Q2 2024 Labcorp Holdings Inc Earnings Call

Good day and thank you for standing by.

Operator: Second Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session.

Speaker Change: Welcome to the LabCorp Holdings, Inc. second quarter 2024 conference call. At this time, all participants are in a listen-only mode.

Operator: To ask a question during the session, you will need to press Star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

After the speaker's presentation, there will be a question and answer session.

Operator: Please be advised that today's conference is being recorded.

Kristen O'Donnell: I would now like to hand the conference over to your speaker today, Kristen O'Donnell, Vice President of Invest Relations. Please go ahead.

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today Kristen O'Donnell, Vice President of Investor Relations. Please go ahead

Kristen O'Donnell: Thank you, operator.

Operator: Thank you, operator. Good morning, and welcome to LabCorp's second quarter 2024 conference. As detailed in today's press release, there will be a replay of this conference call available. This morning, in the investor relations section of our website at www.labcore.com, we posted both our press release and an investor relations presentation with additional information on our business operations. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2024 guidance and the related. Operating and Financial Results, Cash Flows, and or Financial Conditions, including the COVID-19 pandemic and global economic and market conditions. We have no obligation to provide any updates to these forward-looking statements.

Kristen O'Donnell: Good morning and welcome to LabCorp's second quarter 2024 conference call. As detailed in today's press release, there will be a replay of this conference call available.

Kristen O'Donnell: With me today are Adam Schechter, Chairman and Chief Executive Officer, and Glenn Eisenberg, Executive Vice President and Chief Financial Officer. This morning in the Investor Relations section of our website at www.labcour.com, we posted both our press release and an investor relations presentation with additional information on our business operations, which include a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures, both of which are discussed during today's conference. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2024 guidance and the related assumptions, the spin-off of Fortria Holdings Inc., the impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial conditions, including the COVID-19 pandemic and global economic and market conditions, and future business issues.

Speaker Change: Cash flows and or financial condition including the COVID-19 pandemic and global economic and market conditions

Kristen O'Donnell: These strategies, expected savings, benefits, and synergies from the launch pad initiatives and from acquisitions and other strategic transactions and partnerships, the completed holding company reorganization, and opportunities for future growth. Each of the forward-looking statements is subject to change based upon various factors, many of which are beyond our control.

Kristen O'Donnell: More information is included in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company's other filings with the SEC. We have no obligation to provide any updates to these forward-looking statements, even if our expectations change.

Speaker Change: More information is included in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company's other filings with the SEC.

Adam Schechter: Now, I'll turn the call over to Adam Schechter. Thank you, Tristan, and good morning, everyone. It's really a pleasure to be here with you today. We look forward to sharing our strong results for the quarter, our updated 2024 outlook, and progress on our strategy. Let's turn now to our financial results. In the second quarter, revenue totaled $3.2 billion. Adjustment earnings per share was $3.94. In three cash flow from continuing operations was $433 million. Enterprise revenue increased 6% compared to the second quarter of 2023. Diagnostics revenue was up 8% driven by strong organic growth and acquisition.

Unknown Executive: Thank you, Tristan. And good morning, everyone. It's really a pleasure to be here with you today. We look forward to sharing our strong results for the quarter. Diagnostics revenue was up 8%, driven by strong organic growth and acquisition. Partially offset by a decline in early development of 15%, resulting in biofarmer laboratory services up 1%. The book to bill for early development was strong, with higher orders and lower cancellations.

Speaker Change: We look forward to sharing our strong results for the quarter, our updated 2024 outlook, and progress on our strategy.

Speaker Change: And free cash flow from continuing operations was $433 million.

Adam Schechter: Central Laboratories was strong at 9%, partially offset by a decline in early development of 15%, resulting in biopharmor laboratory services up 1%. The book to build for early development was strong, with higher orders and lower cancellations, and we expect the business to be back to growth towards the end of the year. Adjustment EPS were up 15%, and enterprise margins were up slightly. Margins and biopharmor increased, while margins and diagnostics were flat, which reflects the impact of a cyber event that affected a large partner.

Partially offset by decline in early development of 15%.

Speaker Change: Resulting in biofarmer laboratory services up 1%.

Unknown Executive: And we expect the business to be back to growth towards the end of the year. Adjusted EPS was up 15%, and enterprise margins were up slightly. We continue to execute well on our strategic priorities, such as being a partner of choice for health systems and regional and local laboratories, and harnessing science and innovation to develop and launch new tests.

Speaker Change: And we expect the business to be back to growth towards the end of the year.

Speaker Change: Margins in biopharma increased, while margins in diagnostics were flat, which reflects the impact of a cyber event that affected a large partner.

Adam Schechter: We continue to execute well on strategic priorities through the following. Being a partner of choice for health systems and regional local laboratories, partnering science and innovation to develop and launch new tasks in important therapeutic areas, and by utilizing data and technology to bring important services and capabilities to our customers. We are confident in successive lab work in the months and quarters ahead, with strong growth in diagnostics and biopharmor laboratory services. Glenn will provide more details on a result in 2020 for outlook in just a moment. The 2024 outlook reflects the anticipated closing and vetoing next week.

Speaker Change: We continue to execute well on our strategic priorities through the following.

Unknown Executive: Glenn will provide more details on our results and 2024 outlook in just a moment. Following the quarter end, LabCorp entered into a comprehensive strategic collaboration with Naples Comprehensive Healthcare, located in Florida, to manage its inpatient lab operations and to serve as a primary lab later this summer. We continue to have a very strong business development pipeline, and the first year will be diluted by approximately 3%. We've included 120 million dollars of revenue in 2024, and the vast majority of Volution in 2024; we expect it to be a mantra for 2025 with top-line growth of more than 10% per year. We have great respect for Envita's capabilities and team, and we look forward to welcoming our new colleagues to LabCorp.

Speaker Change: Glenn will provide more details on our results in 2020 for Outlook in just a moment.

Adam Schechter: In the second quarter, lab group continue to advance in our strategic growth areas. First, we continue to maintain a leadership position as a partner of choice for health systems and regional local laboratories. Following a quarter end, Lab Group entered into a comprehensive strategic collaboration with Naples Comprehensive Healthcare located in Florida. To manage its inpatient lab operations, and to serve as the primary lab later this summer. We're also on track to close the previously announced acquisition of select assets of Bio-Reference Health Diagnostics business by the end of the third quarter. We continue to have a very strong business development pipeline, and we look forward to sharing more of those details in the future.

Glenn: In the second quarter, LabCorp continued to advance in our strategic growth areas.

Glenn: First, we continue to maintain a leadership position as a partner of choice for health systems and regional local laboratories.

Speaker Change: Following a quarter end, LabCorp entered into a comprehensive strategic collaboration with Naples Comprehensive Healthcare, located in Florida.

Speaker Change: We're also on track to close the previously announced acquisition of select assets of bioreference health diagnostics business by the end of the third quarter.

Adam Schechter: We also announced the acquisition of select assets of an BTAA, a leading medical genetics company. We're excited about BTAA's complimentary cutting-edge science, genetic testing solutions, and technology, which aligns strategically with our focus on specialty testing and oncology. Together, we will work with our customers to utilize genetic insights to develop new treatments and to deliver personalized care in oncology and to select rare diseases. Upon closing the transaction, we anticipate the first 12 months will provide revenue of $275 to $300 million. And the first year will be diluted by approximately 3%. We've included $120 million of revenue in 2024, and the vast majority of dilution in 2024.

Speaker Change: And we look forward to sharing more of those details in the future.

Speaker Change: We also announced the acquisition of Select Assets of Invitae, a leading medical genetics company.

Speaker Change: We're excited about MBTA's complementary, cutting-edge science, genetic testing solutions, and technology, which aligns strategically with our focus on specialty testing and oncology.

Speaker Change: And the first year will be diluted by approximately 3%.

Speaker Change: We've included $120 million of revenue in 2024 and the vast majority of dilution in 2024. We expect it to be a credo for 2025 with top-line growth of more than 10% per year.

Adam Schechter: We expect it to be a credo for 2025, with top-line growth of more than 10% per year. We have a very strong integration team in place, with members from both Lab Book and a VTA. We will move quickly and thoughtfully to reduce costs without impacting the great science and the great customer experience that a VTA provides today. Also, we anticipate VTA will benefit from the full scale and breadth of LabCorp's platform as a global leader in laboratory services. We have great respect for VTA's capabilities and team, and we look forward to welcoming our new colleagues to LabCorp.

Speaker Change: We have a very strong integration team in place with members from both LabCorp and Envite.

Speaker Change: We have great respect for Envita's capabilities and team, and we look forward to welcoming our new colleagues to LabCorp.

Adam Schechter: As we advance our growth strategy, we continue to make great strides in expanding our testing solutions. In April, LabCorp receives FTA approval as a humanitarian use device for its companion diagnostic to determine patient eligibility for treatment with Pfizer's gene therapy for hemophilia B. This is expected to expand LabCorp's leadership in precision medicine and the ability to improve the health of the patient. We introduce the first trimester screening test to assess preeclampsia risk during pregnancy. It is the only test of its kind available in the United States, available for order by physicians for their patients, including those with a low average risk for preeclampsia or first-time pregnancies.

Unknown Executive: As we advance our growth strategy, we continue to make great strides in expanding our testing solutions. We announce several new strategic service offerings with our Precision Oncology portfolio. Our comprehensive genomic profiling service, LabCorp Tissue Complete, is now available through our laboratory network centers in Geneva and Shanghai to support global clinical trials. We also continue to focus on creating easy-to-use digital technology solutions for our customers.

Speaker Change: We introduced the first trimester screening test to assess preeclampsia risk during pregnancy.

Speaker Change: Including those with a low to average risk for preeclampsia or first-time pregnancies.

Adam Schechter: Roughly one in 25 pregnancies in the United States is affected by the condition. And with this test, LabCorp is the only lab that can detect preclampsia risk across all trimesters of pregnancy. We now have several new strategic service offerings with our precision oncology portfolio, extending our leadership in oncology. Our comprehensive genomic profiling service, LabCorp Tissue Complete, is now available through a laboratory network centers in Geneva and Shanghai to support global clinical trials. We've also added OmniSeq Insight circulating tumor DNA to a portfolio of comprehensive genomic profiling services. Together, these solutions support customers as the advanced therapeutic development programs. Lastly, we continue to expand LabCorp OnDemand, our consumer initiated testing offering, with the launch of several new tests in May and June, including standard drug, complete drug, comprehensive testosterone, HIV, and complete heart health.

Speaker Change: And with this test, LabCorp is the only lab that can detect preeclampsia risk across all trimesters of pregnancy.

Speaker Change: Our comprehensive genomic profiling service, LabCorp Tissue Complete, is now available through our laboratory network centers in Geneva and Shanghai to support global clinical trials.

Speaker Change: We've also added OmniSeq Insight Circulating Tumor DNA to our portfolio of comprehensive genomic profiling services.

Speaker Change: Our consumer-initiated testing offering, with the launch of several new tests in May and June , including standard drugs, complete drugs, comprehensive testosterone, HIV, and complete heart health.

Adam Schechter: We also continue to focus on creating easy-to-use digital technology solutions for our customers. In the quarter, we launched a suite of solutions referred to as Global Trial Connect aimed at increasing the speed and efficiency of clinical trials. The solution differentiates LabCorp in the market and has been well received by our customers.

Speaker Change: We also continue to focus on creating easy-to-use digital technology solutions for our customers.

