LH - Earnings call transcript Q2 2018 | Laboratory Corporation of America Holdings

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Operator

Good day, ladies and gentlemen, and welcome to LabCorp's Second Quarter 2018 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, this conference call maybe recorded. I would now like to turn the conference over to Scott Frommer, Vice President of Investor Relations.

begin. may You

Scott Frommer

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

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

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

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

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

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

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

David P. King

of acquisition organic level from we acquisition, growth, delivered adjusted Covance's flow. XXXX top quarter deployment benefits to through paydown. and well growth XX%. through returned In share our our its across powered growth offerings revenue of debt The through our and outstanding of morning. another We the our XX% robust through Sciformix you, lowest line as to Scott free and leverage strong disciplined LabCorp created reduced repurchase, since and reform shareholders capital the cash enhanced quarter, good value Thank integrated enterprise. LaunchPad EPS tax combination of the contributions, initiative

transaction of focus creation. the to quarter to Solutions close enhance a our In Food at we our expected value the business providing to divest This agreeing in portfolio addition, support continue is valuation. to by proceeds attractive additional third very

Our on I on leads now our which and execution profitable turn stable initiatives, will on in to results margins. each. our growth update strong financial key enterprise progress performance from strategic you

strategic first expanded to announced reimbursement customer's innovative Our we In high rates. based incorporated effective significant quarter, UnitedHealthcare fair record is Furthermore, convenient, delivering based to range cost multiyear and track with opportunities agreements objective both value and support broad In and transition arrangements. our quality the Aetna. our and into these translated value partnerships proven of services of instances, care. a

our multiple with retain underway United opportunity have with capitalize and growth initiatives customers business We to our on Aetna.

to continued population immunotherapy of leadership In Advance, digital we through, OmniSeq a other medicine our our and among health net in revenue LabCorp's we our strong position the we market. As laboratory insured size of result highlight fragmented the given and increasingly clinical said, have with activities, medicine tools partnership personalized the delivering population, those year. precision and expand each through in competitive next that these in important They to Nonetheless, capabilities. expect negatively patients profit and impact also quarter, includes company's launch relative commercial Philips tools targeted role care key partnerships tool the reinforce to capabilities pathology biomarkers. the

process. the second objective to is drug Our development strategic enhance

experience. offering the performance and lab, in to demonstrate deliver beyond of to the continue industry, CRO increase invest our of high in one largest on differentiated We expanded improve sponsors the solutions value and to trial quality the beyond efficiency backlogs patient

whom top partnership. source were for collaborated we a XX sponsor biopharma strategic we a not quarter, dual the past have During in with selected by the

solutions. Covance was the of reasons primary study selected feasibility sponsor strong and the One our data

clinical provide and this services will customer. all laboratory development areas therapeutic across central for We

Our early pharma with XX primary a a development strategic partner become won competitive top to sponsor. provider process a business

toxicology companion expect net awards this orders quarterly global ramp the to at commercial eventually These over from partnerships revenue record time; Unilabs throughout year. and new this and worldwide. book-to-bill first we in facilitate greater will opportunity with Dx beginning with sponsor step signed is diagnostics neither end quarter. companion We a will with Unilabs companion double is our or in from of the partnership Europe. partnership diagnostics of extending that current availability delivered the Companion new the awards unique diagnostics, levels offering benefited In a

clinical the at utilization health virtual a in service XX of of time, our capabilities, and progress by to investments is trial better patient technologies accelerated into last traditional global contributed the and running, represents key optimizing our and opportunities, same which of in invest pace added design, enhanced Each to mobile we of with studies and These along tools. resources and begin toward future. did quality another At improvement customer patient patient data, incorporated technology and adoption basis site performance with these delivery also margin LaunchPad, preferred global We The highlighted point site recruitment experience. discussed trial a rapid selection, the partnerships, suite investigator quarter we our CRO of model the the and improving progressing up continue quarter. is infrastructure. Covance's

platform. strategic to engagement a leading consumer objective create third Our is

enhance to continue We patient to engagement, market broaden and build and loyalty. convenience channel brand our

improve centers the continue and our mobile in on tools to patient apps. consumer-friendly service also We

year additional discussing ways Walgreens combined integrate partnership with the services. addition markets XX can expand our collaboration strategic with this Our of stores We we expand Florida. and actively that expanded to are in this sites to and has into plan

and them consumers our on they want to will us meeting next met platform be consumer where Our home. focuses reach innovation let at

our with we draws. track this have remain between concordance collected traditional device currently progress innovative We results year. to is the in make beta and commercially testing of self-collection available The and showing significant venous on later device, validation made test on our strong blood device it

call foremost approximately on decision promptly we turn to want designed service protect to ransomware took to Before detected was offline. This our to the although week certain recent address over systems led at network, was the disruption event When one, in I LabCorp. one our required first Glenn returned have it suspicious That I action patients which of the right IT team information private we for the the a and now to normal. Operations serve. activity recovery.

