Good day everyone and welcome to the Cardinal Health Inc. First Quarter Fiscal Year 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to your host Lisa Capodici. Please go ahead.

Thank you, Lynette. Good morning and welcome to Cardinal Health's first quarter fiscal 2019 earnings call. I am joined today by our CEO, Mike Kaufmann; and Chief Financial Officer, Jorge Gomez. During the call we will provide details on our first quarter results, full year outlook and an update on our strategic initiatives. You can find today's press release and presentation on the IR section of our website at ir.cardinalhealth.com. During the call, we will be making forward-looking statements. The matters addressed in the statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected or implied. Please refer to our SEC filings and the forward-looking statement slide at the beginning of our presentation for a description of these risks and uncertainties. During the discussion today, our comments will be on a non-GAAP basis unless they are specifically called out as GAAP. Our GAAP to non-GAAP reconciliations for the first quarter can be found in the schedules attached to our press release. In addition during the call we will provide an update to our FY 2019 outlook on a non-GAAP basis. We do not provide guidance on a GAAP basis due to the difficulty in predicting items that we exclude from our non-GAAP earnings per share and non-GAAP effective tax rate. During the Q&A portion of our call, we ask that you limit your questions to one with one follow-up, so that we may give everyone in the queue a chance to ask a question. As always, the IR team will be available after this call, so feel free to reach out to us with any additional questions. I will now turn the call over to Mike.

Thanks, Lisa, and good morning, everyone. I'm glad you could join us. As Lisa mentioned, I'll open up with some comments on our first quarter of fiscal 2019 and then provide a brief update on the six strategic initiatives we have underway to best position Cardinal Health for future growth. I'm proud of the hard work our team is doing, and we are on track as we execute on these initiatives. The first quarter provided us with a solid start to the year. Non-GAAP EPS came in at $1.29, up from the $1.09 we reported in the first quarter last year. Revenue for the quarter grew 8% to $35 billion. Non-GAAP operating earnings for the quarter were $542 million and operating cash flow was $365 million. Overall, operating performance came in about as expected. On the bottom line, we saw a large benefit from a lower tax rate. This was composed of the expected benefit from tax reform and roughly $0.18 of discrete benefits that Jorge will discuss in more detail. Based on our current assumptions, we are reaffirming our previous earnings guidance for the full year. Turning to the Pharma segment, let me share a few comments. On the top line, we are pleased with the revenue growth of nearly 9%. This increase was driven primarily by growth from existing customers. I believe that we are well aligned with customers who are growing, and this is being reflected in our increased volume. As it relates to segment earnings, the primary reason for the year-over-year decline is the previously communicated performance of our generic programs. Of note, we continue to be very pleased with the performance of our Specialty business which once again delivered outstanding results. Looking ahead, as we focus on driving the profitability and long-term growth of the…

Thank you, Mike, and thank you all for joining us. This morning I will cover our Q1 results, elaborate on our full-year outlook, and share some detail on a few of the key initiatives that Mike mentioned. Starting with our first quarter results on slide 4, overall, these results were in line with our operating performance expectations apart from the tax rate, which was better than expected this quarter. I will discuss this shortly. Total company revenue increased 8% versus prior year to $35 billion. This increase was driven by growth from Pharmaceutical Distribution and Specialty Solutions customers. Total company gross margin was essentially flat at about $1.7 billion. GAAP operating earnings for the quarter were $816 million, which includes a pre-tax book gain on the sale of naviHealth of $508 million. Non-GAAP operating earnings were $542 million. Our non-GAAP EPS for the quarter was $1.29, an 18% increase from the prior year. Our Q1 effective tax rate of 14% was lower than expected due to favorable discrete items of approximately $0.18. This is included in our Q1 EPS of $1.29. These discrete items include primarily the continuing work to alleviate the tax rate pressure created by Cordis financial performance in certain jurisdictions. We completed the majority of this work in Q1, as we anticipated and shared with you last quarter. For Q1, SG&A increased 6%, primarily due to opioid-related expenses and a one-time stamp duty incurred in Switzerland related to international legal entity changes for Cordis. These changes were a key driver for the more favorable tax rate in Q1. I will discuss the opioid-related expenses when I cover the Pharma segment results. Shifting to our cost optimization initiative that we introduced last quarter, we are making strong progress and seeing results. Our initial labor savings and policy changes…