Adam Schechter: In closing, I'd like to thank our team of more than 65,000 employees around the world. Together, we are focused on our customers, achieving our financial commitments and making meaningful progress on our strategy. We have strong momentum and significant growth opportunities ahead of us.

Adam Schechter: In closing, I'd like to thank our team of more than 65,000 employees around the world. Thank you, Adam. I'm going to start my comments with a review of our second quarter results, followed by a discussion of our performance in each segment, and conclude with an update on our full year guidance. Operating Income for the quarter was $295 million, or 9.2% of revenue, or 14.9% on an adjusted basis. In addition, we have $23 million of expenses for the Transition Service Agreements related to Spina Bifida, with the corresponding income recorded in other income.

Speaker Change: In closing, I'd like to thank our team of more than 65,000 employees around the world.

Speaker Change: Achieving Our Financial Commitments

Speaker Change: and making meaningful progress on our strategy.

Glenn Eisenberg: With that, I'll turn the call over to Glenn. Thank you, Adam.

Glenn Eisenberg: The increase in operating income and margin was due to the benefit of demand and launch pad savings that were partially offset by higher personnel expenses. Our Launchpad initiative continues to be on track to deliver $100 to $125 million of savings this year, consistent with our long-term target. The adjusted tax rate for the quarter was 23% compared to 23.9% last year. The lower adjusted tax rate was primarily due to the geographic mix of earnings and the additional R&D tax credit.

Glenn Eisenberg: I'm going to start my comments with a review of our second quarter results, followed by a discussion of our performance in each segment, and conclude with an update on our full-year guidance. For reference, we've also included additional business information that can be found in our supplemental deck on our Investor Relations website. Revenue for the quarter was $3.2 billion, an increase of 6.2% compared to last year, primarily due to organic-based business growth and the impact from acquisitions, partially upset by lower COVID testing and foreign exchange. The base business grew 6.9% compared to the base business last year, driven primarily by organic growth of 4.5%.

Speaker Change: For reference, we've also included additional business information that can be found in our supplemental deck on our investor relations website.

Speaker Change: The base business grew 6.9% compared to the base business last year, driven primarily by organic growth of 4.5%.

Glenn Eisenberg: Operating them for the quarter was $295 million, or 9.2% of revenue, or 14.9% on an adjusted basis. During the quarter, we had $100 million of restructuring charges and special items, primarily related to acquisitions and launch pet initiatives. In addition, we had $23 million of expense for the transition service agreements related to the spin-off trium, with the corresponding income recorded in other income. Excluding these items and amortization of $62 million, adjusted operating income in the quarter was $480 million, or 14.9% of revenue, compared to $448 million, or 14.8% last year. The increase in operating income and margin was due to the benefit of demand and launch pet savings that were partially upset by higher personnel expenses.

Speaker Change: During the quarter, we had $100 million of restructuring charges and special items, primarily related to acquisitions and launchpad initiatives.

Speaker Change: Excluding these items and amortization of $62 million adjusted operating income in the quarter was $480 million, or 14.9% of revenue, compared to $448 million, or 14.8% last year.

Glenn Eisenberg: Our launch pet initiative continues to be contracted to deliver $100 to $125 million of savings this year, consistent with our long-term target. The adjusted tax rate for the quarter was 23%, compared to 23.9% last year. The lower adjusted tax rate was primarily due to the geographic mix of earnings and additional R&D tax credits. We continue to expect the full-year adjusted tax rate to be approximately 23%. At earnings from continuing operations for the quarter, we're $206 million, or $2.43 for the alluded share. Adjusted EPS were $3.94 in the quarter, up 15% from last year. Operating cash flow from continuing operations was $561 million in the quarter, compared to $162 million a year ago.

Speaker Change: The adjusted tax rate for the quarter was 23% compared to 23.9% last year.

Glenn Eisenberg: Earnings from continuing operations for the quarter were $206 million, or $2.43 per diluted share. During the quarter, the company invested $34 million in acquisitions, paid out $60 million in dividends, and repurchased $100 million of stock. At quarter end, we had $265 million in cash, while debt was $5.1 billion.

Glenn Eisenberg: The increase in cash flow was due to cash earnings and working capital. Capital expenditures totaled $128 million in the quarter, or 4% of revenue. This compares to $103 million, or 3.4% in the prior year. For the full year, we continue to expect capital expenditures to be approximately 3.5% of revenue. Pre-cash flow from continuing operations for the quarter was $433 million. During the quarter, the company invested $34 million in acquisitions, paid out $60 million in dividends, and repurchased $100 million of stock.

Speaker Change: For the full year, we continue to expect capital expenditures to be approximately 3.5% of revenue.

Speaker Change: Pre-cash flow from continuing operations for the quarter was $433 million. During the quarter, the company invested $34 million in acquisitions, paid out $60 million in dividends, and repurchased $100 million of stock.

Glenn Eisenberg: Talk. The Board of Directors has approved an increase in its share repurchased authorization by $1 billion to a total of $1.4 billion. At quarter end, we have $265 million in cash, while debt was $5.1 billion. Our leverage was 2.4 times for us debt to trailing 12 months suggested EBITDA. We have $2 billion of debt maturing over the next 12 months, and we expect to refinance it later this year.

Speaker Change: Our leverage was 2.4 times gross debt to trailing 12 months adjusted EBITDA.

Glenn Eisenberg: Now review our segment performance, beginning with diagnostics laboratories. Revenue for the quarter was $2.5 billion, an increase of 7.9% compared to last year, with organic growth of 4.7%, and acquisitions net of divestitures contributing 3.2%, partially offset by foreign currency translation of 0.1%. The base business grew 8.9% compared to the base business last year, driven primarily by organic growth of 5.7%. Total volume increased 5.7% compared to last year. Base business volume grew 6.3% compared to the base business last year, as organic volume increased 3.5%, while acquisitions contributed 2.9%. Price mix increased 2.1% versus last year, due to an organic base business increase that was partially offset by lower-coded testing.

Glenn Eisenberg: The base business grew 8.9% compared to the base business last year, driven primarily by organic growth of 5.7%. Base business volume grew 6.3% compared to the base business last year as organic volume increased 3.5% while acquisitions contributed 2.9%. The revenue growth was driven by continued strength in central labs, which was up 9%, while early development was down 15% due to higher than normal cancellations and lower orders in prior periods. However, we did see a sequential improvement in early development, gross orders, and cancellations. We ended the quarter with a backlog of $7.9 billion, and we expect approximately $2.5 billion of this backlog to convert into revenue over the next 12 months.

Speaker Change: Base business volume grew 6.3% compared to the base business last year, as organic volume increased 3.5%, while acquisitions contributed 2.9%.

Speaker Change: Price Mix increased 2.1% versus last year due to an organic-based business increase that was partially offset by lower COVID testing.

Glenn Eisenberg: Base business organic price mix was up 2.2% compared to the base business last year. Diagnostic suggested operating income for the quarter was $442 million, or 17.5% of revenue, compared to $410 million, or 17.5% last year. Adjusted operating income was up due to organic demand, acquisitions, and launch pad savings, partially offset by higher personnel costs. Operating margins were flat, but would have been up approximately 20 basis points were it not for the impact of a cyber event that affected a large partner.

Speaker Change: Base Business Organic Price Mix was up 2.2% compared to the base business last year.

Speaker Change: Diagnostics suggested operating income for the quarter was $442 million, or 17.5% of revenue, compared to $410 million, or 17.5% last year.

Speaker Change: Operating margins were flat, but would have been up approximately 20 basis points were it not for the impact of a cyber event that affected a large partner.

Glenn Eisenberg: Now review the segment performance in biopharma laboratory services. Revenue for the quarter was $707 million and increased of 1.1% compared to last year, due to an increase in organic revenue of 1.2%, partially offset by foreign currency translation of 0.1%. The revenue growth was driven by continued strength in central labs, which was up 9%, while early development was down 15% due to the higher the normal cancellations and lower orders in prior periods. However, we did see a sequential improvement in early development growth orders and cancellations, which we expect to lead to higher revenues in the second half of the year and deliver year-over-year growth beginning in the fourth quarter.

Speaker Change: Now I'll review the segment performance in Biopharma Laboratory Services.

Speaker Change: Revenue for the quarter was $707 million, an increase of 1.1% compared to last year, due to an increase in organic revenue of 1.2%, partially offset by foreign currency translation of 0.1%.

Speaker Change: The revenue growth was driven by continued strength in central labs, which was up 9%, while early development was down 15% due to the higher-than-normal cancellations and lower orders in prior periods.

Speaker Change: However, we did see a sequential improvement in early development gross orders and cancellations, which we expect will lead to higher revenues in the second half of the year and deliver year-over-year growth beginning in the fourth quarter.

Glenn Eisenberg: Biopharma adjusted operating income for the quarter was $107 million, or 15.2% of revenue, compared to $105 million, or 15% last year. Adjusted operating income and margin increased due to organic growth and launch pad savings, partially offset by higher personnel costs. We ended the quarter with a backlog of $7.9 billion, and we expect approximately $2.5 billion of this backlog to convert into revenue over the next 12 months. The Trailing 12 Months book to bill held at 1.00 compared to last quarter and is expected to increase in the second half.

Speaker Change: Biopharma adjusted operating income for the quarter was $107 million, or 15.2% of revenue, compared to $105 million, or 15% last year.

Speaker Change: Adjusted Operating Income and Margin Increased Due to Organic Growth and Launch Pad Savings Partially Upset by Higher Personnel Costs

Speaker Change: We ended the quarter with a backlog of $7.9 billion, and we expect approximately $2.5 billion of this backlog to convert into revenue over the next 12 months.

Glenn Eisenberg: Now I'll discuss our updated 2024 Fullyer guidance, which assumes foreign exchange rates effective as of June 30, 2024, for the remainder of the year. The Enterprise Guidance also includes the impact from currently anticipated capital allocation, with free cash flow targeted for acquisition, share repurchases, and dividends. The acquisition of select assets of in VTA, which is expected to close next week, is now included in our guidance for 2024. For the remainder of the year, we expect in VTA to add approximately $120 million in revenue, lower adjusted earnings per share by approximately 40 cents, and reduce cash flow by approximately $150 million, primarily due to one-time costs related to retention, severance, and integration, as well as an increase in working capital.

Glenn Eisenberg: Now I'll discuss our updated 2024 full-year guidance, which assumes foreign exchange rates effective as of June 30, 2024 for the remainder of the year. The acquisition of select assets of Invite, which is expected to close next week, is now included in our guidance for 2024. Lower adjusted earnings per share by approximately $0.40. We expect enterprise revenue to grow 6.4 to 7.5% compared to 2023. We continue to perform well in diagnostics.

Speaker Change: The enterprise guidance also includes the impact from currently anticipated capital allocation with free cash flow targeted for acquisition, share repurchases, and dividends.

Glenn Eisenberg: We expect enterprise revenue to grow 6.4 to 7.5% compared to 2023. Versus prior guidance, we are increasing the midpoint 135 basis points, with in VTA contributing approximately 100 basis points of the growth. We continue to perform well in diagnostics. We expect diagnostics revenue to be up 6.9 to 7.9% compared to 2023. This is an increase at the midpoint from our prior guidance of 200 basis points due to stronger base business demand and in VTA, which is expected to contribute around 130 basis points of the growth. We expect by a farmer revenue to grow 3.7% to 5% compared to 2023.

Glenn Eisenberg: We expect diagnostics revenue to be up 6.9 to 7.9% compared to 2023. This is an increase at the midpoint from our prior guidance of 200 basis points due to stronger base business demand and in Vitae, which is expected to contribute around 130 basis points of the growth. The decrease at the midpoint from our prior guidance of 35 basis points is due to early development, partially offset by continued strength in central labs. We expect enterprise margins to be flat versus the prior year despite the negative impact from Invitae of approximately 40 basis points.

