Scott Frommer - Laboratory Corp. of America Holdings David P. King - Laboratory Corp. of America Holdings Glenn A. Eisenberg - Laboratory Corp. of America Holdings Gary M. Huff - Laboratory Corp. of America Holdings John D. Ratliff - Laboratory Corp. of America Holdings

Nicholas M. Jansen - Raymond James & Associates, Inc. Jack Meehan - Barclays Capital, Inc. Lisa Gill - JPMorgan Chase & Co. Steven J. Valiquette - Bank of America Merrill Lynch Ross Muken - Evercore ISI Amanda L. Murphy - William Blair & Co. LLC Erin Wilson Wright - Credit Suisse Securities (USA) LLC William R. Quirk - Piper Jaffray & Co. Kevin Ellich - Craig-Hallum Capital Group LLC Dan Leonard - Deutsche Bank Securities, Inc. Ricky R. Goldwasser - Morgan Stanley & Co. LLC Donald H. Hooker - KeyBanc Capital Markets, Inc. Ralph Giacobbe - Citigroup Global Markets, Inc. A.J. Rice - UBS Securities LLC Brian Gil Tanquilut - Jefferies LLC Isaac Ro - Goldman Sachs & Co. LLC Mark Anthony Massaro - Canaccord Genuity, Inc.

Good day, ladies and gentlemen and welcome to the Q2 2017 LabCorp Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. I would now like to introduce your host for this conference call, Mr. Scott Frommer. You may begin, sir.

Good morning and welcome to LabCorp's second quarter 2017 conference call. As detailed in today's press release, there will be a replay of this conference call available via telephone and Internet. With me today are Dave King, Chairman and Chief Executive Officer; Glenn Eisenberg, Executive Vice President and Chief Financial Officer; Gary Huff, CEO of LabCorp Diagnostics; and John Ratliff, CEO of Covance Drug Development. In addition to our press release, we also filed a Form 8-K this morning that includes additional financial information. Both are available in the Investor Relations section of our website at www.labcorp.com and include a reconciliation of non-GAAP financial measures discussed during today's call to GAAP. Finally, we are making forward-looking statements during today's call. These forward-looking statements include, among others, statements about our expected financial results, the implementation of our business strategy, and the ongoing benefits from acquisitions. These statements are based upon current expectations and are subject to change based upon various factors that could affect our financial results. Some of these factors are set forth in detail in our 2016 Form 10-K. We have no obligation to provide any updates to these forward-looking statements, even if our expectations change. Now, I'll turn the call over to Dave King.

Thank you, Scott, and good morning. LabCorp delivered record results in the second quarter, highlighted by excellent performance in the Diagnostics business, a substantial increase in net orders and book-to-bill in the Drug Development business and continued strong progress on our enterprise initiatives. We reported year-over-year growth in revenue, adjusted operating income and adjusted EPS against our strongest quarter from last year. In addition, we reported solid free cash flow of $240 million and returned $100 million to shareholders through share repurchases, bringing our year-to-date total repurchases to over $250 million. The distinctive advantages of our integrated solutions are resonating with customers and partners. In the quarter, we announced two significant partnerships and closed several major health system transactions. We are collaborating with Walgreens, Novant Health, Mount Sinai, Providence Health & Services and Catholic Health Initiatives, prestigious healthcare organizations that share our focus on the innovation to improve health and improve lives. Through these partnerships, we are expanding the impact of our offerings, developing innovative solutions for the rapidly changing healthcare environment and driving long-term profitable growth. In Diagnostics, despite the unfavorable impact from the calendar of approximately 150 basis points, we had outstanding top line growth with another quarter of significant increases in both total and organic volume as well as in revenue per requisition. Our broad-based strength and utilization was powered in part by our strategic focus on women's health and reproductive genetics. Our acquisition of Sequenom, a leader in non-invasive prenatal testing, has reenergized our larger genetic testing portfolio and is performing ahead of expectations. I also would like to highlight our longstanding strategic collaboration with 23andMe, which has demonstrated an impressive growth trajectory, represents an important innovative component of our consumer-facing offerings and presents further strategic collaboration opportunities. In Drug Development, the trends improved as we…