experts, Our has independent theft no or investigation, of evidence which forensic included data. highly IT has misuse found of respected

full We are the financial impact still this assessing event. of

the not the be time. remediation early company cyber too efforts. insurance We significant impact is have coverage. determine impact We the financial has related will and believe incurred to volume It to at costs this

As does guidance not cause a a in result, this change year event range. full our

tall colleagues heart. say for tools prosper my They of to ask of the and to this in and here attack these more a proud we went clients of and critical time in adversity. solved. responsive things and attentive what makes years against stayed never to I have help the of passion mile Every colleagues information. and we demonstrated sort been always of us. Although LabCorp, partners improve one components did XX on stood my to teamwork who need thank the been value and and we and of of my nearly hours it are Because guard They us that their the were mitigate because do. need incident. commitment with to of recovery health as amazing in always people was what little have long of of patients In to who great and them They worked to our they passion deliver of host serve to needed They focus passion to who is of be. I to more for during this patients sharply each extra When and will get existence, in we continues bottom They everyone LabCorp challenge doctors, has rest. great me our mission our the lives, a from calm people. depends face improve problems the consumers than

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

Glenn Andrew Eisenberg

Dave. performance you, discussion review a commentary outlook. results and by with year conclude Thank comments going of our I'm our segment full a my start each with our followed to in on of quarter second

XXXX, XXXX prepared follow, numbers of translation financial As or our adopted million, we ASC on XX.X% we to valuation results for to million enable basis using we a increased XX% references the added results of all otherwise. we are XXX quarter In session January unless an the X, XX.X%, our restated or benefited of last $X.X increase to guidance. was the Q&A XX.X% restated to year. performance the meaning our the press compared was that and reminder, revenue better remarks and over for of release, the XXXX $XXX billion, method, and specifically full Operating XXXX points. retrospective $XXX X.X%, to foreign our year, revenue, quarter last as from currency acquisitions note organic income Revenue the XX

Food The income, had process restructuring due not from in savings related adjusted million result to LaunchPad XX.X%, Solutions of $XXX by to the was prior operating to the The the offset million excluding adjusted restructuring of from was a amortization, organic the mix and was from costs. down decline charges Adjusted our and as LaunchPad acquisition last quarter primarily results. was partially in special business last Chiltern, lower of which tax integration, of special $XX we the implementation planned XX.X%, was XX $XXX growth U.S. the increase in the and point quarter to The reform of XX.X% last million, year. the and the margins impact business. compared PAMA of acquisitions, to million the personnel million This compared XX.X% income which or PAMA and During rate was year's revenue, special XX.X% $XX amortization primarily charges the of of basis year. items, for primarily divestiture excludes pricing of was lower implementation operating revenue items improvement or acquisitions, rate, tax implementation tax $XX in operating our and and XX.X% The due initiative to charges rate due year. Medicare initiative,

translated last favorable revenue, million earnings or million $XX the working The to of up into capital. full-year from cash other expect flow per $X.XX and the higher due diluted $XX X.X% to rate adjusted of approximately restructuring increase Adjusted amortization, net X% to $XXX the million $XXX over earnings charges a was tax quarter XX% were benefit quarter, year. up which quarter, to million XXXX totaled and reform tax and operational or $XXX expenditures XX%. EPS, million Strong was last in special for items, performance share. be in the excludes of cash $X.XX year the Capital continue Operating ago. year. or compared We

million quarter, million result, at cash As end, million million, allocation. $XXX remained first in $XXX the was down a throughout was flow end the up the last quarter quarter in active balance We from quarter. terms year. of free of At cash $XXX the $XXX our capital from

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

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

times. During our debt the the X.X the end, EBITDA end times months leverage leverage brought at down quarter, gross of reducing This X XX rate paid also of of debt top term our to ratio $XXX total last X.X to variable target at $X.X our company's billion loan. we to to million quarter

