LH - Earnings call transcript Q4 2017 | Laboratory Corporation of America Holdings

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 LabCorp Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time.

As a reminder, today's conference is being recorded. I would now like to turn the call over to Mr. of President Vice Frommer, Investor Relations. Scott may you begin. Sir,

Scott Frommer

fourth Good call. conference welcome LabCorp's morning, to quarter XXXX and

As Development. today's telephone LabCorp CEO of and President this CEO me detailed and a Ratliff, are Diagnostics; Chief conference be in today Covance Officer; Eisenberg, of call and press Executive release, Chief Officer; John available Executive King, Financial of via Dave and Glenn With will Internet. Drug Chairman there Vice replay Huff, Gary

also we are filed Form addition Investor to reconciliation release, In financial discussed additional at Both press morning of this information. Relations website measures includes a during available a that and our our X-K the include today's www.labcorp.com non-GAAP GAAP. section call financial of in to

results, making current operating are and statements statements These upon and to financial forward-looking not limited the based the call. financial today's future of include, impact results. change with the statements are could various are are respect XXXX forward-looking statements for during opportunities based affect factors factors related Finally, upon expectations our to on that guidance, but we and various growth. and to subject These assumptions,

factors Forms filings our detail forth set Form XX-K, company's XXXX subsequent these in with of XX-Q Some the are in SEC. and in other the

obligation no to these expectations forward-looking any have to We updates our provide statements, even change. if

Dave over King. Now, I'll the to call turn

David P. King

returned debt billion over million $XX and EPS in $X in both good and to leverage range, Scott, billion. of flow We keeping times EBITDA. adjusted morning. By XXXX. $XXX every and billion, across our you, acquisitions excess around invested Revenue shareholders, excelled the Thank our cash X businesses, LabCorp top measure, to at strategic approximately free guidance of approximately $X.X in

into initiatives, in the translated and from cash and flow. acquisitions, outstanding and contributions improvement organic for our performance as Drug in platform increases Development EPS, fourth and double-digit in free Diagnostics margin Our growth revenue multifaceted demonstrated quarter

strong of another for us positions growth year in platform Our XXXX.

flow the plan and Our deploy continued our priorities, and guidance for integrating support key PAMA, relentlessly value. and our in to despite driving that people, execution achieve To we impact negative from opportunities contemplates increases across XXXX, on are cash optimizing focused to key we our create shareholder acquisitions, deliver revenue guidance, profitable significant margins. producing growth, EPS, enterprise in growth,

opportunities systems, service Our focus and These deeper quality, qualities on managed foundation and profitable existing enterprise-wide such testing, groups, They critical book-to-bill qualities care Diagnostics, are in Walgreens the provide health drug and and new and XXXX to orders, and monitoring, also in create growth the In genetics to our are starts women's physician our as critical attracting new as commitment for well growth large strength collaborations with partners. customers Drug In Development, oncology XXandMe. drive net revenue health, ones. will retaining of and conversion. they medical in these with collaborations foundation as innovation. and

proposition capabilities that our therapeutic ongoing investments with existing to new value strengthen and win medicine, Our in partners, rate expertise, is continue and precision solutions, biologic development drug increase our FSP winning customers. strategic

customers flawlessly. our into integrating branding key incorporated and underscores introduced Drug second Development legacy for pace. team robust The businesses. key new is commitment and XXXX a Chiltern We've acquisitions our Our at proceeding talent Chiltern's of to priority leadership is integration that

customers to In as Health, offerings and alike. Providence PAML's continue and development have now of capabilities Chiltern Diagnostics, premier scale Mount Our Catholic drug clinical and benefiting former and our expand Sinai partnerships with Covance integrate greater these businesses. we owners, and medical device

to combined year. growth revenue process you To these generate million to business during to we and from improvement in growth initiative. integrations LaunchPad updating We LaunchPad profitable of and expect on our year these is profitable $XXX three a acquisition incremental margins, integration forward we revenue with streamline transactions and full business a a with XXXX, services operational use the and in and benefiting look optimize create and approximately with enterprise ownership will of of enhance undertaking tools demand, through our and align long-term the through IT to multi-year reengineering and delivery capabilities in and business that utilize client our efficiencies customers' Covance technology. processes. people the platforms of Covance automation new LaunchPad commercial is innovative experience investments

million achieved through in We significantly Drug in margins. XXXX Development period additional ending of savings to in million savings expect XXXX, the increasing $XX having our achieve net three-year $XXX

near-term. revenue despite will We The expect earnings and margins that headwind Drug Development must driving the At capabilities of XXXX we expand the to combination how LabCorp's we over growth powerful face the system. in time think value of optimizing strong same and enterprise rapidly-evolving in our PAMA. Diagnostics we time, lead the growth, creator profitable in and integrating about role shareholder acquisitions, healthcare is can a from

our of in healthcare role future. on system are strategic broaden to We the the three focused initiatives

our support transition to will we care. First, value-based customers'

Second, the process. Drug we streamline will Development

right the enabling helping to is right a LabCorp Third, of we of From and each molecular our that delivering test care, in now precise care. the of player to tailored, our Diagnostics and is world-class more broad Drug next-generation right platform and critical targeted, innovative consumer at drugs, life-saving to a will the engagement time thinking diagnostics, I areas. and the high-value healthcare. progress these patient devices choose a will offering discuss critical tests, in combination accelerating genetic personalized therapeutics. Development create value-based capabilities for integrates in In

care. stakeholders. diagnostics and treatment of capabilities value of quality, and access market industry Our IT our and customers platforms, leadership healthcare to in demonstrate investments in to provider enable bringing expertise, to and end-to-end solutions payer differentiated Development, companion value scale, all capabilities, standardized goal our value-based Drug real-world evidence the In support collaboration a

as costly investigators. increased We an technology data-driven for to comprehensive diagnostics. studies initiative strategic scalable design, facing is on scientific high, capitalize clinical tools, patients for second increasingly extensive enhancing access to biomarkers demand and and by data, and all-time therapeutic process. development complex, performance and offer and drug challenges, advantage relevant solutions differentiated Client tests Our competition to leadership the focuses and and by are the tools study site at our investigator these competitive our of continue development comprehensive therapeutics and in on in Furthermore, data, companion underpinned we our industry and to our patient expertise. concurrent conferred and invest

utilize to continue designs. capabilities to also enterprise support trial We the of our combined innovative

which completed recently progression our evidence virtual we through study, enrolled Market its example, For and Covance monitored in patients second team Access call center. our real-world their

