Laboratory Co. of America Q1 2025 Earnings Report

Laboratory Co. of America EPS Results

• Actual EPS: $3.84
• Consensus EPS: $3.73
• Beat/Miss: Beat by +$0.11
• One Year Ago EPS: $3.68

Laboratory Co. of America Revenue Results

• Actual Revenue: $3.35 billion
• Expected Revenue: $3.41 billion
• Beat/Miss: Missed by -$64.44 million
• YoY Revenue Growth: +5.30%

Laboratory Co. of America Announcement Details

• Quarter: Q1 2025
• Date: 4/29/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, April 29, 2025
• Conference Call Time: 9:00AM ET

Labcorp Holdings, Inc. engages in providing medical testing services. The company was founded on April 16, 2024 and is headquartered in Burlington, NC.

Laboratory Co. of America Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Q1 twenty twenty five LabCorp Holdings Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

[Operator]

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. 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.

[Christin O'donnell, VP - Investor Relations at Labcorp Holdings]

Thank you, operator. Good morning, and welcome to LabCorp's first quarter twenty twenty five conference call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schecter, Chairman and Chief Executive Officer and Julia Wong, Executive Vice President and Chief Financial Officer. This morning in the Investor Relations section of our website at www.labcorp.com, we posted both our press release and Investor Relations presentation with additional information on our business and 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 call.

[Christin O'donnell, VP - Investor Relations at Labcorp Holdings]

Please see the Use of Adjusted Measures section in our press release and Investor Relations presentation for more information regarding our use of non GAAP financial measures. Additionally, we are making forward looking statements. These forward looking statements include, but are not limited to, statements with respect to the estimated 2025 guidance and the related assumptions, the projected impact of various factors on the company's businesses, operating and financial results, cash flows and or financial condition, including global economic and market conditions, future business strategies, expected savings, benefits and synergies from the LaunchPad initiative, 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. More information is included in our most recent annual report on Form 10 ks and subsequent quarterly reports on Form 10 Q and in the company's other filings with the SEC.

[Christin O'donnell, VP - Investor Relations at Labcorp Holdings]

We have no obligation to provide any updates to these forward looking statements even if our expectations change. Now I'll turn the call over to Adam Schechter.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Thank you, Kristen, and good morning, everyone. We appreciate you joining us today to discuss our first quarter twenty twenty five financial results and progress towards advancing our strategic priorities. Performance in the first quarter was solid with 5% revenue growth or 6% on a constant currency basis across the enterprise. The performance was driven by 6% growth in our diagnostics laboratories business, where there was a strong rebound in volume in March after impact from weather in January and February. Our strong managed care access and our payer contracts continue to serve us well in the marketplace.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Adjusting for Invitae and weather, the margin in the Diagnostics business improved 50 basis points. Invitae continues to perform very well and remains on track to achieve 10% revenue growth and to be slightly accretive to earnings for the full year. Our biopharma laboratory services segment grew 3% excluding currency. Margin for BLS was strong, improving 80 basis points, and the quarter book to bill was also strong at 1.13, with a trailing twelve month of 1.07. Adjusted earnings per share of $3.84 were up 4% year over year.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

It is certainly a very dynamic environment, and our team is closely evaluating the ongoing shifts in the macroeconomic and regulatory landscapes. We are pleased with the outcome of the court's decision and the challenge of the LDT rule. We believe it's in the best interest of bringing new innovative tests to patients as quickly as possible. We are also contingency planning for various tariff and regulatory scenarios. We have developed duplicative, flexible supply chains, and we're in communications with our customers and suppliers.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

While we do anticipate some impact, our guidance range includes what we believe to be the most likely scenarios at this time. The essential nature of our work has enabled us to be successful through many different economic cycles over time, and we will continue to focus on serving the needs of our customers and driving growth, all while delivering value for shareholders as we advance our mission to improve health and to improve lives. Based upon our performance and outlook, we have reaffirmed our revenue and free cash flow guidance, while increasing the midpoint of our EPS guidance by $05 per share, with implied growth at the midpoint of approximately 10% for the year. We also continue to expect margin expansion in each segment for the full year. Julia will provide more details on our results and the 2025 outlook in just a moment.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We continue to execute well on our strategic priorities of being a partner of choice for health systems and regional local laboratories, by launching new tests in important high growth therapeutic areas, and by harnessing science, innovation, and advanced technology to bring valuable services and capabilities to our customers while improving operational efficiency. In the first quarter, LabCorp became the partner of choice for several health systems and regional local labs. These partnerships enable us to accelerate growth and to expand into important geographies and therapeutic areas. In January, we announced a strategic collaboration with New Jersey based Inspira Health to manage the operations of the health system's hospital laboratories and to serve as the primary lab for the physician network. In March, we announced an agreement to acquire select assets of BioReference Health's oncology and related clinical testing services.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

This transaction will extend our leadership in oncology. We also completed the acquisition of Select Assets of North Mississippi Health Services ambulatory outreach laboratory business, and we became a referral lab for its seven hospitals and clinical laboratories. Looking ahead, we have a strong business development pipeline, and we look forward to sharing additional growth opportunities with you in the coming quarters. We also continue to incorporate the power of science, of innovation, and of advanced technology across the organization. We're focused on bringing new tests into four strategic areas: oncology, women's health, autoimmune disease, and neurology.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

These areas have significant unmet needs for patients and are expected to grow up to three times faster than other therapeutic areas, and they are proving to do so. Having the latest innovative tests in these areas enables us to successfully capture more volume across testing for those patients. For example, in the quarter, we introduced LabCorp Plasma Complete, a groundbreaking liquid biopsy test to aid in personalized cancer treatment decisions. This advancement significantly expands LabCorp's extensive ecology portfolio. We made significant strides bringing Invitae's genetic testing solutions to our customers by launching patient affordability and access tools and by introducing two additional genetic risk panel tests.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