Thank you, Dave. I'm going to start my comments with a review of our second quarter results, followed by a discussion of our LabCorp Diagnostics and Covance Drug Development segments and conclude with an update on our 2017 guidance. Revenue for the quarter was $2.5 billion, an increase of 4.9% over last year, as organic revenue increased 1.9% and acquisitions added 3.6%. This growth was partially offset by unfavorable currency translation of 60 basis points. In addition, revenue growth was constrained by approximately 100 basis points due to the unfavorable impact from the year-over-year comparison to Leap Year and the timing of the Easter holiday. Operating income for the quarter was $336 million or 13.4% of revenue, compared to $366 million or 15.3%, last year. The decline in operating income was due to restructuring charges and special items in the quarter of $50 million compared to $15 million a year ago, primarily related to severance in connection with the Covance LaunchPad initiative and the termination of a software development project. Adjusted operating income, which excludes amortization, restructuring charges and special items, was $437 million or 17.5% of revenue, compared to $425 million or 17.9% last year. The increase in adjusted operating income was primarily due to favorable price mix, acquisitions and LaunchPad savings, partially offset by higher personnel costs. The 40-basis-point decline in margin was due to the impact from the year-over-year comparison to Leap Year and the timing of the Easter holiday. The tax rate for the quarter was 33.7%, down from 34.5% last year, primarily due to the company having a higher percentage of its earnings in lower tax rate foreign jurisdictions in the quarter. The adjusted tax rate, excluding special charges and amortization, was 33.6% compared to 33.8% last year. We continue to expect the full-year tax…

Our first question comes from Nicholas Jansen with Raymond James & Associates. Nicholas M. Jansen - Raymond James & Associates, Inc.: Hey, guys. Congrats on a strong quarter. Just wanted to get a better understanding of the core – the accelerating organic revenue growth that's built into the Covance guidance for the back half of the year. I know net orders and book-to-bill have been really strong over the last two quarters but just your level of visibility in terms of backlog conversion. Are we through kind of a lot of the noise that we've seen over the last 12 months on revenues? Thanks.

Yeah, I think that you pegged it. It is based on the backlog that we have and then the last 12 months book-to-bill, the 1.23 in the last 12 months and that's up from the 1.15 as of last quarter and 1.11 at the beginning of the year. That net order rate will then allow us to have revenue growth in the second half of 2017. We expect revenue growth in all segments, ED, clinical and central labs. And that, obviously, then allows us to push through the reason for the slower revenue growth in the first half, it was primarily due to the cancellation by the sponsors, the two large studies in late 2016. And so that is the rationale for the revenue growth and backlog conversion. Although slower, based on the complexity of the trials as well as mix, as well as start-up, we do see the revenue growth for the second half and therefore the implied revenue growth in all segments.

And, Nick, it's Dave. Just a reminder that the cancellations will annualize in 4Q, so that will improve the year-over-year comp as we get toward the end of the year. Nicholas M. Jansen - Raymond James & Associates, Inc.: Great. And my follow-up question would be on the Diagnostics side. Clearly demonstrating strong organic volume growth, actually accelerating sequentially. Just maybe give us an update on your market share positioning right now. How are these new health system relationships that you've developed over the last 12 months kind of helping that figure? And then how do we think about the pipeline for M&A as the reimbursement environment continues to be in flux for some of these hospital labs, which will face more – greater reimbursement pressures relative to you guys? Thanks.

It's Dave. I'll start, and then if Gary has any further comments. So, obviously, we're very pleased with the organic growth and a number of factors are contributing, the women's health focus, the immuno-oncology and companion diagnostics, genetics driven by Sequenom, 23andMe has been a major contributor to organic volume growth as well. The health system partnerships are off to an excellent start. Obviously, they're – we're in early days with both Mount Sinai and PAML, but they have both exceeded our expectations in terms of performance up to this time and contribute volume as well as additional opportunities for strategic partnership and growth. So we're very pleased with the caliber of the institutions that we're forming these deep partnerships with and we continue to see a robust pipeline of opportunities for hospital partnerships.

And Dave, I'd like to add on to that as well. Nicholas, we saw very broad-based growth in organic, which was very encouraging, because we have had a strategy of focusing on increasing and enhancing customer value through deeper patient or customer relationships. And I think when you go to the health systems piece, once again, our strategy of creating deep, broad-based relationships with anchor health plans or health systems helps us to create additional value through added products and solutions. Nicholas M. Jansen - Raymond James & Associates, Inc.: Great. Thanks, guys.

Our next question comes from Jack Meehan with Barclays.

Thanks. Good morning. Wanted to continue on the lab side. A much bigger organic volume number we were expecting, especially in light of the calendar. Did you see any inflection in the underlying trends at all? And then similar to the hospital commentary, in addition to just doing deals, are you seeing any additional willingness to outsource versus in-source with some of the regulatory changes on the horizon?