This the and to cost performed and LabCorp XXXX. patient approach Our highly-attractive centers biometric central associated our the and the speed site-less studies, improves expand this and service testing. draws we blood of Covance lowers measurements, in lab Diagnostics performed offering expect

a to deepen develop relationships. broad Our third initiative strategic our is platform consumer to

LabCorp We Express, technology, user the and have LabCorp progress PreCheck our including strong out experience services of tools and made to LabCorp and improving continue new Patient. roll

will LabCorp to We version our Patient currently app both portal. release Consumer convenience engagement mobile businesses. available in Patient a an growth quarter additional supports this later option of consumer for the as added of

trials consent XXXX. XXX,XXX Our and to database of figure to patients higher participants, this expect who've we in learn exceeds about relevant significantly drive provided clinical

later launch of channels delivery, our and expand LabCorp-Walgreens and with use reach this consumers. new our year, for care home of engagement New as significantly the offering self-collection such

to success XX% LabCorp, want the met demonstrating example, patients of are markets. supporting meeting new For in in to in sites our initiative where this Denver, of the and they be into consumers LabCorp-Walgreens new expansion

that of We we a Analyst hope view our I'm our around at in an As improve us Day passion, or on and world work. XX,XXX and event. our in-depth deeply key event. mission-driven colleagues we reminder, will this initiatives business closing, the XXXX for that improve proud and to webcast provide their for made listen join meaningful you the I Investor health our of and have lives. In grateful XX to February am advances commitment mission will hard on to

intently customers, reach and and beyond. and innovative in relevance, delivering our expanding focused of in time, the strong to on offer. solutions critical another delivering by consumers, we that increasing year will XXXX on in Through the initiatives, as are and system continue leader life future focus LabCorp same healthcare our only benefit XXXX. employees global broadening capabilities, the can will these At sciences, in a LabCorp role We shareholders our

turn I'll Glenn. over to call Now, the

Glenn A. Eisenberg

$XXX organic revenue, year million XX last added points. over and quarter we compared XX.X% last as Operating the year. Dave. I'm discussion XX.X% or XX%, a start translation by $XXX to from my our with million, Diagnostics income of XX.X% foreign followed our increased of revenue or for currency $X.X benefited acquisitions a results, an for quarter Thank fourth comments increase Covance going billion, you, our Drug with Revenue XXXX and the review and was LabCorp conclude of quarter of basis guidance. of to segments, Development was X.X%,

of partially million related The as million were taxes for items, adjusted favorable the States. quarter, Chiltern. revenue, excludes million charges $XXX due of $XX volume, basis to or the tax XX.X% savings. the benefit tax. year. United one-time During to the offset Adjusted million, to the integration income improvement and and well repatriation a items as restructuring restructuring in million Income included in organic or XX.X% impacted $XX of acquisition amortization reform margin and acquisitions, we of the charges which special operating by the benefit income, special and were operating of taxes, was initiative, $XX $XXX deferred price point had LaunchPad primarily and from primarily last mix compared increase XX $XXX revaluation LaunchPad by quarter million in deemed This

amortization, the this foreign was XX.X%, benefit, rate of was and taxes. compared versus domestic This charges increase XX% other year. to due Excluding primarily adjusted to net tax special mix last

XX% million the earnings for tax cash was including or cash EPS, LaunchPad last ago. from totaled $XXX million lower in $XX of or by collections expenditures million reform, the rate. flow share, $X.XX last working diluted and which our initiatives. special to higher than million, year. The cash quarter, U.S. or the the capital, XX.X% benefit $XX charges our our businesses other be compared was which tax of from XXXX were a operating items amortization, X.X% in Capital compared revenue for flow tax XX% level the over tax driven per to excludes compared to year. $XXX result to strong adjusted restructuring Adjusted $X.XX accelerated quarter million across expect improved company's in Net $XXX Operating up guidance reform. X.X% year approximately as the We to of due XXXX, quarter benefiting a was rate were

$XXX million As flow last the in year. result, compared cash was quarter million free to a $XXX

million paid stock. million During invested of quarter, of debt and $XX in we the acquisitions, down million repurchased $XX $XXX

had under million authorization we $XXX program. XX, December of repurchase of remaining As share our

end pro the debt from at balance year-end and last last the to X.X at $X.X of million, down the cash from million quarter. billion, Our decreased $XXX during forma to $X.X was XX leverage gross company's months times down debt as third was December EBITDA of XXst. billion quarter, $XXX quarter total The

was of performance over measured X.X% X.X% of X.X%, and last $XX by increased I'll volume, acquisitions. of and increase million basis primarily revenue and Now, acquisitions, XX.X% increase segment due LabCorp XX% in approximately our income currency point by by increased revenue for to adjusted requisition last inclusive year. Sinai $XXX was in volume in million XX translation led were transactions. for beginning from volume was quarter improvement Diagnostics. was points. $X.X and the $XXX Acquisition volume savings. growth of adjusted was year. revenue Total margins basis acquisitions strong income LabCorp requisitions review due driven LaunchPad operating XX billion, of an operating Revenue which or the benefit to organic A million compared organic increase PAML the Diagnostics' or to the Mount X.X%. X.X%, Revenue with per by quarter The

of LaunchPad the Covance organic XX.X% by of or income an operating from margin basis in offset $XXX million Development. quarter the savings, for XX.X% the The $XXX benefit higher currency the of partially revenue increase million compared as Adjusted Now, revenue as organic was to and last translation. points I'll acquisition $XXX Chiltern, Drug over growth year. year, segment was increase by last primarily due performance of personnel the acquisition for and income or growth million, of XX% costs. Chiltern, foreign operating to XXX were and the led well Revenue review of

and organically During Development margin Drug quarter, revenue including both sequentially, operating and increased the year-on-year Chiltern. and

In cost addition, of of on from remains track synergies million within company of the Chiltern integration the to three $XX the deliver years acquisition.

