Labcorp Holdings Inc.

22 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. Please be advised that today's conference is being recorded. I would now hand the conference over to your speaker today, Chas Cook, Vice President, Investor Relations. Please go ahead.

Thank you, Operator. Good morning, and welcome to LabCorp's first quarter 2022 conference call. As detailed in today's press release, there will be a replay of this conference call available via telephone and internet. With me today are Adam Schechter, Chairman and Chief Executive Officer, and Glenn Isenberg, 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 an investor relations presentation with additional information on our businesses and operations projects. which include a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2022 guidance and the related assumptions, the impact of various factors on the company's businesses operating in financial results, cash flows, and or financial condition, including the COVID-19 pandemic and the general economic and market conditions, our responses to the COVID-19 pandemic, future business strategies, expected savings and synergies, and opportunities for future growth. Each of the forward-looking statements is subject to the 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 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, Chas, and good morning, everyone. Thanks for joining us today. In the first quarter, we continued to advance our strategy through science, innovation, and technology. We delivered a solid first quarter despite Omicron, which had a significant impact across both businesses in January and continued to impact drug development outside the US throughout the quarter. We remain focused on growth opportunities while continuing to take actions to mitigate inflation. In the base business, each month of the quarter was progressively better than the previous one. This positions us well for continued success throughout the year. In the quarter, revenue totaled $3.9 billion, adjusted earnings per share reached $6.11, and free cash flow was $239 million. Diagnostics-based business volume increased 4.4 percent versus last year, as both routine and esoteric testing saw a significant uptick after an initial slowdown in January. In drug development, our book-to-bill remained strong at 1.23 on a generally 12-month basis. Our backlog increased to $15.2 billion, an increase of 8.7 percent compared to last year. COVID-related vaccine work was lower versus a year ago across the segment, with the largest impact in clinical trying testing solutions, or CTTS, which primarily consists of our central laboratory's operations. While we continue to see some impact from Omicron and the conflict in Ukraine throughout the quarter, overall drug development recovered nicely in March, giving us confidence in our 2022 performance and guidance. Turning now to COVID-19, our PCR volume is approximately 70,000 per day for the quarter. Testing rates have since declined, and we expect the decline to continue for the remainder of the year. Time to results for COVID PCR test is currently one day on average. We are maintaining our ability to process 300,000 PCR tests per day, pending supplies and labor, to help the country remain prepared for potential new waves of infections or new variants as a public health emergency persists. I'll now highlight examples of progress on our strategy. In oncology, we are fortifying our leadership position by harnessing the scope and the scale of our comprehensive capabilities. During the quarter, we closed the acquisition of PGDX and the integration is going smoothly. PGDX's portfolio of liquid biopsy and tissue-based products enhances our leading oncology capabilities and puts us at the forefront of helping to drive better outcomes for people with cancer. We believe that PGDX's kitted solutions will allow LabCorp to expand genomic profiling globally and help our pharmaceutical clients identify more personalized treatments for patients. In addition, we recently announced a new collaboration with Cxcel Biosciences to advance the development of cell and gene therapy research. This follows our previous investment in company and is designed to help clients more effectively bring innovative cell and gene therapies to market. Next, LabCorp continues to intensify its customer focus and embed data and digitalization throughout the business. In February, we launched our innovative LabCorp on-demand digital health platform. We have a pipeline of tests focused on preventive wellness and health monitoring, women's health and family planning, and men's health, and we plan to add to those throughout the year. Separately, we introduced a new risk-scoring test this quarter for people with advanced liver fibrosis due to NASH. This test helps provide an assessment of the risk of liver disease progression and allows for earlier intervention that can support better patient outcomes. And we became the first U.S. commercial laboratory to offer quantitative tests for detecting, and measuring unintentional gluten consumption, which can help with the management of celiac disease. LabCorp continues to be committed to pursuing short and long-term high growth opportunities. During the quarter, we entered into and expanded several strategic relationships with hospitals and health systems. Last month, we announced our strategic relationship with Prisma Health, the largest health system in South Carolina. As a part of the arrangement, LabCorp agreed to acquire select outreach business assets and provide ongoing technical support to their hospital laboratories. This allows us to offer PRISMS patients and providers the benefit of enhanced care across multiple clinical areas. We also expanded our relationship with Atlantic Care in New Jersey in the quarter by agreeing to acquire select assets of the organization's clinical outreach business. In addition, we've agreed to purchase the outreach business of St. Dominic's Hospital in Jackson, Mississippi. This builds on our 2020 acquisition of the outreach program of Franciscan missionaries of our lady health system. As I previously reported in February, we entered into a comprehensive laboratory relationship with Ascension, one of the U.S. healthcare's largest systems. The long-term relationship will include our management of hospital labs in 10 states, as well as the purchase of select outreach laboratory business assets. And we continue to make progress on planning efforts for this collaboration. As expected, these transactions are scheduled to close later this year. Our pipeline of acquisition and investment targets remains robust, and that should result in a very active 2022. We're committed to investing in our employees and continuing to operate responsibly so that we can provide the highest quality services to patients and to customers. We recently issued our 2021 Corporate Responsibility Report, which offers insight into the following, our practices and processes to manage our company with integrity, our sustainability journey, including our pursuit of a science-based target to reduce carbon emissions, our commitment to provide employees with an environment in which they can thrive, and our efforts to help address the world's most pressing healthcare challenges in the communities where we live and work. The report is available through our investor relations website, and I'd encourage you to read it to better understand LabCorp's progress and commitments in these important areas. In addition, we continue to take other actions designed to enhance shareholder value. This quarter, we are providing additional information about the quarterly revenue contribution of each drug development business unit. And earlier this month, LabCorp initiated a quarterly dividend and announced a cash dividend of 72 cents per share of common stock payable in the second quarter of this year. To sum up, our base business continued its recovery across diagnostics and drug development progressively in the quarter despite some headwinds. We continue to execute well against our strategic priorities and our current momentum in the base business, combined with our recent hospital systems business development announcements, sets us up well for success throughout the year. So with that, Glenn will take you through the details of our first quarter results.