Labcorp Holdings Inc.

Good day and thank you for standing by. Welcome to the Q3 2024 LabCorp Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Kristen O'Donnell, Vice President of Investor Relations. Please go ahead.

Kristen O'Donnell Thank you, operator. Good morning and welcome to LabCorp's third quarter 2024 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 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 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. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2024 guidance and the related assumptions, the spinoff of Fortrio Holdings Inc., 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 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-K, and subsequent quarterly report on Form 10-Q and in the company's other filings with 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. Thank you for joining us as we review our third quarter financial performance and progress against our strategy. Before discussing our results, We'd like to acknowledge the communities across the southeast and mid-Atlantic, including our home state of North Carolina, which continues to face the devastating effects of hurricanes Helene and Milton. Our thoughts are with those impacted, including our employees and residents of those communities across several states who are grappling with a long recovery ahead. We continue to support relief and recovery efforts as a member of the American Red Cross Disaster Response Program. Turning to our results for the quarter, we continue to perform very well across both diagnostics laboratories and biopharma laboratory services. Our results reflect strong growth in diagnostics and central laboratories, driven by strong volume and core performance, and by advancements in science, technology, and innovation. Let's start by reviewing our financial results. Revenue in the quarter was $3.3 billion an increase of 7 percent compared to the third quarter of 2023. Diagnostics continue to deliver strong revenue growth, up 9 percent, driven by organic growth of 5 percent, while biopharma laboratory services revenue grew approximately 3 percent, driven by strong growth in central labs of 9 percent, partially offset by the expected decline of 11 percent in early development. We continue to expect early development to show year-over-year growth in the fourth quarter. The trailing 12-month book-to-bill was 1.02. We expect the book-to-bill to grow sequentially quarter-over-quarter in the fourth quarter, but it's overlapping with a very strong fourth quarter last year. Overall, the book-to-bill remains healthy for continued growth. Adjusted EPS of $3.50 was up 4% year-over-year. Enterprise margins were down 40 basis points due to the impact of MBTAG. We expect to finish the year with solid growth across both diagnostics and biopharma laboratory services. Glenn will provide more details on our results in just a moment. We continue to execute well on our strategic priorities by being a partner of choice for health systems and regional local laboratories, by harnessing science and innovation to expand our leadership in important therapeutic areas, and by utilizing data and technology to bring important services and capabilities to our customers. In the third quarter, LabCorp continued to advance in these strategic growth areas. First, we maintained a leadership position as a partner of choice for health systems. During the third quarter, we announced an agreement to acquire select operating assets of Ballard Health Outreach Lab Services. Ballard Health expands our comprehensive laboratory and testing capabilities to rural communities in Tennessee, Virginia, North Carolina, and Kentucky. We also entered into a strategic collaboration with Naples Comprehensive Healthcare in Southwest Florida to manage the daily operations of its inpatient laboratory operations. Turning to regional and local laboratories, We signed a new agreement to acquire select assets of LabWorks, an independent clinical laboratory located in Alabama. And we closed a previously announced acquisition of select assets of BioReference's health laboratory testing business. We continue to have a strong business development pipeline, and we look forward to sharing more of those details in the future. We also made several notable advances in science, technology, and innovation in the quarter through strategic acquisitions, investments, and new product launches. First, we completed the acquisition of select assets of Invitae during the quarter. Performance was in line with our expectations, and we continue to expect it to be slightly accretive to earnings for 2025 with top-line growth of approximately 10%. We are excited about Invitae's complimentary cutting-edge science, their genetic testing solutions and technology, which aligns strategically with LabCorp's focus on specialty medicine and oncology. The acquisition extends our leadership in specialty testing capabilities and our ability to utilize genetic data to improve clinical trials and treatment regimens in oncology and select rare diseases. By integrating Invitae's genetic testing technology with LabCorp's specialty testing capabilities, we can offer a more complete set of insights for each patient, from testing to diagnosis to treatment. The integration is on track with our financial goals without impacting the great science and customer experience that Invitae provides today. In July, we announced an expanded collaboration with Ultima Genomics to utilize the sequencing solution and technology to explore new whole genome sequencing clinical applications, including MRD in patients with early-stage solid tumor cancers. In August, LabCorp received de novo marketing authorization from the FDA for our PGDX ileoplasma-focused DX, the industry's only kitted pan-solid tumor liquid biopsy test. This test enables laboratories to perform genomic profiling when tissue is limited or unavailable. LabCorp has an industry-leading comprehensive oncology testing menu, and we are uniquely positioned as the only company offering FDA-authorized kitted solutions for both tissue and liquid-based solid tumor testing. We also continue to expand our LabCorp on-demand offerings with additional consumer-initiated tests in July and August, including syphilis and luteinizing hormone tests. Subsequent to the quarter end, we announced an exclusive agreement with Now Diagnostics to distribute the first over-the-counter point-of-care syphilis blood test, granted marketing authorization by the FDA. We plan to make the test available to providers by the end of 2024 and directly to patients to LabCorp OnDemand in 2025. In the quarter, we also made improvements to our customer experience using data and technology to bring important services and capabilities to our customers. We introduced a new order tracking experience for our diagnostic customers, giving a majority of providers real-time visibility of test order status. This new capability offers comprehensive sample tracking enhancing providers' ability to manage patient care effectively with clear, up-to-date information on all test orders. Ovia Health by LabCorp announced the expansion of its women health solutions to include a personalized, comprehensive postpartum experience. This 12-month program is designed to help women manage multiple aspects of the postpartum period through personalized recovery modes, symptom tracking, and alerts, and mental health support. I am proud of our accomplishments and how we operate as an organization. We recently earned ethics fair compliance leader verification, which recognizes organizations with an outstanding commitment to achieving a best in class ethics and compliance program. Ethics and integrity are at the heart of everything we do and integral to our mission to improve health and improve lives. We were also proud to be named a Best Place to Work with Disability Inclusion after earning the top score of 100 on the 2024 Disability Equality Index. In the quarter, Congress delayed the implementation of PAMA, removing a potential $80 million revenue headwind in 2025. While we are pleased with this further delay, we continue to work closely with our trade association to seek a permanent fix to PAMA, as there is bipartisan recognition that long-term reform is needed. In conclusion, we continue to execute well on our short-term financial commitments, while also making progress on our longer-term strategy. I am confident in our growth opportunities, and we remain on track to achieve our longer-term outlook. With that, I'll turn the call over to Glenn.