Glenn Eisenberg: The decrease at the midpoint from our prior guidance of 35 basis points is due to early development partially upset by continued strength and central labs. We expect early development to have a slow recovery than previously anticipated, but with year-over-year growth still expected to begin in the fourth quarter. We expect enterprise margins to be flat versus the prior year, despite the negative impact from in VTA of approximately 40 basis points. Diagnostics margins are now expected to be down due to the inclusion of in VTA of approximately 60 basis points. We continue to expect margins in bioparma to be up year-over-year.

Speaker Change: We expect biopharma revenue to grow 3.7% to 5% compared to 2023.

Speaker Change: We expect enterprise margins to be flat versus the prior year despite the negative impact from Invitae of approximately 40 basis points.

Glenn Eisenberg: Although diagnostics margins are now expected to be down, we continue to expect margins in biopharma to be up year over year. Our guidance range for adjusted EPS is $14.30 to $14.90, partially offset by a 10 cent increase in the underlying business. The free cash flow guidance range is now $850 million to $1 billion and includes approximately $150 million of cash use from Envite, which is primarily due to one-time costs. Excluding MBTA, the free cash flow guidance range is unchanged from prior guidance.

Glenn Eisenberg: Our guidance range for adjusted EPS is $14.30 to $14.90. We have decreased the midpoint of guidance by 30 cents, driven by the expected dilution from in VTA of approximately 40 cents, partially offset by a 10 cent increase in the underlying business. The free cash flow guidance range is now $850 million to $1 billion and includes approximately $150 million of a cash use from in VTA, which is primarily due to one-time costs. Excluding in VTA, the free cash flow guidance range is unchanged from prior guidance.

Speaker Change: We continue to expect margins in biopharma to be up year over year.

Speaker Change: We have decreased the midpoint of guidance by $0.30, driven by the expected dilution from Invitae of approximately $0.40, partially offset by a $0.10 increase in the underlying business.

Glenn Eisenberg: In summary, lab work is well positioned for profitable growth both organically as well as through acquisitions. We're excited about the acquisition of in VTA from both a strategic and financial perspective. Strategically, the strengthens our position in T long-term specialty testing growth areas of oncology and select rare disease. from a financial perspective, while it's diluted in 2024, we expect it to be accreted in 2025 and deliver a very attractive return on investment as we profitably grow the business. In addition, LAPR continues to generate strong free cash flow that will be used for acquisitions while returning capital to shareholders through our dividend and share repurchase program.

Operator: In summary, LabCorp is well positioned for profitable growth, both organically as well as through acquisitions. In addition, LabCorp continues to generate strong free cash flow that will be used for acquisitions while returning capital to shareholders through our dividend and share repurchase program. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: In summary, LabCorp is well positioned for profitable growth, both organically as well as through acquisitions. We're excited about the acquisition of Invite from both a strategic and financial perspective.

Speaker Change: Strategically, this strengthens our position in key long-term specialty testing growth areas of oncology and select rare diseases.

Speaker Change: In addition, LabCorp continues to generate strong free cash flow that will be used for acquisitions while returning capital to shareholders through our dividend and share repurchase program.

Operator: Operator will now take questions. Thank you. As a reminder to ask the question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Speaker Change: Operator will now take questions.

Speaker Change: Thank you. As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced.

Operator: Please stand by while we compile the Q&A roster. And our first question comes from Michael Czerny of Leering Partners. Your line is open.

Michael Cherny: And our first question comes from Michael Cherny of Learing Partners. Your line is open. Good morning, and thank you for taking the question.

Speaker Change: And our first question comes from Michael Cherney of Learing Partners. Your line is open.

Adam Schechter: I'm going to have two questions in one just to make things easier. Here, first, can you give a little more color on what you're seeing in terms of the new awards and early development and how you should think about at least from a category disease state perspective, where this should translate into the better growth, the back half of the year, and then just quickly on the invite a Cretian estimate for 25. I think that's a little faster than anticipated used. Give us some of the qualitative dynamics behind what you're doing to get that to be such a strong EPS contributor next year.

Michael Cherney: Morning. I'm going to ask two questions in one, just to make things easier. First, can you give a little more color on what you're seeing in terms of the new awards and early development and how we should think about

Adam Schechter: Yep, sure. So, first of all, if you look at the business in terms of biopharmal laboratory services, we had very strong growth in our central laboratories of about 9%, and early development declined 15%. Both of those businesses are leaders in their respective markets. We believe we reached the trough for early development, and that's based upon the cancellations that we've spoke about in the past. If you look at the book to build for the quarter, it was strong, and it was strong for several reasons: number one, because the orders were strong, but importantly, number two, because there was significantly less cancellations than what we've seen in prior quarters.

Unknown Executive: Yep, sure. So first of all, if you look at the business in terms of biopharma laboratory services, we had very strong growth in our central laboratories of about 9%, and early development declined by 15%.

Speaker Change: Yep, sure. So first of all, if you look at

Unknown Executive: Both of those businesses are leaders in their respective markets. We believe we've reached the bottom. If you look at the book to build for the quarter, it was strong, and it was strong for several reasons. Number one, because the orders were strong.

Adam Schechter: So, that's what gives us the confidence for the improved performance that we expect in the early development as we go throughout the year. With regard to indeed take accretion 2025, you know, we said from the beginning that we were going to use calendar months, because we didn't know the exact timing of closing. And we said it would be dilutive in the first 12 months and a credo in the second 12 months. It's closing a bit faster than we originally anticipated, which is good because we'll be able to move quicker. That's why you see a bit more dilution in 2024 than you may have anticipated.

Unknown Executive: With regard to in-vitro accretion 2025, you know, we said from the beginning that we were going to use calendar months because we didn't know the exact timing of closure. And we said it would be dilutive in the first 12 months and accretive in the second 12 months. It's closing a bit faster than we originally anticipated, which is good because we'll be able to move quicker. That's why you see a bit more dilution in 2024 than you may have anticipated. But that's also why it becomes accretive in 2025.

Speaker Change: With regard to in vitae accretion 2025, you know, we said from the beginning that we were going to use calendar months because we didn't know the exact timing of close-in. And we said it would be dilutive in the first 12 months and accretive in the second 12 months.

Michael Cherny: But that's also why it becomes a credo in 2025. Great, thanks so much. Thank you.

Andrew Brackmann: Our next question comes from Andrew Brackman of William Blair. Your line is open. Good morning, Adam, Glenn, Kristen. Maybe just sticking on and be there for a minute, Adam. In your period of March, I think you said that you expected to benefit from your breadth and scale. So anything that you can share about customer account overlap there, which sort of drives that confidence, just trying to get a sense of that. Thank you. Opportunity. Yeah, absolutely.

Unknown Executive: Great, thanks so much. Our next question comes from Andrew Brackmann of William Blair. Your line is open. Thank you. Our next question comes from Eric Coldwell of Baird. Your line is open. 213 plus in the fourth quarter and what you did here in the second quarter, or is it more of a hockey stick into the fourth? Maybe just, you know, I don't know if you could parse out your revenue expectation between early development and central lab for the full year. That might be another way of doing this. And then I'll come back on my second attempt.

Speaker Change: Our next question comes from Andrew Brackmann of William Blair. Your line is open.

Adam Schechter: You know, it's an exciting time, and we've spent a lot of time with our colleagues that will be coming over, and if you take. And first and foremost, the sales organization is very excited. They're excited because they now have a broader portfolio of products. It's one thing to go into an office and talk about inherited cancers. It's another thing to say, but you can also test for all the other things that you may want to test out patient for. And ultimately, we're going to try to bring that all together so the physicians can order directly through one tool and get whatever they need for the patients.

Adam Schechter: So the sales organization is very excited about the breadth of what they'll bring into those customers. In addition to that, we have such strong partnerships that are broad at LabCorp. We're hoping to be able to use those partnerships and have discussions with them about our new offering during BT. So, although we've not built in significant upside for the future with the new customers, we may be able to bring an additional test to we believe that this market is going to grow significantly faster than other markets that we compete in. And we believe that there'll be more than 10% growth in this market versus other markets as we go forward.

Speaker Change: In addition to that, we have such strong partnerships that are broad at LabCorp. We're hoping to be able to use those partnerships and have discussions with them about our new offering through Invitae.

Speaker Change: additional tests to.

Adam Schechter: So, we think it's a very exciting opportunity as we go forward. We're excited about welcoming new colleagues. They're excited about being part of LabCorp. And we're going to move extraordinarily fast, but thoughtful. Perfect.

Andrew Brackmann: And then Glenn, maybe one for you on the balance sheet. Thanks for the reminder on the $2 billion maturing here over the next 12 months. Anything that you can share and as it relates to your expectations for the potential increases there, or even any other alternatives that might be out there to potentially lower that increase. Thanks.

Andrew Brackmann: Perfect. And then Glenn, maybe one for you on the balance sheet. Thanks for the reminder on the two billion dollars maturing here over the next 12 months. Anything that you can share and as it relates to your expectations for the potential rate increases there or even any other alternatives that might be out there to potentially lower that increase? Thanks.

Glenn Eisenberg: Andrew, yeah. It's our expectation that we will refinance all of the debt. We're not going to look to pay it down. We have around a billion of it do between now and in the end of the year, starting actually in September. And then a billion that's due in February. We expect to refinance all of that this year. Obviously, the markets have improved nicely. So, we'll have that done for modeling purposes. If you wanted to look at kind of the net interest expense line, we will refinance obviously at a higher rate than what's maturing. Our net interest expense this year directionally will come in at around 210 million.

Glenn: Yeah, Andrew, yeah, it's our expectation that we will refinance all of the debt. We're not going to look to pay it down.

Speaker Change: For modeling purposes, if you wanted to look at kind of the net interest expense line, we will refinance, obviously, at a later date.

Speaker Change: Higher rate than what's maturing our net interest expense this year directionally will come in at around 210 million and Then obviously once it's annualized for next year that'll tick up to maybe around 240 again We'll see ultimately when we go into the markets, but right now the markets look pretty attractive

Glenn Eisenberg: And then obviously, once it's annualized for next year, that'll tick up to maybe around 240. Again, we'll see ultimately when we go into the markets, but right now the markets look pretty attractive.

Andrew Brackmann: Perfect. I'll leave it there.

Andrew Brackmann: Thanks, guys.

Eric Coldwell: Thank you. Our next question comes from Eric Coldwell of Beard. Your line is open. Good morning, Eric. Good morning, guys. Thank you. So, two questions. First one should be pretty quick here. Early development positive to hear about the order flow and the lower cancels. And I can see your revenue guidance for the fourth quarter. If you're expecting growth, that one is pretty easy to get to. But I am curious, what is the ramp or the phasing of the ramp from 2Q to 4Q? Is it split the difference between 213 plus and the fourth quarter and what you did here in the second quarter?

Speaker Change: I'll leave it there.

Glenn Eisenberg: Or is it more of a hockey stick into the fourth? Maybe just, you know, I don't know if you could parse out your revenue expectation between early development and central lab for the full year. That might be another way of doing this.

Speaker Change: Maybe just, you know, I don't know if you could parse out your revenue expectation between early development and central lab for the full year. That might be another way of doing this. And then I'll come back on my second. Thanks.