Thank you. We'll hear first from Robert Jones from Goldman Sachs. Please go ahead. Robert Patrick Jones - Goldman Sachs & Co. LLC: Great, good morning. Thanks for the questions. Mike, I guess we don't spend a lot of time typically talking about revenue, but the top line in the Pharma segment grew significantly and was obviously well above what we were anticipating in the quarter. And yet, as you guys mentioned, it didn't really have the same incremental or commensurate impact on the operating profit for the segment. So I was hoping maybe you could just go back and spend a little time helping us better understand the dynamic at play there, just what was driving what seems to be well above average top line growth and maybe not seeing the flow-through on the operating profit side within the Pharma segment.

Thanks for the question. I appreciate it. It was strong revenue growth in the quarter. As I mentioned, it was really because we're aligned with I think some very strong growing customers. So it really wasn't materially new business. It was really coming from existing customers who had strong revenue growth in the first quarter. And as Jorge said, it was several things. It's just a little bit too early for us to be looking at these as trends because we know there are some upcoming headwinds with some things we're lapping, as we built into our plan. So at this point in time, we're pleased with the first quarter, but again, a little bit too early for us to call it out as a trend, but we'll continue to evaluate that. Robert Patrick Jones - Goldman Sachs & Co. LLC: And then I guess, Mike, just to follow up there, embedded in that was just why not the commensurate impact on operating profit. Obviously, you're aligning yourselves with these customers that are driving significant or above-average top-line growth, but yet you're not really necessarily seeing that carry through to the profit side. Any further explanation just on that dynamic?

I think we obviously did see some drop-through from it. It's coming from larger customers that are going to be lower margin rate customers, so that's one thing to keep in mind. A lot of it's going to be on lower margin branded business because it's higher dollars, and so that doesn't have as high a margin rate. And as Jorge said, there are some other puts and the takes in the quarter such as extra opioid spend and a few other things that are all netting out. So we did see some drop-through, but there are several different puts and in the quarter. Thanks for the question.

We'll move next to Charles Rhyee from Cowen. Charles Rhyee - Cowen & Co. LLC: Hey, thanks for taking the questions. Hey, I just wanted to get a couple clarifications. Jorge, in regards to the tax rate, you talked about legal entity changes. Can you clarify? What does that mean? Are we consolidating the global footprint for Cordis and rationalizing that? And then you also talked about the increased cost rate of the Cardinal Health brand, including Cordis. Is that related to commodities? If you can just give us some more details around that, that would be great. Thanks.