XXXX. July began to continue LaunchPad from also Covance We in benefit initiative, our which

we costs XXXX, of savings this savings million, expect incurred In million $XXX the to the one-time three-year addition ending half realized of XXXX, was which another with period of approximately to million approximately in of $XX in XXXX. $XX initiative deliver in through

global implemented savings the net from from Drug of design Development to as organizational expect in new another book-to-bill. improvements. the We integration delivered of technology, productivity, as XXXX and including tools and come labor well and right-sizing orders and actions strong quarter process

For the XX of quarter book-to-bill XX-months, months. $X.X we X.XX. net over producing end this of billion to the orders billion, $X.X of and revenue trailing an $X.X the approximately increased expect next the at net convert improved billion, were Backlog to into backlog

Covance in the accounting Development, of cost Now, and our restated X, LabCorp in and inclusion release. basis, refer includes of when XXXX. report the year-on-year revenue, we will to a expense. expenses we margins. in applied recognition evaluate can increase In revenue new expected than reduction To to restatement revenue reduce this impact of finalized which adoption This recognition to due consistent in both will of quarter be will we changes revenue, of and other our investigator In guidance, as SG&A result January the Drug rather I'll results. found increase which XXXX Diagnostics, on revenue change change XXXX will our the a press as discuss treated this the debt of our as be fees lower impact be our revenue performance categories, will and which results, revenue, accounting first standard as pass-through bad margins

revenue by we that new XXXX the recognition XX enterprise, operating margin adjusted have the income of adjusted the in would million, lowered by respectively, and increased points. revenue have standard For estimate and approximately million would operating impact $XXX basis $X and

States. includes In implementation United addition of the to our tax XXXX revenue reform recognition, in the guidance

repayment. XXXX, deployment and the XXXX. share and Foreign for exchange assumptions from repurchases, remainder impact rates guidance cash XX, the year, provide as December for now free debt the of acquisitions, our these of into I'll consideration, towards of currently-anticipated flow Taking

XX.X% XXXX currency basis We of over to includes XX of benefit restated the points expect revenue growth revenue of X.X% of translation. which billion, $XX.X approximately

revenue of $X.X X% X% points XXXX negative approximately of the the X% currency We from XX restated billion. revenue of the over PAMA benefit This of expect LabCorp as approximately impact Diagnostics basis translation. implementation of to growth as legislation includes of growth well

X, restated benefit of translation. closed to of We expect XX% XXXX. the historical Covance XXXX, grow at Drug on Development September $X.X points and of to that will of be growth growth revenue billion, rate growth the expect we to basis expect approximately organic largest of the revenue driver which XXXX mid The XX% XXX includes an over revenue Chiltern of currency On we high-single-digits. acquisition business it in its basis, of

$X.XX is $XX.XX of increase EPS $XX.XX, XX% in to guidance adjusted Our to an over XX% XXXX.

the the distribution to expect approximate earnings of distribution last We quarterly year.

The tax EPS rate benefit XXXX, EPS However, adjusted expected this year. adjusted in the from is to will negative the contribute to severe legislation of more by the implementation the PAMA impacted from is further experienced to approximately quarter by weather $X.XX expected reduce negatively $X.XX. approximately first while the impact be lower

Excluding the these adjusted would we to impact changes, have double-digits. increase EPS two of expected

an Our free is billion XX% in cash will increase rate The tax billion cash flow. result expected of in flow our $X.X $X.X billion XXXX guidance last to compared lower approximately year. to $X.X in

this in revenue, capital enthusiastic be increase In remainder with facilities, we prospects our by accelerated a In to We XXXX. in approximately capital expect approach long-standing invest infrastructure XXXX, about we're consistent a with automation. X.X% to portion expenditures driven investments for and of technology, in manner deployed to the our summary, our expect of and people allocation.

year strong another top flow. earnings into growth, process line business cash initiatives improvement free expect significant to translate and of We attractive and

formal This flow expect addition, concludes In now continue value. return cash shareholders, to acquisitions, shareholder we'll we questions. and our remarks, to the debt free Operator? which and deploy to to long-term of strategic capital build take reduction, our will

Operator

And line from Thank our comes with Jack question Meehan the first Barclays. of you.

Your line is open.

Jack Meehan

morning. Good Thanks.

are looking cancellation want than in the quarters, front Covance, quarter fourth the view, there to noteworthy in over last there your anything on driven few in mind? keep and just I In for. to the outlook was So improvement better what's we the book-to-bill focus is on

David P. King

way, quality the in Covance, and performance, leadership, turn start and to over leadership John comment the lot guess, – it's order that is, a team a by And made heard I'll Jack, of then me is and marketplace. that we're today. the I've which Dave. at the very explanation which briefly, John. it testament and John's I winning is, of to succinct with most book-to-bill the to, yesterday, terrific the that of

I'm John So over for that, more to, going to turn with it detail.