Now, was benefit I'll primarily over quarter organic May. in offset operating $XXX was increase of last Total million basis XX by review the volume per from Diagnostics. points. Mount volume PAML, which from X%. of segment in was The or of negative PAMA, business were Diagnostics' approximately partially million due volume year. was X.X%, with was X.X% by PAMA partially increase from the the Revenue performance benefited last the billion, or PAMA. in measured was by our operating $XXX acquisition Note Revenue income compared acquisitions of $X.X requisition outreach related and year. driven These offset our margin joint acquisitions, impact currency decreased negative volume the from certain an ventures, and requisitions, primarily and beginning Operating excluding essentially from acquisitions. items The LabCorp Sinai's impact offset impact quarter which by due annualized decline XX.X% LabCorp of adjusted negative revenue income revenue, increased the and of for translation PAMA. organic the personnel that volume X.X% favorable XX.X% acquisitions, X.X% to costs. and were impact primarily to to organic for by growth

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

are LaunchPad XXXX of Chiltern the and on XXXX. by of savings track synergies by to $XX net the deliver We cost end million Covance of million the of $XXX integration end from from of

million was $XXX dollar. $X and from X.XX. net quarter, XX to a For book-to-bill currency at was translation primarily end of quarter to of due the last decrease stronger the trailing relating months, $X.X approximately the U.S. the billion, foreign Backlog were orders net billion

We expect to $X.X over the of this XX backlog billion revenue into months. convert approximately next

assumes XXXX repayment. rates Now, the flow share currently deployment debt remainder toward I'll and discuss impact our the year anticipated guidance of XX exchange for as acquisitions, free from of cash includes June foreign which of repurchases and the

Solutions financial addition, related of quarter. divestiture In the Food to announced third previously impact the includes in guidance expected the the this business

revenue divestiture includes as XX.X% billion, growth revenue XXXX XX of Covance compared which XX% of in the Solutions of increased expect by points to is XX.X% the of range translation. guidance a business. the narrowing to XX%, as of planned offset of Drug outlook over This $XX.X We currency prior is the to Development of our benefit approximately the Food basis revenue

to the We XXXX expect a includes our Food to the from translation. XX of Solutions approximately X.X% LabCorp guidance planned X.X% prior X% billion, of of revenue the to Diagnostics points revenue growth of due This currency benefit of over which basis decrease business. of $X.X X.X% divestiture is

in modeling Diagnostics For in million XXXX Solutions Food the margins purposes, approximately a $XXX generated at per revenue but at overall, higher segment business the revenue significantly of with line requisition.

revenue of basis of XX% our translation. Drug currency an over growth over XX% includes This expect $X.X to Covance Development XX% approximately of is benefit due investigator which XXX revenue guidance to points fees We billion, to XX% increase of the prior higher-than-expected of XXXX offset change mid by We for the to foreign organic currency stronger reimbursed, pass-through the track other the [revenues] (sic) translation and expenses on XXX which basis point high-single company to dollar. remain be will XXXX. deliver growth digit in partially due to U.S. in

compared is Our as $XX.XX, the a $XX.XX adjusted EPS to guidance guidance narrowing of of our prior $XX.XX. to to $XX.XX range

we Finally, we now Operator? our from billion, and expect remarks prior between our and free billion This cash unchanged flow concludes $X.X to $X.X will questions. formal guidance. take be

Operator

comes question of of the first Our from Meehan line Barclays. Jack

open. Your line now is

Jack Meehan

the Aetna drive net-net you're during what investments us other good around you help UnitedHealth gains and of to what new and be some Dave, the Thanks morning. some share put and in And this try think period? with can put place the you ranges payers to also relationships are XXXX? of impact in will going

David P. King

make Morning, couple has and a if ask Jack. anything Gary further. this on I'll comments

That's a then yeah, or that there not just we that against we'll and likely more is outcomes to covered not I the of United in each highly it's now. is have those in ranges about think anything will say we'll the it's United covered of pick of Aetna appropriate I Aetna, larger number because lose United plans, with under United it guiding the toward we're reality than not market. from lives talk XXXX percentage that lives up more and given have beginning, are as Aetna. against said in we of

a And will on look negative and profit. that as always on opportunities have what at those we impact to are the revenue accommodate structure we'll cost obviously to do, the changes. So tweak

data we're tools for of one that doing of the talked critical that I all about terms doing In the we're work things is around think integration. gain, and share data we've and most

both allows that, are the our digital comparable approximately, really check-in the which Walgreens and app increasing conjunction so do, the to my offerings. experience, and how the Net example, not my know their cohorts? my health only the on for Walgreens, customers, not and of the is in the physicians are the patient service population want Covance system, physicians and data as patient of mobile bonus together. opportunities reach Walgreens, experiences where that use in the that In the partners Ratings. know enhance gaps improve focused week, we that integrate last are them internally performing – are the email patient how of analytics and cohort again, those want care, using literally, on doing, opportunities how a data whole I Promoter example, treat for with with example, saw And performing talk patients mentioned, receive check-in do comparable I have to the app centers, better to that the us we realtime with experience, to also improvements the self or How LabCorp integration to my also working the to so thinking population on process capabilities. tools are can data, against what externally? patient they payments and think to in patient They So we a consumers, about only with against at the I and but feedback Star how the the during couple large overlap tools for with to contemporaneous combination health patient So calculations our with we we're we've opportunity, I mobile

share we're think to beyond how system, health with sales brand anything working So would our about as create gain the mechanisms. we physician add all that? the can enhance our traditional consumer, the are opportunities we identification to like these with and about to you Gary, with talking towards things that