Sure. On the first question about tax and Cordis, if you recall, back in Q3 our tax rate was – Q3 of last year our tax rate was very high as a result of some issues that we experienced with international legal entities for Cordis and how the profitability was looking at that time. We took pretty decisive action at that point and we began a process to restructure the legal entities that basically are the basis for the business of Cordis outside the U.S. We began the first set of execution of steps in Q4. And as you may recall, we had actually a very favorable tax rate in Q4 of last year, and that was the result of the first steps that were executed. At that point, I also indicated that we had not finalized that project; that we would finalize it in Q1, which in fact we did. And as we completed the final steps in that restructuring, we also experienced some further discrete items that benefited the rate in Q1. So that process related to restructuring those legal entities is now finalized, and we basically went back to the place we wanted to be of the structure of legal entities outside the U.S. So that's what happened there. With respect to Cardinal brand cost, there are a few things going on. And as you probably have heard from others, there's some substantial increases in market cost of commodities and other supplies in that business. So that has created some cost pressure. We also had in the quarter some elevated costs related to TSA-related expenses, the assets from TSAs with Medtronic, those supply chain costs, and FX was a slight headwind in the quarter net-net for the Medical segment as well. And then finally, I'd say as it relates to cost within Cordis, we have talked about this a couple of times, but in manufacturing we have some headwinds, primarily manufacturing outsourcing costs. As we have indicated before, we have a very good plan to bring inventory balances for Cordis down to the levels that we think are sustainable and reasonable for this business. And as a result of that, production levels have come down, have slowed down, and that creates an accounting impact related to absorption that is reflected as a headwind from a cost perspective in that business. Charles Rhyee - Cowen & Co. LLC: If I can follow up, is that to continue through the rest of the year when we think about modeling out Cordis? Because you talked about greater than expected savings, and obviously you had better tax this quarter but were reaffirming guidance. Should we think about then the difference would be more just a flow-through on the Cordis side here through the rest of the year?

I think we're thinking about this cost pressure not only related to Cordis but commodities and other parts of our cost basis within Medical. That will continue over the next few quarters. There are issues around nitro prices and other commodity prices. We're doing a lot of things to manage that exposure. We hedge where we can. We're managing inventory levels. We are trying to use pricing as possible to offset some of those pressures, but we expect that it will continue over several quarters. But again, all of those cost pressures are captured within our assessment of our guidance for this year. So all of that is contemplated and it will be a headwind, but it's included in our guidance.

Operator?

We'll move next to Ricky Goldwasser from Morgan Stanley. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Good morning, thanks for taking my question. Jorge, one question of clarification. When you talked about next quarter, were you referring to EPS enterprise operating profits or a specific segment?

My comments about Q2 was enterprise-level first, and I said that we expect the performance in this quarter, in Q2, to be in line with Q1 from an operating earnings perspective. That was my comment. From an EPS perspective, there's the tax rate. It's something that, as we have indicated before, it can fluctuate from quarter to quarter. But overall for the year, we still think that the tax rate is going to be very close to – within the range that we talked about before. But operating performance in Q2 we believe sequentially is going to be very similar. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: And should we think about it in an absolute dollar value; i.e., the operating earning number that you reported in the quarter, or is it growth rates?

Correct. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Okay, great. Thank you.

No problem. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: And then, Mike, you talked about a potential new payment model, as did your peers on their calls. How should we think about the potential transition to a model where rates are determined product by product or by product class? Should we think about this type of changes happen upon contract renewal, or is this something that's going to happen all at once? If you can give us some color there and your thoughts about the time it's going to take to make that transition.

Yeah, so since I'm not 100% sure whether you're referring to upstream or downstream, I'll just address both to be helpful. Downstream-wise, as we've said in the past, we continue to evaluate our pricing models to make sure that we are looking at the various product classes and pricing them appropriately. So basically, while we will always continue to bundle price to some degree on the Pharma side, we're trying to break that bundle down as appropriate to drive the right behaviors and protect us from margin erosion and make sure that contracts going forward are both we're getting paid appropriately and mix changes don't impact us as much going forward. And so we're working and continuing to do that. I know you've heard us and many others talk about things like Specialty and those. We're continuing to just refine that pricing model downstream. Second thing is, if you go upstream, it would depend on the manufacturer. I'm very comfortable with the current model priced on black, like it is with the DSAs as long as we're being paid appropriately and the dynamics work as they're supposed to. The area where we're most likely to change our pricing models upstream is in the contingent margin agreements with manufacturers. If the manufacturers are going to have lower price increases or different price increases than expected per what we calculated to be our fair payment, then we're going to have to adjust those models. And we're constantly having conversations with those manufacturers to make sure not only this year we'll be paid appropriately, but going forward that those deals reflect a proper value of what we provide to them. Thank you, next question.