Jack, it's Dave. I'll take the second part of the question first. Obviously, we're in a position where there is considerable uncertainty about what particularly the government reimbursement environment is going to look like going forward. I don't think that's changed a lot of perspectives in terms of the hospital labs. I think maybe it's accelerated some decision making. But we see more a desire to, at least in the customers that we're targeting, to partner broadly at the strategic level around the on-site laboratory, the reference work, the pathology, the patient recruitment, the care management, the analytics and that's our focus and has always been our focus in terms of how we think about these health system partnerships. So we're optimistic that we're going to continue to have significant deals to announce, but they take time and as we said in the prepared comments, we want to be selective about how we choose to allocate our resources and where we can bring the most value.

And then – and just on the first part of that question, related to any sequential underlying trends in the volume rate?

I don't think there's any particular inflection points. We've seen a nice, steady increase across a number of these areas. I will say, obviously, the non-invasive prenatal testing is growing and that's pulling along other OB/GYN work, which is really one of the major value propositions that we have with Sequenom. So – but we're seeing nice, broad-based growth across the core and with esoteric growing a little bit faster than the core business, we're seeing strong positives across the environment.

Great. And if I could just follow up on PAML, how much revenue percentage remains with the JVs that remain outstanding? And did that contribute to any of the margin decline there in the lab business?

So the – I don't have the specific number in terms of the revenue that's outstanding but in terms of the margin decline, remember the impact of the days explains the margin decline entirely. That said, we would've had margin improvement but for the mix down from the acquisitions that have closed because they're not fully integrated into the business yet and so they haven't reached operating margins.

Yeah. The one thing I'd just add, albeit it's what David said, the acquisitions obviously did have a negative mix impact on our margins as they become fully integrated. But with your specific question on the JVs, until they're consolidated, if you will, they show up below our lines, so really not impacting our operating income at the segment level but ultimately when we close those deals, the net income will move up to the segment as well.

Great. Thanks, guys.

Our next question comes from Lisa Gill with JPMorgan. Lisa Gill - JPMorgan Chase & Co.: Thanks very much. Dave, I just wanted to start with PAMA. Yesterday Quest had made a comment that the ACLA had met and reiterated the thought that not everyone that's being included today or not – all the hospital outreach to be included are not necessarily being included and basically thought that perhaps that this could be pushed out from a timeline perspective. I just wanted to get your thoughts around that.

Well, we sent a letter to CMS, met with the CMS Administrator, have had multiple legislative and executive branch meetings, explained that the data set that they are reviewing includes only approximately 5% of the hospital volume that goes through hospital labs. And as we know, there's a significant delta between what hospitals get paid by commercial insurance and what independent laboratories get paid. So as we've said from the very beginning, the Congress intended to have a market-based approach, and the rule that CMS wrote, and we said this in our initial comments of the rule and we've been saying it ever since, the rule that CMS wrote looks at a highly selective portion of the market in a way that doesn't reflect the true market. So we've asked for a six-month delay for them to fix the rule to allow for inclusion of the hospital laboratory, outreach laboratories and the commercial pricing that's not included. I don't have any insight on whether that would be permitted or not other than to say that ACLA and all of our colleagues in the industry and other laboratory trade associations as well and the hospital trade associations have been involved in discussions with CMS and with the legislative and executive branch about trying to make this proposal work the way that it was intended to work. So I'm hopeful that we'll get a better resolution than what we have seen to-date. Lisa Gill - JPMorgan Chase & Co.: And when will we hear, though, about the – so you send the letter, you go through this whole process, is there a timeline that they need to respond to you in X number of days so we would know before the ruling comes out in September? Or would it be simultaneously that they – or they come out at that point and say, look, we're going to delay it because we've now taken a second look and we've decided the following? I mean, I'm just trying to understand this better from a timing perspective.

Yeah. I wish there were specific requirements, but there are not. So when we were having trouble loading the data in the portal, we made multiple requests for an extension of the deadline and we didn't hear for quite a while, and then they agreed to extend the deadline, pretty close to the initial deadline, which, as I recall, was in March, and they gave us a 60-day extension. So we're optimistic that they'll respond in a timely fashion. I will say, though, we are obviously preparing for next year on the assumption that there's not going to be any change in the implementation and that we need to take the appropriate actions to manage whatever will come out in September. Lisa Gill - JPMorgan Chase & Co.: Okay. That's helpful. Thank you.

Our next question comes from Steve Valiquette with Bank of America Merrill Lynch.

Hey. Thanks. Good morning, guys. Dave, so from the CRO business, we can obviously infer from the improved TTM (35:59) book-to-bill that bookings were strong in the quarter. I'm not sure if you touched on this before or not, but just how do we think about the bookings trends in early-stage development versus late-stage? Are you seeing, perhaps, greater strength in one side more than the other or are things pretty broad-based as far as the improvement in net orders?

