We believe that that's gonna continue to enhance clinical care for the providers. It's gonna continue to enhance choice and lower cost for
... for patients, and it continues to advance the mission of the company, which is access to care at lower cost, so the oncology business is very differentiated inside-
... U.S. pharma, and we're just generally pleased with the consistent growth that we've seen.
Okay. And obviously, you had a really notable large customer win with Optum. Can you speak more to what you think enabled you to win the business, and how you think about, you know, the onboarding of that business and potential to offer to work more with Optum going forward than you might initially?
We're really pleased with Optum signing the Optum transaction. The transition thus far, which began July 1st, has gone very well.
And we're very pleased with how we've worked together through that transition. Optum is an opportunity for us to continue to provide our excellent sourcing services as well as our excellent distribution services. When we look to add to our business, we start with value, and price is obviously a component of what you're looking for with new customers. But we start, and we look at value, and what value can we bring across, you know, our diversified platform, whether that be branded and specialty services or our generic sourcing operation. And the breadth of what we have across our U.S. pharmaceutical business, we believe is attractive. We believe that will create value for customers like Optum, and we're really pleased to have the opportunity to continue to work with them long term to build this relationship out.
Again, it's the breadth of services and the consistency of our operations that sets us apart.
Okay. When we think about, you know, the translation of that this year from a modeling perspective, it sounds like, you know, you guys haven't necessarily had to incur a massive amount of onboarding costs. I think you suggested that, as that contract goes online for your fiscal second quarter, you should be pretty close to a full run rate. Is that the right way to think about it, or is there any nuance to how Optum ramps kind of throughout this year?
Yeah, that began July 1st, so-
Yeah
... we'll begin ramping it full level. We began ramping at full level July 1st.
Yeah.
From a transition perspective, there were some transition costs, but they were pretty de minimis.
There was a significant amount of working capital that we had to put into place in the first quarter to be prepared for that transition. The transition has gone very well, and the partnership that we have with Optum is great so far.
All right. That's good to hear. As we think about your customers, you know, maybe on the smaller side of the spectrum, you know, obviously there's been concern about that for, you know, kind of a long time. For independent pharmacies, they've done better than I think people maybe would've thought. But as you think of the challenges they're facing now, something like the NADAC reimbursement changes, potential impacts from the IRA, what are you hearing from your smaller customers about what they need and how they're thinking about the business for the next couple of years?
Yeah, our independent group of customers has continued to be very resilient over a long period of time. We have a very large, independent consortium of pharmacies.
They do a lot of things in terms of inventory management, care in the community, and we try to enhance those services how we can. You mentioned reimbursement. We provide reimbursement services on behalf of the independent network, and so that's another way that we create value. So what we've seen is not anything significantly different than we've seen over the last many years. You will see some pharmacies either sell or owners retire or transfer that, you know. As many as, you'll have new ones open. And so the churn that you see in there is just normal churn. Some will transition out through retirement or through ownership changes, and we have new ones that grow and come into the independent channel. Overall, the volume that we see is pretty consistent.
The resiliency of those operators continues to be good, and we continue to add a lot of capabilities and value to them.
Okay. When we think about, you know, the U.S. pharma business, I think you made some revenue adjustments to, you know, the guidance in the first quarter. I think you alluded to a decent amount of that was driven by, you know, Humira, biosimilar changes in your assumption. Can you speak to, you know, the changes you made on the revenue side and what else maybe we should be considering, you know, in addition to Humira, if anything?
Yeah, so we, you know, when we started the year, we worked with all of our customers in terms of what their needs are gonna be and what their volume demands are gonna be, and we made an assumption on the conversion for a particular customer-
Mm-hmm
and their formulary choice. And that assumption, the conversion, happened faster than we had assumed that it would.
Okay.
And so that created more of a revenue impact than we had in our planning at the beginning of the year. It's such a large product.
Yeah
And the conversion just simply happened a little bit faster than we had anticipated. That created a revenue impact. It's not creating a profit impact.
Mm-hmm.
The profit on that particular drug and drugs like that, that are high-cost specialty drugs, generally are lower margin rates than others. But from a revenue perspective, that was the main component of it. Now, Optum will begin in the second quarter.
Mm-hmm.
And so, as you look at our full-year guide, that is reflected within-
Yes
The full-year guide.
Okay, and then, you know, to take it down to the EBIT line. Sounds like that, you know, the issue around the formulary is not an EBIT headwind, even if the revenue's lower. I think is the message there.