Gary M. Huff

Well, we first like plan. Aetna look say really at the to for comes an we down I would I opportunity an plan. of all, to as of UnitedHealthcare say that, would organizational a execution like have us extensive and to and it that

We to we're mobilized execute on plan. and that are prepared

Jack Meehan

of And That's for the can it's I us out John, next any lead and made great. which getting just the is on the you of a color, and to Covance? relationships, that, you in timing have update tool for check-in made you'd they quarter? opt-in strategic did any good expanded lot progress on patients a related question on you the just had bookings And some your rolling of the Dave, progress into to impact the

David P. King

Well with I'll start check-in tool. the

things to of database is grow. opted continues of to on couple the that. be a So that contacted who have One patients in

we self I think how and collection so have email addresses. well addresses their a and have consideration of more interest a email in check-in, trial to will about for And with base consent opportunities opportunity be at very, important, we we their patients engage of with to we through the using very solicit with opt-in. patients, large review as billing to the communicate significant after engage those process, of patients

about patients through and we've a next what addresses us who whose for of to are it's of of about the actually not and our LabCorp virtual bills, number number have the pay trials. not studies, on always about have a sort opt come interested all opportunity see communicate is market be the trials, simply checking we're you can alarms, into criteria So just opportunity enthused as because, collect eligible, and and talked we patients email even access the and of reasons, enormous Covance. virtual so a behalf generation data we'll of communicating observational narrow to not we with lot that about customers are people who but think ability who look, to coming trials, be those And of how with that we when tend who that – are control quite the our business, patients only subset and on capitalize trial they

strong opt-in it to terms data the continue the over that's and we are on of where the we the progress turn there. see database I'll very on And of bookings. in John impact So to on

John D. Ratliff

data exceeded facilitated really to looking into selection As the Development capabilities where matured, the an now awards successful. We've we're Drug as billion $X that of has important be at capability in Covance. our factor have necessary integration data

cumulative than the case capabilities We Day, our even we initial Analyst million finished into $XXX lab our on really space clearly, the and, of studies partnership XX months the an realtime assets. revenue through studies higher the able We through we've we even data then how clinical we'll industry of sure where of Dave have unique expect in exceed of and of timing sponsor. did the data, quarter, on the terms partnerships compared Investor from demonstrate example, the estimate the acquisition. the finally but as a to noted, XXXX, the earlier studies demonstrated, these bookings three central data was five I'm have in enabled competition. the top to that than been actionable oncology through tied anywhere now our our to of our And clinical we the oncology to to to showcase as get demonstrations on nature strategic as

is So clearly, there environment our winning a facilitating data capability and for Covance.

Jack Meehan

both. you Thank

Operator

Thank you.

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

now is Your line open.

Lisa C. Gill

much. morning, Hi, with today. Good to the Dave. around managed comments thanks in of some I follow care up market just your very happening wanted what's

is market that, there current we the lot I can bigger of about value think bigger understand kind tools, how you to talked contract but you the this, and around yourselves paid we any how about think opportunity do large value about based from you're move analytics, we you labs? United about population like think clearly, based any national within continue initiative? data health to Quest? think potentially players to Quest? we offerings the that, the how differentiated And regional Aetna, even a around And One, from care, is value the be how new as share than to do and two, As contracts, do about enhancements based and away and think shift