This is John. And thanks for the question, Steve. The strength is pretty broad-based. This past quarter, it was actually from the lab side. Over the last three quarters, it's been over – the strongest unit would be on the clinical side. And then early development, though, had strength, even last quarter, and so the proposals are up in the early development area as well as quarter-to-quarter on clinical and the lab side. So just to say that the strength's in all areas, the 1.23 book-to-bill is even with a weak third quarter of 2016 inside of it. So we look to continue that strength throughout the second half.

Okay. And one other quick follow-up. I know you guys talked previously about, perhaps, improving your functional service provider or FSP offerings. Where do we stand on that right now? And has that helped in any of the accelerated bookings in the quarter?

It has helped in terms of the first half. We have actually a pretty robust business in terms of the FSP and the monitoring areas with a number of different large clients. And at the same time, we'd like to strengthen the FSPs and the biometrics area, et cetera, but nice strength within the FSP area. That also say in that clinical business, we've actually seen nice diversity of the business wins, we know we've talked to you about oncology, and it'll stay a strength in our backlog. But we've had that even broaden out to the FSP business, to the cardiovascular, metabolic areas as well. And so somewhat stabilized in that regard, and given wider diversity on the strength of our talent that we've added and/or the strength of the talent that we have within the business.

Okay. Great. That's helpful color. Thanks.

Our next question comes from Ross Muken with Evercore ISI.

Just sticking sort of in the same vein as Steve, as we think about all the M&A that's going on in the CRO side, obviously you guys are much farther into your process in terms of having integrated the asset. And, obviously, others have dealt with also a number of the industry challenges. As you think about sort of the potential for share gains in the market now that you could potentially exploit some of the investments you've made and utilize the technology portion. And hopefully we're sort of through this period of cancellations, although that's always tough to predict. How are you thinking about the setup of you versus the remainder of the space from that perspective? And whether or not, particularly on the clinical side, you guys can start making greater strides? Obviously, this quarter orders were great, but consistently show maybe some share progression over the maybe next 36 or 24 months?

Ross, this is Dave. Obviously we're happy to comment on our own business, and, I think, John has done an excellent job of that. I think we're extremely well positioned. We continue to invest in the things we need to be positioned in. We continue to invest in the areas that we need to strengthen, such as the FSP and some of the therapeutic areas. So I think we're going to be very well positioned. Ultimately, how we get selected is a combination of our strengths and capabilities, our technology, our leadership, our relationships. And we're pleased about where we are, and we're pleased about the improvement. And I think that's all we're going to say on the topic of share and share gain because a lot of that has to do with where the competitors are. It's really not our practice to give commentary on the position of our competitors in the market.

And I'd just say, Ross, just to – on our strength, A, we're proving it in terms of the net orders. Second, we're proving it with approaching the $500 million in terms of the orders based on data. We're proving it on, as Dave said, companion diagnostics, a solution that's evidence of the combination. We're proving it on really the high level of interest from the health systems and becoming preferred clinical partners. And we're proving it even from the opt-ins that are coming from the patient service centers in terms of the 145,000. And then finally, this is a people-based business, and we're adding talent. We're adding executive talent and deepening our bench, so we feel good about the future.

Thanks, guys.

Our next question comes from Amanda Murphy with William Blair. Amanda L. Murphy - William Blair & Co. LLC: Hey. Thanks. I just had a couple more questions on the Covance side. So, I guess, Dave and John, you've been pretty open with the need to scale the clinical business. So I just wanted to get your latest thoughts there. How you're thinking about increasing exposure to some of the things you've talked about, small, mid-cap pharma, Asia (42:22), et cetera, just especially given the number of CRO assets you've traded so far this year?

Amanda, it's Dave. I think the most important thing for people to take away from what's happened so far this year is we're a disciplined and focused buyer, and when we buy, it's going to be an asset that fits our needs and meets our financial return criteria. And so we're still interested in doing the things that we've talked about. On the other hand, I should be very clear that we don't have to do anything. We don't have to overpay for an asset. We don't have to acquire something that's not the right fit for us financially, culturally. So we're going to continue to evaluate our position, invest internally in building our strengths, as John has made reference to, and when we have something further to update you on, we'll absolutely do that. Amanda L. Murphy - William Blair & Co. LLC: Got it. Okay. And then also just a question on the cancellations that are pretty well discussed, but I was curious if you could help us understand the performance of Covance, sort of excluding that in the quarter, was revenue in line with your expectations? And then just thinking about that cancellation – the two cancellations, just how they progressed over the year. I think that will be helpful just to get a sense. Obviously, you talked about Q4, but just in terms of how that's impacted the year so far and then Q3, or the rest of the year, I guess, would be helpful. Thanks.