Right.
When we think about, you know, the 6% EBIT growth that you had in the first quarter, obviously, you know, the guidance for the full year is a little bit higher than that. What are the key moving parts to driving the acceleration through the back half of the year on the EBIT line?
Sure. First of all, the performance that we had in the first quarter met our expectations.
Yeah.
It's in line with the long-term guidance growth rate that we provided, and we're really pleased. We're continuing to add providers to the oncology network, so that's a building block to the year as we continue to add providers-
Mm-hmm
... as we continue to add scale and capability to the oncology platform. I'd say the operating efficiency that we're gaining through the scale that we have across our U.S. pharmaceutical network. We're really pleased with that. We've continued to add automation and other capabilities.
Mm
-to drive more efficiency, and then our generic sourcing program. You know, we have a very strong generic sourcing business and performance from a sourcing perspective all the way through to how we are very disciplined on the sell side.
Sure.
So we're able to create stable spread, positive spread, and provide low costs for our customers at a high availability of supply. So the generics business is a big component of that as well.
Mm-hmm.
So I'd say it's a continued growth within the oncology platform, continued operating efficiency across the network-
Yeah
and the continued strength within our generics business.
I think because we talked about Optum, like maybe, you know, you weren't including that, but is it fair to say that Optum would probably be the single largest thing in those factors in totality?
Optum has the single largest revenue impact.
Yeah.
Optum will have an impact across our sourcing, generic sourcing business, as well as distribution.
Okay.
So it certainly is building block, but it's the breadth of services and capabilities across the segment that we're really pleased with.
Okay. Yeah, and you mentioned, I think there was a discussion on the call about the potential for, you know, cost improvement through AI and automation in, you know, the U.S. pharma business. Can you speak to a little bit maybe the scope of that, the materiality of that, and what you think could be accomplished over the next few years?
We're really excited about using automation in more of an efficient way-
Yeah
Internally, but also to reduce some customer friction. We're early stages on this.
Mm-hmm.
But we're running a lot of opportunities, whether it could be smarter or around working capital.
Okay
... smarter around pricing opportunities for our customers, pricing opportunities internally, certainly just new ways of doing business.
Mm-hmm.
And we're thinking about: How can we help our customers? So one of the things that we've talked about is, if you think about the oncology provider space, when they're doing their clinical work, they're using a lot of unstructured notes.
Mm.
Those unstructured notes, what we're doing with AI is creating a way to put those into the iKnowMed system in a more structured way using AI, and that will help speed clinical evaluation and research and, you know, production on a day-to-day basis for the oncologist. That's just another way that AI can take unstructured data, put it into the system in a more structured way for clinical purposes.
Obviously, you know, front and center for, you know, the IRA and Part D redesign, what are the things the company's watching most quickly or most closely to see how that plays out over the next couple of years?
You know, I think the new information here is this: CMS is setting the price or the, the-
Yeah
... maximum fair price. Certainly, that was news for us. We'll evaluate how they provide more information on how they arrived at that.
Mm-hmm.
You know, we believe that we're still well-positioned in terms of our positioning and providing fixed fee per services.
Yeah.
So we're focused on the services that we provide, regardless of the price of the particular drug. You know, as this continues to evolve over the next few years, we again think that we're less impacted because we're providing services and being paid a fixed fee for those services. In terms of Part D, again, we're looking here is: How can we provide information and education to support better access and lower cost availability? And so whatever legislation comes down that supports-
Mm
... those two things, you know, we'll certainly be involved with.
... Okay, that's good to hear. And then, yeah, you mentioned that, you know, the generic performance has been, you know, a very positive contributor for, you know, the past, you know, really couple of years now. I guess when you think about, you know, the combination of stronger volumes, and it seems like more moderate deflation, I guess, how's the company feeling about the sustainability of that? I know there's some concern that the longer the deflation has been less of an issue, you know, there's some concern that, hey, could it reemerge? Could there be more competition, maybe on the generic side, than there has been for the past couple of years? I guess, how's the company thinking about that?
So this has always been an interesting topic for me.
Yeah.
What I think is important to understand is we use our scale to source with hundreds of manufacturers.
Mm-hmm.
It could be two manufacturers on a particular drug, or it could be ten.
Yeah.
What's important to understand is not that the inflation or deflation on the basket of products-
Mm-hmm.