We'll hear next from Steven Valiquette from Barclays.

Thanks, good morning, Mike and Jorge. So just another question on the commodity costs on the Medical business. I guess in your 10-K, you guys help us out as you give the math on the hypothetical 10% inflation on your $425 million direct exposure. And just back of the envelope calculation, it seems like that would be about maybe a $0.10 EPS impact. But I guess I'm curious to hear more color on what you're seeing on the actual inflation trends in the real world right now on this key basket of inputs so far in this fiscal year, whether that's trending below 10%, above 10%. Just any color on that might help. It's hard for us to know all the inputs in that particular component. Thanks.

Hi, Steve. Thanks for your question. Yeah, it's hard to give an overall inflation rate for the entire basket of commodities because of timing issues and all the actions that we take, and so it's hard to give an overall number. But I would say that the inflation pressures on those items are high, and we are working really, really hard to minimize the impact, but it's something that in the last several months has increased substantially. But as I said before, based on our projections, when we look at each of the products and the projections for the rest of the year, we believe that based on the forward curves that we see of inflation for those products, we can certainly manage that within the guidance for this year.

The only real quick follow-up, just if you have a one-liner on, you sort of changed talking about the direct and indirect impact. Now you just talk about the direct impact in that 10-K discussion. Just any quick color around the thought pattern on the change there?

Yeah so clearly, we are exposed to both direct inflation on the products that we buy to make our products, but we also have the exposure related to finished products that we buy. So the best example is exam gloves, which has experienced a lot of inflation in the last several quarters, first due to supply disruptions, and now it's more about the actual cost of the raw materials. So we track both. Obviously, the direct exposure is easier to hedge and to manage. The indirect exposure we try to handle through contract negotiations, inventory levels, and other operational actions.

Operator, next question?

We'll move next to Ross Muken from Evercore ISI.

Good morning, guys. Could we talk a little bit about the underlying Medical trend? Because if I adjust for the $42 million from the prior year, the implied on the base is obviously pretty negative. And I know we've talked about Cordis and some of the input costs, but I'm just trying to understand more the magnitude of how we're going to get from what looks like down double digits underlying right now back to growth, and what are the biggest buckets of that driver. I know you called a few things out, but I'm just trying to understand magnitudinally what the biggest push is on that to get particularly to the back half numbers given what you said already about Q2.

Thanks for the question. I'll let Jorge go through the details. I just want to say, though, remind everybody, we are very excited about the way Patient Recovery is going so far off of the TSAs, and we are seeing very good performance there and making some good progress. But there are some puts and takes that I think would be helpful that Jorge will give you a little more color.

Yeah, Ross, the first thing I would say is, so we have been very transparent about the performance of the Medical segment. And excluding Patient Recovery, the step up, we are down in the quarter for the Medical segment. Mechanically, if you remember, first you need to deduct naviHealth and China. So those are two elements that deduct from the growth in the quarter. Then we have several businesses within Medical that are actually performing really well. I mentioned at-Home services. Those are businesses that are growing. And so, as you think about the rest of the year and the ramp, we believe and we are forecasting those businesses to help out the next several quarters from a growth perspective. When we go down to Cordis, Cordis from its top line perspective has grown for the last few quarters, and we are expecting and we're seeing that all the actions that we are taking in that business will contribute over time, over the next several quarters, to ramp the earnings of the Medical business. Patient Recovery, Mike mentioned this before. It's performing as expected, progressing well the integration. And as I said before, we feel very comfortable with respect to meeting the accretion goals that we talked about in the past. We have the challenges from a cost perspective. And I mentioned commodity, I mentioned supply chain costs. Net-net, including all of the puts and takes, we are comfortable with the trajectory of the Medical segment this year, and we think it will continue to ramp to deliver the numbers that we indicated in our guidance, the growth rate that we presented for the Medical segment. We feel good about that despite the cost challenges that we saw in Q1.