Glenn Eisenberg: And then I'll come back on my second. Hey, Eric, it's Glenn. Take a first cut. But overall, again, we feel good about how we're positioned now within the biopharmate group, and central out clearly has had a very strong first half. And we expect that to continue. What's interesting is the growth rate that we had in the first half benefited a little bit based upon the comp we had a year ago, given some softness in the investigator's insights with some labor constraints. But a solid first half, and we expect a more normalized growth rate within the central lab in the second half.

Glenn: Hey, Eric, it's Glenn. I'll take a first cut, but overall again, we feel good about how we're positioned now within the biopharma group, and Centreloc clearly has had a very strong

Eric: First Half, and we expect that to continue.

Speaker Change: What's interesting is the growth rate that we had in the first half benefited a little bit based upon the comp we had a year ago, given some softness in the investigator sites with some labor constraints, but a solid first half, and we expect a more normalized growth rate within the central lab in the second half.

Glenn Eisenberg: The flip side is within ED. Again, we are seeing a little bit of a slower recovery, but based upon the anatomy marks with a strong or order book in the quarter, with cancellations coming back down to more normal, we feel confident that we'll see sequential improvement in the revenues of ED in both the third and the fourth. So not kind of the hockey stick, but a continued progression. But that in the fourth quarter will now start to see favorable country on year. So an improved outlook in the third, but still down year on year for ED, but in the fourth and improved revenues with positive comps.

Speaker Change: The flip side is within ED, again, we are seeing a little bit of a slower recovery.

Eric Coldwell: Okay, great.

Eric Coldwell: And then just a quick one. I almost and reluctant to bring it up since you didn't bring it up, but your competitor had a bit of an update on the employer market drug testing and well-being testing for employers. You did not call that out today, but I am curious if you could give any additional comments on your business that may be a little bit of sizing data and what you're seeing in those respective markets on the employer side. Yes, sir, we've seen a decrease in employer side, but it's not that big or material to us that was something we would call out.

Unknown Executive: Just a quick one; I'm almost reluctant to bring it up since you didn't bring it up, but your competitor had a bit of an update on the employer market for drug testing and well-being testing for employers. You did not call that out today, but I am curious if you could give any additional comments on your business that may be a little bit of sizing data and what you're seeing in those respective markets on the employer side. Good morning, Elizabeth. Hi guys. Good morning.

Speaker Change: You did not call that out today, but I am curious if you could give any additional comments on your business, maybe a little bit of sizing data and what you're seeing in those respective markets on the employer side.

Eric Coldwell: But there's no doubt that you're seeing as some employers haven't fully come back to work. They don't have events that they used to have for wellness. Sometimes they're not doing the vaccinations that they used to do in offer spaces, but it's less than 5% of our business, so it's not material to us.

Speaker Change: But it's not that big of a material to us that it was something we would call out.

Speaker Change: But there's no doubt that you're seeing as some employers haven't fully come back to work.

Speaker Change: They don't have the events that they used to have for wellness. Sometimes they're not doing the vaccinations that they used to do in office spaces. But it's less than 5% of our business, so it's not material to us.

Eric Coldwell: Okay, thank you very much.

Operator: Thank you.

Speaker Change: Okay, thank you very much.

Elizabeth Anderson: Our next question comes from Elizabeth Anderson of Evercore ISI. Your line is open. Good morning. Thanks so much for the question. I have one question about sort of each part of your business.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Elizabeth Anderson of Evercore ISI. Your line is open.

Unknown Executive: Thanks so much for the question. I have one question about sort of each part of your business. If we think about the, you know, be in the corner, maybe it might be slightly different than some of your internal assumptions, and you kind of flowed through the core non-invite EPS by 10 cents for the full year guidance. Can you talk about sort of the factors, like maybe, is there like a little bit of conservatism? Obviously, there's like the crowd strike and stuff in the third quarter.

Elizabeth Anderson: Good morning, everybody.

Glenn Eisenberg: If we think about the, you know, be in the corner, maybe it might be slightly different than some of your internal assumptions, and you kind of flow through the core non-invite EPS by 10 cents for the full-year guidance. Can you talk about sort of the factors like, maybe, is there like a little bit of conservatism? Obviously, there's like the CrowdStrike and stuff in the third quarter, so just sort of your confidence maybe on that versus just the guidance rates.

Unknown Executive: So, just sort of your confidence maybe on that versus the guidance rate. And then, secondarily, obviously, nice to see the early development business improving. Can you comment on pricing in early development and any kind of shift you've seen in that over the last quarter or so? So, the core. Oh, sorry.

Adam Schechter: And then, secondarily, I would say nice to see the early development business improving. Can you comment on pricing in early development and any kind of shift you've seen in that over the last quarter or so?

Adam Schechter: Yeah, Elizabeth, I'll take the second question first, and I'll ask when to comment a bit about the first question. You know, it's good to see the orders coming back and the cancellations being reduced in early development. That's what's giving us confidence in revenue growth as we go throughout the year. I would say the biggest difference in pricing that we've seen is the price of the NHBs. They were much more expensive last year than they are this year. When the price went up, that was largely passed through to the customers, so we weren't making margin on that business.

Adam Schechter: Now that the price is lower, it actually helps with the margin a bit, but that's the biggest difference. So the course—oh, sorry, go ahead. Go ahead, Elizabeth. I was going to say the course.

Adam Schechter: I can't get into the course. Early development, pricing, XNHPs is sort of stable. Is that what you're saying? Just to make sure I understand what you were saying. Yeah, I would say it's relatively stable. I mean, it's always under pressure. There's always pressure there, but I'd say continued pressure relatively stable.

Elizabeth Anderson: Go ahead Elizabeth. I was going to say the core early development pricing X NHPs is sort of stable. Is that what you're saying? I just want to make sure I understood what you were saying.

Elizabeth Anderson: Great, thank you.

Glenn Eisenberg: And then Elizabeth on the first part. So when you look at, again, excluding in detail, the underlying business, we've increased the outlook at the top line. So overall, at the midpoint, we're up around 135 basis points, a hundred of it from a BTA. So the underlying business is up both upon the performance in the second quarter, as well as an improved outlook for the remainder of the year. The growth, as we commented earlier in the outlook improvement, is an increased inter-outlook for diagnostics organically, for central ads organically, and partial assets by a little lower outlook within the early development business.

Unknown Executive: Go ahead. Great, thank you. And then, Elizabeth, on the first part, so when you look at, again, excluding Invitae, the underlying business, we've increased the outlook at the top line. So overall, at the midpoint, we're up around 135 basis points, 100 of it from Invitae. So the underlying business is up both on the performance in the second quarter as well as an improved outlook for the remainder of the year. The growth, as we commented earlier, and the outlook improvement is an increase in our outlook for diagnostics organically, for central labs organically, and partially offset by a little lower outlook within the early development business.

Elizabeth: Great, thank you.

Speaker Change: And then, Elizabeth, on the first part, so when you look at, again, excluding Invitae, the underlying...

Speaker Change: So, overall, at the midpoint, we're up around 135 basis points, 100 of it from Invite, so the underlying business is up both upon the performance in the second quarter, as well as an improved outlook for the remainder of the year.

Elizabeth: The growth, as we commented earlier, and the outlook improvement is an increase in our outlook for diagnostics organically, for central labs organically, and partially offset by a little lower outlook within the early development business.

Elizabeth Anderson: But the strength of the higher top line growth is obviously what's translating down to the bottom line, which causes us to have the underlying business excluding in BTA, where we would have increased the midpoint of our EPS guidance range by 10 cents. Got it. Thank you.

Speaker Change: But the strength of the higher top-line growth is obviously what's translating down to the bottom line, which causes us to have the underlying business, excluding in vitae, where we would have increased the midpoint of our EPS guidance range by 10 cents.

Jack Nihen: Our next question comes from Jack Nihen of Neffron Research. Your line is open. Good morning, Jeff. Good morning. So when the follow-up on the NBTA ideal, so with the transaction about to close, how are you feeling about integration and retention of the business? You know, obviously, they went bankrupt. So in your revenue assumptions, here are unchanged. I just wanted to hear your confidence around potential leakage that might have taken place over the last few months. Just your views on that. Sure, Jack.

Speaker Change: Thank you.

Unknown Executive: But the strength of the higher top line growth is obviously what's translating down to the bottom line, which causes us to have the underlying business, excluding Invitae, where we would have increased the midpoint of our EPS guidance range by 10%. Morning, Jack.

Speaker Change: Good morning.

Speaker Change: So one of the follow-up on the In-Vitae deal, so with the transaction about to close, how are you feeling about integration and retention of the business? You know, obviously they went bankrupt, so it was, and your revenue assumptions here are unchanged. I just wanted to hear your confidence around potential leakage that might have taken place over the last few months, just your views on that.

Adam Schechter: You know, first of all, when we first made the announcement, we very quickly put an integration team together. Very confident qualified people across all parts of lab work that we match them with equally competent people across all parts of the VTA. So we've had an integration team that has been working really hard to ensure that we have a very smooth transition. I feel very good about the work that they've done. As we look at their monthly sales, they're relatively stable, and we feel good about the way in which they've managed their business through what I would say some pretty difficult turmoil.

Jack: Sure, Jack.

Jack: As we look at their monthly sales, they're relatively stable, and we feel good about the way in which they've managed their business through what I would say is some pretty difficult turmoil. And their team has done, I think, an extraordinary job of trying to hang on to customers and hang on to business.

Adam Schechter: And their team has done, I think, an extraordinary job of trying to hang on to customers and hang on to business. So the question I'm asking the integration team is, where do we see upside? What else can we go after with the new portfolio that they'll have, the increased relationships and partnerships that we have? So I'm actually less concerned about the leakage, and I'm more focused on where the growth opportunities are.

Speaker Change: So the question I'm asking the integration team is, where do we see upside? What else can we go after with the new portfolio that they'll have, the increased relationships and partnerships that we have? So I'm actually...

Jack Nihen: Awesome.

Unknown Executive: And then, I'm sorry if I missed this, but maybe for Glenn, just was wondering if it was possible to call out the magnitude of the impact of the Ascension cyber event that took place during the quarter and just any issues related to CrowdStrike in July. Thanks. Thanks, Glenn. Our next question comes from Kevin Caliendo of UPS. Your line is open.

Glenn Eisenberg: And then I'm sorry if I missed this, but maybe for Glenn, it just was wondering if it was possible to call out the magnitude of the impact of the attention cyber event that took place during the quarter and just any issue related to CrowdStrike in July. Thanks. Yeah, hey, Jack. So on the our partner that had a cyber event again did not affect the last quarter, but did affect our partner. We commented that it was around a 20 basis point headwind during the quarter from the margin of diagnostics. That's roughly around 5 million of call operating income that would have been forgone.

Glenn: Awesome. And then, I'm sorry if I missed this, but maybe for Glenn, just was wondering if it was possible to call out the magnitude of the impact of the Ascension cyber event that took place during the quarter and just any issue related to CrowdStrike in July . Thanks.

Speaker Change: Yeah, hey, Jack. So on the, our partner that had a cyber event, again, did not affect LabCorp, but did affect our partner. We commented that it was around a 20 basis point headwind during the quarter.

Speaker Change: From the margin of diagnostics, that's roughly around $5 million of call it operating income that would have been foregone.

Glenn Eisenberg: A little bit of some timing delay and cash as well that we'll get that just delayed from the second quarter to the third, but obviously we had a very strong free cash flow number overall for the quarter in any event. We didn't comment on the CrowdStrike or, frankly, even the hurricane impact in our results. Obviously, it happened after the second quarter. So when you think about the magnitude of those. You're also looking probably around five cents a share impact earnings, so when you look at the change in our guide, other than in VTA where we took the underlying business guide up ten cents, that's even after absorbing the impact from that IT outage event and the weather impact.