LabCorp On Demand launched several new consumer initiated tests, including electrolytes, GGT, hepatitis A, and total testosterone for women. Subsequent to the quarter, we introduced HPV and STI self collection options in LabCorp patient service centers and physician offices. These solutions help overcome barriers to essential health screening by providing convenient private testing options. And in April, we launched our p tau beta amyloid ratio test, a powerful new blood based biomarker test to aid in the diagnosis of Alzheimer's disease. This first of its kind immunoassay further expands our leading portfolio for Alzheimer's disease and dementia.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Launching tests in these important areas will enable us to outpace the growth in the overall market over time. We're also using AI and technology to enhance our customer experience and to bring forward new operational efficiencies to improve our margins. For example, earlier this month, LabCorp received a Modern Healthcare twenty twenty five Innovators Award for LabCorp Diagnostic Assistant, a digital solution integrated into electronic health records that supports providers with real time access to comprehensive laboratory data, insights, and self-service capabilities. This award recognizes us as a leader in driving innovation that improves care and achieves measurable results. We also launched eClaim Assist, a next generation digital platform that introduces smarter workflows to improve efficiencies in billing, payer alignment, and denials.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We will continue to find operational efficiencies through technology in all aspects of our business. Lastly, we released the LabCorp Corporate Responsibility Report, which highlights our significant progress in key areas such as reduced water withdrawal and improved fuel efficiency. We invite you to review the report on our Investor Relations website. In summary, our business continues to perform well, and we are making strong progress against our strategy. We believe that LabCorp will continue to be successful and will lead the way with our relentless focus on science, innovation, and advanced technology.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We remain committed to providing value to our customers and our shareholders alike. With that, I'll turn the call over to Julia.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Thank you, Adam. Let me start with a review of our Q1 financials. Revenue for the quarter was $3,300,000,000 an increase of 5.3% compared to last year, driven by organic growth of 2.1% and the impact from net acquisitions of 3.7%, partially offset by foreign currency translation of 0.5%. Operating income for the quarter was $326,000,000 or 9.7% of revenue, which is 14% on an adjusted basis. During the quarter, we had $73,000,000 of restructuring charges and special items, primarily related to acquisitions and Launchpad savings.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Excluding these items and amortization of $17,000,000 adjusted operating income in the quarter was $469,000,000 or 14% of revenue, compared to $463,000,000 or 14.3% of revenue last year. The increase in adjusted operating income was primarily due to demand and Launchpad savings, partially offset by higher personnel costs. The 20 basis point decline in adjusted operating margin included headwinds from Invati and weather, excluding which Enterprise margins would have been up 60 basis points. The adjusted tax rate for the quarter was 22.5 compared to 23% last year. We continue to expect our adjusted tax rate for full year 2025 to be approximately 23%.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Net earnings for the quarter were $213,000,000 or $2.62 per diluted share. Adjusted EPS was $3.84 in the quarter, up 4% from last year. Operating cash flow was $19,000,000 in the quarter compared to a use of $13,000,000 a year ago. The increase in cash flow was primarily due to the timing of working capital. Capital expenditures totaled $126,000,000 in the quarter.

[Julia Wang, EVP & CFO at Labcorp Holdings]

For the full year, we continue to expect capital expenditures to be approximately 3.8% of revenue. Free cash flow for the quarter was a use of $108,000,000 compared to a use of $164,000,000 last year. The first quarter is typically the company's lowest quarter for free cash flow. We continue to expect free cash flow for the full year to be $1,100,000,000 to $1,250,000,000 During the quarter, the company invested $211,000,000 in acquisitions and partnerships and paid out $62,000,000 in dividends. At quarter end, we had $369,000,000 in cash, while total debt was $5,600,000,000 Our debt leverage as of quarter end was 2.5 times gross debt to trailing twelve months adjusted EBITDA, at the low end of our targeted leverage of 2.5 times to three times.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Now I will review our segment performance beginning with Diagnostics Laboratories. Revenue for the quarter was $2,600,000,000 an increase of 6% compared to last year, with organic growth of 1.6% and net acquisitions of 4.7%, partially offset by foreign currency translation of 0.3%. Organic growth was impacted by approximately 190 basis points from weather and one fewer revenue day, which is timing related within the year. Total volume increased 3% compared to last year, as organic volume contributed 0.9%, while acquisitions net of divestitures contributed 2.1%. Organic volume also includes the negative impact from weather and one fewer revenue day.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Price mix increased 3% versus last year due to organic growth of 0.7% and acquisitions net of divestitures of 2.6%, partially offset by foreign currency translation of 0.3%. Organic pricemix was up due to mix, as we benefited from an increase in tax part accession and lab management agreements. Diagnostics adjusted operating income for the quarter was $428,000,000 or 16.3% of revenue, compared to $418,000,000 or 16.9% of revenue last year. Adjusted operating margin was down 60 basis points due to Invete and weather. Excluding these items, adjusted operating margin would have been up approximately 50 basis points, as the benefit of organic demand and Launchpad savings was partially offset by higher personnel costs.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Inmatee remains on track to be slightly accretive for full year 2025. Now I will review the segment performance of Biopharma Laboratory Services or BLS. Revenue for the quarter was $721,000,000 an increase of 1.5% compared to last year, due to an increase in organic revenue of 2.6, partially offset by foreign currency translation of 1.1%. Excluding currency, early development revenue growth was approximately 5%, while central lab revenue growth was approximately 2%. As expected, the central lab growth rate was low in Q1 twenty twenty five, as we had a large amount of COVID vaccine and therapeutic revenue in Q1 of twenty twenty four.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Our segment quarterly book to bill was strong at 1.13, bringing the trailing twelve month book to bill to 1.07. BLS adjusted opening income for the quarter was $107,000,000 or 14.8% of revenue, compared to $100,000,000 or 14.1% of revenue last year. Adjusted operating income and margin increased due to organic demand and Launchpad savings, partially offset by higher personnel costs. We ended the quarter with a backlog of $8,200,000,000 and we expect approximately $2,600,000,000 of this backlog to convert into revenue over the next twelve months. Now I will discuss our updated 2025 full year guidance, which assumes foreign exchange rates effective as of 03/31/2025 for the remainder of the year.

