Mckesson Corp (MCK) September 8, 2026 Conference Transcript

Hi everyone, I'm really pleased to be kicking off UGOS Fargo Health Care Conference with Steve Baxter, the Health Care Services Analyst, and I'm really happy to have McKesson joining us today. McKesson, as I'm sure all of you know, is a direct distributor and provider of pharma-focused health care services. From the company, we're pleased to be joined by Brian Tyler, CEO of Kenny Chalk, and his first appearance at the conference as McKesson's CFO, so pleased for that. Anything you guys like to start with, comments or anything else, or should we just get right into the questions, please?

Good morning, everyone. Thank you for being here. We appreciate your support and interest in McKesson. We're excited to share a little bit about our strategy and recent performance, and it's great to be on the stage for the first time with Kenny, who will share a little bit about our financial discipline and the way we think about growth and investment in the company. So, appreciate your time this morning.

It's the acquisition of Precision Medicine Group for $2.25 billion, so this is going to be part of your oncology and multi-specialty segment going forward. I mean, maybe first talk a little bit about the strategic rationale for the deal and then a couple of kind of follow-ups.

Yeah, sure. Look, we're really excited about this. You know, about seven years ago, we stepped back and kind of rethought the enterprise strategy for McKesson. We oriented that strategy around a few pillars, people, culture, and talent being the first one, reinvigorating the growth in the core North American supply chain businesses, and then thinking about the portfolio, but then focusing our growth and our capital allocation around two areas that we think both represent long-term good growth, organic growth opportunities for the company and places where we had differentiated And those two markets were oncology and biopharma services. When we look at precision for medicine, it has two primary businesses. One aligned very well to our oncology growth strategy and one aligned really tightly to our biopharma commercialization business. And so this acquisition for us is very close adjacencies to both of our growth strategies, which we're really, really excited about. It brings us new capabilities in clinical trials, particularly kind of leading clinical trials oriented around biomarkers, and that complements our existing Sarah Cannon assets, Ontata assets, and our U.S. oncology network very well. So we just view this as a natural next extension of the assets that we've already built. And then on the commercialization side, It takes us into some new markets like payer strategies and helping think about market access for the biopharma company. So it's a really great fit supporting both of our growth strategies.

I think one of the things that we're extremely proud of at McKesson is when we think about building platforms, right, it's really important that these platforms create access with our portfolio that are complementary. So think about distribution, practice management, data and insights, clinical trial services, as Brian just And with PMG, this really fits that mold perfectly, being able to have a 1 plus 1 equals 3 equation where we can tack on to Sarah Cannon, to your point, to Antata, and really provide incremental value for our bioforma partners around drug innovation, clinical services, commercialization, as Brian mentioned, and at the end, access to patients as well. in particular, the committee setting.

And I think that all makes perfect sense. I do think one of the things that you mentioned that stuck out in the deal announcement and some of the diligence that we did on the asset was just that, you know, CRO offering feels like a little bit new for the company. I know that the services offered by PMG are maybe a little bit niche and distinct versus some of the larger full-service CROs. But maybe just expand a little bit about the CRO component and maybe what your aspirations could be longer term in the CRO space.

Yeah, look, I'd be happy to. I mean, in McKesson today, and through our Sarah Cannon joint venture, we've got site management operations. And maybe a little bit of CRO light capabilities and assets, but PMG brings a true CRO capability, which we think complements that site management operation very, very well. What we really liked about it, though, is that it's really focused on oncology, which is obviously a real strength for us and we have a we have a lot of unique assets in the oncology space and then you know rare rare disease immunology cell and gene therapy these are areas that you know we've made bets in McKesson as well we have a cell and gene operation that we call in spiro gene so it's it's not broad but it is global it does give us capabilities um in the what we view as the most exciting, highest growth areas in the CRO segment. But if it wasn't for that focus on an area of strength we already have, we probably wouldn't have been interested. But it's a really great complement to the assets we have and the markets that we've identified as growth markets going forward for the enterprise.