John D. Ratliff

is Jack, that. benefit that, the solutions our bringing so well, the one that is think I to and it forward, we're development. it I companion We've strategic think is in with acquisition continue investments diagnostics would book-to-bill from the technology is we, benefit being our capabilities, team, consistent last Chiltern in broad-based, clinical. but of with do example months obviously of gotten clinical in It labs. in a It what without in the XX of Chiltern, terms be even are. early

And line and across so, are board in with historical. the cancellations the strength

So quarter. the the cancellation there's terms at within in been abnormalities all of no

Jack Meehan

strategy of three as just And the the early you fits, think within do the within how plan piece that of in ourselves, Covance? get want about growth but ahead you of Great. development accelerate and to to businesses what's the too Covance, think and don't context far

David P. King

development early business is Jack, responded a to of Obviously, is well. this thing, the it's would extremely continue Dave number times right to and time, say over the performing question start. to we've which again, same now

end-to-end we and clear win to Covance segments. comments, in As the become seems business more our capabilities of as of across the prepared mentioned value more

at a early strategically, to moment, sound so, in development for streamlining and the what development of drug fit we're value-based in trying And care process. this very accomplish is the

point will the need year, that there a this is the capabilities to make capital benefit make little of reflected come business, down later we'll we in that's anything expenditures in the road. particularly the facilities. further? it some a think investments will But further I tax of and a determination bit in the John, reinvestment some of in for that some

John D. Ratliff

the the of area, within our say early that whether in and being that'd I'd the then, the a little said. bit through percentage tox immuno-oncology in we're a large BioA No. significant flow And it's into obviously so molecule our oncology platform. what seeing flow-through business, Dave the and and development be area clinical to business, additive large

Jack Meehan

Great. both. Thank you

Operator

comes Thank the you. Evercore question Ross from line with Muken And our of next ISI.

Your is open. line

Suzie Yoon

Hi. Yoon morning. Good Ross. for in This Suzie is

David P. King

to to going speak have You're up.

Suzie Yoon

Hi, sorry. better? me Do you hear

David P. King

Yes.

Suzie Yoon

Hi. Good Ross. Suzie This in is Yoon morning. for

check particular Our in been What gaining channel share you've that in across to see biopharma. strength the did the suggests CRO, areas particularly you quarter? mid-cap small

John D. Ratliff

small-medium, within would large same of at time, were win they small-medium the big we spectrum. strength that But broad of penetration have terms even a the if and the say, I saw large Well, from our we saw the strength terms category. in pharma in penetration had we Chiltern, We we But really well. that as small-medium. – in this the early fact development of that did – a against terms of benefit see you broadly. and is they John in rates, the strength look mid-tier Obviously, at our areas

in as business, the more the the the see the development, small-medium of So their all, terms mid-tier labs, in the early board. strength you large as the strength central across across clinical well in penetration of could and in

Suzie Yoon

follow-up, details you just beat as in some strength product of us particular composition areas wondering give seeing Diagnostic on it. the you're and there? what And if Got a the can

David P. King

molecular particular were The Sure. women's our new within single and and in medical strengths within testing. and testing, swab, swab our primary wellness drug oncology toxicology business, monitoring health, in our genetics

and quarter. particular growth saw where I over end the be the both would think year-on-year those strong we areas

further percentage strength add? to as prior to Gary, good a organic than anything continue relative the of its have quarter. less actually was XXandMe, We in although growth contribution the

Gary M. Huff

I that think it. covers Thank No, you.

Suzie Yoon

very That's helpful. it. Got Thank you.

Operator

you. Thank

Our Gill with next Lisa the JPMorgan. comes question line of from

Your line is open.

Lisa C. Gill

think in fee-for-service guidance. place, comment comments Thanks marketplace. talking understand. And there's in talking opportunities now you environment of as more secondly, I share Good care? could value-based incremental two; have very more just I progression here heard that just are are understand that a in the correct? we morning. or about much. a of a your clarification. you little you want repurchase color a contracting, Dave, that then, you're point I that prepared the to specific opportunities PAMA hospitals lot and to to with about, no for change care. seeing, about as well-positioned, that a others Clearly, just I in want think in one; just we we see change There's LabCorp. from Glenn, I want to value-based Is

David P. King

is deployment is Good morning, Lisa. capital It's included understanding Dave. Glenn will that My but guidance, that. verify in the

eye is terms and care, would on different obviously, and the to and way the beholder, value reimbursement. about it everybody perspective value, guy a payers shift in of what how causes generally In value what's a less. other of more, in to has have have is the me characterize the terms the thinking And are is, are I value-based providers of seeing we

accordance do enhance of only have XX% the deliver better to physician health value the opportunity context right bring the value. participate at we in position of as test the able of proposition about in the companion providers their of acutely the in with time, as right decisions, the to to of not care than large anybody environment. spend in results? adds our ill recurrent deliver the guidelines So patients driving value-based help capabilities it to enterprise our and lab get medicine, and view around kidney access how – That's trials, care the things in delivery ability systems us kidney Covance of beyond think that's solution, to a right range our why to to disease groups value chronic also stone diagnostics, like for There's deliver the to to our that else but solution, to simply precision cutting-edge patient actually the deliver combination the the X% with whole why to medications. being we the And

well-positioned, that why to not to on clarify when helps So individual of the of only going continue the but value? hopefully, well, in ourselves we we contribute invest you the and are enterprise why how at capabilities to perspective we would so people the think that say, look critical be the combined differentiate to businesses, capabilities in are us vis-à-vis others do

Lisa C. Gill

this I talked in would to bigger you Dave, do we the assume about about shifting the lab I changing you're tests really you way way? see going Day, of model more today, is, from and for but part being the the get that a talk at guess away just So Analyst some just paid question business me, the solution.

we're to to So we mechanisms we're that going And is talk see next would this your the of model, going well? as think again, and in changing payment weeks. about change probably assume it business about evolving as couple I more

David P. King

will think, x sort you percent mean, We some they you payers, their time contract. of that providers they payment I yeah. I mechanisms will, to talk will tell of Again, when over the have value-based do on change.

be because systems traditional, definitions more for going has pure we fee-for-service these There over we're things efficacy look contracting different paid. will of think see that slower there of be develop be And think, Now, for granted, they do drug think to us test. may providers different for metrics. example, a has like going the of what's do to to be to demonstration than how they're time, of get outside – a a although away the we an are contracting be I But value-based are future from is going demonstration to reimbursement need to to it like or evolution U.S. for I there anticipate, value where long-term a value. are, may they they to

Lisa C. Gill

ahead? I'm helpful. Glenn, go Okay, sorry,

Glenn A. Eisenberg

No.

for XXXX, we be question a the the that, we that will, in other we share the on expect our in kind your debt And Just so we will and redeploy and down M&A flow share leverage free combination assume at fully did have combination our flow of the share tuck-ins, repurchases. repo we guidance, what M&A times repurchases also that, that. expect said range our to cash reduction. year expected, that say but in on we amount but the guidance, does that, free provided that it's X.X both guidance guidance fair is use in bring the to a of ended expect cash of that you would bit, if We leverage to a will

Lisa C. Gill

Great. Thank you.

