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F500-2021-218-Laboratory Corp. of America

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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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Q4 2024

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 LabCorp's Fourth Quarter twenty twenty four Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kristen O'Donnell.

Thank you, operator. Good morning, and welcome to LabCorp's fourth quarter twenty twenty four conference call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schechter, Chairman and Chief Executive Officer and Julia Wang, Executive Vice President and Chief Financial Officer. This morning, in the Investor Relations section of our website at www.labcor.com, we posted both our press release and an 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 spin off of Fortria Holdings Inc, 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 from 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 K and subsequent quarterly reports on Form 10 Q and in the company's other filings with the SEC.

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

Thank you, Kristen. Good morning, everyone. We appreciate you joining us as we review our 2024 performance and share our outlook for 2025. Today, I'm also joined by Julia Wen. Julia joined us as Executive Vice President and CFO this past December.

As you know, Julia succeeded Glenn Eisenberg following his retirement announcement. Julia and I have hit the ground running and Julia's experience in both diagnostics and pharmaceuticals combined with our strong financial expertise have already been very valuable to LabCorp. In 2024, our market leading diagnostics and biopharma laboratory services businesses made meaningful advances in our strategy through organic growth, transformative acquisitions and through continued commitment to science, innovation and technology. Looking back in 2024, we executed well on our strategic priorities. We furthered our role as a trusted partner to hospitals and health systems and to regional local laboratories by closing or signing 10 transactions.

We advanced our position in key high growth markets, including oncology, women's health, neurology and autoimmune disease. And we introduced new important diagnostic tests to meet significant unmet medical needs. We expanded our leadership in genetic testing solutions through our acquisition of select assets of Invitae. Our clients now have access to Invitae's cutting edge science and genetic testing solutions to guide personalized treatment recommendations for oncology and rare disease patients. We advanced the development of Plasmidetect, an assay that uses whole genome sequencing and a proprietary machine learning analysis to detect MRD.

Plasma Detect is in 12 global trials across several tumor types. We expect to move into clinical use in 2025 in The U. S. With an early experience program for academic medical centers beginning with colorectal cancer. We launched LabCorp Global Trial Connect, a suite of central laboratory solutions aimed at increasing the speed of clinical trials and investigator sites.

Turning now to our fourth quarter financial results. We performed very well across diagnostic laboratories and biopharma laboratory services, driven by strong underlying demand and advancements in science and technology solutions to better serve the needs of our customers. Revenue in the quarter was $3,300,000,000 an increase of 10% compared to the fourth quarter of twenty twenty three. Diagnostics and biopharma revenue each grew by approximately 10% in the quarter. Enterprise margins were down 40 basis points due to the expected impact of Invitae, which we referenced in our previous earnings call.

Adjusted EPS of $3.45 was up 5% year over year. Free cash flow from continuing operations was $665,000,000 As we look ahead to 2025, we expect enterprise revenue growth of 6.7% to 8% and improving margins across both diagnostics and biopharma. We also expect an adjusted EPS range of $15.6 to $16.4 which represents an implied midpoint growth rate of 10%. Additionally, we expect free cash flow to grow in line with our earnings. In just a moment, Julie will provide more details on our results and our 2025 guidance.

Turning to highlights of our enterprise strategy in the quarter. First, we advanced our leadership position as a partner of choice for hospitals and health systems and regional local laboratories. In November, we completed the acquisition of the select assets and molecular testing location of LabWorks, enabling broader access to comprehensive testing and laboratory services in Alabama. In December, we completed the acquisition of Select Outreach Laboratory Services for Ballad Health in the Appalachian region. In January, subsequent to quarter end, we announced a strategic collaboration with New Jersey based Inspira Health to manage the operations of the health systems hospital laboratories and to serve as the primary lab for Inspira's physician network.

As we look ahead to 2025, our pipeline remains strong and we look forward to supporting more health systems and to expanding access to LabCorp's world class diagnostic solutions. We also made several advancements in science, innovation and technology in the quarter. As part of our focus on autoimmune disease, we lost a multiple sclerosis monitoring profile used to monitor neurofilament light chain serum and GFAP values in multiple sclerosis patients. Working with the CDC, we announced the commercial availability of an H5 birth flu molecular test. And we announced the availability of the first companion diagnostic assay to identify gastric cancer patients eligible for targeted treatment for people with advanced cancer of the stomach.