That's great. And then just thinking about the financial profile of the asset, I don't think that there was really a lot disclosed on that front. I guess how should we be thinking about the accretion profile how you guys are thinking about how it contributes to the model for the next few years?

Yeah, so we did sign a definitive agreement to acquire the asset. And right now, we are in the approval phase right now, including regulatory review and approval. As we march towards closing on the asset, we will provide more around financial accretion in terms of EPS and the likes. With that said, though, maybe taking a step back, as I said earlier, this is a one plus one equals three equation. We do view this as accretive to our overall company from a strategy standpoint, as BT just mentioned, as well as a financial standpoint as well. So for us, every time we look at any deal, there has to be right rigor, hurtling the cost of capital, nice spread between that, ROIC, being able to embed any risk involved as well, balancing that with near-term and long-term value for our customers and our shareholders as well. And the third leg of the stool is making sure that we balance against the asset at play versus the overall capital allocation structure as well. Obviously, we looked at traditional return back to shareholders. As we said on the Q1 earnings call, this year we are committed to deploy roughly $5 billion back to shareholders, where $2.5 was achieved through share repo in Q1. And then our dividend increased to 15%, which is commensurate with our long-term growth. Overall, given the fact that our strong balance sheet, we have the luxury to invest in our business organically through M&A as well, and also rewarding our shareholders. Overall, we feel very good about the robustness of our balance sheet.

Got it. And then just to pivot now, going back to Q1 results, obviously strong results. I think the number one KPI that probably jumped out to people was the earnings growth in the North America pharma segment at 19%. I think it was a lot higher than what we were looking for. AND I THINK MOST INVESTORS WERE LOOKING FOR IN ABOVE RECENT TRENDS, HOW SHOULD WE THINK ABOUT WHAT THE KEY DRIVERS WERE OF THAT RESULT IN THE QUARTER AND HOW YOU GUYS ARE THINKING ABOUT THE PHASING OF RESULTS FOR THE NORTH AMERICA BUSINESS AND THE BALANCE OF THE YEAR?

YEAH, I CAN START. SO WE ARE EXTREMELY PLEASED WITH OUR OVER ENTERPRISE PERFORMANCE IN Q1. WE SAW DOUBLE-DIGIT GROWTH ACROSS OUR NAPD BUSINESS, AS YOU POINTED OUT, OUR ONCOLOGY AND MULTI-SPECIALTY BUSINESS, AND OUR R-XTS BUSINESS AS WELL. particular around your question about what drove the 19% growth for Q1. So Q1, just to recap, for NAPD, our top line grew roughly 5%, and our bottom line, AOP grew roughly 19%. On the revenue side, we saw broad-based growth across the board, across products, channels, brand generics, and the likes. So broad-based growth, which is not just one single item. For example, we saw really meaningful growth within our, especially within our health system products, given the fact that we're seeing strong utilization trends. So we saw nice growth on revenue side, and then that worked our way down to AOP because we saw a nice GP tailwind as well, given some of the product launches that we saw within the quarter. And then on the supply chain side, we saw really healthy metrics, too. Productivity is robust, and we're seeing really nice automation as well that's driving the leverage from revenue down to GP, down to AOP. You know, one of the things that we talked about on the earnings call was product launches, new product launches. And what I mean by that is within the quarter, we saw new brands and also BX to GX, brand generics. And, you know, just to kind of, you know, provide some color there, you know, every launch is unique and different, right? Depending on various variables, different channel mix, customer mix, when it comes to generic number of entrants, for example, the molecule itself. So we did see some favorability in Q1 from that. And the good news is our team tracks this very, very on a granular level. And right now, that is embedded within a four-year forecast. But in the last question is about the phasing for NAPD. I think your question behind the question is that if your first quarter is 19% and your four years 9.5, why is there a quote unquote slowdown in the back half of the year? I think that's the question behind the question. So for me, my point, just two points I would say here. The momentum is real. We're seeing underlying strong fundamentals within our NAPD business. Right now, we are forecasting the back half to embed investments in our business for business growth, automation, and technology. It is the right thing to do for our business. Here in McKesson, we're all about delivering at the spot moment and building for tomorrow as well. Even this year, we've done that. We invested in our business. I'll give you a couple examples. We invest in supply chain with AI, really orchestrated between demand, supply, operations, and that's yielding working capital benefits, right? That's just one example. So we have many, many more. So as BT and I think about capital allocation, we have the luxury right now, given our liquidity profile, to invest in our business while also delivering for our shareholders for the year as well.