[Julia Wang, EVP & CFO at Labcorp Holdings]

The Enterprise guidance also includes the impact from currently anticipated capital allocation utilizing free cash flow for acquisitions, share repurchases and dividends. We are operating in a dynamic macro environment and there are a series of regulatory developments that we continue to monitor closely. Our guidance has taken into account various scenarios of the ever changing tariff and regulatory landscape. Based on what we believe to be the most likely scenarios at this time and the resilience of our businesses, we are reaffirming our Enterprise revenue and free cash flow guidance while raising the midpoint of adjusted EPS. Enterprise revenue growth guidance remains 6.7% to 8% compared to 2024.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Diagnostics continues to perform well. Consistent with prior guidance, we expect Diagnostics revenue to be up 6.5% to 7.7 compared to 2024. We still expect BLS revenue to grow 3% to 5% compared to 2024. This includes the negative impact of 30 basis points from foreign currency. Prior guidance included a negative impact of 140 basis points.

[Julia Wang, EVP & CFO at Labcorp Holdings]

We continue to expect Enterprise margins to be up, with margins improving in both Diagnostics and BLS in 2025 versus 2024, driven by top line growth and Launchpad savings. Our guidance range for adjusted EPS is $15.7 to $16.4 with an implied growth rate at the midpoint of 10%. As compared to prior guidance, we have narrowed the range and raised the midpoint by $05 Our free cash flow guidance range is $1,100,000,000 to $1,250,000,000 unchanged from prior guidance. And due to normal seasonality, we expect it to be weighted towards second half of the year. In summary, we had a solid first quarter with a dynamic macro environment.

[Julia Wang, EVP & CFO at Labcorp Holdings]

We expect to drive continued profitable growth and strong free cash flow generation that will be used for acquisitions that support our strategy and supplement our organic growth, while also returning capital to shareholders through our share repurchase program and dividends. Operator, we will now take questions.

[Operator]

Thank you. And our first question comes from Michael Cherny of Leerink Partners. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Michael.

[Michael Cherny, Senior Managing Director & Senior Research Analyst at Leerink Partners]

Good morning, Adam. Thank you so much for taking the question. Maybe just I'll just have one here and it's tied to the BLS segment on both Central Lab and early development. Obviously, there's a lot of noise and volatility tied to the changing administration, tied to changes of the FDA. As you progress through the quarter and as you think about what's embedded in your guidance now, how much variability versus what you'd expect to be normalized demand is incorporated there?

[Michael Cherny, Senior Managing Director & Senior Research Analyst at Leerink Partners]

And are you seeing any feedback on either central lab or early development, any pushback relative to awards to starts based on the uncertainty that's clearly been created by the current administration?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, no, thank you for the question, Michael. And what I start off with, if you look at the BLS business, we had about 3% growth overall, and it was about 2% in CLS and about 5% in early development. And what we saw was continued strength in the book to bill. So the book to bill actually was a 1.13 for the quarter and the trailing twelve month increased to 1.07. So we feel good about where we are right now.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

When you look at the range that we gave for the revenue, we gave 3% to 5% with a midpoint of 4%. You could have said, well, with exchange, why did you not increase the range? The reason we didn't increase the range is because there is some unknowns in the landscape to which you acknowledged and brought up. So wanted to give ourselves room within the range. If foreign exchange stayed right where it is today and we didn't see any additional impact from some of the things in the macro environment, we'd end up at the high end of the range, the highest end.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

If we see some of these other things like a delay in study starts due to getting regulatory information in a timely way, well then that could bring us more towards the midpoint of the range or maybe below the midpoint of the range. So we feel like with the range that we gave, it takes into account the various different things that could occur within the landscape with the midpoint being what we think is most likely. So I really believe that we have room within the range for things that could occur. As we sit here today, we have not seen study delays. We have not seen studies that have not progressed.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We saw one larger cancellation for a COVID trial in our book to bill, but you can see from our strength of our book to bill, we more than overcame that one trial. But other than that, it seems to be steady as we go at the moment. But we'll continue to monitor it. It is a very fast moving environment, but I feel good about where we are and what the range is.

[Operator]

Thank you. And our next question comes from Ann Hynes of Mizuho. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Ann.

[Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group]

Hi, good morning. You were saying that you have tariffs now embedded in guidance, which I don't believe was an original guidance. Can you let us know how much tariffs now are embedded in guidance? And I'm assuming that implies the underlining operations are doing better than your initial expectations.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, thanks, Jen. So as I think about the tariffs, first of I'd say we are well positioned and we expect to continue to deliver on the commitments that we put forward. First and foremost, we built duplicative and flexible supply chains that I think really helps and improves our resiliency. There will be some impact from the tariffs, but our guidance range includes what we think are the most likely scenarios. But just to give you some context, Anne.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So the vast majority of our vendor spend is from importer of record. If you look at our contractual arrangements with secured pricing, it represents more than 80% of our spend. Many of these deals are multi year contracts. So some of them come up every year for renewal. We're gonna work on our supplier community.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We're gonna negotiate hard and accordingly. If you look at items that we buy directly from countries like China, they're mostly plastics, consumables, supplies, stuff like that. But it's minimal today. And we are looking to shift to more favorable countries as best we can. And I think we have a pretty good path forward for that.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

If you look at biopharma and you look at central labs in particular, there is some impact from kits moving in and out of The United States. But a lot of that's transportation and a lot of those costs can be typically put through pass throughs, which is gonna help us manage it. As I look at the range of different possibilities within what we think are most likely scenarios through continued expense focus, continued focus on our operations, we think we'll be able to offset the impacts from the tariffs. And that's why we felt comfortable with the guidance that we gave for revenue of 6.7% to 8% with a midpoint of 7.5% and holding to that. And we feel comfortable and actually raise the bottom end of our adjusted EPS based upon that strength.

[Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group]

Great, thanks.

[Operator]

Thank you. And our next question comes from Erin Wright of Morgan Stanley. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Erin.

[Erin Wright, Senior Healthcare Equity Research Analyst at Morgan Stanley]

Hey, good morning. Could you break down a little bit in terms of your expectations on underlying organic growth across Diagnostics business for the balance of the year? How much is from acquisitions versus organic? And has anything changed in terms of your expectations there in terms of underlying utilization trends? And if I could also ask more of a housekeeping one, but how did that weather impact of Tencent you previously alluded to actually shake out relative to your expectations?

[Erin Wright, Senior Healthcare Equity Research Analyst at Morgan Stanley]

Thanks.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, no, thanks Erin. So in general, we still expect about half to come from organic and inorganic. If you look at the first quarter, organic growth was 1.6%. But if you just adjusted for weather and the revenue day, it would have been 3.5%. And therefore, think it would be more of what you would expect typically.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

I don't know if Julie, if you want to provide some additional context there.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Absolutely. Good morning, Erin. So we were pleased with our results for the Diagnostics business in the first quarter. As you've seen in our release, we grew revenue about 6% in the quarter versus a year ago, which was supported by strong volume growth of 3% and favorable price mix impact of 3%. As Adam just shared, if you were to neutralize the unfavorable impact of additional weather as well as the one less revenue day, the organic revenue in the quarter would have grown about 3.5%, which was in line with our historical trend as well as our expectation going forward for 2025.

[Julia Wang, EVP & CFO at Labcorp Holdings]

If you just anchor ourselves against the organic revenue growth reported in the quarter of 1.6%, organic volume was 0.9% of growth. Once again that was impacted by one less revenue day and weather. The organic pricemix was up 0.7%, primarily due to higher tests per session and increased lab management agreements. If you neutralize the impact of weather as well as the one less revenue day, the volume to price mix growth contribution would be approximately three:one ratio, once again in line with our historical trend. Now looking forward, we are pleased about the trajectory of the emitting integration.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Once again, as Adam shared in the prepared remarks, we continue to expect that business to be slightly accretive in earnings for full year 2025. And we have reaffirmed the revenue guidance for the full year for Diagnostics to be between 6.5% to 7.7%. And we look forward to expanding the margin for the business as well versus 2024, which will contribute to our expectation that we will look to expand the enterprise margin for 2025 versus 2024 as well.

[Erin Wright, Senior Healthcare Equity Research Analyst at Morgan Stanley]

Great. And if I could ask a follow-up on the policy front and regulatory front, we obviously got the LDT favorable rule there. But on PAMA versus PAMA reform, what are your latest thoughts in terms of timing and magnitude? Obviously, this is degrees of positive from the original PAMA methodology, but how big of a difference will that be?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

First of all, we were very pleased with the court ruling regarding LDTs. As I said before, it wasn't a significant impact to us in terms of revenue nor expense because we were doing a lot of the work by submitting to New York State already. But I felt that it would really impact innovation in getting tests to patients as quickly as possible. So I think that we ended up in a good place there and I think it would enable us to meet patients' needs in the marketplace. As I look at PAMA, for the last five years, we've been trying to get legislation in place that makes more sense than the current legislation.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And we have support from Republicans and Democrats, and we've had that for five years now. But unfortunately, we haven't gotten legislation through, which has led to each year a delay. We'll work with our trade group, ACLA, to continue to see if there's better legislation that can be passed. We'll continue to work hard to see if that can be done. At the same time, we'll try to find ways to look for additional delays.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

But I continue to put in our base case that each year, the next year, PAMA will come. So I assume in January of next year, there'll be an impact from PAMA. That that impact could be around $100,000,000 for the full year. And we'll build a plan that makes us successful despite that. If you look at our three year guidance that we provided a bit ago, that included an impact from PAMA.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So we have always anticipated that in our base case that it would be coming and planning around that. So we'll continue to do so, but we'll do everything in our means to get better legislation passed or to get another delay.

[Erin Wright, Senior Healthcare Equity Research Analyst at Morgan Stanley]

Okay, great. Thank you.

[Operator]

Thank you. And our next question comes from Elizabeth Anderson of Evercore ISI. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Elizabeth. Hi,

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

good morning, Adam. Thanks so much for the question. I noticed you guys mentioned a couple of times higher personnel costs in the quarter. And I just wanted to clarify, is that something that you're sort of seeing overall? Or was that specifically a function of the revenue sort of day and cost day impact in the quarter?