Operator

with Thank comes our question Associates. from & the Jansen next line you. And James of Nicholas Raymond

Your line is open.

Nicholas M. Jansen

CRO phase. with think LaunchPad revenue quarter. on components three-year and Certainly, about LaunchPad guys. versus I accelerating beyond. to already Hey, just a great a growth under some the Diagnostic for exiting and asset Congrats wanted the talk as we opportunities bit you're probably about improvement the of has XXXX the expansion which margin

pricing the have reductions You from PAMA.

the be rolls enterprise margins should thinking in how near-term? of to So maybe just, how holistically we up the that and the segment, about the

Glenn A. Eisenberg

this Nick, Glenn. is Hi,

it. at Let take a cut least me at first

Your pretty observation good. is

Drug look of to where years. margins, incremental business, net we over the embracing side, next you three about kind beyond, savings LaunchPad If within to well expect of of Development million we've initiative at see that the of the seeing in as now $XXX and strength by demand as both and we're kind see talked XXXX it we expect that improving the due the the to expect

see we relative expecting some margin we as was good to So are commented improvement. see well. against also some of room were to our to And pick before, up competitors, where as has John there that

the flip over margins. we So benefited side that in you legislation be on enjoy obviously is three But the the to the headwinds we're frankly, the our from LaunchPad are operating reflected the of in The initiative, very constraining Diagnostics as strong last really that margins. We've begun margin. years encouraged there. will that, PAMA get we've know XXXX,

down few could be going over of then additional will obviously we headwinds Diagnostics occurs in the PAMA with So ultimately margins next do kind upon be based what years expect XXXX, and that beyond.

start-off we're though, an to as over that, So some to we improvement. see continue margin as time looking enterprise

of our even the And acquisition year in for our though the the XXXX. first within not look were perspective, PAMA the because for kicking on as of PAMA headwind, continue But The it XXXX continue long-term have difficult we LaunchPad Development will benefit prior without be overall, on in LaunchPad go the in. Chiltern to initiative quickness within given operating starting ways initiative the up. constraint of have in restated the enterprise Drug about XXXX recognition for even a in there operating margin, be frankly, will a the little even of a new accounting to the maximize would will to expected the bit to we But place, with period, be that's while an for improve of revenue margins come we we've initiative there's margins. margins to from ongoing we still talk forward. Covance, full-year And

Nicholas M. Jansen

you, the Walgreens XX at guys XXXX those stand follow-up, growth as the more these terms of like just where in holistically you Certainly, helpful. of pie? in become where Thanks. think things acceleration parts XX XXXX, pursuing to platforms consumer process further been have of terms beyond? certainly XXandMe, seeing Where in as are over maybe of contributors months. like the bigger organic is That's relative last today you in relationship, it's maybe And we Dave, terms in and of my to for things Great. strategy the look

David P. King

got long-standing we've XXandMe and been with volume Obviously, has quite their growth significant. in a collaboration, Sure.

to be we're testing their about other have or collaboration, that that routine complement they're tests now to our combination we're as things capabilities, ordering genetic added that what now ordering to testing. of and So can having pleased such genetic volume of consumers them obviously people opportunity a growing, them through offering the very ordered talking is is do tests, to direct routine

significant for patient open, we ideas we always a have we think year. not a in that to we're for the very the have of just whole more next variety that be about insisted pursue our channel of we and want why capabilities expanding footprint the the to the expansion is a consumer. in innings we're early obviously consumer We would spaces that we Walgreens, talking wanted healthcare With to but But again things with of seven to around about combination center our service plan to drugstore being want as reach constellation stores to also want lab, we we convenient have which expand as Walgreens of expand like setting.

in patient some How are a at help and do do is how we patient engagement test Management, the piece in Medication of license the with and taking? So There patient we with the terms things Walgreens practice diagnoses and recruitment tool? Covance as top demographics opportunities introduce a Walgreens ordering terms states. of like the into in a the of patient we pharmacist Therapy How the lot database use database medication patient do LabCorp of there. that even

come digital, thinking see about about the the met. that potentially In through And scaling us. footprint, where us pursue that's not collaboration about mobile, meeting the are, consumer on is years our in but for through we settings and focused so, where ahead. want you us we And be scaling have other to the to we consumer retail increasingly only through summary, but where see footprint strategy opportunity you'll telling consumer an they not think the think

Nicholas M. Jansen

a See in Thanks, weeks. you guys. couple

Operator

next you. Thank from the our question Sachs. Goldman Donnelly line of Patrick And comes with

open. Your line is

Patrick Donnelly

about moving that obviously given book-to-bill How stable. know then, I'm backlog a with think And parts so in XXXX? the coming curious revenue will I Chiltern about in cancellations quarter, should being you talked pace the in. the guys, out Thanks, healthy we conversion how of

as mean, same with I going of cancellations of you expecting level historical backlog? you the are comfortable are the the security forward how recent So numbers?