Yeah, cancellations this past quarter, first half, first three quarters of last year, all in line. The only abnormal one was where we noted in the fourth quarter, and from that vantage point, we, obviously, called that out on the two large studies within the central labs. So cancellations are right in line with what's transpired on five of the last six quarters.

And I think, Amanda, to your specific question on the progression, I think the impact of the cancellations was fairly immediate. So it was first – it was fourth quarter mostly, and then a little bit lapped over into the first. So that's why you would see the comp in the fourth quarter being over a lower number.

Yeah. Hi. And obviously, in terms of those cancellations that kind of happened in November, that's why Dave said, they annualize in the fourth quarter, and then, obviously, then 2018 will be a much more normalized year with respect to that. Amanda L. Murphy - William Blair & Co. LLC: So just from that cancellation perspective, the impact, I mean, I get the annualization piece of it, but the impact through the year, is it straight line then? Or is it – I think you were saying it was a larger effect right away and then it should diminish, even excluding the annualization point.

Yes. Amanda, this is Glenn. Yeah, the impact was pretty straight-lined. It was an active program that was scheduled to go through the full year, if you will, for most of the year, and so expect each quarter until we get to the fourth quarter to have the same impact. Amanda L. Murphy - William Blair & Co. LLC: Got it. Okay. Thank you very much.

Our next question comes from Erin Wright with Credit Suisse. Erin Wilson Wright - Credit Suisse Securities (USA) LLC: Great, thanks. On the CRO business, can you speak to the overall RFP environment as well as the biotech funding environment? And how your integrated offering is resonating across the larger pharma versus smaller biotech customers? Thanks.

Sure. This is John again. In terms of the biotech business, is robust. It is in the 15% to 20% area of our business, much more significant in the earlier development area. We are up in the biotech in the first half, over 2016. We see that as a significant opportunity to penetrate greater. And that's true within our clinical business as well as our lab business. We see large pharma, in terms of spend, but more so in the lower single digits in terms of the R&D dollars; the mid-tier in the mid-single digits; and then the biotech's in that higher single-digit territory in terms of the industry. I think one of the advantages that we are seeing is strong growth in that early clinical area that is helping drive the later-stage business, and that should be prolonged, because once you're in a sticky situation with a customer and you execute, then that plays forward, so. Erin Wilson Wright - Credit Suisse Securities (USA) LLC: Great. And on the clinical, CRO side more, so how would you characterize the current pricing environment? Are you seeing any sort of shifts or outliers? Or is everyone behaving relatively rationally? Thanks.

Behaving rationally, haven't seen any real outliers. Erin Wilson Wright - Credit Suisse Securities (USA) LLC: Great. Thanks.

The next question comes from Bill Quirk with Piper Jaffray. William R. Quirk - Piper Jaffray & Co.: Thanks. Good morning, everybody. A couple of questions for me. I guess, first, Dave, thinking about potential M&A on the Diagnostics side, if we consider the continuing performance of Sequenom and I guess, I'd say probably the outperformance of Sequenom, how should we be thinking about, I guess, your deal preference for other specialty lab deals versus your kind of more traditional, kind of routine testing tuck-in deals?

Morning, Bill. Every deal that comes to us gets evaluated against our strategic fit, the financial metrics and then what I would describe as the cultural fit, so leadership and kind of how we think the organization would fit or not fit well with LabCorp. I wouldn't say that we have a particular preference one way or the other. We've done some very interesting esoteric deals. On the other hand, we've done some significant health system deals, which are not focused on particular tests or particular assets but they're focused on partnerships and they're focused on expanding our scale and reach and our patient access. So, I guess, in the end, the preference is going to be for the deal that is going to best fit our strategic and financial needs and that may be a test menu as with Sequenom that we feel gives us the opportunity to pull more work through from the OB/GYN and pull more genetics through. It may be geographic, where we want to have a broader presence in a particular market or it may be strategic partnership where we want to add another important component as part of our anchor health system strategy. And I know that's not particularly specific in response to your question, but it actually is the way that we think about these opportunities. Everyone stands alone in terms of being evaluated by the team for, is it the right deal for us to do given those considerations. William R. Quirk - Piper Jaffray & Co.: Understood. And I appreciate the color, Dave. And then I get separately on PAMA, and I, obviously, recognize that there's a lot of things going on behind the scenes politically but is it reasonable to assume for all of us kind of watching this from the outside as we get closer and closer to September that it's likely that we're going to see the implementation in accordance with the January 1, 2018 deadline or date, excuse me?