And just to follow up, relative to your comment on Q2 being flat on an operating earnings basis, if I look back historically at Cardinal, that wouldn't be an unusual outcome in prior years, flat to probably up modestly, and Q2 was fairly typical. But last year, partially given the full onboarding of Patient Recovery and maybe a little bit less of the inventory, you had a much bigger sequential step-up. And so the Street was looking for that this year. I guess if I think about that flat guide for Q2 or color, am I to think that most of that comment or the delta is probably on the Medical side, or is it also contemplating the pricing reset from United, which seems to be happening next quarter? I'm just trying to get magnitude where the Street in your mind was probably most off.

What I can tell you, Ross, is sequentially, if I look at the magnitude of the earnings and the puts and takes from what is seasonal and what is not seasonal from Q4 to Q1 to Q2, we are not seeing anything that I would call out as special that could yield a result that was not based on our expectations, so we see a trend from Q1 to Q2. When I look at all the puts and takes from quarter to quarter, I don't see anything that is unusual from an operating earnings perspective. It is in line with our expectations, with the trends, with the progression that we are seeing for each of the businesses, including obviously the headwinds that we indicated we would have this year, including the headwinds related to generic deflation, customer contract renewals, those types of things. So all things considered, everything we shared with you guys and what we see in terms of drivers of the business, there is nothing unusual there from Q1 to Q2 that we would highlight.

Operator, next question.

We'll hear next from Michael Cherny from Bank of America Merrill Lynch. Please go ahead, sir.

Good morning, thanks for the question. I apologize for this. Maybe it's a fuzzy line, maybe whatever it is. I just want to make sure it's clear as possible. There are a bunch of questions that have been coming into me. Q1 to Q2, this is dollars that are similar, not growth rate on EBIT, enterprise EBIT?

Correct.

Okay. If that's the case, when you think into the back half of the year, I know you reiterated guidance. In terms of that delta, what is the biggest thing in your mind, either across Medical, across Pharma, or across corporate that really gets better, especially because I know there are some concerns as we start the – into fiscal 2019 that there might be lower branded price inflation than we've seen given all the political rhetoric that's going on.

I'll mention a few things and then, Jorge, if I miss anything. First of all, remember, our Q3 is always seasonally high. And at this point in time, we are still expecting the amount of branded inflation that we essentially originally forecasted or budgeted for the year in Q3. And we have had a lot of conversations with the manufacturers that are contingent and still continuing to believe that that is the right assumption. We've said that if we're off by a couple percentage points, that could be absorbed within our guidance range. But at this point in time, we are still assuming that based on conversations that we're having and compared to what we plan to have. So remember that Q3 tends to be bigger. The second thing is that we are ramping up our cost initiatives. And so those grow and create benefits for us over the rest of the year. And then we have some other initiatives that we continue to work on. And I don't know, Jorge, if you would add anything else to that.

No, I think, Mike, you covered all the key points there.

Thank you so much.

No problem.

We'll hear next from Erin Wright from Credit Suisse. Erin Wilson Wright - Credit Suisse Securities (USA) LLC: Great, thanks. Can you detail a little bit more on where you were at in the progress of your cost structure initiatives? What are those next steps maybe that help us reconcile with that quarterly progression a little bit more in terms of how that or when that will materialize more meaningfully here? And given you mentioned that could exceed your initial expectations, are those higher expectations embedded in your 2019 assumptions? Thanks.