Speaker Change: A little bit of some timing delay in cash as well that we'll get that just delayed from the second quarter to the third, but obviously we had a very strong free cash flow number overall for the quarter in any event.

Jack Nihen: Awesome. Thanks, one. Thank you.

Speaker Change: Awesome. Thanks, Glenn.

Kevin Caliendo: Our next question, Kevin, comes from Kevin Caliendo of UBS to Lonus Open.

Glenn Eisenberg: Good morning, Kevin. Good morning, guys. Thanks for taking my question. The diagnostic revenue wreck the mix, the organic growth in general was better than we had models and I'm just wondering if you can talk through, there's any changing dynamics or anything that was surprising there that if there's something happening in the market that's affecting mix in a positive way, or you guys taking share or are you seeing volumes coming from a different place because they have been strong and a revenue wreck was better. I just would love to understand what's actually happening in the marketplace there.

Adam Schechter: Good morning, Kevin. Good morning, guys. Thanks for taking my question. You know, we've talked about the importance of tests in four areas specifically, women's health, oncology, neurology, and autoimmune disease, and we've been really focused on launching new tests in those areas, ensuring that we're having discussions with opinion leaders. We've increased our scientific wherewithal in the marketplace in those areas, and those areas, the reason we're focused on them is that they grow faster than the other parts of diagnostic testing.

Speaker Change: Our next question comes from Kevin Caliendo of UPS. Your line is open.

Kevin Caliendo: Good morning, Kevin. Good morning, guys. Thanks for taking my question.

Speaker Change: Oh.

Speaker Change: The diagnostic revenue wreck, the mix, the organic growth in general, was better than we had modeled.

Warner: Warner, if you can talk through if there's any changing dynamics or anything that was surprising there, that if there's something happening in the market that's affecting mix in a positive way.

Speaker Change: or are you guys taking share, or are you seeing volumes coming from a different place? Because they have been strong, the revenue rack was better. I just would love to understand what's actually happening in the marketplace there.

Glenn Eisenberg: Sure, Kevin. So if you look at the revenue, it was two and a half billion dollars for diagnostics, and it increased by about 8%. You break down at 8%; it was about 6% up from volume, and price mix was up about 2%. So, as you say, it was a very good strong performance. I think there's a couple of things that are driving. And first of all, it's, you know, the team is doing a really good job executing in the marketplace. Number two, the hospital and local regional laboratory deals that we're doing, they're very good deals in themselves, but there is certainly some spillover that occurs in the geographies that are surrounding those areas.

Warner: Sure, Kevin. So if you look at the revenue, it was $2.5 billion for diagnostics, and it increased by about 8%. If you break down that 8%, it was about 6% up from volume, and price mix was up about 2%. So, as you stated, it was very good, strong performance.

Speaker Change: I think there's a couple things that are driving it. First of all, it's, you know, the team is doing a really good job executing in the marketplace.

Speaker Change: Number two, the hospital and local regional laboratory deals that we're doing, they're very good deals in themselves, but there is certainly some spillover that occurs in the geographies that are surrounding those areas.

Glenn Eisenberg: We are seeing continued strength in the number of tests per session, which is helpful. And we continue to see a slight shift in mix when it comes to specialty testing or esoteric testing versus routine testing. And I think all those things together are giving us the uplift that we're saying. And as we look at the rest of the year, we expect to see continued strength of about the same type of momentum.

Speaker Change: We are seeing continued strength in the number of tests per accession, which is helpful. And we continue to see a, you know, slight shift in mix when it comes to specialty testing or esoteric testing versus routine testing. I think all those things together are giving us the uplift that we're seeing. And as we look at the rest of the year, we expect to see, you know, continued strength of about the same type of momentum.

Adam Schechter: Is this specialty tests in the additional test per wreck? Is that a LabCorp specific like are you guys increasing your capabilities to be able to do that or is that something that's just happening in the marketplace and that's the way the market's moving and you guys are benefiting from it. You know, we've talked about the importance of tests in four areas, specifically women's health and ecology, neurology, and autoimmune disease. And we've been really focused on launching new tests in those areas, ensuring that we're having discussions with opinion leaders. We've increased our scientific wherewithal in the marketplace in those areas.

Speaker Change: Is this specialty tests and the additional tests per rec, is that a LabCorp specific, like are you guys increasing your capabilities to be able to do that or is that something that's just happening in the marketplace and that's the way the market's moving and you guys are benefiting from it?

Speaker Change: You know, we've talked about the importance of tests in four areas specifically, women's health, oncology, neurology, and autoimmune disease, and we've been really focused on launching new tests in those areas, ensuring that we're having discussions with opinion leaders, we've increased our scientific

Glenn Eisenberg: And those areas, the reason we're focused on is they grow faster than the other parts of diagnostic testing. Now, when you run 650 million tests a year, even if you're seeing a shift in mix, it's hard to see that in market share. You can do a math of what will market share point is. But we're certainly starting to see some growth in those specialty areas. And I think it's partially due to the market, and it's also partially due to our focus. Yeah, also Kevin, just to kind of reinforce what Adam had said, that when you look at the volume growth that we're now experiencing, and again, organically, our base business was up three and a half percent.

Speaker Change: wherewithal in the marketplace in those areas and those areas the reason we're focused on is they grow faster than the other parts of diagnostic testing.

Adam Schechter: Now, when you run 650 million tests a year, even if you're seeing a shift in mix, it's hard to see that in market share. I mean, you can do the math on what your market share point is, but we're certainly starting to see some growth in those specialty areas, and I think it's partially due to the market, and it's also partially due to our focus. Yeah, also, Kevin, just to kind of reinforce what Adam had said that when you look at the volume growth that we're now experiencing, and again, organically, our base business was up three and a half percent, obviously, it's higher than our historical growth.

Speaker Change: Now, when you run 650 million tests a year, even if you're seeing a shift in mix, it's hard to see that in market share. I mean, you can do the math on what market share point is, but we're certainly starting to see some growth in those specialty areas, and I think it's partially due to the market, and it's also partially due to our focus.

Kevin Caliendo: Yeah, also, Kevin, just to kind of reinforce what Adam had said, that when you look at the volume growth that we're now experiencing, and again, organically, our base business was up three and a half percent, obviously, it's higher than what our historical growth is. And we attribute that in part, as Adam said, to some of the share growth around the hospital.

Glenn Eisenberg: Obviously, it's higher than what our historical growth is, and we attribute that, in part, as Adam said, to some of the share growth around the hospital outreach labs that we've acquired as we penetrate those markets even stronger than then maybe they had as well. But overall, when we look at the cops now to 2019, the cages are stronger than historical averages. So, we're last year, we saw some of the improved growth rates really more a function of a softer cop year over year. We actually think now we're copying to a more normal period a year ago, and that the growth rates are now more sustainable.

Adam Schechter: And we attribute that, in part, as Adam said, to some of the share growth around the hospital outreach labs that we've acquired as we penetrate those markets even stronger than maybe they had as well. But overall, when we look at the comps now to 2019, the cagers are stronger than historical averages.

Adam Schechter: So where last year we saw some of the improved growth rates, really more a function of a softer comp year over year, we actually think now that we're comping to a more normal period a year ago, and that the growth rates are now more sustainable. And as Adam said, as we give our guidance, and what's implied is that we will continue to see, we expect that strong level of both volume growth and favorable mix along the lines that Adam had commented on. That's helpful.

Speaker Change: outreach labs that we've acquired as we penetrate those markets even stronger than

Speaker Change: Then maybe they had as well. But overall, when we look at the comps now to 2019, the cagers are stronger than historical averages. So where last year we saw some of the improved growth rates really more a function of a softer comp year over year, we actually think now we're comping to a more normal period a year ago, and that the growth rates are now more sustainable. And as Adam said, as we

Glenn Eisenberg: And as Adam said, as we give our guidance, and what's implied is that we will continue to see, we expect that strong level of both volume growth, but also favorable mix along the lines that Adam had commented.

Speaker Change: Give our guidance, and what's implied is that we will continue to see, we expect that strong level of both volume growth, but also favorable mix along the lines that Adam had commented on.

Glenn Eisenberg: That's helpful. Can I ask a quick follow-up to that? Is that the launch pad savings you talked about are hitting targets? And one thing I think investors love to see with the higher organic growth is an expectation that margins can expand. I'm just wondering, is launch pad able to keep up with the other inflationary pressures around labor wages, turn that kind of thing? Is that gotten better or worse different?

Speaker Change: That's helpful. Can I ask a quick quick follow-up to that?

Speaker Change: The Launchpad savings you talked about are hitting targets, and one thing I think investors love to see with the higher organic growth is an expectation that margins can expand. I'm just wondering, is Launchpad able to keep up with the other inflationary pressures around labor, wages?

Glenn Eisenberg: Any color around that would be super, super helpful. Yeah, no, overall, we continue to be very pleased with the launch pad activities. We talk about around 100 to 125 million per year of savings. We comment that that's what we look to do to help offset the inflationary expenses primarily related to personnel, which would fall within that call of 100 to 125 million dollar level. So we are able to offset that. We do normally expect to see good leverage on the incremental volume and revenues that we have. And obviously you saw in the case of Biopharma, good leverage on modest top line growth with margins that were up, benefiting from launch pad.

Unknown Executive: Can I ask a quick follow-up to that? Yeah, no, overall, you know, we continue to be very pleased with the LaunchPad activities. We talk about around 100 to 125 million per year of savings. Our next question comes from Lisa Gill of J.P. Morgan. Your line is open.

Speaker Change: Yeah, no, overall, you know, we continue to be very pleased with the LaunchPad activities. You know, we talk about around $100 to $125 million per year of savings.

Speaker Change: We comment that that's what we look to do to help offset the inflationary expenses primarily related to personnel, which would fall within that call of $100 to $125 million level. So we are able to offset that.

Speaker Change: We do normally expect to see good leverage on the incremental volume and revenues that we have, and obviously you saw in the case of Biopharma, good leverage on modest top line growth with margins that were up.

Glenn Eisenberg: And even within diagnostics, while margins were flat during the quarter, we commented about the cyber event. We're still dealing with a little bit of a headwind from lower COVID as well. But as we think about the full year, the leverage, ideally, we'd leverage it around a growth profit margin for the business that we're approaching that level for the full year when you take out the unusual items or the discrete items that could be a headwind. And so that we think is out and commented earlier, the business is performing well from a top line standpoint and from an operational standpoint.

Speaker Change: Lower COVID as well.

Speaker Change: Margin for the business that we're approaching that level for the full year when you take out the unusual items or the discreet items that could be a headwind. So we think, as Adam commented earlier, the business is performing well from a top line standpoint and from an operational standpoint.

Glenn Eisenberg: Thank you guys so much.

Lisa Gill: Thank you. Our next question comes from Lisa Gill of JP Morgan. Your line is open. Good morning. Thank you for taking my question.

Speaker Change: Thank you guys so much.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Lisa Gill of J.P. Morgan. Your line is open.

Lisa Gill: Just quickly, can you maybe just comment on the LBT rule, you know, came out since you last reported any impact? How are you thinking about that for your business? I understand that the industry overall is in some way disputing it, but I just want to hear your thoughts around it. Yeah, absolutely, Lisa. So, you know, we continue to believe that the right path forward is to improvements to and to enact the ballot act, frankly, and that was legislation that was developed specifically for laboratory diagnostics, including LBT's, that had broad bipartisan support. And we think that's the right way forward.