I would say that that is the working assumption as we think about things like our 2018 budget. I would also say that I think that would be, from my perspective, a serious mistake if CMS does it. I don't think it's been well thought through. I don't think they've thought about the implications. I was just reading an article that came out in CAP TODAY, I'm probably not supposed to give them a comment on an earnings call, but a system – a hospital system in New Mexico that serves 125 nursing homes in highly rural areas, and if there are significant cuts to what they get paid by Medicare for those services, we're going to see significant beneficiary access issues in my view and that would be – this statute was called the Protecting Access to Medicare Act, not the Diminishing Access to Medicare Act. And we made that point to CMS and they told us that Congress didn't tell them to take it as a consideration in the statute. So this is a very, very important policy decision that CMS is going to make. And I hope that they, and Health and Human Services and the legislative branch will be able to come to some understanding that they need to do this right as opposed to just do it and get it done with. William R. Quirk - Piper Jaffray & Co.: Got it. Thank you.

Our next question comes from Kevin Ellich with Craig-Hallum.

Good morning. Hey, Dave, I have a couple of quick questions for you. I guess, first on the guidance raise, if we look at the midpoint of where you guys took guidance, and I think versus the midpoint of your old guidance, I think that gets us an incremental $140 million in revenue, give or take. How much of that should flow through to pre-tax? Because I guess, I'm wondering why EPS guidance wasn't taken up more.

Kevin, this is Glenn. Let me start. Obviously, we give a range when we give our guidances, but from our perspective we talked about the increase in the revenue range in part was due to the currency translation but also based upon Diagnostics' strong performance organically as well as acquisitions and primarily the timing of the acquisitions such as PAML. So when you look at the earnings per share impact from the acquisition side, while they clearly meet our criteria and are accretive in the first year, they start off, obviously, fairly marginal. And then as we integrate them and get the synergies, then the margins kick into, call it, our segment number. So just illustratively with PAML, you're looking at the revenues that we're having without a corresponding, really meaningful impact in earnings. So assume that the increase that we had, obviously, in our earnings guidance, which we took up – we narrowed it but also took up the midpoint, was really driven off of the performance that we had in the second quarter. And obviously we'll continue to update that as we go forward.

Okay. No. That makes sense, Glenn. Thanks for the color there. And then kind of a dumb question, so sorry for this one. But you guys called out the 1% impact from Leap Year and the timing of the Easter holiday. I guess, can you explain that to me? I just was thinking about the days. It seems like it's the same number of days this quarter. Easter fell into – it was March last year, April this year. So where does that come from?

I knew somebody would ask how February ends up in the second quarter. So it's not a dumb question, and the answer is our revenue – it's the strength of revenue days, Kevin. That's what we compare year-over-year, and the strength of the leap day because of the way the days of the week fall actually does end up in the second quarter even though the day is in February. And so that's why the impact is so pronounced. Obviously, Easter, because of the holiday time there's a significant shift when it moves from quarter to quarter in volumes. But the leap day is based on the strength of days and the strength of revenue on particular days of the week. And that's why it lands in the second quarter.

That makes sense.

Kevin, just to...

Yeah.

...add to that, obviously, we knew that coming into the year. And so when we provided even the initial guidance last quarter, we talked about the impact that it was going to have in the second quarter, impacting our top line and impacting our margins, which, obviously, it has.

Okay. Thanks so much, guys.

Our next question comes from Dan Leonard with Deutsche Bank.

Thank you. I was hoping you could elaborate more on how you're looking at the consumer genetics testing opportunity. It seems like 23andMe is accelerating further. You're involved in some other ways in that market, and it's in the news a lot lately. So if you could elaborate, that would be helpful.

Sure. It's Dave. We've had a long-term collaboration with 23andMe around performing their consumer genetic testing, and they've done a terrific job in the market. So our focus on consumer testing is more on the core testing. It's more on the direct engagement with consumer around the core testing. And as we said in the prepared comments, see a lot of opportunities for broader collaboration with 23andMe around some of the work that they're doing, but our consumer offering is largely focused on engaging them around what I would characterize as core testing, wellness testing, things that we would think of as more on the routine side.

Okay. Thank you.

Our next question comes from Ricky Goldwasser with Morgan Stanley. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Yeah. Hi. Good morning. So a couple of follow-up questions. First of all, just on the questions on the guidance for the year, are you implying that there is potential upside from PAML as the year continues, as we see profits starting to match revenue contribution?

