McKesson Corporation (MCK) Earnings Call Transcript & Summary

All right. Good morning. I'm Steve Baxter, the health care 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 operate pharma services business in addition to a medical distribution business. From the company, we have CFO, Britt Vitalone. Thanks again for being here. Did you want to make any opening remarks or should just go right to the questions.

Well, first of all, thank you for having us. Appreciate being here. We're happy to talk about our business today and it give you some more insight on some of the segments.

Great. Okay. So yes, maybe we could start with kind of the acquisition activity. So last week, you announced the deal in Florida to acquire 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 earning stream and maybe compare and contrast that to the existing U.S. oncology economic model?

Yes. But first of all, we're pleased to have been able to sign 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 specialist 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 will add scale to our GPO services. It will 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 for it to grow that as well. 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 capabilities. So it's right on strategy for us. It is subject to regulatory clearance. 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 an acquisition, a large acquisition versus adding provider groups, maybe more on an organic basis. Like how does the company approach making those type of decisions, prioritizing maybe organic growth versus acquisitions like why did an acquisition make sense here?

Yes. 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 going to 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. 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 with good financial returns, we're going to continue to return capital to our shareholders through a growing dividend. So we've been growing the dividend now for 7 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 want to make sure that we're also returning capital to our shareholders.

And you mentioned appropriate returns. I guess any color you can give on the expected accretion for the transaction and maybe how that could pace over a couple of years as you integrate the business?

Yes. We haven't got to that point yet. That time will come. 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 -- more accretion guidance will come at a later point.

Okay. And then you had another announcement on the divestiture front this morning, you announced the sale of Rexall, an online business in California. You're keeping the Canadian distribution and biopharma businesses. What makes this the right way to move forward in the Canadian market?

Yes. Great question. So we announced that this morning. Again, it all starts with strategy for us. and owning retail facilities in Canada owning retail operations just generally is not a strategy for us. And in terms of Well.ca, online health and wellness is also not on strategy for us. As we think about that, not being on strategy, having returns that we believe we can deploy capital elsewhere to advance our strategies. That's a better opportunity for us. We have growing distribution and biopharma capabilities in Canada, and we want to continue to allocate time and treasure to that. We think that is 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 as you think about the distribution relationship that I assume you'll continue to maintain with Rexall. Just any color on the magnitude of how long 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 the next couple?

Yes. 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. 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 going to have a material impact on our operations in Canada or the enterprise in fiscal '25. So it's really fairly immaterial from an economic perspective to the enterprise.

Okay. And then to pivot kind of to the more on the fundamental side. On the U.S. pharmaceutical business, obviously, your end markets have been really strong, like firing on all cylinders. There's 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 our first quarter is a reflection of hitting on the expectations that we had for the business. 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 as a core fundamental. Our customers continue to win and continue to grow 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 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. We added over 200 providers last year to the oncology platform. This year, we added 58 in the first quarter. We just announced Illinois Cancer recently here, which is another set of providers. So we continue to add scale to that platform. We believe that that's going to continue to enhance clinical care for the providers. It's going to continue to enhance choice and lower cost 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 the onboarding of that business and the 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 1 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 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, and we believe that will create value for customers like an 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. And when we think about the translation of that this year from a modeling perspective, it sounds like 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? Is there any nuance to how Optum ramps kind of throughout this year?

Yes, that began July 1. So we'll begin ramping at full level. We began ramping at full level July 1 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 maybe on the smaller side of the spectrum, obviously, there's been concern about that for kind of a long time for independent pharmacies. They've done better than I think people maybe would have 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?

Yes. Our independent group of customers has continued to be very resilient for 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 as many as close as many -- you'll have new ones open. And so the churn that you see in there and it was 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 the U.S. pharma business, I think you made some revenue adjustments to the guidance in the first quarter. I think you alluded to a decent amount of that was driven by HUMIRA biosimilar changes in your assumption. Can you speak to the changes you made on the revenue side and what else maybe we should be considering in addition to HUMIRA, if anything?

Yes. So when we started the year, we work with all of our customers in terms of what their needs are going to be and what their volume demands are going to be. And we made an assumption on the conversion for a particular customer and their formulary of choice. And that assumption, the conversion happened faster than we had assumed that it would. 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 and the conversion just simply happened a little bit faster than we had anticipated. That created a revenue impact not creating a profit impact. The profit on that particular drug and drugs like that, they 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. And so as you look at our full year guide, that is reflected within the full year guide.