Thanks, Erin. So we indicated that we are targeting to achieve this year annualized cost savings of about $100 million. Those savings actually began to accrue in Q1. We implemented some labor initiatives as well as some spending policy initiatives as a first step, and those are in flight. They were implemented. And in Q1, whatever we had in budget we actually exceeded in Q1. Those initiatives will continue to ramp throughout the year, and there are other initiatives related to operating model and other zero-based redesign operating model in each that are kicking in, in Q2 and Q3. And as I said in my prepared remarks, I feel very comfortable about achieving the target that we set for fiscal 2019. I believe we will be actually overachieving that saving, and it will continue to ramp. When we exit fiscal 2019, we should be on or above $100 million in annualized cost reductions for the enterprise. As Mike indicated, everything is on the table. We're working on labor policy, zero-based redesign, all of those things, and we feel good about it. Erin Wilson Wright - Credit Suisse Securities (USA) LLC: Okay, great. And then on capital deployment, how should we be thinking about the timing and magnitude of the debt paydown as well as share buyback with the new authorization announced today? Are you active on the buyback quarter to date?

The first thing I would say is we just completed a $600 million share repurchase program. We paid out a dividend of close to $150 million. So our commitment to returning cash to shareholders I think is very clear. We will continue to balance our capital deployment following the same principles that we have followed in the past. We want to reinvest in the business when it makes sense. We'll continue to pay our dividend. We'll continue to do share repurchases depending on valuation and depending on excess cash. We are not going to sit on idle cash, and we want to keep up all of those options available to us, always with the intention of having a very prudent reasonable capital structure, financial flexibility, and returning cash to our shareholders. I don't think you should expect to see any changes, any significant changes from what we have been doing for the last several quarters and years.

Operator, next question.

David Larsen from Leerink, your line is open.

Hi. Can you talk a little bit more about your expectations for costs related to opioids? I think you mentioned maybe $100 million or so for the year is what's expected. How much of that is actually included in your adjusted operating results? How much of that is related to the State of New York? And if it spreads to other states, what sort of exposure are you thinking about? Thanks.

Thanks for the question. I'll start and then turn it over to Jorge. First of all, I just want to step back from this whole thing and tell you that Cardinal just cares deeply about this whole opioid abuse issue and the impact it's having on families and communities. We understand it's a complex and multi-faceted problem. Many parties are involved, and we're working with all of them to help find solutions. We want to be part of the solution. We're sure, as complicated as it is, we're going to continue to focus on that. We do want to continue to always remind folks that we're not the ones that control the supply or demand for opioids. We don't promote. We don't manufacture and we don't prescribe. So I think just stepping back for a minute, that's really important. Specifically to the costs that we're incurring and expect to incur this year between the opioid and litigation spend, let me have Jorge give you a little bit of detail on that.

Yes, Mike. So just to clarify, the number that I mentioned in my prepared remarks was about $80 million of expenses related to both opioid litigation or opioid legal fees as well as the New York assessment that we are contemplating for the next few quarters. Within that number, I would tell you the majority of that number is related to legal fees.

Okay. And then if it expands to other states, is that included in this $80 million estimate? And based on what you know now with your discussions with your attorneys, is that a possibility or not?

It is too early to make any comments on that.

We'll move next to John Kreger from William Blair. Please go ahead. Courtney Owens - William Blair & Co. LLC: Hi, this is Courtney Owens for John Kreger, but our questions were answered, so I'll just hop out of the queue. Thanks, guys.

Thanks.

Thank you.

Operator?

We'll move next to Lisa Gill from JPMorgan.

Thanks very much, good morning. Mike, I just want to go back to your comment earlier in your prepared remarks. So you said everything is on the table. You clearly talked about what's happening on the medical supply component of your business and continued challenges there. You've talked about some of the other elements of your business. What do you mean exactly by that comment, number one? And number two, what's the review process that you're going through today to look at what businesses make sense for Cardinal on an ongoing basis?