Ricky, it's Dave. The guidance is a range, and we provide a range because obviously there are points within the range that are achievable as things go better and there are points in the range that we achieve if things go worse. So where we've identified the range is the entire possible range of outcomes, and certainly there's always the opportunity for outperformance. And we're always optimistic about outperformance and certainly don't plan for underperformance. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Okay. And then on the United contract renewal, can you give us some color as to where you are in your conversation with United? And also, when we think about the opportunities in the marketplace, I mean, obviously, there are two contracts right now that have national exclusivity, United and Aetna. How should we think about these two opportunities? Are they fairly comparable in size or any other color there?

Well, obviously, we have been engaged in conversations with United and continue to be, and the conversations have been constructive. And all I'll say is when we have something specific to tell you, we will absolutely tell you. In terms of Aetna, even over the years that we've been outside of the Aetna contract, we've had a very constructive relationship with them. And so we continue to have discussions with them about the possibility of re-entering that contract when it opens up. I think in terms of membership lives, United is larger than Aetna. So that would at least imply that in terms of dollars spend, United would spend more on lab services than Aetna, but I can't give you much further than that because obviously not being in one of the contracts, we don't have a lot of insight to it. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Okay. And just lastly on the relationship with Walgreens, I know you made some prepared comments, but can you just kind of like share with us how you are going to choose or how you chose the initial sites and how the strategy do you think will evolve over time? Do you think this is just going to be about specimen collection or you can expand it into other patient care as well?

Well, the team chose the sites based on availability of space in stores, based on strengths of both businesses, places where both business had strong infrastructures. We're starting with seven sites. We're going to quickly evaluate whether they're successful. We've already had discussions with Walgreens about other opportunities both to expand the patient service center positioning as well as to provide other types of patient care services within those sites and within their stores. So I am very, very excited about this relationship. I think it's a significant step forward. We've said for a long time we want to be in a healthcare environment and we're in one of the premier healthcare environments and so we look forward to updating you on how we progress. Ricky R. Goldwasser - Morgan Stanley & Co. LLC: Thank you.

So it's three minutes past the hour and we still have a number of people in the queue. If we could try to just ask one question, please, and if your question has already been asked, really, it's not necessary to ask it again. Thank you.

Our next question comes from Donald Hooker with KeyBanc.

Hey, just a real quick follow-up, you guys alluded to kind of a pull-through from early-stage to late-stage work in the Covance business. I don't know if it's possible, but I was curious if there is a way to quantify that and give us a sense if that's something that could be growing now over time or – because, I guess, in the past those two businesses have been somewhat separate?

Sure. This is John. We analyze the pull through, whether it's from the preclinical tox business into the BioA, into the CMC from the BioA into the lab businesses, into the clinical businesses from Phase I into the II, III, IV. I think it's safe to say slight increases in terms of those. You still have the buyers of early clinical, the buyers of labs, the buyers of clinical and then timing of that, even within pharma, those hurdles obviously still exist. And then you try to put in pieces of the organization. Our early development segment has a business area, the EPDS (01:02:46) area that actually is a sales, marketing, technical solution that attempts to then bridge those gaps between those organizations. So we're attempting to do that more and more, especially with the oncology portfolios, the immuno-oncology portfolio lends to that, but at the same time, you do have natural hurdles in terms of the " follow the (01:03:16) molecule". We do have nice strength in all of the areas and we continue to do business within the individual segments as well.

The next question comes from Ralph Giacobbe with Citi.

Thanks. Good morning. I hopped on a little late, so I apologize if this was asked already, but it seems like there's been more activity on the hospital outreach side. Do you think that's PAMA related? Is it pressures the hospitals may be seeing in sort of a need for capital from them? Maybe comment on the pipeline, as maybe it's just a coincidence that these deals seem to be kind of coming up all at the same time. And then remind us, Dave, again, how long do they have to be out of the market for? Is there a specified sort of contract term where they can't do the outreach? Or is it in perpetuity? Thanks.

I think we already commented on the pipeline and the hospital, kind of the approach of the health systems and I would say I don't think it's as much PAMA-driven as it's just the entire environment is changing. I mean value-based care, bundled payments, pay-for-outcomes. So I don't think it's – PAMA's part of it, but it's certainly not the sole or in my mind even one of the major drivers behind hospital thinking. And as I say, we commented on the pipeline. Every outreach deal and every partnership deal is different. Our approach is to do strategic deals, so we're not asking people to exit the market; we're asking them to build and strengthen the market with us. So, but that – but if you're doing an acquisition, there is typically a negotiation around what that means in terms of a non-compete, there's no standard.

Our next question comes from A.J. Rice with UBS.