In addition, we continue to help consumers manage their health and well-being through LabCorp On Demand. We launched several consumer initiated tests in the quarter, including homocysteine for heart health, vitamin A, vitamin C and vitamin E. We announced several enhancements to Global Trial Connect, including sample tracking with earlier visibility into Sample's chain of custody and electronic requisition, a fully digital solution that improves workflows, efficiency and document management. We also experienced continued adoption of LabCorp Diagnostic Assistant by health system clients and their physicians. LabCorp Diagnostic Assistant brings together lab result data, clinical guidelines and EHR data to inform clinical decisions at the point of care.

New capabilities like smart trends combine information from the client's EHR with all of the patient's lab results available through LabCorp regardless of ordering provider and it brings it into a single integrated view. LabCorp Diagnostic Assistant and Global Trial Connect are just two examples of how we're harnessing our innovative testing capabilities, our VAST data assets and technology to support clinical trials and patient care. In closing, 2024 was a strong year for LabCorp as we continued to execute against our enterprise strategy and we are well positioned for continued growth in 2025. I want to thank our 70,000 employees for the hard work and dedication as we pursue our mission to improve health and improve lives. In fact, we're just named to Fortune Magazine's World's Most Admired Companies list for 2025, a testament to the efforts of our team and their dedication to our mission.

Finally, I want to personally thank Glenn for his contributions to the company during his ten year successful run as CFO. Glenn and I have worked side by side since I joined as CEO and I truly enjoyed having him serve as a key member of our Executive Committee. Ben is a remarkable CFO and a remarkable executive. He remains as a special advisor to me through the April to ensure a smooth collaborative transition that positions LabCorp to further accelerate our strategy in 2025. Please join me in wishing Glenn and his family all of the best in his retirement.

With that, I'll turn the call over to Julia.

Thank you, Adam. Hello, everyone. I want to start by sharing that I'm really excited to be with you all today. My experience across broader healthcare, including diagnostics and drug development has been very helpful as I jump started my new role. I have been truly inspired by the strength of our business fundamentals, our passionate employees and the tremendous impact that LabCorp has on the patients that we serve each and every day.

Now I'm going to focus my comments on our financials, start with a review of our fourth quarter results, followed by a discussion of our performance in each segment and conclude with an update on our full year guidance. For reference, we have also included additional business information that can be found in our supplemental deck on our Investor Relations website. Revenue for the quarter was $3,300,000,000 an increase of 9.8 compared to last year, driven by organic growth of 5.4%, the impact from net acquisitions of 4% and the foreign currency translation of 0.3%. Operating income for the quarter was $217,000,000 or 6.5% of revenue, which is 12.7% on an adjusted basis. During the quarter, we had $120,000,000 of restructuring charges and special items, primarily related to acquisitions and launchpad initiatives.

In addition, we had $16,000,000 of expense for the transition service agreements related to the spin of Fortria, with the corresponding income recorded again other income. Excluding these items and amortization of $70,000,000 adjusted operating income in the quarter was $423,000,000 or 12.7% of revenue compared to $395,000,000 or 13% of revenue last year. The increase in adjusted operating income was primarily due to organic demand and launchpad savings, partially offset by higher personnel costs. The 40 basis point decline in adjusted operating margin was due to Invitae. Our Launchpad initiative delivered savings for the full year in line with our long term target of $100,000,000 to $125,000,000 per year.

The adjusted tax rate for the quarter was 22.4% compared to 19.5% last year. The higher adjusted tax rate was primarily due to the geographic mix of earnings. We expect our adjusted tax rate for 2025 to be approximately 23%. Net earnings from continuing operations for the quarter were $144,000,000 or $1.7 per diluted share. Adjusted EPS was 3.45 in the quarter, up 5% from last year.

Operating cash flow from continuing operations was $777,000,000 in the quarter compared to $518,000,000 a year ago. The increase in cash flow was primarily due to higher cash earnings. Capital expenditures totaled $112,000,000 in the quarter. For the full year, capital expenditures were 3.8% of revenue, in line with the prior year, and we expect this to be consistent in 2025. Free cash flow from continuing operations for the quarter was $665,000,000 During the quarter, the company invested $88,000,000 in acquisitions, paid out $16,000,000 in dividends and repurchased $75,000,000 of stock.