Lisa Gill: Good morning Lisa. Good morning. Thank you for taking my question. Just quickly, can you maybe just comment on the LBT rule? You know, it came out since you last reported. Any impact? How are you thinking about that for your business? I understand that the industry overall is

Speaker Change: Yeah, absolutely, Lisa. So...

Speaker Change: Continue to believe in the right path forward.

Speaker Change: is through improvements to and to enact the Ballot Act frankly and that was legislation that was developed specifically for laboratory diagnostics including

Speaker Change: LVTs. That had broad bipartisan support and we think that's the right way forward. As you said, our trade organization, ACLA, did file a lawsuit and they're challenging the FDA's final rule.

Adam Schechter: As you said, our trade organization, ACLA, did file a lawsuit, and they're challenging the FDA's final rule. And we're supportive of ACLA doing that. In the meantime, of course, we're going to be prepared to adhere to the LDL, the LBT ruling and, you know, when you look at the science, we do the vast majority of that science. And we submit all, I mean, most of not all of our LBT's to New York State already. But at the same time, there's some things that we have to prepare for in terms of monitoring and reporting requirements, and so forth.

Speaker Change: All, I mean most if not all of our LVPs to New York State already.

Adam Schechter: And we have a team in place.

Adam Schechter: I don't sure that we're ready for that to occur as soon as the LBT rule is final. At the same time, it's not going to have a significant impact on our revenue or on our expenses. I think the bigger impact is going to be the patients. And, you know, these LBTs are typically for people with rare diseases or smaller patient populations. And the question is, will the FDA even have the ability to approve these quickly enough so that all patients have access to these important tests as quickly as possible. So to me, it's more of a patient access and important for patients than it is any type of impact the lab for, frankly.

Speaker Change: for that to occur as soon as the LDT rule is final.

Speaker Change: And the question is, will the FDA even have the ability to approve these quick enough?

Speaker Change: So that all patients have access to these important tests as quickly as possible. So to me, it's more of a patient access and important for patients than it is any type of impact to LabCorp, frankly.

Adam Schechter: Adam, you know, just as I think about DC and any updated thoughts from your side on either Pamela or Salsa or the opportunity for Salsa to finally pass? Yeah, you know, so we continue to strongly support the Salsa legislation, and I've been saying this for I think four years now, and it has strong bipartisan support, and I've been saying that for four years now. So it's kind of remarkable to me that it has not passed yet. And it continues that strong support. We continue to, you know, be very supportive of it ourselves, but it's really hard to know if it'll be passed again this year, even though we're going to try to push for it to be passed.

Unknown Executive: Yeah, you know, so we continue to strongly support the SALSA legislation. And I've been saying this for, I think, four years now. And it has strong bipartisan support.

Speaker Change: Yeah.

Speaker Change: You know, so we continue to strongly support the SALSA legislation, and I've been saying this for, I think, four years now, and it has strong bipartisan support, and I've been saying that for four years now. So it's kind of remarkable to me that it has not passed yet.

Unknown Executive: So it's kind of remarkable to me that it has not been passed yet, and it continues to have strong support. We continue to, you know, be very supportive of it ourselves. But it's really hard to know if it'll be passed again this year, even though we're going to try to push for it to be passed. What I would say is that if it is not passed this year, I do believe that there's a likelihood that it'll be delayed again. Our next question comes from Erin Wright of Morgan Stanley. Your line is open. Morning Erin.

Speaker Change: And it continues to have strong support, we continue to, you know, be very supportive of it ourselves. But it's really hard to know if it will be passed again this year, even though we're going to try to push for it to be passed.

Adam Schechter: What I would say is that if it did not pass this year, I do believe that there's a likelihood that it'll be delayed again. And if it's delayed again, that would be, you know, $80 million that we would not see as a downside next year. And a lot of that would fall to the bottom line. So let's wait to see how the year plays out when we give guidance. If every next year we'll know what's happened and where we are, but in the meantime, we're going to continue to push for Salsa as best we can.

Speaker Change: What I would say is that if it is not passed this year, I do believe that there's a likelihood that it'll be delayed again.

Speaker Change: that we would not see as a downside next year, and a lot of that would fall to the bottom line.

Speaker Change: So, let's wait to see how the year plays out. When we give guidance in February next year, we'll know what's happened and where we are. But in the meantime, we're going to continue to push for SALSA as best we can.

Operator: Great. Thanks for the comments. Sure. Thank you.

Aaron Wright: Our next question comes from Aaron Wright of Morgan Stanley. You're long as open. Thanks.

Unknown Executive: Thanks. Hi, good morning. So, I'm going to be really early with this question, but just as we head into 2025, excluding Invitae and some of the dynamics there, can you just point us to some of those key headwinds, tailwinds that you're thinking about, or that we should be thinking about heading into 2025? And it sounds like you remain a little bit more confident on the underlying utilization trends and mixed dynamics as we head into 2025, and And I guess I'm mostly speaking to the diagnostic segment, but I guess also on biopharma as well, if there's anything to call out there. Hey, good morning.

Speaker Change: Our next question comes from Erin Wright of Morgan Stanley . Your line is open.

Aaron Wright: Hi, good morning. So I'm going to be really early with this question, but just as we head into 2025, excluding in VTA, some of the dynamics there, can you just point us to some of those key headwinds, tailwinds that you're thinking about or that we should be thinking about heading into 2025? And it sounds like you remain a little bit more confident on the underlying utilization trends and mixed dynamics that's ahead into 2025, how sustainable those can be. And I guess I'm mostly speaking to the diagnostic segment, but I guess I'll throw in biofarm as well as there's anything to call out there.

Speaker Change: you remain a little bit more confident on the underlying utilization trends and mixed dynamics as we head into 2025, how sustainable those can be. And I guess I'm mostly speaking to the diagnostics segment, but I guess I'll throw in biopharma as well, if there's anything to call out there, thanks.

Adam Schechter: So what I'd say, Aaron, is that, you know, we would obviously not give you 2025 guidance today, but as I look at the trends and I look at the things that I'm considering as we go into 2025, the market dynamics continue to be strong. And what's interesting about the diagnostic business in particular is that regardless of Republican presidents, Democratic presidents, recessions, non-recessions, the business is very durable and has shown its durability over time. So I feel very good about a diagnostic business, the underlying performance. I would say the biggest headwinds last tailwind is going to be what we just talked about, which is does Pam occur or does it not occur?

Adam Schechter: As I think about the biofarm are laboratory businesses, we have momentum; we have strength. I feel good about our orders and our order book as we go into the end of this year. And I expect that our book-to-bill is going to continue to improve, even for where it is today, which is strong, as we go through the rest of this year. And that would both well as we go into 2025. And again, the biggest headwinds, tailwinds, there is just what happens with the smaller biotech companies in the marketplace, as well as farmer, and what they decide to do based upon their environment.

Speaker Change: As I think about the biopharma laboratory businesses, we have momentum, we have strength.

Speaker Change: I feel good about our orders and our order book as we go into the end of this year and I expect that our

John Kim: Okay. Great. Thank you.

Speaker Change: Okay, great. Thank you.

John Kim: Our next question comes from Michael Riskin of Bank of America. Your line is open. Hey, good morning.

Speaker Change: Our next question comes from Michael Riskin of Bank of America. Your line is open.

Unknown Executive: This is John Kim on for my, I don't know, talked about targeting the midsize pharmas as well. And I guess that's why there's that early development business growing further in the second half. I know you mentioned the cancellations have lowered, the bookings are improving, but also just interested to know if there's been any trend there. Yeah.

John Kim: This is John Kim on for Mike. Good morning.

Michael Cherney: Good morning, Michael.

John Kim: Speaking of the small biopics and farm, has there been any improvement in the client mix or, sorry, the knocking improvement, but rather a shift in the client mix? I think you talked about how are getting the midsize farm as well. And I guess is that why there's a confidence in that the early development business growing further in the second half. I know you mentioned the cancellations have low where the bookings are improving, but also just interested to know if there's any trend there. Yeah, so if you look at the mix of business, it is a very different mix.

Speaker Change: Hey, good morning. This is John Kim on for Mike.

Speaker Change: Howdy.

Speaker Change: Good morning.

Speaker Change: Speaking of the small biotechs and pharmas, has there been any improvement in the client mix, or sorry, not the improvement, but rather a shift in the client mix, I think?

Speaker Change: You talked about targeting the mid-sized pharmas as well, and I guess, is that why there's a confidence in that?

Unknown Executive: So, if you look at the mix of businesses, it's a very different mix if you look at the central laboratory business versus the early development business. And I'm just going to give you some rough numbers. Assume it's about 70% larger pharma and large biotech in the central laboratory and maybe 30% of small biotech. And it's the opposite when you look at early development.

Adam Schechter: If you look at the central laboratory business versus early development business. And I'm just going to give you some rough numbers: as soon as about 70% larger farm on large biotech in central laboratory and maybe 30% of the small biotech. And it's the opposite when you look at early development; the vast majority is in the smaller early biotechnology companies, less than the big farmer. We'd like to see that mix shift over time, but I don't want to see the shift mix because the small farmer comes down so far and so fast. We haven't seen a lot more orders necessarily from large farmer, but we've actually seen that the smaller biotech market seems to be doing a bit better as we look at the improvement booked bill for the quarter.

Speaker Change: Yep, so if you look at the mix of business, it's a very different mix if you look at the central laboratory business versus the early development business.

Speaker Change: And I'm just going to give you some rough numbers. Assume it's about 70% larger pharma, large biotech.

Speaker Change: in Central Laboratory and maybe 30% of the small biotech. And it's the opposite when you look at early development. The vast majority is in the smaller, early.

Unknown Executive: The vast majority is in the smaller early biotechnology companies, less in the big pharma. We'd like to see that mix shift over time, but I don't want to see that shift happen because small pharma is coming down so far and so fast. We haven't seen a lot more orders necessarily from large pharma, but we've actually seen that the smaller biotech market seems to be doing a bit better as we look at the improvement in book to bill for the quarter.

Speaker Change: We'd like to see that mixed shift over time, but I don't want to see the shift mixed because the small pharma comes down so far and so fast.

Speaker Change: We haven't seen a lot more orders necessarily from large pharma, but we've actually seen that the smaller biotech market seems to be doing a bit better as we look at the improvement in book-to-bill for the quarter.

John Kim: Got it. Thank you for that.

Unknown Executive: Thank you for that. And then, in terms of margins, I hear you on the top line doing well, and the team's executing well. What about in terms of employee turnover? Has the labor cost inflation tracked within expectations?

Glenn Eisenberg: And then, in terms of margins, I hear you on the top line doing well and the teams executing well. What about in terms of the employee turnover? Has there has the labor cost inflation tracked with an expectation? Yeah, so again, overall we feel good about the margins that we're having today. We talked about the big drivers of it being from top line growth and our launch pad, but the headwinds obviously continue to be a personnel cost, the top of our cost structure. The labor market has improved. We assume roughly 3% plus or minus cost inflation for personnel costs, which again, launch pad is helping offset.

Speaker Change: Got it. Thank you for that. And then in terms of margins, I hear you on.

Speaker Change: The top line is doing well and the team is executing well. What about in terms of the employee turnover? Has the labor cost inflation tracked within expectations?

Speaker Change: Yeah, so again, overall, we feel good about the margins that we're having today. We talked about the big drivers of it being from top-line growth in our launch pad, but the headwinds obviously continue to be personnel costs, that's half of our cost structure.

Speaker Change: The labor market has improved.