John D. Ratliff

This John, Patrick. is

so, And high-single-digits; the obviously XXXX backlog a organic guidance, is we acceleration the then Chiltern. have basis. mid to of the revenue of The within based growth contracted the on and basically

that anytime very same actually So increase bit backlog. the rate, there. is do it's than and and a stable a in funding, level a growth. at the are higher strong higher you terms time, penetration category, of more a growth you They higher Obviously, you have of discipline little backlog underneath small of goes get small-medium conversion. the into of the you as but higher the level get the R&D the medium, and as XX% molecules have get clean but cancellation can in and from more that possibly rigid

in that I in half terms first of to then and in with also months, X.XX went XXXX, last slightly quarter up just seeing the we've growth X.XX, of we X.XX basically earlier. think, where – QX, had trough the from or mid through fourth, at positive plus outstanding to picked mid-single-digit you you're the the we got X.XX that cancellations the fourth very or XXXX, the end low orders, the the XX to the

our of data in utilizing the that the come from patient capabilities win diagnostics. and that, to solutions team, LabCorp resonation the the the strategic companion then seeing just awards, You're technology investments

Patrick Donnelly

the mean, to Okay, PAMA, pipeline, curious business thanks. as focus your you maybe should on valuations lab And expect I but in CROs, presume one we I around take on more pulled maybe the just deal have guys I back there? mean, a quick labs to with

David P. King

it's evaluate of a fit. strategic and evaluate deals, We Dave. based on and we Patrick, business everyone lot

have we'll given we at fit top integration deal and regard business of that best priority. top the it look to needs. is and So Chiltern a priority comes every what's CRO, for flawless Nonetheless, the that remains said see along the the with the the

Patrick Donnelly

Thanks. Great.

Operator

Leonard next Thank with from Deutsche the you. line And Bank. question Dan our comes of

open. is line Your

Dan Leonard

could in organic for elaborate was Diagnostics hoping expectations the you I Thank revenue XXXX? you. growth LabCorp on

Gary M. Huff

as pleased we're Dan. we organic with growth achieved the really is This year. for fourth the as quarter Hi, the Gary. in well Yes, that

and a wasn't growth been on And broad earlier, it all growth, it geographies. focus on a just across several organic mentioned was but We've as segments, in was also that. based. have segments, few in the focusing Dave We very

We will growth. intense we're but satisfied, of continue it not more you to organic drive on were us our have XXXX, organic continue will and see to focus with an happy XXXX. growth into in We

David P. King

it's Dave. Dan, And

we framework. to actually in. in this consistent X% growth would per about going top you I mentioned, we volume revenue was terms that that have that would organic X% organic relatively remember revenue I a to growth gives going with of should whenever so some think, you be constrained that that by PAMA line year, so be headwind growth be, hopefully expect about

Dan Leonard

housekeeping the quick follow-up. a Chiltern just could quarter? you specific and helpful, Possibly in be on revenue fourth That's contribution the Okay.

Glenn A. Eisenberg

gave I $XXX think full-year. we you million for the Chiltern for

We're And you you in delineation, quarter. so but that indication a an this the that segment-by-segment guide. terms give give not guidance and/or into of getting should should fourth

Dan Leonard

you. Thank Okay.

Operator

question Credit Erin And the from Suisse. next you. of our with Thank Wright line comes

Your Hi. Hong Credit actually is Suisse LLC is taking Thanks for Tran line Erin. open. - the Hong (USA) Securities This for on question.

backlog do are bookings guys business. Just have XX revenues the imply CRO And booked disclosed over for XX% your converted expect backlog roughly that would coverage next know into of for the or to currently how generally that sort quarter I you one the more roughly quick or you just billion up the you on shaping one they $X.X for be into of year. a remaining months. visibility What aren't XXXX? that the us

John D. Ratliff

John. is This

the standpoint of from – And so, momentum rate. the I order continued think, within seeing we're

of early early terms in You to development, mix the you revenue converts development, do that the development, faster central the do within into us that degree and of another have business labs, clinical having backlog labs. with have –

consistent So attainment. is quarter prior that with $X.X the billion

think I in And across that or assessment, early but whether seeing accelerating CMC you're strength across whether momentum half or And development the And Chiltern businesses, continued the labs. more the even Covance, stability so there's a fair a of safety in metabolic BioA, second then board the seeing on the optimization legacy clinical order rate so even, the – there, the whether and in of clinical lead that's We're XXXX. that's in areas. XXXX. the that's that's

Great. Okay. bookings the better terms what guidance terms terms Credit of just And this monetize good sort - we've That follow-up. So now momentum of (USA) stand attaining visibility, year? of be the in need Tran given. ability your sense. of data Hong of lot we makes do good LLC for then lab to a in Securities of the that Suisse one to balance in that Where

Scott Frommer

third back question. Erin (sic) jump going Securities your Tran still problem. I'm [Hong], (USA) people of queue. have Hong in. That's Credit I'm No Yeah. the ask - a We sorry. you Suisse LLC number to to in

Operator

with Thank you. from our comes the next Ralph And of Citi. line question Giacobbe

line Your open. is

Ralph Giacobbe

majority people of your think, I baked little remarks, can infrastructure. I hoping in you've bottom Thanks. from reinvestment But tax reform. look you've a prepared the detail down in Good more in morning. benefit It bit talked give to on like you you much line. reinvestment about a was and how the pulled

And split what the forward given can growth then for us. you your hoping pressure going backdrop, labor is any going of incremental So expectation out of just and estimate that cost maybe ahead. wage cost Thanks.

David P. King

Dave. It's Sure.

guidance, use whole engagement of in of future to tax IT, There's you the benefit, variety as that's patient investments that's So we a one, without capital specifically growth. are detailing the capability. some investments saw the accelerating support And the that's in infrastructure, business.

in this that based service. be that which The that will the pay, all the be we so paid year investing employees of talked bonus will of non-bonus And March. our time at be on would people, formally in length will second we in thing, eligible to actually be of that our about context one-time a detailed

The are the we're in business in deploy So time. intend in investments we a the obviously, tight which costs those at ways, people to and in market now, the labor same from wage reform. the Ralph, the tax

number this who length As bonus at employees the business in long-serving service, we significant. colleagues look very, our are on our based actually of is XX,XXX of people among very

we X% for lot wage as and that's it inflation the range, in out have we about sketch sort rate so how stability the We a future. workforce. in think of of the being And

Ralph Giacobbe

Thank Okay. you.