Thanks for the questions. I would say it comes from a couple different angles. First of all, from an expense standpoint, we're saying everything is on the table. And as it relates to there, just because we've been doing something this way in the past doesn't mean we're going to continue doing it. We're looking very aggressively at things such as putting robotic automation in place to be more efficient, looking at blockchain, other things like that. So we are looking at all types of automation and activities, streamlining, spans, and layers to get aggressively after our cost structure. We're also looking aggressively at the way we contract both upstream and downstream. And just because again we've been doing something one way in the past, we're looking hard at that. And that's not just what we typically talk about, which is the Pharma segment, but very much so also in the Medical segment. We are very much looking at the fact that we need to do category management in a much more disciplined and aggressive way than we ever have, because we believe that it's actually not only just better for us, but much better for our customers, because when we carry fewer SKUs and can drive higher service levels and better costing, it allows us to operate more efficiently in our distribution centers. It allows us to be a better partner with the manufacturers that we partner with. And most importantly, we can provide better service levels and better costing to our downstream customers in Medical. And that is something that we need to be aggressive at and look at. It's not something you can change overnight, but it is something that is clearly on the table. And then I would say in the third bucket is around the businesses. We are putting a lens on every business that we have. We are being dispassionate about how long we've had it, why we've had it, where it's at. Can we win, are we best positioned to be a winner with that business, and what are the growth prospects of that business? And we are doing, as you can imagine, a very detailed analysis on each one of our businesses. And we look at them, and when appropriate, we will work through the appropriate either exits, partnerships, or growth if we think it's an area for us, then we want to double down. And so we are being very fact based and not emotional or stuck to anything that we do.

Great. And just as my follow-up, Jorge, I think that we continue to get the question, I know you answered this several times as we think about first quarter to second quarter. It is EBIT that you expect to be flat first quarter to second quarter. Is that the right way to think about it?

That is correct. Yes, Lisa.

Okay, great. Thank you so much.

No problem.

Operator?

George Hill from RBC, please go ahead.

Hey, Jorge. I'm going to get on the guidance merry-go-round one more time. And I guess as I look at the guidance for the Pharmaceutical segment, you're talking about low single-digit revenue growth and high to low single-digit EBIT growth decline for the year. Q1 put up, as Bob noted earlier, very strong revenue growth. I don't see a reason why that would shift in Q2. It looks like something flips in the mix significantly in the back half of the year because the implication would be revenue growth slows down pretty dramatically while margins would have to somehow improve given the guidance. I guess is there any more color that you can give us around the moving pieces in the drug segment as it relates to the EBIT and the guide? And I have a quick follow-up, if we have time.

Yeah, I'm going to repeat something that Mike said with respect to revenue, so let me start with revenue. Clearly, we had a very strong Q1 with a growth of 9%. At this point, we don't want to extrapolate from that number. Our largest customers are growing really fast. They had a good quarter. That benefited us. Mike talked about that. When I look at the progression of the quarters, we expect the top line to have a healthy growth, in line with what we indicated in our guidance. And within the businesses, we have Specialty great Q1, and we're seeing good performance for the rest of the year. And the other pieces, we talk about that. You'd have branded inflation. Q3 is the key quarter for us. At this point, we don't have any reason to believe that that number that we have in the budget for Q3 is going to be different. I think we feel good about that. And then generic deflation will continue to be a headwind for the rest of the year, as we indicated in our guidance, and that's what we're seeing today. So there is no – in totality for the Pharma segment as well as, yeah for the Pharma segment in totality, what we are projecting now is in line with what we had initially contemplated for that segment.

One thing I'll add that just might be a little bit helpful is remember, some of our larger customers also they still warehouse and buy the products from us. So it's hard to over one quarter when they can be adjusting their inventory levels up or down to all of a sudden determine that's a trend for a whole year. And so as I said, we're comfortable that we're aligned with strong growing customers. Remember that sometimes just on the days of the week or the timing of some of their decisions around inventory, it can cause revenue to fluctuate a little bit, and we just want to be prudent to let some more time pass and feel that it's a little bit early.

Okay, that's helpful. And I guess if we look at the brand side of the business, we've seen the authorized launch of a generic – or we're about to see the authorized launch of a generic drug in hep C, and we've seen Amgen take a steep price cut on a cholesterol drug. As you guys think about the changes to the branded side of the business, do you think your unit economics can stay the same or your unit profit can stay flat in an environment where manufacturers are taking price of their own accord or (61:16)?

