Labcorp announces 2024 first quarter results

Labcorp announced results for the first quarter ended March 31, 2024 and updated full-year guidance.

“Labcorp’s first quarter performance sets a strong foundation for the year ahead,” said Adam Schechter, chairman and CEO of Labcorp. “We have a strong position as a partner of choice for health systems and regional/local laboratories, announcing or completing several transactions in the quarter. Additionally, we continue to harness science, technology and innovation as we expand Labcorp’s test menu to meet patients’ evolving needs. The Labcorp team will build off this momentum and continue to deliver value for customers, shareholders and employees as we further our mission to improve health and improve lives.”

Labcorp advanced key growth initiatives that supported its strategy.

• Selected as the winning bidder for select assets of Invitae. This transaction will advance our strategy to launch and scale specialty testing in areas such as oncology and rare diseases.
• Entered into an agreement to acquire select assets of BioReference Health’s diagnostic business. The company expects this transaction will increase access to Labcorp’s high-quality clinical laboratory services, focused on clinical diagnostics and reproductive and women’s health.
• Closed three transactions in the quarter, including health system agreements with Baystate Health in Massachusetts and Providence in California and a regional lab acquisition in California.

The company continues to make advances in science, technology, and innovation:

• Launched a test to identify the presence or absence of pTau217, a pivotal blood biomarker that helps diagnose Alzheimer’s and monitor patient treatment.
• Introduced a GFAP blood biomarker test, for the early detection of neurodegenerative diseases and neurological injuries.>
• Launched Labcorp® Plasma Detect™, the first clinically validated, whole-genome sequencing molecular residual disease (MRD) solution for early-stage colon cancer, extending its leadership into MRD clinical research.
• Introduced its Weight Loss Management portfolio, a new offering that supports individuals and physicians with accessible and convenient testing options to guide weight loss management decisions and treatment.
• Labcorp OnDemand introduced a Magnesium Test and Micronutrient Test to measure key vitamin and mineral levels to support individual wellness.
• Launched a sexually transmitted infection test for mycoplasma genitalium, which can be as widespread as chlamydia and gonorrhea.
• Received emergency use authorization from the U.S. Food and Drug Administration (FDA) for its Mpox PCR Test Home Collection Kit, the first mpox at-home collection kit authorized by the FDA.

Today Labcorp announced that it intends to implement a new holding company structure on May 17, 2024. The name of the new holding company will be Labcorp Holdings Inc. The new parent company will replace Laboratory Corporation of America Holdings as the publicly-traded entity and Laboratory Corporation of America Holdings will become a wholly owned subsidiary of Labcorp Holdings Inc. The new parent’s name is more closely aligned with the brand name, and the company will have a structure that is optimized to reflect the company’s operations. Common stock will continue to trade on the NYSE on an uninterrupted basis under the existing symbol “LH” and Laboratory Corporation of America stockholders will automatically become stockholders of Labcorp Holdings Inc. on a one-for-one basis with all of the same rights.

On April 11, 2024, Labcorp issued its 2023 Corporate Responsibility Report. The report offers an overview of the company’s governance profile, inclusion, diversity and belonging initiatives, environmental sustainability impact and community engagement.

On April 11, 2024, the company announced a quarterly cash dividend of $0.72 per share of common stock, payable on June 12, 2024, to stockholders of record at the close of business on May 28, 2024.

Consolidated results
First quarter results
Revenue for the quarter was $3.18 billion, an increase of 4.6% from $3.04 billion in the first quarter of 2023. The increase was due to organic revenue of 2.3%, acquisitions, net of divestitures, of 1.8%, and foreign currency translation of 0.5%. The 2.3% increase in organic revenue was driven by a 4.2% increase in the company’s organic Base Business, partially offset by a (1.9%) decrease in Covid-19 PCR testing (Covid-19 Testing). Compared to the Base Business last year, Base Business revenue grew 6.7%. Base Business includes Labcorp’s operations except for Covid-19 Testing.