Operator

from of Kevin And question Ellich Thank Craig-Hallum next our comes with line you. Capital. the

Your line is open.

Per Ostlund

related question to M&A. Kevin labs looking opportunities Patrick's potential Dave, I your is wanted industry does or pursuing? Thanks. regarding of, today? to discussions kind your litigation I of that and/or would Ostlund discussions the then, the is those business. looking with your keep it ongoing across viewpoint PAMA, you Good is relief with that uncertainty But think, was guess, that. follow-up legislative you're morning. for the you're at extent on earlier to the sort how CMS And at appreciate I Per having on that's that What a current sort specifically, today. can on This And, to, I any in going characterize Thanks. of pattern those holding

David P. King

Sure.

time, large At of lot that to PAMA with a continues in health been yet of fully of the been the into detail, getting has pipeline executive impact last laboratory the operations be system fully the the the I So PAMA a think not without suites. the on necessarily large I health And same don't system – filled was week. I'm of impact particularly has CEO in robust. sure realized,

that pipeline, board, toward I thoughtful to the our to we capital think whether emerge be impact year. about we're how and think I deploy that continue on deal will has acquisitions So PAMA going across throughout the an

Judge, in the has have schedule Court the court a April, appeared would On assigned all in papers mid-April. District years to to the briefing ago. of for case him. the front in we been and an Judge litigation, U.S. the I District for of of with Sullivan, He's the Columbia, many call be The statute. very us process think that many, we excellent evaluation. by filed say, the of to thoughtful a give feel in rule specific persuasive led case comply did that CMS that sorry of would data And collection just we continue a will very that PAMA the the language process have promulgating with he collection the I and not to a I data –

optimistic have the we'll June that So win decision one, the case. of that we'll we're by a and obviously, timeframe, two, sort

well to We develops. it CMS. a to how seek as we'll solution with legislative And see engage continue

Per Ostlund

you. Thank Great.

Operator

with our And line William comes you. Thank Blair. next Amanda the Murphy of from question

Your line is open.

Amanda L. Murphy

morning. good Hi,

there? the of super-quick on lot know, well. one I when United you've as asked we on terms a of hear any updates just one, been a situation might in what's But going Just kind

David P. King

We've my will we I'm the optimistic over United much reasonably a reach teams at in with team at engagement accelerated understanding and negotiating short pace Dave. of Amanda, at level. the engaged, an month-and-a-half. And that The it's level, are timeframe also level, now. very last had Gary's

Amanda L. Murphy

very Thanks much. Great.

Operator

question the next from our Thank you. line Morgan Stanley. And with comes of Goldwasser Ricky

line open. Your is

Ricky R. Goldwasser

Yeah, just good of follow-up morning. a Hey, questions. couple

you're on about clarify accelerated United, First all, Dave, so of just to talking conversation.

the assume we into about be that there's one. that the one, are that impacted can kind just bit seeing quarter? incorporated talk and from And that's to RFP you if you should is the benefit second issued; going little So flu guidance that's a season, your it no of how

David P. King

but constructive can a some or we're I short my just partner reach discussions, may dictate Obviously, accelerated process discussions, we'll say, what mind their can't and with hoping I'm Sure. I don't may as in we United, in pace not I that, of process, entail. their resolution comment on relatively a very we've timeframe. so of sort a say had that,

In terms as of the flu unusually virulent season. an flu, we everybody knows, are experiencing

that's in not actually to see impact testing, testing. testing to hand, did increase any have an flu significant not enough is near-patient the testing point-of-service the On or of on results. us, but is reference We flu testing our most other it it's done referred

Ricky R. Goldwasser

you. Thank

Operator

Thank you.

next Our line Piper Bill Quirk Jaffray. from of comes with question the

line is open. Your

William R. Quirk

Great, thanks. Good morning, everyone.

to of rates affiliated ancillary metrics because about hospital business up if you from LabCorp direct with last Just hospital the as Dave, there there can that Ricky, point-of-service. seeing flu. lot at you certainly it's sort guys I see deduction – a Thanks. pointed of out, have the the and talk been question a don't the follow-up, you're admission any you associated guess, recognizing quick on that often (XX:XX). curious you're Is any just I'm benefit

David P. King

morning, Bill. Dave. Good It's

everybody benefit, rooms in going of I to testing generate any us amount the has hospital and to for But rates think emergency it'd on identify very flu. be unlikely it's admission ancillary material from increase the us. read about pressure reference for obviously that, that's any hard

William R. Quirk

it. Thank Got Okay. you.

Operator

Wells of Fargo our comes line you. the question with And Thank from next Tim Evans Securities.

Your line is open.

Tim C. Evans

Thanks.

specific the I a on this did just year, $XXX you triangulate right contribution follow-up quick the But us to that be in million run on me, little a the you basis. from just on help rate too; give million quarter. want don't would quarterly that Just a the $XXX understand bit, Chiltern to below

probably better Is QX. did trying $XXX to looks it like in fair it rate a call Just that, million that run assumption? you triangulate, than

Glenn A. Eisenberg

Glenn. it think but we how that John ahead tracking is fair, is is this that mean, it, I slightly Tim, I maybe are roughly of comparable. characterized number, annualized to

kind back organic accelerating XXXX. the into if trying rate that taking into the for So by organic to kind a we get you business, as growth growth of just and quarter you're rate proxy mid-kind the of of get for again, as a to will

Tim C. Evans

you you Is that sorry. mid-single-digit just what Did I'm say rate? growth said? organic

Glenn A. Eisenberg

benefit the with of the translation. currency right, That's

with number. pro John it, and But You'll the the that would we've you of a up into currency increasing quarter about be by based benefit what it upon, the number mid-single-digit back for the get backing commented owned translation, able as roughly we time the XXXX. again, we've organically, for go as to characterized then to into rata Chiltern