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

And any one timers just to point out on the 2Q that you would call out right now? Thank you.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, no, thanks Elizabeth. So when we talk about higher personnel costs, it's just the inflation of personnel, which we expect every year to be 3% to 3.5%. And we work hard with our Launchpad initiative to offset that. So nothing other than what would be typical in the normal range of higher personnel costs due to inflation.

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

Okay, that's super helpful. And any one time items you would call out so far, particularly impacting the 2Q outlook or, you know, so far that seems to be on track.

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

Okay, perfect.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Nothing to call out.

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

Great, thanks.

[Operator]

Thank you.

[Julia Wang, EVP & CFO at Labcorp Holdings]

And our diagnostic volume continues to perform well into April, which continues the strength of what we saw in March. So we are very encouraged by that.

[Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore]

Okay, great. Thank you.

[Operator]

And our next question comes from Lisa Gill of JPMorgan. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Lisa.

[Lisa Gill, Managing Director at JP Morgan]

Good morning, Adam and Juliet. Thanks for taking my question. Adam, I just want go back to your earlier comments when we think about potential changes on the FDA side. There's been some talk on the early development side of the business around animal testing. Can you maybe just remind us in early development, how much of the business is today with animal testing?

[Lisa Gill, Managing Director at JP Morgan]

And if that were to change, what the potential impact would be?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, so I'll start with some context, Lisa, and then I'll provide some additional information. So as we look at non animal testing, we've always said that as soon as the market can move to that, we'll be very supportive. In fact, we have about 90 PhDs or MDs that are working all day every day to try to find non animal models to move forward with. As we think about that, that will become a bigger business over time, and we want to be part of that business over time. Of course, we'll continue to work with regulators, and we're committed to complying with all regulatory compliance guidelines in the research that we conduct.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

There's currently no full replacement for animal models in research and development that we're aware of. But we're gonna continue to work to find ways to do that. So there's no doubt that any new guidance would have to be implemented over time, of which we'll collaborate and work with the folks over time. When you look specifically about the animal testing that they were looking at impacting the monoclonal antibodies in the beginning, that's roughly ten to fifteen percent of our total revenue, so it's not a big piece of our BLS business. And I think for other parts to move to non animal models, it's just gonna take a lot longer.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So I would summarize it to say we don't expect any significant impact this year. We're gonna work on non animal models with regulators. As soon as they're ready, we're ready. We want to be part of that business into the future. And if monoclonal antibodies were the first place to move, then it would not be that big of an impact of our total business.

[Lisa Gill, Managing Director at JP Morgan]

So just so I understand it,

[Lisa Gill, Managing Director at JP Morgan]

so it'd be 10%

[Lisa Gill, Managing Director at JP Morgan]

to 15% of the operating profit of BLS. And so if I think about it for the total enterprise, it would be single digit, right? Is that the way to think about it?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Well, so that's of revenue, and operating profit will be less than that. And then it would be very small, very, very small in terms of the total revenue for the company.

[Lisa Gill, Managing Director at JP Morgan]

Perfect. Thank you so

[Lisa Gill, Managing Director at JP Morgan]

much.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Sure.

[Operator]

Thank you. And our next question comes from Jack Meehan of Nephron Research. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Jack.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Good morning. Hope you're doing well. I wanted to follow-up on your comments around Invitae traction toward getting to accretive for slightly accretive for the year. In the quarter, think the math you laid out implied between Invitae and weather was about a 30,000,000 EBIT impact to the DX segment. I was wondering, could Invitae have been around $20,000,000 And then maybe just talk about like how do you get that to be a positive number later in the year?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yes. So I think it's less than that, but I'll have Julia talk about that specifically. I just wanna give some context to Invitae. The integration is going very well. In fact, I'd argue it's going better than what I had even anticipated.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And we continue to make a lot of progress. As we think about the full year, we still expect the revenue growth is going be over 10%. And we've said that we believe women's health, autoimmune disease, oncology, and neurology represents opportunities to have outpaced growth versus the overall diagnostic market, we believe that this is a piece of that. And this is another proof point to show that when you're in women's health or in oncology, you can get faster growth. So I feel very good about the revenue.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

I feel very good about the integration. We remain on track to have Invitae accretive for the full year. And when you look at the way in which we've gone after the expenses, we've been very methodical. We've taken the best of the best approach. We take the best science, the best customer interactions from either LabCorp or Invitae, and then we apply it across the organization.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So it's taken us a little bit longer to get the costs out than we typically would see. But it's going very well, and that's why I'm confident to reiterate that we believe it will be accretive for the full year.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Yes, the only additional color I would add is as it relates to the impact in the quarter. So what we shared was, if you look at our enterprise AOI in the quarter, you saw a 20 basis point decline versus a year ago, and the major drivers were a combination of E and VT and weather. When you exclude those two items, the enterprise margins would have been up about 60 basis points. Now as Adam reiterated earlier, our expectations as we progress throughout 2025, you'll start seeing in May be shifting from a loss to an accretion, particularly in the second half, so much that for the full year, we expect the in May be to be slightly accretive. That's the impact of the in May.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Okay. Thank you. And then maybe as a follow-up, just on lab M and A, how do you how would you characterize the environment right now? And you have leverage at two and a half times. You're integrating a lot

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

of deals you've done over the last year. Just how should we expect kind of the

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

pace of activity throughout the rest

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

of Thank you.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So I would say the pipeline remains very strong. And I would say with some tariff implications to hospital systems, as well as some of the other things they could be facing in the macroeconomic landscape, we're actually seeing more outreach to us to actually have discussions. As you recall, some of these discussions take a very long time. Some of them go in a shorter time than others. But over time the pipeline looks really good.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And I would expect we'll have more to share with you as we go through each quarter this year.