Great. So thanks for that. And another elephant in the room for kind of all the companies in your space is just that there are a number of large customer renewals that are in focus at the moment. I guess how should we think about renewals broadly and kind of the opportunities and trade-offs that come with a large renewal, kind of where you are in the renewal process and maybe when investors might start to hear more news kind of on this front.

Yeah, so look, we generally think about a third of our business every year is up for renewal, and it's been that way. You know, renewals are a great chance for us to be very engaged with the customer, opportunity to talk about market dynamics, how we think things are evolving, how we can evolve our service or provide more services to them to help them as they navigate their priorities as a business. So that is just a pretty normal occurrence of the business. Now, obviously, there are some customers that are bigger than others. And we're very, very engaged with customers day to day. So renewals are in some ways not an event, right? I mean, you start thinking about a renewal the day you ink the original contract and start thinking about how you keep that intimacy up, how you evolve your services to support their evolving businesses and their unique needs. And that's what we do with all of our customers. You know, we try to be a value-based partner, not a transactional partner. We have a lot of capabilities beyond just core distribution that we can bring to help our customers solve problems, and that creates really tight ongoing relationships. So we're very pleased. A lot of our larger relationships are 20-plus-year relationships, and the businesses are really tightly aligned and integrated. So we don't often, as a point of policy, talk about specific customers for kind of obvious reasons why we don't do that. but but we're we're very aligned we appreciate the deep partnerships we have and and our goal is to always extend and renew and continue to provide additional values to the customers through it through through every year of a contract cycle yeah and maybe there's you know is there a way to expand a little bit on as you have these conversations like the type of services that it could be of interest obviously you guys are getting more capabilities yourself every day like what what do you hear from i mean we've got capabilities and in cover my meds we've got a We interface with 50,000 different pharmacies. We think about supply chain. We think about the AI tools and how they're evolving and how do we get better insights, provide better insights, better connect downstream and upstream to make the entire supply chain more efficient. So there's a range of those kinds of conversations that we can have. And we prefer to have because the more we have those conversations, we know we're great at the day-to-day transactional. We'll get the product where it needs to be, when it needs to be there for the patient that needs to consume it, but there's a lot more we can do as an industry to help think about the value creation from manufacturer to end provider.

And then if we think a little bit more, you know, I guess outside of the renewal dynamics as kind of about the base fundamentals, obviously generics have been, you know, a very solid contributor to you over the past few years and much more stable than prior periods, you know, really across the industry. I guess, how do you think about the sustainability of trends and the generic component of the business? And how do you think about kind of the key opportunities with upcoming LOEs, which seem like they're more meaningful than maybe they have been in a little while now?

Yeah, I'll let Kenny elaborate on this. But generally, the generic environment is competitive. It's always been competitive, but it's been stable for many years now. In the episode you were referring to, I think, was like 2015 or 16. So it's, you know, long memories in the room, but it's a long way in the rearview mirror. We think about our job in generics as having a scaled, efficient sourcing engine. We have a joint venture called Claris One that does our sourcing that we think is as good as any out there. So we've got a source for stability of supply, obviously for price to be competitive. And then we need to be partnered with our customers downstream and make sure we have availability of supply. And we don't make margin on anything you can't supply. So stability of supply, competitive price, and then growing the channels. And then, of course, we have LOE events. You can talk about the dynamic there. I would remind everyone, though, before Kenny makes remarks, that given the growth of our North American pharmaceutical distribution business, generics are not as material as they may have been in the past decades. I mean, just because the growth has been so significant.