Tim C. Evans

right, you. thank All

Operator

Donald Thank you. with of question And Hooker our next the comes line KeyBanc. from

open. is line Your

Donald H. Hooker

Great.

third-party to adaptive the for on expansion trials of Obviously, the and the $XXX you developing around Just one or studies at like said things your you digital LaunchPad investments three efficiencies, million from Is monitoring there? you next clinical new have of project around vendors? to over and that in me, so horizon you going nature? margin how around I when of guys, enrollments, but of capabilities the kind is that I guess, tools the think on of tools producing, think, about Covance much sort adding years rely that of tools I drive are sort own sort of

David P. King

It's Dave.

is tools So – technologies. we digital. year. incremental, is of study for for proprietary It's is is and point, But it that and number and $XXX the those other own fits right-sizing of of the timeframe. over It's which It's and total monitoring, it's basically and and the remote LaunchPad site internal it into But be – optimizing expanding with the we our process. it's re-engineering, $XXX will and will capabilities expand million for PHARMACUITY. of our It's developed trial investment and reengineering management going monitoring, Covance Xcellerate are as the of long-term our second And that LaunchPad Development a be partners, variety so to last both we efforts. the we tools our million in strategy in And have some continue it bulk tools are right-sizing by whole platform. about streamlining way, them, said, enhance capabilities. obviously, to invest medical The LaunchPad some did for start-up in our endpoint. start-up, Drug and about that we talked

Donald H. Hooker

Thank you.

Operator

Thank of the you. Thank Massaro question next Canaccord you. And our Genuity. comes from line Mark with

Your line is open.

Mark Anthony Massaro

organic were volumes just maybe Thanks average for prenatal driven Dave, volumes NIPT you Can and might to health. you called the you the Hey, and franchise expectations is risk later by how any year? taking Sequenom this women's part then, doing testing have guys. speak out in question. on

David P. King

it's doing is terrific. steady Obviously, the very see Yeah, run to Sequenom We're continuing in now. rate growth.

us. attractive an our was testing for capabilities business to reasons are such one the platform, capabilities. continuing of Sequenom opportunity we We are the was we to add why OB/GYN which the office And one-stop of in because felt winning

average In a controversial of area terms coverage. risk, obviously terms of that's in

continue do So the average of there's been risk NIPT risk. to the we and for advocate NIPT value average average some of And in as improvement risk in recognition payer for obviously others. population,

concerned decisions. So coverage the make we're same are be the make payers progress, escalation they very the about of the they an we'll to their hopeful is area and that time, as want at continue expense, but to in thoughtful it which

Mark Anthony Massaro

Obviously, oncology? you in related the of as your can and on But just speak therapy a level follow-up, And to industry lot late-stage selection particular, Diagnostics side. interest Great. there's to the biopsies? a in liquid buzz use in in

David P. King

Yes.

number projects So we have biopsy liquid a of ongoing.

great things a we're punch invasive for is the costly, that the and for certainty you're we're involves for actually to I a that it reason at for, a going procedure to is at NIPT which miss think miss into you part takes biopsy what was cells liquid right procedure non-invasive liquid with looking was, prostate some of our the that that well looking didn't the that something as revitalized biopsy, project R&D it actually opportunity a look was an turns cells you to trials because involves development same prostate risk that Long-term, exactly a have that's patient critical risks the at you which We get ongoing Covance. if opportunities in There a ongoing there. for. a biopsy biopsy that capturing we've the Sequenom's liquid that is, is that high do and of as some you're cancer in way may looks cancer degree industry

I And biopsy it the remember, idea years of looking NIPT, we – So the early became took first with were And near-term as see same time XXXXs. the be be to type of fetal opportunity, in at. presented over definitely the perfected. which cell it game-changing, technology ten it sorting, took long-term, to for the liquid was something we

Mark Anthony Massaro

you. thank Great,

David P. King

you. Thank

Operator

I'm you. And Thank showing...

David P. King

sorry, go ahead? I'm Justine,

Operator

remarks. call turn I'd I'm like to over closing sorry. now showing no I'm back for King further Mr. questions. the Dave to

David P. King

every LabCorp our joining a organization no I'd not day. my for us that Thank the world morning, XXXX continuing it happen the XXXX, of who the and to colleagues Covance great like of the reiterate Diagnostics and And this single and team, my seeing – you but achievements in the have commitment LabCorp, leadership make to day, to pride the further greatness in again, future. our once XX,XXX around to and personal this to questions, only gratitude, in strength for

Operator

for program, great and day. the This you thank all disconnect. conference. and Ladies today's Everyone in participating have does conclude gentlemen, you a may

Scott Frommer	Laboratory Corp. of America Holdings
David P. King	Laboratory Corp. of America Holdings
Glenn A. Eisenberg	Laboratory Corp. of America Holdings
John D. Ratliff	Laboratory Corp. of America Holdings
Gary M. Huff	Laboratory Corp. of America Holdings
Jack Meehan	Barclays Capital, Inc.
Suzie Yoon	Evercore Group LLC
Lisa C. Gill	JPMorgan Securities LLC
Nicholas M. Jansen	Raymond James & Associates, Inc.
Patrick Donnelly	Goldman Sachs & Co. LLC
Dan Leonard	Deutsche Bank Securities, Inc.
Hong Tran	Credit Suisse Securities (NYSE:USA) LLC
Ralph Giacobbe	Citigroup Global Markets, Inc.
Per Ostlund	Craig-Hallum Capital Group LLC
Amanda L. Murphy	William Blair & Co. LLC
Ricky R. Goldwasser	Morgan Stanley & Co. LLC
William R. Quirk	Piper Jaffray & Co.
Tim C. Evans	Wells Fargo Securities LLC
Donald H. Hooker	KeyBanc Capital Markets, Inc.
Mark Anthony Massaro	Canaccord Genuity, Inc.

Laboratory Corporation of America (LH) 6 Feb 182017 Q4 Earnings call transcript