For the full year, free cash flow from continuing operations was $1,100,000,000 The company invested $839,000,000 in acquisitions, paid out $243,000,000 in dividends and repurchased $250,000,000 of stock. We continue to have a robust pipeline of potential acquisition opportunities that meet our financial criteria and will supplement our organic growth. In addition, we continue to believe that our share repurchase program is an important part of our capital allocation strategy. The company currently has approximately $1,300,000,000 of share repurchase authorization. At year end 2024, we had $1,500,000,000 in cash, while total debt was $6,300,000,000 This higher balances are due to the pre funding of maturing debt.

The company paid down $1,000,000,000 of debt that matured on 02/01/2025. Our debt leverage as of year end is 2.2 times net debt to trailing twelve months adjusted EBITDA. Now I will review our segment performance beginning with Diagnostics Laboratories. Revenue for the quarter was $2,600,000,000 an increase of 10.2% compared to last year with organic growth of 5.1% and net acquisitions of 5.2. The BITS business was up 11.4% compared to the BITS business last year, driven primarily by organic growth of 6.2%.

Total volume increased 6.8% compared to last year. This business volume grew 7.5% compared to the this business last year as organic volume increased 4.7% while acquisitions contributed 2.9%. Price mix increased 3.4% versus last year due to organic base business growth and acquisitions, partially offset by lower COVID testing. This business organic price mix was up 1.5% compared to the business last year due to mix as we benefited from an increase in test prep session and lab management agreements. Diagnostics adjusted operating income for the quarter was $316,000,000 or 13.9% of revenue compared to $354,000,000 or 15.1% of revenue last year.

Adjusted operating margin was down 120 basis points due to EMEA and the unfavorable impact of days 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. As we look to 2025, we anticipate Invitae will perform in line with our expectations. That is, we expect Invitae revenue growth to be approximately 10% annually and to be slightly accretive for full year 2025. Now I will review the segment performance of biopharma laboratory services.

Revenue for the quarter was $767,000,000 an increase of 10.4% compared to last year due to an increase in organic revenue of 8.9% and foreign currency translation of 1.5%. Central Labs continued its strong performance with revenue growth of 10%. Early developments also demonstrated strong year over year revenue growth in the quarter, up 12%, albeit the prior year was a soft comparison. BioPharma adjusted operating income for the quarter was $131,000,000 or 17% of revenue compared to $109,000,000 or 15.7% 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 $8,000,000,000 We expect approximately $2,500,000,000 of this backlog to convert into revenue over the next twelve months. Book to bill for the quarter was $1.17 with the trailing twelve month book to bill of $1 Now I will discuss our 2025 full year guidance, which assumes foreign exchange rates effective as of 12/31/2024 for the full year. The enterprise guidance also includes the impact from currently anticipated capital allocation, utilizing free cash flow for acquisitions, share repurchases and dividends. We expect enterprise revenue to grow 6.7% to 8% compared to 2024. This includes a headwind from foreign currency translation of approximately 50 basis points.

We expect the Diagnostics revenue to be up 6.5 to 7.7% compared to 2024. This guidance assumes roughly half of the revenue growth comes from organic growth and half comes from the annualization of acquisitions completed in 2024. We expect biopharma revenue to grow 3% to 5% compared to 2024. This guidance includes a headwind from foreign currency translation of 140 basis points. We expect both the central NAS and early development to grow at the mid single digit constant currency growth rate for the year.

We expect enterprise margins to be up with margins improving in both diagnostics and biopharma in 2025 versus 2024, driven by top line growth and launchpad savings. Our guidance range for adjusted EPS is $15.6 to $16.4 with an implied growth rate at the midpoint of 10%. Our free cash flow guidance range is $1,100,000,000 to $1,250,000,000 and due to normal seasonality, we expect it to be weighted towards second half of the year. In summary, we are encouraged by the underlying strength of our business. As we move into 2025, 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.

Lastly, I want to thank Glenn, as he has been a tremendous resource during this transition. I have been really impressed by the passion and the quality of our team. And I look forward to advancing the market leading position of the company in an extremely impactful industry. Operator, we will now take questions.

Thank Our first question comes from Michael Cherky with Leerink Partners. Your line is open.

Good morning. Thanks so much for the question. And Julia, welcome to the call. Maybe if I can just ask a simple one straightforward. You talked about margins stepping up over the year year over year.

Obviously, we still have Invitae ramping over the course of the year. Can you give us a sense of what underlying margins are in terms of embedded into guidance and how you think about the push and pull on what would lead you to either the upside or the downside of the guidance range, EPS guidance range?