Yes, absolutely. We're having very active conversations with manufacturers. Whether it is launching an authorized generic but that acts actually more like a brand that we are looking at the unit rates that we are making and adjusting the percentage fees appropriately with those so that we don't lose net dollars. And we are having very positive and proactive conversations with manufacturers related to this because the value of what we do does not change as they make these large price decreases, and that we still need to get paid for the services that we provide. So we're having very appropriate, proactive, and I think good conversations with manufacturers around those types of items.

Operator, next question? Operator?

Eric Percher, please go ahead.

Thank you. Maybe back to the conversation around everything being on the table, we learned this quarter that you're exiting the Specialty Pharmacy business. Could you speak to what was behind that and the commitment to Specialty distribution?

Absolutely, thanks for the question on that. I guess first and foremost, we're incredibly committed to Specialty. We've said that we had another really great quarter with Specialty. The business continues to perform very well, and it remains one of our key growth drivers. We've done exceptional job of growing the business, consistently double digits, both upstream and downstream to providers and manufacturers. I do want to emphasize, though, we still possess specialty pharmacy capabilities. We still have a full service specialty pharmacy that complements our Metro Medical dialysis products business, and we also have a non-commercial specialty pharmacy that is part of our Sonexus hub services business. This was just an individual specialty pharmacy that we got through an acquisition in the past that represented a very, very small portion of our Specialty Solutions business, and that we just didn't feel that we were in the best position to grow that particular piece of business. It was incredibly small, and to continue to grow it to reach competitive scale just didn't make sense for us. So it's very consistent in how we've talked about evaluating our portfolio around simplifying, playing where we can win, and being dispassionate about those types of things. But I want to stress that we are deeply committed to specialty, invested in several areas in specialty in this area, and continue to have scale in all the tools we need where we need to be and want to be in specialty.

So I should take from that that in supporting your current customer base, you feel like you have those capabilities, but you're no longer looking to create a significant specialty pharmacy presence for its own purpose.

I think if I understand that right, that would be right. Everything that our current customers need, whether it's a provider or really manufacturer, we can service them. But having just a separate standalone specialty pharmacy and competing in that environment with these dynamics just didn't – it was again, incredibly small, very minor to our earnings that it just didn't make sense to continue to hold on to that. And we believe that we sold it to someone else that can do very well with that and add to the scale they already had.

Operator, I think we have time one more question.

Your last question will come from Eric Coldwell from Baird. Eric W. Coldwell - Robert W. Baird & Co., Inc.: Great, I get the scraps today. Thanks, guys, for letting me in, just a couple of quick technical ones. First off, on the New York stewardship, the opioid situation, have you changed how manufacturers ship to you, or are you considering doing so such that they pay the fees and not you?

As you can imagine, we are looking at that. We have communicated to manufacturers that there will be some changes in the way we would expect to operate going forward. We plan to work with them and with our provider customers. But we will and have – we will be making changes and have had discussions and communicated with manufacturers around that. Specifically what the details are, I'm not comfortable going into those exact details. But as you can imagine, we would expect to mitigate the cost of that assessment going forward. Eric W. Coldwell - Robert W. Baird & Co., Inc.: Sounds good. Now the $80 million of opioid cost in non-GAAP guidance, how much of that is incremental from the original guidance this year?

Over half of that is incremental to our original guidance this year.

That does conclude the question-and-answer portion of today's conference. I would like to turn the conference over to Mr. Kaufmann for any additional or closing comments.

Thank you very much. I just want to end with thanking all of you for your questions. And most importantly I want to wish you all some enjoyable time with family and friends over the holidays. Take care, and I'm sure we'll be seeing many of you.

That does conclude today's teleconference. We thank you all for your participation.