Okay. And then to take it down to the EBIT line, it sounds like that the issue around the formulary is not an EBIT headwind even if the revenue is lower, I think, is the message there. When we think about the 6% EBIT growth that you have in the first quarter, obviously, 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. It's in line with the long-term guidance growth rate that we provided. 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 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 continue to add automation and other capabilities to drive more efficiency. And then our generic sourcing program. 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. So we're able to create stable spread, positive spread and provide low cost for our customers at a high availability of supply. So the generics business is a big component of that as well. So I'd say it's a continued growth within the oncology platform, continued operating efficiency across the network and the continued strength within our generics business.

I think because we talked about Optum, like maybe you weren't including that, was it fair to say that Optum would probably be the single largest thing and those factors in totality?

Optum, I think it has the single largest revenue impact. Optum will have an impact across our sourcing -- generic sourcing business as well as distribution. 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. Yes. And you mentioned, I think there's a discussion on the call about the potential for cost improvement through AI and automation in the U.S. Pharma business. Can you speak to a little bit maybe the scope of that and materiality of that or what you think could be accomplished over the next few years?

We're really excited about using automation in more of an efficient way internally, but also to reduce some customer friction. We're early stages on this, but we're running a lot of opportunities whether it could be smarter around working capital, smarter around pricing opportunities for our customers, pricing opportunities internally, certainly just new ways of doing business. 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. And 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 production at -- on a day-to-day basis for the oncologist. So that's just another way that AI can take unstructured data, put it into the system in a more structured way for clinical purposes.

And then obviously, front and center for the IRA and Part D redesign, what are the things the companies watching most quickly or most closely to see how that plays out over the next couple of years?

So I think the new information here is CMS' setting of the price or the maximum fair price. Certainly, that was news for us. We'll evaluate how they provide more information on how they arrived at that. We believe that we're still well positioned in terms of our positioning and providing fee for -- fixed fee for services. So we're focused on the services that we provide, regardless of the price of the particular drug. As this continues to evolve over the next few years, again, we 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 -- how can we provide information and education to support better access and lower cost availability. And so whatever legislation comes down that supports those 2 things, we'll certainly be involved with.

Okay. That's good to hear. And then you mentioned that the generic performance has been a very positive contributor for the past, really, a couple of years now. I guess when you think about the combination of stronger volumes and it seems like more moderate deflation, I guess, how is 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. There's some concern that, hey, could it reemerge? Could there be more competition may be on the generic side than there has been for the past couple of years. I guess how is the company thinking about that?

So this is -- this has always been an interesting topic for me. And what I think is important to understand is we use our scale to source with hundreds of manufacturers. It could be 2 manufacturers on a particular drug, it could be 10. What's important to understand is not that the inflation or deflation on the basket of products, 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 of whether there's inflation or deflation, that's what we're focused on and then turning around and creating a spread on the sell side in a very disciplined manner. So there's always going to be levels of inflation and deflation within the pockets of a portfolio. Remember, there are thousands of products here. 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. I appreciate that. If we were to talk about 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 whether GLP-1s were positive year-on-year contributor. We've probably 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 broadly. And then as I go through that, I'll hit on your points here. 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 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. GLP-1s continue to grow from a transaction perspective, and we provide prior authorization services for all the primary GLP-1 medication. 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 as the medication growth is just lower than it was a year ago. We talked about 26% distribution transaction growth in our pharma business. That's much lower than it was a year ago, but still growing. And so we have the support for all those prior authorization services. From a margin perspective, in the quarter, we had a couple of things that occurred here. Again, GLP-1s are a lower rate of growth than they were in the prior year. We had product launch delays within our 3PL business. And we had other mix issues. So I'll talk a little bit about our access portfolio of services and our affordability and other services within those 2 broad components, there are a lot of services and 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 annual guide for adjusted operating profit, still 11% to 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 5 years. There's a number of factors that I think are important when you think about the volatility within this business. I mean, I will just touch on a few of those. First of all, you have a very important building bock here is prescription utilization. I think 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 of product launch delays in the first quarter. So 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 that needs to support that particular product will change. And over time, as a 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 another program. So that's important here. The fourth thing I think you should think about is we have a very large and impactful seasonal program, which is our annual verification program for customers that occurs in our fiscal fourth quarter. That drives a higher level of profitability for the segment in our fourth quarter. We've been very successful the last few years. We anticipate another season of successful annual verifications for our customers. And then the last thing I'd say is the size and timing of investments that we make to continue to enhance the product 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 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. And we would anticipate that our second quarter will look a lot like the first quarter. But again, as the year goes through, we have our seasonal annual verification program, continued growth of transactions of prescription utilization. Those are all supportive of the annual performance of this segment. A couple of the things that 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 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 our prior authorization services. 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, 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 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 and prior authorizations is GLP-1. Okay. And so GLP-1s represent roughly 55% to 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. So there's a lot of things that we do within prior authorizations. I think this is -- 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 as prescription transactions change as the growth of transactions change, customer demands for the support for those products, those numbers will change from year-to-year. But as you think about FY '25, 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 MedSurg business, the first quarter there was a little bit different, I think, than maybe -- the Street was looking for. 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 COVID-related products? Was it kind of another area of incremental weakness. Can you just expand a little bit on what you're seeing in the MedSurg segment in the first quarter from a demand perspective?