[Jack Meehan, Equity Research Analyst at Nephron Research LLC]

Thank you, guys.

[Operator]

Thank you. And our next question comes from Luke Sergott of Barclays. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Luke.

[Luke Sergott, Analyst at Barclays Capital]

Good morning. Thank you. Just wanted to dig in a little bit on the diagnostic operating margin expansion just laid out there from Invitae. But I was hoping you can dig in there a little bit on the puts and takes or bucket out the individual components for what's driving OMX for the year. So you talked a little bit on OMVTA, but if you could talk about how the recent M and A contributes, maybe some of the tariffs or tariff offsets, the core improvements from the e claims, your pricing mix, just the underlying assumptions based on that OMX assumption.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yes, I'll start with, if you look at the operating margin for diagnostics, it was down 60 basis points. That was due to a VT weather. If you adjust for that, it would have been up 50 basis points. We still expect margins to actually be up this year versus last year when you look across the year. So that tells you we see strength in the diagnostic business margins as we go through the year.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

A lot of that is the overlap of Invitae. Once we overlap that and it becomes accretive, it actually helps us with the margins overall. The second thing is we continue to focus on our Launchpad initiatives where we take out between 100,000,000 to $125,000,000 and a lot of that still comes out of the diagnostic business. So we continue to see benefit there. And we're continuing to see some benefit from mix in terms of esoteric testing as well.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

All those things give us reason that we expect the margins to increase and get better as we go through the year.

[Luke Sergott, Analyst at Barclays Capital]

Great, and then just a follow-up here and go back to the BLS booking strength. You know, there's the overhang or the thought from pharma tariffs coming on that could initiate another round of restructurings. Interested in what you guys are hearing from your various customer bases across biotech, large pharma, how they're thinking about the tariff and if there's you think that there's more pipeline rationalization or R and D cuts that are still that could be on the come.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So as I look at that, I look at our central laboratory business first. And I look at our central laboratory, most of that is phase two, phase three trials. And I think that's the last place pharma would ever go to reduce cost because the phase two, phase three is the future growth, the future pipeline. So I feel good about the pipeline as I look at the CLS and I look at the book to bill. We continue to have good RFPs in early development.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Our win rate continues to do well and the book to bill continues to look good. But that's an area we'll have to continue to watch closely because I think that could be impacted more by some of the things that you mentioned over time. But we have and we continue to work towards getting a larger mix of business and early development from mid to larger size pharma. And I think as we shift that mix, it'll serve us well over time as well.

[Luke Sergott, Analyst at Barclays Capital]

Great, thanks.

[Operator]

Thank you.

[Operator]

And our next question comes from Kevin Caliendo of UBS. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Morning, Kevin.

[Kevin Caliendo, Managing Director at UBS Group]

Morning, Adam. Good morning, Julia. Thanks for taking my question. I want to talk a little bit about the margin and diagnostics again just a little bit further. I know you've touched on it a bit here.

[Kevin Caliendo, Managing Director at UBS Group]

If we think about the first quarter, '60 basis points net of Invitae being better, 60 basis points net of Invitae, net of weather. Is the weather number a net number or just the number for the quarter? Because presumably there was weather in 1Q24 as well, right?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

It's a net number. Yeah, it's a net number, Kevin. Yes.

[Kevin Caliendo, Managing Director at UBS Group]

Fantastic. That's super helpful. So then if I think about what's going on and the fact that March, the strength in March goes into April, as Julia mentioned, and we think about the improvement in margin year over year for 2Q, because I don't think there was any weather comp or anything else in 2Q. Should we be thinking about a year over year margin improvement with Invitae getting a little bit better that maybe you could see is that 60 basis points sort of the baseline on a year over year basis that we'd be thinking about for 2Q? And is that like a progression over the year?

[Kevin Caliendo, Managing Director at UBS Group]

Is that how we should think about it net net?

[Julia Wang, EVP & CFO at Labcorp Holdings]

Yes. So thank you for the question. Don't guide to the quarter. But directionally, your thought process is reasonable. Typically, you see Q2 being a strong quarter definitely from a top line standpoint.

[Julia Wang, EVP & CFO at Labcorp Holdings]

And then to your point, as we continue to make progress towards shifting INVATE to be accretive, obviously, that would help the overall margin for the diagnostic business in particular. So the thought process once again is reasonable.

[Kevin Caliendo, Managing Director at UBS Group]

Fantastic. Thank you very much.

[Operator]

Thank you. And our next question comes from Michael Ryskin of Bank of America. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Michael.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Good morning. Thanks for the question, Adam. Just want to go back to your BOS comments earlier a little bit, the reduction in FX headwind, but you're sort of absorbing that given some of the macro uncertainty. I mean, that certainly makes sense. But just you haven't seen anything yet.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Obviously, you talked about the strong book to bill in the first quarter. It doesn't seem outside of that COVID contract that you called out that you've seen any weakness. Sort of

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

how did you

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

approach that resetting guide? Is it anything that's come up in conversations with customers? And I guess sort of what are you monitoring as you go through the year to assess the health of that end market? Is it the evolution of tariffs? Is it something on the policy front?

