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F500-2021-218-Laboratory Corp. of America

The life sciences company operates one of the largest clinical laboratory networks in the world. As many put off routine medical care during the pandemic, the company saw business decline, but according to its 10-K for 2020, polymerase chain reaction (PCR) testing for COVID more than made up for the losses.

This year's Fortune 500 marks the 66th running of the list.

The medical testing company employs nearly 65,000 people worldwide and conducts clinical research for pharmaceutical companies.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Labcorp provides laboratory services to pharmaceutical and diagnostics companies, health care and health insurance providers, governments, hospitals and health systems, patients and consumers, academic institutions, and retailers. Labcorp operates in over 100 countries and performs more than 600 million tests around the world each year.

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Labcorp Holdings (LH): Company Profile, Stock Price, News, Rankings

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Labcorp Holdings

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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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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.

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%.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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

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?

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?

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.

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.

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.

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.

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

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.

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.

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.

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.

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.

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

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?

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.

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

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.

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.

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.

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?

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.

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.

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.

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.

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

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?

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

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.

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.

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.

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

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?

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

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.

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.

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.

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?

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.

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

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?

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.

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.

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.

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.

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.

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

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

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.

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

Labcorp Holdings (LH) Q1 2025 Earnings Call Transcript

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