But you have to look at it product by product. Within the basket of products, some will be inflating faster than others, some will be deflating. Our job here is to position ourselves with our scale and our sourcing capabilities to drive the lowest cost at the highest availability for our customers. Regardless whether it's inflation or deflation, that's what we're focused on.
Yeah
... and then turning around and creating a spread on the sell side in a very-
Yeah
disciplined manner. So there's always going to be levels of inflation and deflation within the pockets of a portfolio.
Mm-hmm.
Remember, there's thousands of products here-
Yeah
And everyone has a different set of characteristics, depending on what the API is, the source of the API, the formulation of that particular drug, how many manufacturers are producing that drug. So product by product is how we actually source this, not at the whole portfolio level.
Okay. No, I appreciate that. If we were to talk about new prescription technology for a little bit, I know that there's been a lot of focus on this business because of its leverage to activity with GLP-1s. And when we looked at the first quarter results, I think there was some confusion about, you know, whether GLP-1s were a positive year-on-year contributor. We've obviously watched the script trends increase, but it seems like there is some kind of difference between new scripts and renewal scripts for you. Can you just speak to, broadly, the impact GLP-1s are having on this business in the first quarter, and how we should think about that for the balance of the year?
So maybe I can just step back and talk about the segment a little bit more.
Sure
... broadly, and then as I go through that, I'll hit on your points here.
Yeah.
As you think about the first quarter, first of all, I think what's important is we don't guide quarter-to-quarter, and in this particular segment, there is more volatility, and I'll get into that in a minute, because I think.
Mm-hmm
... that's really important. As you looked at the first quarter, as we expected, we had sequential growth in third-party logistics services. Our third-party logistics services sequentially grew 18%. Inside of that, though, we did have some product launch delays that impacted third-party logistics and impacted the segment's growth by 7%. So product delays or product launch delays was a component from the revenue perspective.
Okay.
GLP-1s continue to grow from a transaction perspective, and we provide prior authorization services for all the primary GLP-1 medications.
Mm-hmm.
So while they continue to grow, they're growing at a slower rate than they did in previous quarters, and we talked about that. That was anticipated. So the transaction level is lower than it was a year ago.
Mm-hmm
... because the medication growth is just lower than it was a year ago. We talked about 26% distribution transaction growth in our pharma business.
Mm-hmm.
That's much lower than it was a year ago, but still growing.
Yeah.
We have the support for all those prior authorization services. From a margin perspective, in the quarter, we had a couple things that occurred here. Again, GLP-1s are a lower rate of growth than they were in the prior year.
Mm-hmm.
We had product launch delays within our 3PL business, and we had other mix issues. So I'll-
Mm-hmm
... I'll talk a little bit about our access portfolio of services and our affordability and other services. Within those two broad components-
Yeah
... there are a lot of services and
Sure
... products that we provide, and the mix of those, certain products will create quarter-to-quarter volatility. Again, this is why we like to look at this business on an annual basis. Despite all of that, we were able to, just have a modest impact on our-
Mm-hmm
... annual guide for adjusted operating profit. Still 11%-15% this year, which is above the long-term target growth rate and consistent with the annual growth rate that we've seen over the last five years. There's a number of factors that I think are important when you think about the volatility within this business, and I'll just touch on a few of those.
Mm-hmm.
First of all, you have a very important building block here, is prescription utilization.
Mm-hmm.
So this is a very transactional business. There are other programs that we do, but it's a very transactional business. Prescription utilization has been consistent and growing, and so that's a support for the growth of this business. In addition to that, you will have the timing and trajectory of new product launches. So as there's new products that are launched, generally speaking, we will provide support programs for the manufacturers for those products. They could be access solutions, like prior authorizations. They could be affordability solutions that we provide. So the timing and trajectory of new product launches is impactful, and as I mentioned, we had a couple product launch delays-
Yeah
... in the first quarter, so that-
Yeah
... that will create some volatility. There's also the evolution of a program's needs for support. So as a product will mature through its life cycle, the needs to support that particular product will change.
Okay.
Over time, the manufacturer may make a decision to reinvest or reallocate that investment to other programs that we have, or in some cases, they'll terminate the program, and those funds will move to, you know-
Yeah
... another program. So that's important here. The fourth thing that I think you should think about is, we have a very large and impactful seasonal program, which is our annual verification-
Mm-hmm
... program for customers, that occurs in our fiscal fourth quarter. That drives a higher level of profitability for the segment in our fourth quarter.
Mm-hmm.
We've been very successful the last few years. We anticipate another season of successful annual verifications for our customers.
Yeah.
