Labcorp Holdings Inc.

Thank you for standing by, and welcome to the Laboratory Corporation of America Holdings Third Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. To remove yourself from the queue, simply press star 1-1 again. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Kristen O'Donnell, Vice President Investor Relations. Please go ahead.

Thank you, operator. Good morning and welcome to LabCorp's third quarter 2023 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 Eisenberg, 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 business and operations, 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 2023 guidance and the related assumptions, the impact of various factors on the company's businesses, operating and financial results, cash flows and or financial condition, including the COVID-19 pandemic and general economic and market conditions, future business strategies, expected savings and synergies, including from the Launchpad initiative, acquisitions and other transactions, 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 to 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. Today I'll cover our third quarter performance and our strategy, which we reviewed at our recent investor day. In the third quarter, LabCorp delivered strong year-over-year growth across the enterprise, with acceleration in our diagnostic laboratories and biopharma laboratory service businesses. Our growth is fueled by our ability to execute well and to deliver greater value for our customers through our leadership in science, innovation, and technology. We see strength in our businesses, we have enhanced financial flexibility, and a clear strategic focus, all of which enable us to end the year with significant momentum. LabCorp will continue to drive growth by expanding our base business, finalizing and integrating our hospital and health system, and our local and regional laboratory transactions, and by advancing our leadership in high growth strategic areas, including specialty testing. Moving to our third quarter results. In the third quarter, revenue totaled $3.1 billion, adjusted earnings per share was $3.38, and free cash flow from continuing operations, excluding spin-related items, was $227 million. Enterprise revenue increased 7 percent compared to the prior year. Diagnostics laboratory's base business revenue continued exceptional year-over-year growth with a 16% increase driven by organic growth and progress in our hospital and health system strategy, including Ascension. Biopharma laboratory services had a strong growth in the third quarter of 8%. Enterprise-based business margin was down 50 basis points compared to the prior year, primarily due to the mixed impact of Ascension. We continue to expect full-year-based business margins to be flat to slightly up versus prior year, implying an increase in fourth quarter margins year over year. Glenn will provide more detail on our quarterly results as well as our 2023 outlook in just a moment. Turning now to our enterprise strategy in the third quarter. We have significant momentum in our health system and local and regional laboratory partnership strategy. I believe the momentum is due to our leadership in science and technology in our dedication to patients, and in our commitment to quality and efficiency. With the most recent partnership announcement, we strengthened our presence and scale in the Northeast and West Coast. In the Northeast, we advanced three partnerships during the quarter. In July, we finalized our strategic relationship with Jefferson Health, one of the largest and most prominent health systems serving the greater Philadelphia area and southern New Jersey. In August, we forged a strategic partnership with Tufts Medicine, a leading health system in Massachusetts. Patients and providers of Tufts Medicine now have improved access to standardized laboratory testing throughout the Tufts Medicine system. We recently finalized our initial agreement with Tufts Medicine, and we've reached agreement to expand the relationship to manage Tufts Medicine inpatient hospital laboratories later this year. And earlier this month, we announced a strategic relationship with Bay State Health, in which we would acquire its outreach laboratory business and select operating assets, including laboratory service centers operated throughout western Massachusetts. On the northwest, we announced a comprehensive lab relationship with Legacy Health in Portland, where we'll acquire select assets of its outreach laboratory business and manage its inpatient hospital laboratories. We also finalized our acquisition of Providence, Oregon's outreach laboratory business in September. The depth and the breadth of opportunity and the quality of our pipeline is robust, and we are optimistic about continued expansion. These partnerships meet our financial criteria, including being accretive in the first year and return your cost of capital within three years. While the first year margins are typically lower than LabCorp's historical margin levels, there is a clear path to improvement. Turning now to our advancements in innovation and technology. In late September, LabCorp became the first company to broadly offer an ATN profile, a blood-based test that combines three well-researched blood biomarkers to identify and to assess biological changes associated with Alzheimer's disease. amyloid plaques, tau tangles, and neurodegeneration, targeted for patients who are being evaluated for mild dementia. This new test builds on LabCorp's leadership in neurodegenerative testing options and gives physicians an easily accessible and interpretable blood test to assess pathologies associated with Alzheimer's disease and other neurodegenerative conditions. Turning to women's health, we announced a new consumer offering for menopause in the quarter. LabCorp's on-demand menopause test aims to help women understand symptoms and hormonal factors related to menopause so they can have more informed conversations with their providers. Finally, our biopharma laboratory services team opened two new international facilities in China, a new kit production facility and an immunology and immunotoxicology laboratory. Before I turn the call over to Glen, as we discussed at Investors Day, we are excited about the future of LabCorp and our strong financial outlook. On a CAGR basis through 2026, we expect overall enterprise revenue growth of 5% to 8%, including 1.5% to 2.5% from acquisitions. For diagnostic laboratories, we expect organic growth of 2.5% to 4.5%. We expect biopharma laboratory services to grow organically between 4.5% to 7.5%. We're focusing on two significant drivers of near-term growth and differentiation as we move towards those target ranges. The first is to be the partner of choice for health systems and local or regional laboratories. And the second is to develop, to license, and ultimately to scale specialty testing, including companion diagnostics. I mentioned the momentum that we have in our health system strategy earlier. We've announced five new agreements this year. Additionally, in specialty testing, we are focused on four primary areas, oncology, women's health, autoimmune disease, and neurology. which we anticipate will outpace the growth of other therapeutic areas. The development of specialty tests and companion diagnostics makes us attractive partners to health systems and biopharma as they continue to develop more therapies in higher specialty areas. Our scale and our geographic presence will be differentiators for both growth initiatives. We're also well positioned for long-term success. in cell and gene therapy, expanding into the consumer market, and international growth through our innovative specialty testing and biopharma business. All this will culminate in top-line performance that we expect will exceed $14 billion by the end of 2026. To close, our team of over 60,000 global employees is executing LabCorp's global strategy at scale and at an exceptional pace. As we close 2023, we will continue to capitalize on the momentum that we've created and drive further value creation for our shareholders. This year has been transformational for LabCorp. We are focused on our growth strategy, and we plan to finish strong as we pursue our mission to improve health and to improve lives. With that, I'll turn the call over to Glenn.