Hello, everybody. Maybe I'll just ask, in your disclosure around margin trends and Covance the last four or so quarters, there's been this discussion, and I think a couple of quarters ago, it was talk about investment in sales force and research associates. That was in there for a few quarters, and now, the last couple of quarters, it's been including targeted strategic investments to support future growth. What I'm just curious about is, is that just sort of part of the ongoing business? Or are you signaling that there's some elevated level of spending right now that at some point in the future might taper off and thus be margin enhancing? Can you give us a little flavor for what's behind that?

Yeah, I think from the standpoint of there has been enhanced investment in the business and whether that's on the therapeutic side or whether that's on the commercial side or the deal-making side, there has been. And then from the vantage point still focused on the organic growth, that'll continue, but look, we need to increase our margins. We, obviously, see the peer level margins that are out there, and so we announced the initial phase of Covance's LaunchPad. It's a three-year program. We first addressed restructurings and facilities, and now we'll move into, really, the re-engineering of our systems, processes, utilizing the new technology and tools focused on improving our productivity. So there is investments that will continue, but there will be margin expansion, and you'll see even the initial part of that in the second half of this year.

And, A.J., to respond specifically to what you asked, I mean, I think John's done a terrific job in investing in enhancing the personnel resources that we have. So that is near-term elevated level of investment that will normalize over time.

Okay. All right. Thanks a lot.

Our next question comes from Brian Tanquilut with Jeffries.

Hey. Good morning. Dave, just a quick question since you talked about staying disciplined on valuation for acquisitions, especially in the CRO space. So is this a time that you and the board, you think, should be revisiting dividends or other forms of capital deployment, kind of like increasing the buyback or paying dividend out?

Well, I think, it's very clear that we are committed to buy back and we bought back $100 million worth of shares in the quarter and over $250 million for the year. So I don't think there's going be any question about our commitment, which we made early in the year and have been firm on that we're returning capital to shareholders. No, I don't think it's the time to revisit our approach. I think our approach has been extremely successful. I think when I became CEO of this company, we were about $3 billion in revenue, we're going to be $10 billion in revenue, and we got there by acquiring strategically, by investing in our people and by growing the business organically and we're going to keep doing the same things.

Appreciate that. And then just a quick follow-up, John, to Kevin Ellich's question...

No, no, no. We've -.

All right.

No, I'm sorry, it's almost a quarter after now.

Okay. No worries.

We need to go on. Thank you.

Our next question comes from Isaac Ro with Goldman Sachs. Isaac Ro - Goldman Sachs & Co. LLC: Good morning. Thanks for fitting me in. A quick one on PAMA. Dave, I'd be interested in your views, if we assume that the current legislation is enacted as expected, if you had a view as to how quickly you think the hospital side of the market will start to take action in light of those reimbursement cuts? And the reason I ask is, I think there was a perception that hospital systems are slow to react, they don't have great visibility or metrics around their lab profitability, so I'm interested in whether or not you think you can see that constituency move relatively quickly once we have some clarity on PAMA, the phase-in. Thank you.

I think there's a growing sense of awareness in hospital administration, that PAMA is going to be impactful in 2018. You see that in comments that are being made by hospital executives. I do think, to your question, Isaac, it's hard for hospitals, it's hard for any big organization, I shouldn't limit it to hospitals, it's hard for any big organization to react quickly to change and so I don't know how fast you would see movement in the market or even what that movement would look like. If you look at just health systems generally, there's been a tremendous amount of health system consolidation in the last several years and that seems to be continuing. Health systems continue selectively to acquire physicians. So the market will move, but I don't know that it will move fast. Isaac Ro - Goldman Sachs & Co. LLC: Fair enough. Thanks.

The next question comes from Mark Massaro with Massaro (sic) [Canaccord Genuity, Inc.] (01:10:49).

Thanks, guys. We're a couple of days in, but recently there was a start-up direct-to-consumer genomics company that is launching exome sequencing applications. And I wanted to see, Dave, how you handicap maybe the platform opportunity over the next three to five years, whether or not you think this is an area that you may want to participate in given some of the success you're having with 23andMe.

Well, I would say that direct-to-consumer genetics is a very complex area from a regulatory, a legal and an ethical perspective. And so, I think, what you can safely assume is that there'll be a lot of people out there trying it and it will not be a high priority for us. Again, the collaboration with 23andMe provides that direct-to-consumer genetic testing in a highly reputable, well-proven environment, where they've gone to FDA and gotten permission to offer – to make the claims and offer the interpretations that they do. We're proud of that relationship. And I think it's – as I say, it's an area that's fraught with challenges. So we don't see any need to plunge in.

Great. Thank you.

And there are no further questions in the queue.

Well, thank you very much for joining us on our second quarter conference call this morning. Hope you have a great day and we look forward to speaking with you as we have updates in the future. Good day.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.