Sure. Michael, I'll start. And I'll start by focusing on diagnostics, right. If you look at the diagnostics business, it was very strong. The revenue grew 10.2% and it was really driven by strong organic growth of 5% and acquisitions of 5%.

If you look at the margins, the margins were about 39% of revenue when you look at AOI as a percent of revenue that's compared to 15.1% last year. The margin was down due to three things. It was down to Invitae, weather and days. The impact of Invitae was more than double each of the other two. As we look at this year, the reason we feel confident about margin expansion both businesses, not just diagnostics, but also in biopharma is because number one, we expect Invitae to be slightly accretive.

It will be diluted to margins in the first half of the year, but then when we overlap the acquisition, it will be slightly accretive for the full year, meaning it will be accretive in the second half. The second thing is, we've built in $0.1 due to weather in the first quarter and that's built into the guidance that we provided. But if there's no additional other weather things that could help us potentially with margin. And then the last thing is the number of days. So we have some real tailwinds that will help us with the margins as we come into 2025 making us feel confident.

Got it. And then just one other question, I guess, in the implications of the guidance. You're ending the year on strong mix of both organic volumes and price mix on the diagnostic side. What do you see as the environment going forward? Is there anything kind of, I'll call it, one time y in nature, but elevated versus what you would have expected on a run rate and how that factors into how you're thinking about the 2025 growth in diagnostics?

Yes. So if you look at the 2025 growth that we put for diagnostics, the range is 6.5% to 7.7%. So it's a midpoint of 7.1% growth. Now if you look at 2024 in the fourth quarter, the 10% growth, volume was up 6.8% and price mix was up 3.4%. And of our volume growth, organic was up 4% and acquisitions were about 2.8%.

At the end of the day, the volume continues to be higher than what we've seen historically. Historically, you see volume growing at 1% to 2%. You would add a little bit on to that because I do think we're gaining some market share. So over time, I would expect that the volume would come back to more in line with what we've seen historically.

Hi, Michael. Yes, the only thing I would add is when you look at the growth for our diagnostic business in 2025, our guidance is assuming half of the growth about 3.5% will be coming from our organic business and the other half will be coming from acquisitions that we've already completed in 2024. So it's a fairly balanced profile in terms of the sources of growth for 2025.

One moment for our next question. Our next question comes from Jack Meehan with Nephron Research. Your line is open.

Good morning. Adam, just wanted to start, a big story of the last year has been M and A in the lab industry. Your cash flow here is pretty strong, leverage is just over two times. Can you give us an update on how your pipeline deals look and just how active you expect to be even as you integrate everything you consummate to last year?

Yes, sure, Jack. What I first thought saying, if you look at this year, we had 10 acquisitions and it was very strong from acquisition year, particularly with the hospital regional local laboratories, but we also had the acquisition of Invitae, which was kind of one of those opportunistic acquisitions that became available to us. As I look at the pipeline, it's strong and it's impossible to know the exact number because sometimes they take three months, sometimes they take two years. But overall, as I look at the potential before us, I feel very good about the acquisition pipeline. But more broadly speaking, the way I think about our capital allocation is we first and foremost are committed to the dividend.

We then look for as many of these hospitals, local, regional laboratory deals as we can do assuming that they meet our financial criteria of being accretive in the first year, return our cost of capital in two to three years and that they're good partners that we can integrate the business well. And then we'll look into the specialty areas to see if there's anything strategic there or if there's anything strategic in the biopharma area. Then we have the authority to do additional buybacks and we have the wherewithal to add buybacks where we think appropriate. So I think we have a very balanced mix. I think we have a good pipeline of deals.

And when you look at our longer term guidance, we've actually increased the amount of revenue that we expect to come from deals. Historically, I would have said 1% to 2% of revenue. Now it's 1.5% to 2.5% and I feel good about that.

Yes. Hi, Jack. The only other comment I would add is our 2025 guidance does include the impact from currency anticipated capital allocation, essentially utilizing our free cash flow generation for acquisitions, share repurchases and dividends. The other point is, as you already commented, we did end the last year with a leverage ratio of about 2.2% in terms of 2.2 times in terms of our net debt to trailing 12 EBITDA, which clearly demonstrates that we have additional balance sheet flexibility to pursue share repurchase of M and A opportunities should attractive opportunities do emerge throughout the year.