Yeah, well, exactly. So think about generics as the clearest one. Really good economics can value that drives, provide for our customers. At the same time, shortage supplies as well. You know, as you think about the LE cliff, we do factor all of that in within our guidance as well. Just like the product launches as well. That's something we look at. It is accretive to our business from a margin standpoint. But probably to Brian's point that he just made, not as accretive as it was before, call it ten years ago or so.

And definitely a big, you know, watch area has been all the dynamics going on and the part, you know, B and D side of the business around, you know, IRA. And obviously it was good to see that the industry as a whole seems to have been able to maintain economics on the 2026 cohort of drugs that we're in for IRA. Have you started to have those same conversations for 2027? If so, how are those going and how are you guys thinking about IRA dynamics over the next couple of years?

Yeah, look, our conversations with manufacturers are continuous, just like they are with our end customers. And those are around specific products, portfolios, how we can help support their commercial launches, how we can make their products be more successful. So we are continually in those dialogues. For the IRA drugs that have come out, we think that manufacturers understand the value that we deliver. getting their products you know to their inpatients and that they have pay a fair value for that service and so while the IRA has been some revenue headwind generally it has not been it has not been a headwind on the bottom line. We are currently in those discussions obviously we don't know exactly the prices and the parameters but we would expect we'd navigate the next wave much like we've navigated the first wave and the waves the waves that have come This is not an entirely new phenomenon. There have been whack decreases in the past. So we've got a model. We've got ongoing engagement. We've got deep dialogue with our partners. And we think they understand the unique value that we bring.

From my standpoint, it's a muscle we flex and know how to flex in terms of just the building blocks given the fact that we have continuous discussion with the manufacturers. I think one proof point that's important to to press upon is the fact that the past couple quarters we did we did see whack pressure right on the pricing side roughly a few hundred basis points on the top line. And even with that, you know, as BT mentioned, you get the revenue headwind, if you will, given the fact that our selling price, you know, dictates more the revenue side. But because of the fixed fee for service that we get, the fee for service that we get, roughly 95% of our contracts are fee for service. That's the reason why our GP and operating income is more intact.

And that's the reason why you're seeing still gp growth aop growth with you know positive leverage within our pnf the past couple quarters despite lack pressure and then obviously there's some really exciting you know potential down the road for you know part b biosimilars and then you know some uncertainty around interaction with ira and how that might impact the opportunity for the company down the road i guess philosophically like how are you thinking about some of the part b opportunities that might still be kind of two three four years in front of the company?

We're excited about the biosimilar space in general. We have been for a little bit of time. I think the ramp up has probably been a little bit slower than some people thought today. I think there's roughly 95 approved biosimilars, 74 or 5-ish that are actually in the market today. In general, we like biosimilars. We think it's good for patient cost. It's good for healthcare costs. It's good for choice. It's good for our physicians to have clinical flexibility and finding the right product for the right patient. We think biosimilars are good for McKesson, good for the health care system, good for patients. We support biosimilars. We also support innovators. It's really about the clinical choice that a clinician or a physician is going to make. Our job is to make sure we have the product they want available where they want it at a price But in general biosimilars should be better for the McKesson model than the innovator drug. Typically they are. They would fall somewhere between generic and brand in terms of the value to McKesson. So we continue to be optimistic and value and focused on that.

Now the channel matters and part B tends to be better for us than part D. So we view it as opportunity for the business. okay and then you know within the oncology and multi-specialty business you have a lot of you know different businesses and assets you know inside of this segment great to see the separately reported segment still by the way when you think about the long-term you know guidance and kind of what needs to happen for that to be achievable like how should we think about what the key building blocks to hitting that 13 to 16 percent earnings growth are going to be for that segment over the next couple years yeah you know as I mentioned you know through double digit for Q1 we are very pleased with that business performance and just kind of unpack that a little bit.