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Is it biotech funding? Just sort of walk us through what you see as the leading indicators there.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, no, thanks for the question. And I want to provide some context to the BLS business, and in particular with the central laboratory business. So we had expected that the first quarter would be the lowest growth rate when we compared to the remainder of the year. And the reason that was is because we saw strength in the first quarter of last year. If you go back to first quarter of twenty twenty three, saw some, or 2024, we saw some real strength.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Within that strength was about $18,000,000 of COVID vaccine and therapeutic rev. That was about the same, frankly, as the first quarter of twenty twenty three. So first quarter of twenty twenty four was about the same as first quarter of twenty twenty three. In 2025, we had virtually zero COVID related work. So it's not a big delta when you compare that to the broader CLS business, but it gives you a sense of the underlying growth rate and impact.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So as I look at the BLS business, the first quarter we expect it to be the toughest compared to last year. As I look at the rest of the year, we continue to expect the business to grow better, and that's why we feel confident in the 3% to 5% guidance range. The reason we didn't raise that range based upon current Forex is for multiple reasons that we can see pushes and pulls. What I'm looking for is do the trials start on time that we expect the trials to start? They have up until now, but we've heard some noise about how fast people are getting regulatory input to some of their trials.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And we want to make sure that the trials start on time that they get the input that they need in order to start those trials on time. So we're going to watch that very carefully. We'll watch the impact of tariffs. And do people change where they're running some of these trials in different parts of the world and do we have to make some adjustments. So we'll watch that as well.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And then we'll continue to watch our early development business where up until now the signs are strong. But we're gonna watch that for biotech funding and so forth. So the reason we didn't change the range is because I believe that if Forex stayed where it was today and everything continued to go well, we'd be at the highest end of that range. If things get a little bumpy in terms of timing of trial starts, I don't think it's gonna impact whether the trials go on or not, but it could impact the timing, well then it could bring you back more towards the midpoint. Foreign exchange could change.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

We've seen it be very dynamic in the marketplace. So we didn't wanna make a change based upon Forex that we've seen kind of bumping up and down so fast in the marketplace. So for all those reasons, we felt confident to confirm the 3% to 5% guidance range with the 4% midpoint.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Okay, that's really helpful. Appreciate that color. Just a quick follow-up on that. Any change in your expectations on pricing? Or have you had any early conversations on maybe customers being a little bit more price sensitive?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

The customers are always going to be price sensitive. I think with some of the issues that everybody is facing, we're all more price sensitive than we are today. We're being harder on our suppliers than we typically can and I would expect that our customers will be hard on us as well. But with all that said, as we sit here today, most of our business is a backlog driven business with studies that are already under contract and so forth. So I feel pretty good about where we are as we go through this year.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

And then we'll continue to look for ways to reduce costs and to offset any pressure that we face. And that's why I feel confident not only in the guidance that we provided, but the fact that we expect that margins will improve this year in both the biopharma laboratory business and diagnostic business versus last year. Because we'll continue to find ways to offset any of those pricing headwinds with additional cost reductions and other things.

[Michael Ryskin, Managing Director at Bank of America Merrill Lynch]

Great. Thank you.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Thanks.

[Operator]

Thank you.

[Operator]

And our next question comes from Patrick Donnelly of Citi. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Hi, Patrick. Good morning.

[Patrick Donnelly, Managing Director at Citi]

Hey, Adam. How are you?

[Patrick Donnelly, Managing Director at Citi]

Thanks for taking the question. Maybe one, I know you just talked about BLS pricing a little bit. On the lab side, can you talk about the conversations there? I know pricing has been a little bit more firm on your guys' side. Do the tariffs change anything?

[Patrick Donnelly, Managing Director at Citi]

Are you guys having different pricing conversations, looking to pass anything on? Just curious what those conversations have looked like recently.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, a lot of our business is contracted, but every year there's new contracts that open up. Most of the contracts are multi year contracts in the diagnostic business. But even the ones that are opening up, we're still having very good constructive dialogue. Price has been relatively flat for us. What we're looking for is to improve our volume, which we've seen organic volume growth, and we're going to continue to focus on that volume growth.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

But I would say we have very good payer access, we have very good managed care access, we have very constructive dialogues with the payers. So as I sit here today, I feel very good about where we are and the discussions that we're having and the strength of the business overall.

[Patrick Donnelly, Managing Director at Citi]

Okay. And then just a quick follow-up on Mike's question there on the pacing of BLS. I know Central Lab, basically a backlog business as you look at this year. So in terms of your answer, it sounds like it's just a matter of when these trials take off, they're all

[Patrick Donnelly, Managing Director at Citi]

in the backlog, do some of

[Patrick Donnelly, Managing Director at Citi]

them slip or not is going to be the delta in terms of the guidance range. Is that the right way to think about it?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

That's a big part of what we're watching. Like I said, there was one trial that was canceled. It was a COVID related trial, but that's in our book to bill and you can see the strength of our book to bill. Would have been even stronger if that didn't get delayed. So I think COVID trials we've seen a little bit different than other trials to be frank, but we don't have many of those in our book to bill any longer.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

It's all non COVID related work. So the question to me is more of a timing issue. Do the sponsors get the information they need from the regulatory agencies in order to feel comfortable that their protocols will suffice in order to get approval of the product. It's not whether they'll get the comments, it's how quickly and will it be on time. At this point, we've not seen any issues, but it's something we'll watch.

[Patrick Donnelly, Managing Director at Citi]

Understood. Thank you, guys.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Thank you.

[Operator]

And our next question comes from Eric Coldwell of Baird. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Eric.