Operating income for the quarter was $321.3 million, or 10.1% of revenue, compared to $329.8 million, or 10.9%, in the first quarter of 2023. The company recorded amortization, restructuring charges, and special items, which together totaled $131.5 million in the quarter, compared to $118.0 million during the same period in 2023. Adjusted operating income (excluding amortization, restructuring charges, and special items) for the quarter was $452.8 million, or 14.3% of revenue, compared to $447.8 million, or 14.7%, in the first quarter of 2023. The increase in operating income was driven by base business demand and LaunchPad savings, partially offset by personnel costs and a reduction in Covid-19 Testing. The margin decline was due to lower Covid-19 Testing.

Net earnings from continuing operations for the quarter were $228.3 million compared to $208.4 million in the first quarter of 2023. Diluted EPS from continuing operations were $2.69 in the quarter compared to $2.34 during the same period in 2023. Adjusted EPS (excluding amortization, restructuring charges, and special items) were $3.68 in the quarter compared to $3.46 in the first quarter of 2023.

Operating cash flow from continuing operations for the quarter was a use of $29.8 million compared to $185.7 million generated in the first quarter of 2023. The decrease in operating cash flow was due to lower cash earnings and the timing of working capital requirements. Capital expenditures totaled $133.8 million compared to $78.2 million a year ago. As a result, free cash flow from continuing operations (operating cash flow from continuing operations less capital expenditures) was a use of $163.6 million compared to $107.5 million generated in the first quarter of 2023.

At the end of the quarter, the company’s cash balance was $99.3 million and total debt was $5.09 billion. During the quarter, the company invested $259.2 million on acquisitions and paid out $62.1 million in dividends.

First quarter segment results
The company’s two segments include Diagnostics Laboratories and Biopharma Laboratory Services (comprised of Central Laboratories and Early Development Research Laboratories). The following segment results exclude amortization, restructuring charges, special items, and unallocated corporate expenses.

Diagnostics laboratories
Revenue for the quarter was $2.48 billion, an increase of 4.1% from $2.38 billion in the first quarter of 2023. The increase was due to organic growth of 1.8% and acquisitions, net of divestitures, of 2.2%. The 1.8% increase in organic revenue was due to a 4.3% increase in the Base Business, partially offset by a (2.5%) decrease in Covid-19 Testing. Total Base Business growth compared to the Base Business in the prior year was 6.8%.

Total volume (measured by requisitions) increased by 3.4% as acquisition volume, net of divestitures contributed 2.2%, while organic volume increased by 1.2%. Organic volume was up due to a 2.6% increase in the Base Business, including the negative impact from adverse weather of approximately 1%. This was partially offset by a (1.4%) decrease in Covid-19 Testing. Price/mix increased by 0.6% due to organic Base Business growth of 1.7%, partially offset by Covid-19 Testing of (1.1%). Base Business volume increased 4.9% compared to the Base Business last year. Price/mix was up 1.9% in the Base Business compared to the Base Business last year.

Adjusted operating income for the quarter was $417.9 million, or 16.9% of revenue, compared to $441.5 million, or 18.5%, in the first quarter of 2023. The decrease in adjusted operating income was due to a reduction in Covid-19 Testing. The decrease in adjusted operating income margin was due to the reduction Covid-19 Testing, weather, and the mix impact from lab management agreements, which we expect to improve over time.

Biopharma laboratory services
Revenue for the quarter was $710.9 million, an increase of 7.5% from $661.3 million in the first quarter of 2023. The increase was due to organic growth of 5.1% and foreign currency translation of 2.4%.

Adjusted operating income for the quarter was $99.9 million, or 14.1% of revenue, compared to $73.6 million, or 11.1%, in the first quarter of 2023. Adjusted operating income and margin increased due to organic growth and LaunchPad savings, partially offset by higher personnel costs.

Net orders and net book-to-bill during the trailing twelve months were $2.83 billion and 1.00, respectively, which we expect to increase throughout the year. Backlog at the end of the quarter was $7.90 billion, an increase of 0.2% compared to last year. The company expects approximately $2.46 billion of its backlog to convert into revenue in the next twelve months.

Outlook for 2024
Labcorp is updating 2024 full year guidance to reflect its first quarter performance and full year outlook. The following guidance assumes foreign exchange rates effective as of March 31, 2024, for the remainder of the year. Enterprise level guidance includes the estimated impact from currently anticipated capital allocation, including acquisitions, share repurchases and dividends.
MB Bureau