Yes. Look, as we came through COVID, this was the segment that was most impacted from a volatility perspective, whether that's volatility in terms of the testing supplies needed, the lab supplies needed, the supplies needed for the administration of COVID. So we saw a lot of volatility there. We're coming on the other side of that, what we're seeing is a slowdown in testing. People are testing less for COVID. They're testing less for other illnesses. And that's having an impact on core medical surgical supply. So as you think about going in and getting either 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 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. And so we want to get ahead of that to 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 restructuring that we announced. And we anticipate that the benefits from that will begin in the second half of our fiscal year.

Okay. And then when you think about 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 going to be driven by the restructuring. Can you just speak to the cadence maybe of how that looks through the year?

As you look at our revenue guidance for the full year, there is an increase in the second half of the year. We do anticipate, as we see every year, that there is a slightly higher second half for testing and flu and other illness. So that's anticipated. That's not abnormal. A lot of the second half will be driven by the benefits from the cost optimization program.

Yes. Okay. That makes sense. And then 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 MedSurg business and whether that looks any different than maybe it has over the past 3 to 5 years?

Well, I can actually talk about the last '19. When I started with the company, I started in the Medical-Surgical business, and I worked there for 6 years. And it's always been a competitive business. 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, at medical surgical supplies. So we have leading positions in 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. And again, I think this is driven primarily by visits for COVID tests.

Okay. As we think about your confidence level and the long-term guidance, the 10% to 12% growth, I think at least speaking for myself, I know you're in outpatient markets, they have better growth characteristics. But I think you still look at the underlying growth of those markets. And it feels like it's translating, I don't know, high single digits to 10% to 12%. It 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% to 12% growth in that business over a longer period of time?

Well, the ranges we gave are long-term for a reason. If you look at this business over the last several years, I think you can go back 5 or more. Consistently, we've grown this business in that range, around 10%. We anticipate that given the position that we're in, given the markets that we're in, given the product breadth and services that we have 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 and putting in place will allow us to continue that growth rate over the long-term. But you should -- you will see some volatility from quarter-to-quarter.

Okay. And then on the capital side, maybe talk about the Florida deal and what you're doing in Canada. When you think about 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? 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 the transaction because what we focus on is it on strategy, will it advance our position, does it have the right financial return. That could be a $200 million deal, it could be the size of Florida Cancer. 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. We think there's opportunities within the pharma services space, and we'll continue to pursue those.

Okay. And then 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 maybe mindful of and maybe we're not.

Well, I would just say that we gave an increased guidance in Q1 to the full year. And we confirm that today. We still feel comfortable with that. Our businesses continue to grow. They're in growing segments of the health care 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 bring this back to Q2. So again, full year, we confirm the growth rate that we provided or the adjusted EPS range we provided in Q1. For Q2, a couple of things that I would point out here is we talked about the medical and RxTS services having similar characteristics in the first quarter. Our tax rate for the full year remains unchanged at 17% to 19%. But for the second quarter, we would anticipate that it would be slightly higher, more in the 21% to 22% range. And so as you kind of put all that together for the second quarter, we would anticipate adjusted EPS for the second quarter of $6.70 to $7 in that range roughly. But for the full year, again, unchanged from the guidance that we provided on Q1.

Okay. That's great. Appreciate that color. All right. Well, thanks for the discussion. That was great. Thanks so much.

I appreciate.

Thanks for coming.

Thanks.