And then the last thing I'd say is the size and timing of investments that we make to continue to enhance the products portfolio that we have to support biopharma's launch and program support for their products. So there are a lot of factors that quarter-to-quarter-
Yeah
... will create some of this, volatility.... First quarter, you saw those results. I talked about that. What we're seeing thus far in the second quarter are very similar trends to the first quarter.
Mm-hmm.
We would anticipate that our second quarter will look a lot like the first quarter.
Mm-hmm.
But again, as the year goes through, we have our seasonal, annual verification program-
Yeah
Continued growth of transactions of prescription utilization. Those are all supportive of the annual performance of this segment. A couple other things I think I'd just like to point out here. If you think about the revenue of this segment, roughly 50% of the revenue of this segment are our third-party logistics services. The other components of revenue are split roughly evenly between our access portfolio and our affordability and other portfolio. Within access, are prior authorization services-
Yeah
and they represent about 70% of the access portfolio. So prior authorization is a big component of our access portfolio, but there are other services within that. From a margin perspective, again, 3PLs, 3PL services are roughly half of the revenue, but they're very pharma distribution-like in terms of margin, and they represent about 5% of the adjusted operating profit of the segment on an annual basis. The remaining parts of the business, access portfolio solutions and affordability and other, our access solutions generally have higher margins-
Yeah
than our affordability and other solutions. Again, within that, there's a mix of products and services, but generally speaking, as a portfolio, access has higher margins. Within our access business in prior authorizations is GLP-1s.
Yes.
Okay, so GLP-1s represent roughly 55%-65% of prior authorization revenues, so a big part of prior authorization within access. Again, there's a number of services and products that we have within our prior authorization. It could be the initiation of a prior authorization, the submission, the sponsored submission of that prior authorization, and then clearly, there are things that we do, like real-time intervention, appeals, denials conversion. We do a lot of reporting.
Yeah.
So there's a lot of things that we do within prior authorizations. I think it's just important to know that there's a broad set of services and capabilities here that are beyond just prior authorizations and beyond just GLP-1s. Now, from quarter-to-quarter and year to year, the splits that I gave you for revenue, you should expect to change-
Okay
as prescription transactions change, as the growth of transactions change, customer demands for the support for those products.
Mm-hmm.
Those numbers will change from year to year, but as you think about FY twenty-five, hopefully this is constructive.
You'll update us every quarter on this?
No, I won't.
All right. Well, that's great. The quantification there is very helpful, and I think helps put things in perspective. Maybe to pivot to the Med-S urg business. You know, the first quarter there was a little bit different, I think, than maybe the street was looking for. You know, you called out, I think, some weakness in the primary care channel, and I think you kind of went further to say, "Hey, demand within primary care, specifically around, you know, COVID-related products," was just kind of another area of incremental weakness. Can you just expand a little bit on what you're seeing in the Med-S urg segment in the first quarter from a demand perspective?
Yeah, look, as we came through COVID, this was the segment that was most impacted from a volatility perspective-
Mm-hmm
whether that's volatility in terms of the testing supplies needed, the lab supplies needed, the supplies needed for the administration of COVID.
Mm-hmm.
So we saw a lot of volatility there. As we're coming on the other side of that, what we're seeing is a slowdown in testing.
Yeah.
People are testing less for COVID, they're testing less for other illnesses, and that's having an impact on core medical surgical supplies.
Mm-hmm.
So as you think about going in and getting either a COVID test or an illness test, and you go into your primary care physician, there's a lot of supplies that are used as part of that visit.
Yeah.
Gloves and table paper. And so as we see a slowdown, fatigue from COVID testing, that's having an impact in the primary care channel. That's part of what we're seeing.
Okay.
So we want to get ahead of that, be a little more proactive, meet the customer where they're at, create some efficiencies from a cost structure perspective, create more cost optimization opportunities, and that's the restructure that we announced. We anticipate that the benefits from that will begin in the second half of our fiscal year.
Okay. And then when you think about, you know, achieving the full year guidance for this business, I think you may have suggested on the call that you don't really need to see a change in the underlying demand environment. You think a lot of the improvement in the earnings stream is gonna be driven by the restructuring. Can you just speak to, you know, the cadence maybe of how that looks through the year?
As you look at our revenue guidance for the full year.
Yeah
... there is an increase in the second half of the year. We do anticipate, as we see every year-
Mm-hmm
... that there is a slightly higher second half for testing and-
Okay
... flu and other illness, so that's anticipated. That's not abnormal.