For Q1, revenue grew roughly 33 percent and AOP grew roughly 41 percent. Now that includes core ventures, right, the lapping. So I think, you know, if you want a proxy, if you will, for organic, back that out. And the AOP roughly grew 15 percent year on year. As we think about the building blocks and what are the drivers There's a few folds. One is we're seeing very healthy volume and growth within existing practices and networks right now. As you think about utilization trends for specialty drugs, we're seeing really nice robust growth on same-store visits with patients as well. That's one side of the drivers. The driver number two is beyond the MSO side, as you probably know, most of the business is GPO and distribution. That's the gift that keeps on giving And then third but not least, because we are good discipline buyers, we know the value of assets and ROIC and MPV and IRR would be the rubric in which we use to evaluate deals. We're seeing nice return on the M&A front as well. So as you think about going forward, we'll continue to obviously drive volume. The position will drive volume through their channels. We'll provide the right supports. Again, we don't offer choice. We don't choose. The second piece is putting new business on the provider solution side. And the last But not least, you have the M&A, being able to find the right deals that's accretive, to my first point, to our overall platform and portfolio.

And then maybe we should spend a minute on prescription technology. I would love to hear a little bit more about recent growth trends for this business, perhaps excluding the contribution from GLP-1s, given some uncertainty about what the trajectory of GLP-1s and GLP-1-oriented prior authorizations are over the next couple of years. How should we think about where growth has been more recently and what's going to need to happen for you to be able to be confident in the long-term work there?

I can start. So as you think about the long-term growth target of RXTS, it's roughly 10% to 13% on AOP growth. For Q1, we were square right in that range. Top line was 9% and AOP was 13%. So on the high end, if you will, on the spectrum of targets. In terms of thinking through the drivers of the business, I know GLP once gets a lot of attention right now, and rightly so. A couple of things I'd say on that front. Yes, it is a driver of the business right now. It's particularly around the bridge program, for example. We're seeing a nice tailwind from that. It's going really well. Now, it's still early innings, by the way. This started in July. And so, but the good news is, you know, the program's performing well, we're performing well as well, you know, fun fact, when a PA gets submitted 95% of the time, we reach a determination within, you know, 30 minutes or so or less, right? So for us, that program's going really well, GLP ones, you have the orals coming in as well. From what we see so far, again, a bit early innings as well.

Yeah.

It's, it's accretive over, you know, versus the injectables, mostly accretive versus injectables. So we're seeing that nice tailwind as well. But I think one thing again to impress upon is while GLP one is important, it's roughly 11% of our total revenue for RxTS, you know, we didn't break this out, but both GLP ones across affordability access and adherence within RxTS grew meaningfully. At the same time, non-GLP ones therapy also grew as well. So what I'm proud about the business is we continue to bring new brands onto the new programs and, you know, the, you know, it's a versatile business where depending on the site we can tailor our offering to meet the needs of our buyer pharma partners. So overall, there's momentum in the business. And with technology, we continue to innovate from that space as well.

Maybe just to expand a little bit on the bridge program, just remind us, I guess, you know, first on the timeline, you know, is a little gray here. But was it included in the initial guidance? I guess what have you kind of factored in for that into your thinking now kind of out of the first quarter and I guess I need general framing on like how should we think about the economics of what you're doing for the bridge program versus similar services you've provided outside of the bridge program historically. Yeah I can start off with the first question.

It is part of so every year when we when we build our our plan we do build a new programs or extension of programs etc and the bridge program was one component of that and we continue to bring new business new brands into our platform. So overall as I mentioned it's in it's in really good shape you know and from us serving state just remember our goal we are the central processor for PAs claims adjudication as well as kind of the payment to the pharmacy so we're going to sit right in that that ecosystem but overall again early innings and as we learn more as we see more we will update the guidance appropriately but right now our last guide in Q1 did contemplate the bridge program but right now we're seeing positive momentum.