Great. And then Julia, one for you. Just be great to hear your initial impressions since joining LabCorp. And on this topic of M and A, and Vitae was a headliner last year, just how you feel like the integration is going with that?

Yes, of course, Jack. As Adam commented earlier, I joined LabCorp in December of last year. So this is month number three for me. Let me just say that I am so happy to be here. In terms of my early observations, first of all, I'm really excited about our growth profile.

When you look at our long term guidance, you are looking at a top line growth of mid to high single digit. I have to say that this growth rate is meaningfully higher than what I would have thought the last time I worked in the industry prior to COVID. Then if you take that strong top line growth, coupled with margin expansion along with the expectation to drive adjusted EPS growth and free cash flow generation in the range of high single digit to low double digit, To me, this is truly compelling. I believe that we have a tremendous platform and opportunity to potentially create outsized returns for our shareholder. I also like our people and our culture.

What we do is grounded in science, innovation and technology. And our people are truly passionate, dedicated and focused. From a personal perspective, it is a delight coming back to this part of the country, which was essentially where I started when first coming to The U. S. Years ago to study at Duke University.

So in many ways, life has come full circle for me. So I'm really excited to be here working across both internal and externally to continue to advance our leadership position in an industry that is extremely impactful to the patients that we serve.

And Jack, with regard to the Invitae integration, it's going very well. I actually had a chance to spend time with the team in California in January. And the science, the people, the technology, the patient experience that they have is really remarkable. I was excited about the deal when we first announced it. I'm actually even more excited about it as I sit here today.

We remain on track financially. We expect the revenue to grow by more than 10% and we also expect it to be slightly accretive as we look at full year 2025, second half of the year being accretive, first half still dilutive. So as I look at that business, if I look at the integration, it's going as well as I would have expected.

One moment for our next question. Our next question comes from Lisa Gill with JPMorgan. Your line is open.

Good morning, Adam and Juliet. Just really wanted to follow-up on your thoughts around the organic growth rate for diagnostics. Adam, when we were together in January, you talked about esoteric testing being three times the typical growth rate of what we see. And then you also talked and you highlighted again today that you expect kind of normal utilization to go back to 1% to 2%. So how do I think about the makeup of the 3.5% that Julia talked about as far as organic?

How much of that is coming from esoteric? Is your underlying assumption that we go back to 1% to 2% historical utilization in that number? And then as we think about Esoteric and your relationship with Menace Care and anything changing there as far as shifting more volume to you etcetera as we think about 25?

Yes. Thank you for the question, Lisa. And when I talk about esoteric business, I then kind of subset it a little bit to look at oncology, women's health, neurology and autoimmune disease. It's in those four areas that I see the growth at three times the historical rate of diagnostics. So it's not the entire set of esoteric tests, it's that kind of subset, which is still a big portion of esoteric testing and we continue to see those growth rates faster than others.

And then when I think about the underlying market historically at 1% to 2%, a big part of it is still that there are so the market is so big. And if you look at the CAGR, it's from 2019, the volume has been in a 1% to 2% range. And I think that's just like a historical rate. With that said, I do believe that we are gaining some market share. And I think with these hospital deals, with the geography surrounding the hospitals, I think it is enabling us to grow faster than the market.

And therefore, I would expect us to continue to do that even if the market growth goes back to historical levels. In terms of esoteric testing, we continue to work with our managed care payers. I think because we have such a broad pipeline, we have 6,500 different tests available to them. It actually gives us a good mix that we can talk to them about when we speak about reimbursement. So I think having the breadth of the test profile that we have helps us.

And just one follow-up on the guidance, lab directed tests that there's supposed to be something obviously coming into play. Your trade organization currently has a lawsuit. Is that cost meaningful and could there be a meaningful shift if you're able to win the lawsuit in May?

Yes. So we forgot to lab developed test. The vast majority of what's being required to do, we actually were already doing because we submit our test to New York State for approval and that's a lot of where the cost was. So we were incurring that. There might be some other costs in terms of systems to track safety and other things, but those are kind of within the ranges that we provided, nothing that I would call out specifically, Luca.

I still think it's the wrong thing for the industry. I think it could slow down the ability to get new important tests to market for people that need them. I think it could cause some healthcare disparities where if you live around an academic medical center, you might have access to an LDT before the rest of the population. For those reasons, I don't think it's the right answer. I think the trade organization needs to work to find a better way with the administration to move forward.