Speaker Change: We assume roughly 3% plus or minus.

Glenn Eisenberg: Overall, for the biopharma business, our attrition rates, where we would expect it to be, the labor count for diagnostics, it's improved a lot. It's probably still a little bit higher than call it pre-pandemic levels, but in a lot of areas now it's more normalized. So it's really only in certain select areas that we see a little bit more turnover than normal, but overall we feel positive on the labor situation. I appreciate it. Thank you.

Speaker Change: personnel costs, which again, LaunchPad is helping offset.

Speaker Change: Overall, for the biopharma business, our attrition rates are where we would expect it to be. The labor count for diagnostics, it's improved a lot. It's probably still a little bit higher than, call it pre-pandemic levels, but in a lot of areas now it's more normalized, so it's really only in certain select areas that we see a little bit more turnover than normal. But overall, we feel positive on the labor situation.

Unknown Executive: I appreciate it. So what has changed in the deal environment that's causing this acceleration? How can we think about the sustainability of this? They also appreciate getting some capital, and they can use that capital by selling the laboratory or selling the outreach business to us. And I think that they are looking to do that. I would say that as hospital systems were struggling more right after COVID, I think they were looking to move quicker than they are today. But at the same time today, our pipeline remains very, very strong for those hospital deals. The local regional laboratories, I think, are struggling a bit after COVID.

Speaker Change: Appreciate it.

Stephanie Davis: Our next question comes from Stephanie Davis of Barclays. Your line is open. Morning Stephanie. Hey guys. Good morning. Thank you for taking my question. Congrats on the quarter. We have seen M&A become such a bigger part of even your large competitors' growth algorithm. And Glenn, you even called out into compared remarks that acquisitions are going to use priority through free cash flow.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Stephanie Davis of Barclays. Your line is open. Good morning, Stephanie. Hey, guys. Good morning. Thank you for taking my question. Congrats on the quarter.

Stephanie Davis: We have seen M&A become such a bigger part of even your large competitor's growth algorithm. And Glenn, you even called out in your prepared remarks that acquisitions are going to be a priority for your free cash flow. So what has changed in the deal environment that's causing this acceleration?

Adam Schechter: So what has changed in the deal environment that's causing this acceleration? How can we think about the sustainability of the dynamic?

Adam Schechter: And given the incredibly different profile of a detail compared to some of the more recent deals, how should we think about what you're looking for in the M&A pipeline? I know that's a many Carter, so thank you with that.

Speaker Change: How can we think about the sustainability of this dynamic? And given the incredibly different profile of Invitae compared to some of your more recent deals, how should we think about what you're looking for in the M&A pipeline? I know that's a many-parter, so thank you in advance.

Glenn Eisenberg: Sure, so certainly when we look at the environment, I'm going to start off first with the hospital's local regional laboratories. I think during COVID, they realized quickly, particularly the hospital systems, that the laboratories weren't necessarily fully up to date with their equipment, that the cost for capital was very expensive and high. And they realized that they could take that money and use it for other things in the hospital versus running a laboratory historic. I think people were worried, you know, could love for one or laboratory without having an impact to the patient care or the physicians getting the test as quickly as they wanted to. But when you do, as many deals as we've done recently, there's so much proof that we can do these extraordinarily well.

Glenn: Sure. So, Stephanie, when we look at the environment, I'm going to start off first with the hospitals, local regional laboratories.

Speaker Change: I think during COVID they realized quickly, particularly the hospital systems.

Speaker Change: that the laboratories weren't necessarily fully up to date with their equipment.

Speaker Change: that the cost for capital was very expensive and high.

Speaker Change: and they realized that they could take that money and use it for other things in the hospital.

Speaker Change: versus running a laboratory.

Speaker Change: Historically, I think people were worried, you know, could LabCorp run their laboratory without having an impact to the patient care or the physicians getting the test as quickly as they wanted to.

Speaker Change: But when you do as many deals as we've done recently, there's so much proof that we can do these extraordinarily well.

Adam Schechter: And that we can actually run the hospital laboratories, you know, extraordinarily well without interrupting patient care, actually giving them better data, analytics, better tools, better equipment. And I think that that's kind of reached a plateau where most hospital systems don't argue anymore on that point. They also appreciate getting some capital, and they can use that capital by selling a laboratory or the Sony outreach business to us. And I think that they look to do that. I would say that as hospital systems were struggling more right after COVID, I think they were looking to move quicker than they are today.

Speaker Change: And that we can actually run the hospital laboratories, you know, extraordinarily well without interrupting patient care, actually giving them better data, analytics, better tools, better equipment. And I think that that's kind of...

Speaker Change: reached a plateau where most hospital systems don't argue anymore on that point.

Speaker Change: They also appreciate getting some capital, and they can use that capital by selling the laboratory or selling the outreach business to us. And I think that they look to do that. I would say that as hospital systems were struggling more right after COVID, I think they were looking to move quicker than they are today.

Adam Schechter: But at the same time today, our pipeline remains very, very strong for those hospital deals. The local regional laboratories, I think, are struggling a bit after COVID. And therefore, there's an opportunity there that will continue to look after.

Speaker Change: But at the same time today, our pipeline remains very, very strong for those hospital deals. The local regional laboratories, I think, are struggling a bit after COVID, and therefore there's an opportunity there that we'll continue to look after. I would say Invitae is not our typical deal.

Unknown Executive: And therefore, there's an opportunity there that we'll continue to look after. I would say in Vitae that this is not our typical deal. In our typical deal, we want to be accretive in the first year, return this cost of capital in two or three years, and be something that we readily integrate all the. In VTI, I feel good about our ability to integrate it, but obviously, it wasn't accretive in the first year. It'll be accretive in the second year.

Adam Schechter: I would say in VTAY is not our typical deal. Our typical deal we want to be accretive in the first year, return this cost of capital in two or three years, and be something that we readily integrate all the time. In VTAY, I feel good about our ability to integrate it, but obviously it wasn't accretive in the first year; it'll be accretive in the second year. That was a strategic decision for us, because we believe the inherent cancer area and the other areas that they're working on in terms of smaller disease areas will grow so much faster in the future.

Speaker Change: Our typical deal, we want to be accretive in the first year, return this cost of capital in two or three years, and be something that we readily integrate all the time.

Speaker Change: In BT, I feel good about our ability to integrate it, but obviously it wasn't accretive in the first year, it will be accretive in the second year.

Unknown Executive: That was a strategic decision for us because we believe the inherited cancer area and the other areas that they're working on in terms of smaller disease areas will grow so much faster in the future, and we've already begun to focus on those areas. We believe that this could be an important add to our portfolio, and I think of it more as a strategic acquisition than the routine acquisitions that we typically do.

Speaker Change: in the second year. That was a strategic decision for us.

Speaker Change: because we believe the inherited cancer area and the...

Glenn Eisenberg: And we've already begun to focus on those areas. We believe that this could be an important add to our portfolio. And I think of it more as a strategic acquisition than the routine acquisitions that we typically do.

Unknown Executive: other areas that they're working on in terms of smaller disease areas will grow so much faster in the future. And we've already begun to focus on those areas. We believe that this could be an important add to our portfolio. And I think of it more as a strategic acquisition than the routine acquisitions that we typically do.

Glenn Eisenberg: Stephanie, the only thing I add to that is, and as Adam said, the predominance of the dollars that we invest are in the more traditional deals, possible systems, independent labs, even specialty tests. But the oncology ones, I think we've done now, maybe three transactions that, in the first year, if you will, were delivered, but all specialty oncology focused. But even from that, from a financial return, so after meeting the strategic focus, all of those deals, including in VTAY, have a very attractive long-term financial profile. These businesses tend to grow. I think we commented at a double-digit top line growth rate versus our call admits single digit for our underlying business.

Unknown Executive: Stephanie, the only thing I'd add to that, and as Adam said, the predominance of the dollars that we invest are in the more traditional deals, the hospital systems, independent labs, even specialty tests, but the oncology ones. I think we've done, now, maybe three transactions that, in the first year, if you will, were diluted, but all were specialty oncology focused. But even from that, from a financial return, so after meeting the strategic focus, all of those deals, including Invitae, have a very attractive long-term financial profile.

Stephanie Davis: Yeah, Stephanie, the only thing I'd add to that is, and as Adam said, the predominance of the dollars that we invest are in the more traditional deals, the hospital systems, independent labs, even specialty tests.

Speaker Change: But the oncology ones, I think we've done now maybe three transactions that in the first year, if you will, were deluded, but all specialty oncology focused.

Speaker Change: But even from that, from a financial return, so after meeting the strategic focus, all of those deals, including Invitae, you know,

Unknown Executive: These businesses tend to grow, I think we commented on a double-digit top-line growth rate versus our call it mid-single-digit for our underlying business, so we think while it's near-term dilutive, it's a very attractive profile longer term. Having said that, you should continue to expect that the majority of the deals we do fit within the ones that Adam commented on that would even be accretive, initially fully burdened by our incremental borrowing costs, and that the deals will be accretive to earnings and cash in year one.

Speaker Change: have a very attractive long-term financial profile.

Adam: These businesses tend to grow, I think we commented, at a double-digit top-line growth rate versus our call it mid-single-digit for our underlying business. So, you know, we think while it's near-term dilutive, it's a very attractive profile longer-term. Having said that, you should continue to expect that the majority of the deals we do fit within the ones that Adam commented about, that would even be accretive, initially fully burdened by our incremental borrowing costs.

Glenn Eisenberg: So, you know, we think while it's near-term dilutive, it's a very attractive profile, longer term. Having said that, you should continue to expect that the majority of the deals we do fit within the ones that Adam commented about that would even be accretive, initially fully burdened by our incremental borrowing costs. That the deals will be accretive to earnings and cash in year one.

Glenn Eisenberg: So shifting gears at this end can work with the hospital business.

Unknown Executive: So shifting gears a bit then to more of the hospital business, I know you've given some color on the immediate margin and cash flow impacts of the extension cyber attack. But have you thought about any follow-on impacts to that business, such as volume flipping to another player in the region or maybe the need to shore up some of their offerings? Now, I feel good about where we are. They're a great partner.

Adam: that the deals will be accretive to earnings and cash in year one.

Glenn Eisenberg: I know you've given some color on the immediate margin and cash flow impacts of the extension cyber attack.

Speaker Change: So, shifting gears a bit then to more of the hospital business.

Adam Schechter: But have you thought about any fall-on impacts to that business, such as volume slipping to another player in the region or maybe the need to shore up some of their offering. No, I feel good about where we are. They're a great partner. We work side by side with them. We work side by side with them through their cyber events. So I feel good about our business there. And I think that they'll be continued success.

Speaker Change: I know you've given some color on the immediate margin and cash flow impacts of the extension cyber attack, but have you thought about any follow-on impacts to that business, such as volume flipping to another player in the region, or maybe the need to shore up some of their offerings?

Unknown Executive: We work side-by-side with them. We work side-by-side with them through their cyber events. So I feel good about our business there, and I think that there'll be continued success. Awesome. Thank you very much. Yeah, thank you. Our next question comes from Patrick Donnelly of Citi. Your line is open, Patrick. Morning, Patrick. I can't tell you.

Speaker Change: No, I feel good about where we are. They're a great partner. We work side-by-side with them. We work side-by-side with them through cyber events. So I feel good about our business there, and I think that there'll be continued success.

Mike: Awesome. Thank you, Mike. Yeah, thank you.

Speaker Change: Awesome, thank you much.

Patrick Donnelly: Our next question comes from Patrick Donnelly of City.