Mm-hmm.
A lot of the second half will be driven by the benefits from the cost optimization program.
Yeah. Okay, that makes sense. And then, you know, I guess there's been a number of questions. I know this is a competitive business, but can you speak to whether there are any pockets of competition that have emerged in the Med-Surg business and whether that looks any different than maybe it has over the past three to five years?
Well, I can actually talk about the last nineteen.
Yes.
When I started with the company, I started in the medical surgical business, and I worked there for six years.
Mm-hmm.
It's always been a competitive business.
Mm-hmm.
We service all alternate sites of care outside of the hospital, all the way through to the home. We have leading positions in pharmaceuticals in the physician space to the ambulatory surgery center, obviously in medical surgical supplies. So we have leading positions. We've got private brand portfolio. We have a good lab business. It's always been competitive. It's competitive today, but again, I think we're well positioned to continue to win here. We are seeing a softer primary care set of visits.
Yeah.
And again, I think this is driven primarily by visits for COVID tests.
Okay. As you think about, you know, your confidence level and the long-term guidance, the 10%-12% growth, you know, I think at least, you know, speaking for myself, I know you're an outpatient market, they have better growth characteristics. But I think you still look at the underlying growth of those markets, and it feels like, you know, it's translating, I don't know, high single digits to 10%-12%. Feels like there's still a little bit of a jump embedded there. I guess, how do we think about the building blocks to get to 10%-12% growth in that business over a longer period of time?
Well, the ranges we give are long-term for a reason.
Yeah.
If you look at this business over the last several years, I think you can go back, you know, five or more.
Mm-hmm.
Consistently, we've grown this business in that range, around 10%. We anticipate that, you know, given the position that we're in, given the markets that we're in, given the product breadth and services that we have-
Mm-hmm
... that we're well positioned to continue to grow. Year to year, quarter-to-quarter, you may see some volatility, but over the long term, we have performed at this level, given the leading positions that we have. Believe that, that plus some of the cost optimization that we're working on-
Yeah
... and putting in place will allow us to continue that growth rate over the long term. But you should... You know, you will see some volatility from quarter-to-quarter.
Yeah. Okay. And then, you know, on the capital side, when we talk about the Florida deal and what you're doing in Canada, when you think about, you know, the potential pipeline of acquisitions that are out there, it seems like oncology obviously will remain a huge focus for you. Are there deals out there that rival the size of Florida, or how do you think about the potential magnitude of deals that could be out there to do this? Is this a bit of an outsized transaction in terms of what you think could be possible over the next few years?
We don't like to talk about the size of a transaction, because what we focus on is it on strategy?
Yeah.
Will it advance our position? Does it have the right financial return?
Mm-hmm.
That could be a $200 million deal. It could be the size of Florida Cancer.
Mm.
So we're really focused on the opportunity, how it advances our strategy. Does it have the right financial return? We believe there are more opportunities to add providers to the oncology platform.
Mm-hmm.
We think there's opportunities within the pharma services space, and we'll continue to pursue those.
Okay. And then, you know, as we take a little bit of a step back, I think we've talked about a few businesses that might have a little bit of a different cadence this year, in terms of the growth rates. Is there anything that as we kind of translate that down to how EPS growth should present itself throughout the year, is there anything that you think we should be, you know, maybe mindful of that maybe we're not?
I would just say that, you know, we gave an increased guidance.
Mm-hmm
... in Q1 to the full year, and we've confirmed that today. We still feel comfortable with that. You know, our businesses continue to grow. They're in growing segments of the healthcare population. We have leading positions there. Clearly, we have an opportunity to continue to allocate capital to whether it be internal capital expenditures or to adding providers. That is going to be a helpful impact to the growth rate. What I would say is that for Q2, maybe just-
Yeah
... bring this back to Q2.
Yeah.
Again, full year, we confirm the growth rate that we provided or the adjusted EPS range we provided on Q1. For Q2, a couple things that I would point out here is we talked about the Med-Surg and RxTS businesses having similar characteristics-
Yeah
... to the first quarter.
Mm-hmm.
Our tax rate for the full year remains unchanged at 17%-19%, but for the second quarter, we would anticipate that it would be slightly higher.
Okay.
We're in the 21%-22% range. So as you kind of put all that together for the second quarter, you know, we would anticipate adjusted EPS for the second quarter of $6.70-$7, in that range, roughly, but for the full year, again, unchanged from the guidance that we provided on Q1.