[Eric Coldwell, Senior Research Analyst at Baird]

Thanks. Good morning. Just a couple of clarifications or add ons here to other Q and A that's happened. On the central lab COVID comp, in Q1, are there additional COVID comps throughout 2025 that we should be aware of?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, no, that's a great question, Kevin. I'm sorry, Eric. And I wanna start off, Eric, by saying that, when I think about the COVID vaccine related works, in general, it's not a big number. It's about $18,000,000 We did $18,000,000 last year. We did $18,000,000 the first quarter the year before.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

This year we did virtually zero. So it's just in the context of the growth rate, we thought it was good to point that out. But in terms of $18,000,000 on a base of 500 some odd millions, it's not a huge number. As I look at the rest of this year, if I assume I have zero for the rest of this year, I had about 18,000,000 for the whole rest of last year. So it was 18,000,000 in the first quarter last year, and then the next three quarters was 18,000,000.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So you figure for the rest of this year, it's zero versus $18,000,000 spread out over three quarters last year, just to give you that context.

[Eric Coldwell, Senior Research Analyst at Baird]

Perfect, that's helpful. And then I know you've mentioned a few times the COVID cancel in Central Lab, and you've talked about the book to bill would have actually been better absent that of course, would you care to quantify that cancellation?

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So we don't typically give numbers, I would say it was slightly larger than about $100,000,000 So just give you a round number of where it was about.

[Eric Coldwell, Senior Research Analyst at Baird]

So a very strong book to bill excluding that.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yes.

[Eric Coldwell, Senior Research Analyst at Baird]

Yeah, okay. And then last one, thank you for all this. You've done a lot of discussion on tariffs and how you're planning to offset and absorb them, is very encouraging. I am curious if you'd be willing to give us a ballpark gross estimate of what kind of headwind you need to absorb? Is it a 1% enterprise revenue kind of impact, 2%, something less than that?

[Eric Coldwell, Senior Research Analyst at Baird]

I'm just trying to get a sense on how much you actually think you need to absorb at this point.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, so Sarka, I don't wanna give a specific number because we have a whole range of scenarios, to be honest with you. And what I've done with my team, looked at the low end, I've looked at the high end of kind of the most likely scenarios. I mean, there's crazy scenarios that could take you down a path one way or the other that we don't think are likely. But within that likely scenario, what we're doing is I'm planning for the worst of the most likely scenarios, and I'm hoping for the best, and it gives me a little bit of breathing room. So what I would tell you versus others in other industries, ours is a relatively small impact.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Because when you think about 80% of our spend being under contract and you think about the majority of our spend coming from The US, you could get to a number that's relatively manageable under all those scenarios.

[Eric Coldwell, Senior Research Analyst at Baird]

Very good. Thanks again. Appreciate it.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Sure. Thanks, Sarah.

[Julia Wang, EVP & CFO at Labcorp Holdings]

Thank you.

[Operator]

And our next question comes from Pito Chickering of Deutsche Bank. Your line is open.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Good morning, Pito.

[Kieran Ryan, Analyst at Deutsche Bank]

Hi there. You've got a Kieran Ryan on for Pito. Thanks for taking our questions. Good morning. I don't have much left here, but I know the I know it's still pretty limited visibility, but I was just wondering if you have any any thoughts or comments around, any potential impacts to your business from some of the changes to Medicaid or ACA exchange subsidies that are being discussed?

[Kieran Ryan, Analyst at Deutsche Bank]

I know Medicaid and Medicare are only, I think, 10% of your diagnostic revenues, so not very large. Any comments you have would be helpful. Thank you.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Yeah, what I would say is that together they're about 10%. As I think about the business there, we've seen switching between so many different parts of the healthcare system, whether it be Medicare to manage Medicaid, to Medicare, and we've seen lots of movement. Under those scenarios, we continue to do well. Where I worry would be if there was a significant number of uninsured people that had to pay out of their pocket. Now I don't think that's likely.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

I don't think that would be tenable for the states nor for the federal government. But that's where I'd be more worried than seeing a shift between Medicaid, Medicare, managed Medicaid, or going into private plans. I think all those other things are manageable. And they have different pushes or pulls. Some you have more tests per accession, some of have a higher price per test.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

So I think the pushes and pulls offset themselves to some degree. As long as people have insurance or coverage, I think that in those scenarios we do really well.

[Kieran Ryan, Analyst at Deutsche Bank]

Thank you.

[Operator]

You. This concludes the question and answer session. I would now like to turn it back to Adam Schechter for closing remarks.

[Adam Schechter, President, CEO & Chairman at Labcorp Holdings]

Well, thank you all for joining us today. We look forward to discussing the business with you in the future. Hopefully you walk away realizing that our diagnostic business remains very strong. Our BLS business remains strong as well, and that we are committed to our patients and to our shareholders alike. So I hope you have a great day and we'll talk to you all soon.

[Operator]

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

Participants

Executives

• Adam Schechter, President, CEO & Chairman

Analysts

• Christin O'donnell, VP - Investor Relations at Labcorp Holdings
• Julia Wang, EVP & CFO at Labcorp Holdings
• Michael Cherny, Senior Managing Director & Senior Research Analyst at Leerink Partners
• Ann Hynes, Senior Healthcare Services Equity Analyst & Managing Director at Mizuho Financial Group
• Erin Wright, Senior Healthcare Equity Research Analyst at Morgan Stanley
• Elizabeth Anderson, Senior Managing Director and Research Analyst at Evercore
• Lisa Gill, Managing Director at JP Morgan
• Jack Meehan, Equity Research Analyst at Nephron Research LLC
• Luke Sergott, Analyst at Barclays Capital
• Kevin Caliendo, Managing Director at UBS Group
• Michael Ryskin, Managing Director at Bank of America Merrill Lynch
• Patrick Donnelly, Managing Director at Citi
• Eric Coldwell, Senior Research Analyst at Baird
• Kieran Ryan, Analyst at Deutsche Bank