Speaker Change: Our next question comes from Patrick Donnelly of Citi. Your line is open. Good morning, Patrick. Good morning, Patrick.

Unknown Executive: Hey, I was wondering, you know, in terms of utilization trends, you know, how you guys are thinking about the rest of the year or how things trended throughout the quarter, maybe, you know, June and July as well. It was helpful to hear about the employer testing piece. But just curious, you know, how things trended during the quarter and then the expectations for the rest of the year. So, obviously, for the quarter, we feel very good.

Glenn Eisenberg: You're lying. You know how you guys are thinking about the rest of the year, how things trended throughout the corner of maybe, you know, June and July as well. It was helpful to hear about the employer testing piece. But just serious, you know, how things trend during the quarter and then the expectations for the next year on utilization.

Patrick: Hi, good morning, how are you?

Patrick Donnelly: I was wondering, you know, in terms of the utilization trends, you know, how you guys are thinking about

Patrick Donnelly: The rest of the year or how how things trended throughout the quarter, maybe, you know.

Patrick Donnelly: June and July as well, it was helpful to hear about the employer testing piece, but just curious, you know, how things trended during the quarter and then the expectations for the rest of the year on utilization.

Glenn Eisenberg: Hey, Patrick. So obviously, for the quarter, we feel very good. We commented a little bit earlier that when you think about it from an organic standpoint, our volume based to base business was up three and a half percent. And you know, Adam went through kind of some of the reasons why we feel that we've seen some improved growth there and share that's actually been pretty consistent in that. Vine growth supplemented, if you will, by favorable mix as we're growing our esoteric business and the benefit of some of those hospital deals or TSAs, as well as the test per session.

Unknown Executive: We commented a little bit earlier that when you think about it from an organic standpoint, our volume base-to-base business was up three and a half percent, and, again, Adam went through kind of some of the reasons why we feel that we've seen some improved growth there in share that's actually been pretty consistent in that volume growth supplemented, if you will, by favorable mix as we're growing our esoteric business and the When you look at the implied outlook for the year, you see that diagnostics revenues are still looking from a top line at around 9%.

Patrick: Hey, Patrick.

Patrick: So obviously for the quarter we feel very good. We commented a little bit earlier that when you think about it from an organic standpoint, our volume base-to-base business

Adam: was up three and a half percent, and Adam went through kind of...

Speaker Change: Some of the reasons why we feel that we've seen some improved growth there and share that's actually been pretty consistent in that volume growth supplemented, if you will, by favorable mix.

Adam: As we're growing our esoteric business and the benefit of some of those hospital deals or TSAs as well as the test per session.

Glenn Eisenberg: When you look at the implied outlook for the year, you know, you get to that diagnostics revenues are still looking from a top line at around 9%. So obviously, in the second half, we expect to see continued growth, with now in detail and part of that guidance for diagnostics. You're still looking at an implied call it organic growth in the second half of around 5% and then 4% aided by MNA, and of that 5%. We continue to expect to see a similar mix, with utilization being the higher part of that growth. So we're kind of averaging caught maybe a trend of three to one from the benefit of organic volume versus the favorability from mix that aids there.

Patrick: When you look at the implied outlook for the year, you know, you get to that diagnostics revenues are still looking from a top line at around 9%, so obviously in the second half we expect to see continued growth.

Unknown Executive: So obviously, in the second half, we expect to see continued growth with now in Vitae and part of that guidance for diagnostics. You're still looking at implied, call it organic growth in the second half of around 5% and then 4% aided by M&A. And of that 5%, we continue to expect to see a similar mix with utilization being the higher part of that growth. So we're kind of averaging, call it maybe a trend of 3 to 1 from the benefit of organic volume versus the favorability of mix that aids there. So we do expect this trend and utilization to continue. Okay, that's helpful.

Patrick: With now in vitae and part of that guidance for diagnostics, you're still looking at an implied, call it organic growth in the second half of around 5%, and then 4% aided by M&A. And of that 5%, we continue to expect to see a similar mix with utilization being

Patrick: The higher part of that growth, so we're kind of averaging, call it maybe a trend of three to one from the benefit of organic volume versus the favorability from mix that aids there. So we do expect this trend and utilization to continue.

Glenn Eisenberg: So we do expect this trend in utilization to continue.

Glenn Eisenberg: Okay, that's helpful.

Unknown Executive: And then Glenn, maybe one for you, just, you talked a little bit about the margins and launch pad and VTEC. Can you just talk about, you know, obviously a few moving pieces as we work our way through 2H and into 25. Can you just talk about the puts and takes there, you know, with the dilution, the launch pad piece?

Glenn Eisenberg: And then glad maybe one for you just you talk a little bit about the margins and launch pad and BPEG. Can you just talk about, you know, obviously a few moving pieces as we work our way through 2H and into 25. Can you just talk about the puts and takes there with the dilution, the launch pad piece, I get labor something. It's maybe plateaued and stable, but just the cadence for the rest of the year, and then I got the right jumping off point into next year. Thank you, guys. Sure, just again, from an overall standpoint, margins for the year, as you think about Lab Corp, we've now commented all in, including the impact of in BTA, our margins should be flat this year, year over year and that the impact of in BTA will be around 40 basis points.

Patrick: Okay that's helpful and then Glenn maybe one for you just you talked a little bit about the margins and launch pad

Glenn: VTEC, can you just talk about.

Speaker Change: Yeah, obviously a few moving pieces as we work our way through 2H and into 25. Can you just talk about the puts and takes there, you know, with the dilution, the launch pad piece? Again, labor sounds like it's maybe, you know, plateaued and is stable, but just the cadence for the rest of the year, and then again, the right jumping off point into next year. Thank you guys.

Glenn Eisenberg: Again, labor sounds, Sure, just again, from an overall standpoint, margins for the year, as you think about LabCorp, we've now commented all in, including the impact of Invitae, our margins should be flat this year, year over year, and that the impact of Invitae will be around 40 basis points, so forgetting even other headwinds, we expected the company to see a nice 40 basis point plus margin improvement. When you look at diagnostics, we commented that prior to Invitae, margins for the year would be flat to slightly up, even absorbing the impact of less COVID business, if you will.

Speaker Change: Sure. Just, again, from an overall standpoint...

Speaker Change: Margins for the Year, as you think about LabCorp.

Speaker Change: We've now commented all in, including the impact of Invitae, our margins should be flat this year, year over year, and that the impact of Invitae will be around 40 basis points, so forgetting even other headwinds, we expected for the company to see a nice 40 basis point plus.

Glenn Eisenberg: So, forgetting even other headwinds, we expected for the company to see a nice 40 basis point plus margin improvement. When you look at diagnostics, we commented that prior to in BTA, that margins for the year would be flat to slightly up, even absorbing the impact of less COVID business, if you will. Obviously, with now in BTA, it'll have around a 60 basis point headwind to diagnostics. So, expect that in the second half of the year, diagnostics margins will be down year over year. Again, excluding in BTA, second half margins and diagnostics would have been up year over year.

Speaker Change: Margin Improvement.

Speaker Change: When you look at diagnostics, we commented that prior to Invitae that margins for the year would be flat to slightly up, even absorbing the impact of COVID-19.

Glenn Eisenberg: Obviously, with Invitae now, it'll have around a 60 basis point headwind to diagnostics, so expect that in the second half of the year, diagnostics margins will be down year over year. However, excluding Invitae, second half margins in diagnostics would have been up year over year, so positive leverage within the diagnostics business. And again, we commented that the margins within the biopharma side, our expectation for the year is for margins to be up, and that the margins in the second half for biopharma will be higher than what they were for the first half. Year over year, there'll be some differences, but overall, assume a higher second half margin profile for BLS than the first half.

Speaker Change: Less COVID business, if you will.

Speaker Change: Obviously, with now in vitae, it'll have around a 60 basis point headwind to diagnostics, so expect that in the second half of the year.

Speaker Change: Diagnostics margins will be down year over year.

Glenn Eisenberg: So, positive leverage within the diagnostics business. And again, we commented that the margins within the biopharmicide, our expectation for the year is for margins to be up and that the margins in the second half for biopharma will be higher than what it is for the first half. Year over year, there'll be some differences, but overall, assume a higher second half margin profile for BLS and then the first half. So, again, we feel we're getting good top line; we feel we're leveraging it well. Launchpad is an integral part of helping our margins help offset some of those inflationary costs.

Glenn Eisenberg: Again, excluding Invitae, second-half margins in diagnostics would have been up year over year. So, positive leverage within the diagnostics business.

Glenn Eisenberg: And again, we commented that the margins within the biopharma side, our expectation for the year is for margins to be up.

Speaker Change: and that the margins in the second half.

Speaker Change: for Biopharma will be higher than what it is for the first half.

Speaker Change: Year-over-year, there'll be some differences, but overall, assume a higher second-half margin profile.

Glenn Eisenberg: So again, we feel we're getting good top line. We feel we're leveraging it well. Launchpad is an integral part of helping our margins, helping offset some of those inflationary costs, and then obviously, we're adding on top of that just the near-term dilutive impact from Invitae.

Speaker Change: For BLS and then the first half. So again, we feel we're getting good top line. We feel we're leveraging it. Well, launchpad is an integral part of helping our margins help offset some of those inflationary costs. And then obviously, we're adding on top of that just the near term dilutive impact from invitae.

Glenn Eisenberg: And then, obviously, we're adding on top of that just the near-term dilutive impact from in BTA. When you think about 2025, the only thing I'll comment really on in the BTA is that, you know, assuming the close later on, or call it next week, even within BTA, you know, we'll still have the headwind in the first half with margin impact being negative from in BTA in the first and second quarters. But what's interesting is, as you move to, once it's annualized, you'll obviously start to see favorable contributions from margins from in BTA because we're now copying off of positive and growing margins versus the first half of this year with negative margins.

Speaker Change: When you think about 2025, the only thing I'll comment really on the Navité is that, you know, assuming the close

Speaker Change: Later on, or call it next week even.

Speaker Change: With Invitae, you know, we'll still have the headwind in the first half with margin impact being negative from Invitae

Speaker Change: What's interesting is as you move to it, once it's annualized, you'll obviously start to see.

Speaker Change: Favorable contributions from margins from Indite because we're now comping off positive and growing margins versus the first half of this year with negative margins.

Glenn Eisenberg: Very helpful.

Glenn Eisenberg: Thank you.

Operator: This concludes the question and answer session.

Speaker Change: Very helpful. Thank you.

Adam Schechter: At this time, I'd like to hand it back to Adam Schechter for closing remarks. Thank you. Thanks, everybody, for joining us today. We're going to continue to focus on our customers, our business shareholders, employees as we move forward, and we look forward to sharing our progress with you next footer.

Speaker Change: Thank you. This concludes the question and answer session. At this time, I'd like to hand it back to Adam Schechter for closing remarks.

Unknown Executive: Thank you. Thank everybody for joining us today. We're going to continue to focus on our customers, our business, shareholders, and employees as we move forward. And we look forward to sharing our progress with you next quarter. Have a great day. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Adam Schechter: Thank you. Thanks everybody for joining us today. We're gonna continue to focus on our customers, our business, shareholders, employees as we move forward. And we look forward to sharing our progress with you next quarter. Have a great day.

Operator: Have a great day.

Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Thank you.

Speaker Change: This concludes today's conference call. Thank you for participating and you may now disconnect.

Speaker Change: [inaudible] 1902-1903 1903-1904 1905-1906 1906-1907 1908-1910 1910-1911 1912-1912 1913-1914 1915-1916