Labcorp(US:LH)2023-07-27 17:47Financial Data and Key Metrics Changes - Revenue for the quarter totaled $3 billion, an increase of 3.8% compared to last year, primarily due to organic base business growth and acquisitions, partially offset by lower COVID testing [54][85] - Adjusted EPS was $3.42, down 15% from last year due to lower COVID testing earnings, while base business adjusted EPS was up approximately 18% [30] - Free cash flow from continuing operations was $177 million, down from $548 million a year ago, primarily due to lower COVID testing earnings and spin-related items [59] Business Line Data and Key Metrics Changes - For Biopharma Laboratory Services, revenue grew 3.1% to $699 million, primarily due to organic revenue growth of 2.1% and foreign currency impact of 1.5% [84] - Diagnostics Laboratories revenue was $2.3 billion, an increase of 3.8% compared to last year, driven by organic growth of 1.8% and acquisitions of 2.2% [33] - The base business grew 12.7% compared to last year, while COVID testing revenue was down 88% [27] Market Data and Key Metrics Changes - The company expects Biopharma Laboratory Services revenue to grow 3% to 4.5% compared to 2022, with a midpoint of guidance reflecting around 9.5% growth in the second half of the year [86] - The base business is expected to grow 13.2% to 14.2%, including approximately 5% growth from the Ascension partnership [63] Company Strategy and Development Direction - The company is focused on expanding its partnerships with healthcare systems, as evidenced by recent collaborations with Jefferson Health and Legacy Health [17][19] - A $1 billion accelerated share repurchase program was announced, indicating a commitment to returning capital to shareholders [16] - The company is actively pursuing regional laboratory acquisitions to increase access to diagnostics and expand capabilities [20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the operational focus and financial flexibility to advance the company's strategy, with strong momentum in the base business [14] - The company anticipates that Early Development Research Laboratories will grow in the second half of the year, with no expected impact from NHP supply constraints [9][68] - Management noted that labor pressures remain, but turnover rates have improved compared to last year [75] Other Important Information - The company completed the spin-off of Fortrea on June 30, treating it as discontinued operations in the second quarter [26] - Capital expenditures totaled $103 million, down from $140 million last year, with expectations for capital expenditures to be approximately 3.5% of base business revenue for the full year [31] Q&A Session Summary Question: Visibility on improvement for Early Development Research Labs - Management indicated they are in good shape for the rest of the year with NHP supply and do not expect additional impacts [68] Question: Trends in reimbursement and value-based economics - Management noted that while there is stability in reimbursement trends, significant progress towards value-based contracts has not yet been achieved [70][95] Question: Labor market pressures and wage increases - Management acknowledged ongoing labor issues but noted improvements in turnover rates compared to last year, with wage inflation continuing to be a concern [75][133] Question: Tracking of Ascension partnership - Management reported that the integration with Ascension is progressing well, with revenue expectations at the higher end of initial estimates [120] Question: Expectations for PAMA and SALSA - Management provided insights on expectations for PAMA, indicating a stable outlook moving forward [142]