At the same time, it's not a significant financial impact to us.

One moment for our next question. Our next question comes from Erin Wright with Morgan Stanley. Your line is open.

Great. Good morning. Could you characterize, I guess, the backdrop right now across biopharma? What are your expectations in terms of the underlying market into 2025? And if you could provide an update on the NHP business as well, just the supply given some of the news on that front more recently?

And just how we think about also from a margin perspective for that business in the quarterly progression, anything to think about into 2025? Thanks.

Yes. Thanks, Aaron. I'll tell you, it's nice to see the growth that we had anticipated in both of the biopharma segments. So if you look at biopharma, we had 10% revenue growth for Essential Labs. And as expected, we did see growth in early development.

Drug development actually grew 12% year over year. As I look at the guidance that we're providing for 2025, we're giving a range of 3% to 5% with a midpoint of 4% realizing that there's a significant impact in that from foreign exchange levels. As I look at that business, it remains healthy. We are a leader in both of those segments. When I start with Central Labs, I mean about 85% of the forecast comes from the backlog.

So I feel good about the forecast that we have and I feel good about the backlog that we have. As I look at early development, I look at three things. I look at the number of RFPs in dollars as well as numbers. I look at our win rate and then I look at the cancellations. If you look at the RFPs, they remain strong both in dollars and numbers.

If you look at our win rate, it remains consistent. And if you look at cancellations, although it's not back to exactly normal levels, it's at the high end of normal now. So it's come down much better than where it had been historically. So I feel good coming into the year with both of those businesses. As I think about margins, we expect margins to expand in the biopharma laboratory services business as well as in diagnostics.

And I think the expansion comes from increased volume as well as increased utilization particularly in early development. As far as NHPs, we have the supply that we need for the forecast that we provided. I feel good about our supplies.

Maybe I could add a little bit more color as it relates to the margins for the BLS segment in 2025 versus 2024. So first of all, we did share in the opening remarks that we are anticipating this currency impact to the top line, which will translate to about 140 basis points of a negative impact to the BLS revenue growth versus prior year. Therefore, when you look at the margin expansion walk through in 2025, the pace of that growth will not be as much as you saw in 2024. The other factor is the sources of our growth from a revenue standpoint from the two business lines within BLS is not going to be as heavily weighted towards Central Labs as it did in 2024. The other point that is worth noting is Q1 typically is the largest margin quarter of the year.

So you might want to take that into consideration as you think about the quarterly phasing within the year.

Okay, that's helpful. And just a quick one on regulatory. You mentioned LDTs, what about PAMA and SALSA and just the broader regulatory environment where we stand today with the new administration? Thanks.

Yes. And so with PAMA, we continue to work with our trade organization to find ways to get better legislation in place that we think is more applicable to what they were trying to achieve and a better way to actually move it forward. We've been trying that for many years now to be frank and if that doesn't happen, we'll try for a delay as has happened in the last several years. And then at the same time, we continue to just push it out a year. So in my base case, I assume PAMA is coming in 2026.

We build a plan that looks good assuming PAMA does happen and then if it doesn't happen, it looks even better. But at this point in time, we continue to work to try to find a better legislative option.

One moment for our next question. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open.

Elizabeth, good morning. Elizabeth, you there?

Hi. This is Joanna Phillips. Can you hear me?

Sorry. Yes, maybe go back to the one time items. I think you said you have $0.1 of weather impacting back in 2025 guide. So maybe what's the total weather impact for 2024? And is Revue Day and Payload Day going to be tailwind or headwind for fiscal twenty twenty five?

Yes. If you look at 2025, in January, we had about $0.1 impact from weather, and we built that into the guidance that we've already provided to you. As we also look at 2025, payroll will actually be a tailwind for us. And let's see what happens with the rest of the quarter with weather before we comment any further. But at this point, we've built in $0.1

Hi, Joanna. The only thing I would add, I definitely agree with Adam. So clearly, if you look at 2025 full year, calendar is largely not a factor. However, Q1, it will be slightly unfavorable because we expect to have one less revenue day, partially offset by one less payroll day. So you might want to take that into consideration as you work through the quarters within the year.

One moment for our next question. Our next question comes from Andrew Bragman with William Blair. Your line is open.

Labcorp Holdings (LH) Q4 2024 Earnings Call Transcript

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