So there was no effect in our Q1. The program started in July. So you'll see the first impact when we report in Q2. We did know, though, we were going to have played this role in the bridge program. So we did build it into the guidance that we provided. Now, I would say the program's probably out to a little bit stronger start than we had thought. But it's also a bit of a unique program. And so forecasting the dynamic of a program, how it's going to grow when it has a terminal date, you know, is a little bit of art and science. And so we'll provide guidance in our Q2 call.

Okay, great. And then to pivot to med surge, you know, the first quarter, you know, kind of a bit noisy. I think there's a kind of a large-ish one-time impact in there that you guys discussed a little bit that muddled some of the underlying trends. I mean, how should we think about what the underlying trends were in the first quarter? Any kind of color you can add on, you know, kind of what was driving that one-time item? And I guess the last impact would be a couple of your MedSurg peers flagged, you know, positive impacts from tariff refunds in this equivalent financial quarter. I'm not sure if you guys discussed that or not, but maybe just let us know if that impacted results in the quarter as well. Yeah, I can start with the first part of the question.

So just to recap from MedSurg, you know, for Q1 revenue, we were up roughly 4%. One of the highest ones we've seen in the recent periods and on the bottom line we're down roughly 20%. As you rightly called out, we did have one-time administrative costs that impacted the year-on-year comp. And the reason why I say year-on-year, because some of the year-on-year impact was within this fiscal year. A lot of it was actually last year. So if you think about year-on-year, that's the reason why we were confident a lot of this doesn't repeat. This one-time admin cost doesn't repeat. It's more on the base of the prior year. You know, let me pivot towards how we think about the goal forward. As we guided on the last earnings call, expecting AOP to be roughly 0% to 4% growth on the year-on-year standpoint, which implies that the business will improve throughout the year, right? You know, there's no one magic bullet here. Stanton and his team has done a good job looking at across the P&L, if you will. So I'll give you a couple of examples on the path, if you will, to get there. So on the revenue side, the team has a robust pipeline right now. We're winning new deals at a possible clip. And so that will continue throughout the rest of the year. Pipeline's robust. On the GP side, the team has nice GP initiatives, including continue to expand and grow the private label side of the house, which carries higher margin calories. But the team isn't stopping there. We also have cost initiatives, supply chain initiatives on the base cost SG&A side of the house. So therefore, you can see from revenue pipeline to the cost to the supply chain, all these four pieces work in concert for us to achieve, call it the zero to 4%, you know, growth of the year. With that said, though, I think it's important to note that right now we are about to enter the illness season right now. It's a big variability for our business, for med surgery in particular. And let me give a bit more color on that. So that doesn't really get hot and heavy and pervasive until probably to the end of the calendar year. but right now we're ramping up based on what we're seeing we're seeing a little bit softer you know than expected but again it's early innings right now we're not really in the season quite yet but based on indications that we track on a daily basis it's a little bit softer as we speak and there's a lot of variability within the season the duration the time the severity right there's obviously answer the revenue top that ties along with the right for a glove for example so for us We'll be able to give a formal update on the next earnings call.

You mentioned tariffs as well but we didn't really address that. So I just first remind people that in our medical business we don't manufacture products. We can be the importer of record. In fact most of what we do under our private label, the largest country we source from is actually the United States. So we don't, tariffs weren't as impactful in our business as some others. There were some incurred, and we're working through whether we'll file for recovery of those and how we'll handle that. But it's not as meaningful since we're not the manufacturer. Okay.

Got it. And then, you know, you've made a lot of progress on the separation with, like, the rebrand, the minority investment, you know, working on the balance sheet there. I guess what are the remaining, you know, gating items and just a broader update on, you know, kind of timing and how's it going?

So we have made a lot of progress. TSAs are stood up. In fact, some of them are starting to wind down. So that's a great sign. We did get the capital structure in place. We got the investment from Apollo. We launched the brand well-versed. So we're marching right on our timeline. Look, it's a lot of work. I mean, sometimes, yeah, why don't you separate from that business? It sounds so easy. I mean, we're standing up an entity that will stand on its own. And the progress, the team has done a phenomenal job balancing, running the business day to day, and then all of the work it takes to do that. We will continue to transition systems out of McKesson environment into a stand-alone environment. That's really a big focus of the team right now. For me, the most exciting thing is seeing all of that work get done on the timeline that we had forecast and then seeing growth come back into the business. So it's very encouraging right now.

As we said on the Q1 earnings call, we are targeting the back half of the calendar year of next year. And we'll do the right thing, as BT mentioned. We're seeing the runoff of TSAs as well, so that's standing up. And then in terms of the IPO, you know, we plan our exit remaining shares after a customary lockup period. Exit remaining shares, either through a split-off or a spinoff. For both.

And, you know, this has come up in a couple of the other questions, but, you know, obviously AI, huge focus, you know, across the board for all of our companies at the moment. I guess how should we think about, you know, the investments that you've made so far and the returns that you're seeing there? And I guess if there's any way to characterize the investments you've made to date versus what you might do over the next couple of years.

Look, we're very optimistic. We're AI enthusiasts. We think at a business of our scale with the transactional intensity that we have, that there's a real role for this to play. And so we started our, we called it digital mindset about four, four and a half years ago, before ChatBGPT was on the scene or any of these tools. But we could see the future coming. And so we've got a few areas that we're focused on. Kenny mentioned the kind of end-to-end supply chain and working capital effects. But we think of it largely in three buckets. We think about our employee experience. How do we take, how do we make more of their time available for high-value work as opposed to administrative work and make McKesson the best place to work in health care? The second bucket we think about is our customers and their patients. How do we provide better data, information, tools, insights, communications to take the friction out of being a patient in, for example, a U.S. oncology practice? So we've rolled out something like scribing to over 80% of our providers so that our docs aren't head down looking at their keyboard. They're engaging with the patient. All the notes are being captured. That doesn't sound like much, but we get letters from doctors' wives who talk about, thank you for giving me my spouse back at night Because they don't have to do this documentation. So the satisfaction grows from practicing in our network. We attract more to practice in the use on network. So the third area is just obviously productivity, efficiency, and then innovation. How do we compress the cycle times of innovation so we can deliver, you know, if we've got 30 great ideas on the white board and we used to be able to deliver five a year, how do we now deliver 15 or 20 in a year? And we're seeing value across all four of those buckets.

That's great. And maybe the last question, you know, we touched a little bit on capital deployment, you know, with the deal discussion today. I guess, how do you think, you know, we've obviously seen the past few years has been a heavier dose of sort of MSO-focused acquisitions. And then the deal you announced more recently is a little bit different. I guess, how do you think about the profile of the assets that might interest the company over the next couple of years?

Look, first and foremost, it's got to be aligned to our strategy. I mean, that's the first gate. And, you know, if you think about the last seven years, we went through an early period where we didn't do a lot of strategic capital deployment. We did a lot more repurchasing shares and that was because we couldn't find an asset for sale at a value that we like that was aligned to the strategy. More recently, we've had success in finding very good assets, Prism, Florida Cancer Specialists, now Precision for Medicine, that are tightly aligned to our strategy. And our balance sheet gives us the flexibility to do that. But first and foremost, capital deployment is about alignment to strategy, clearing our financial return hurdles. And that means against alternatives like dividends or buying back stock. So our capital deployment philosophy has been very consistent for the last seven years. And you should expect to continue to see that going forward.

Okay. I think that's where we'll leave it. Thanks so much for your time today.

Thank you, Steve. Appreciate it. Thank you, everybody.

Thanks, all. Appreciate it.