David P. King

Lisa. Good morning,

Many redirect Aetna So value of amount contract both suffice based to based detail, going insistent commitments. their goes care into contained And lab contract health opportunity higher cost return have enormous value to I the work interface away many telling say medical captive do why so doctors cost the own the United electronically, to is and can fax, systems information are us has terms that providers. say putting we in very higher in laboratories. us initiatives we it send things the care from for to their we which without go is providers. and like work reality will that to there an everything an for work do that into record. some are results the revenue They the of back on reasons There doctor if inconvenient is cannot ourselves. can't

like design are there initiatives from things care we and structural based redirect support care are working in including help network other out work benefit but of that will managed our to initiatives. network value things and laboratories partners are obstacles, to that on, there So our benefiting from

and regionals and versus In the terms it's market still large market. highly a fragmented opportunity for systems, overall nationals of health market

to other effectiveness. consumer consumer quality, engage build which and the we and initiatives testing strong with ways the LabCorp-Walgreens, And We the service on is wants have cost where and convenience, be infrastructure out met. we in competitive home to reach that founded a like continue position, with which the

the So provider a piece about provide we of of we're we with better. numbers we're system health on of not condition but the identification continue and can feel well I to on it a to provide the than work to in that going the how gain market the consumer health provider manage trusted competitively but can paper knowledge to as that trusted a extremely value more only ways physician, my and positioned value and

Lisa C. Gill

have feel And in competitive think we players the that provider? providers just position how the the fairly who is or your you more is of something big move about? that opportunity from other just Is there's differentiated you do away comparable believe regional marketplace, we to against this there you about it that two real national talked and are the national

David P. King

I clearly we look initiatives. That's if innovation. why with at why we're moving we're sees forward That's leading you performance, That's the gaining why differentiation. market are organic think volume. in key

the tools convenient. our that compare the And you population you if more are that at They're offered to are health measurably being tools patient, better. measurably tools think if look I the the thing. offering physicians and doing, view health my is market the as differentiated. systems see to collaboration we're the that is telling we of we're and And ourselves kinds us same

Lisa C. Gill

that don't what X I market's their the difference the going mix? is to And the at believe saying are in organic want but growth or the just yours, market look between of you with understand we times if as it this this Quest, contracting. your some versus we that that's nearly to XXXX quarter, customer shifts you death, LabCorp to into the in and and beat I showing in were about want theirs growth think – quarter the organic saying the

David P. King

never measure reliable and I because for share we're look, it's so it. there's a difficult just I Well, think gaining to determine that say don't

lives that which that's the organic volume telling persistence more means. very has you us is the to the than detail others the that Our market and is things for the was areas telling I of was is market and of covered as all to topic strong speaks are us Aetna. remember the we leave Again, again. to United, opening important testing what itself. our to It is strong it the opening of so interpret appreciate competitor, across what us and think or one testing but to which in Lisa, is I on quarter network the all lines about the is network It XXXX

invariably, we is impact, than United with on an revenue for we have will the Aetna, will us. profitability lose with So more and gain that impact will and

you the when bear telling in are about the will of say, greater have contracts. the to all just because burden that market of think positives than realize positives the that is they covered loss and of share is So what say But lives a working. competitor which us we'll our numbers there XXXX, you are terms in

Lisa C. Gill

very That's you. helpful. Thank

Operator

you. Thank

Our Coldwell of of line Baird. the question comes next from Eric

now open. Your line is

Eric W. Coldwell

much. Hey, thanks very

First the I you because we Or currency growth, M&A CROs hoping contribution, stated could growth? us one just the constant is, the maybe I already if give get have organic was I can differently, think FX. true

John D. Ratliff

Yeah.

in on track growth have high-single that on "Covance." digit with the have We legacy Eric, to the the terms are organic the to full on respect and side, this year of CRO,

Eric W. Coldwell

Got can dollars, get it. the M&A I please? And

John D. Ratliff

of delineating terms the not out We're that Eric. segments, in

Eric W. Coldwell

Okay. because on the well. a what realize think on basis? constant revenue, think pull not you adjustment the we about big And that there was have trailing what could all the on I X-K but basis. a I you do have is. in ASC book-to-bill, XXX Can together to I XX-month quarter XXX the what about would give a trailing I we also basis in don't FX been the pieces you XX-month as know the here. currency to us And have can then your don't book-to-bill of the – we don't or but hoping talk is book-to-bill talk book-to-bill, ASC

John D. Ratliff

you enough? hopefully the the pipeline a in and and some about opportunity, Eric, ASC at versus talk Why least even being out time Fair at the segments. to then the proactive delineated I little don't We the XXX address gives of X-K that take some the just same granularity booking XXX. ASC

Eric W. Coldwell

Okay, yeah.

John D. Ratliff

that actually last with very had, seen time labs up the side We We early clinical of my that. opportunities. development; and still to in central It's versus in the Covance quarter. strong even level the since at the see pipeline respect I've highest is pipeline,

an deals competition, source partnerships, top award XX pharma as now result. that a XX ASC That's had XX source a years two, basis really speaking lab pharma we're the shift As strategic top little probably on with the or from And times QX the source a also early next was about, and the then beautiful side, That no on X.XX from focus from Dave over thing. optional the did QX. from an basis years double biopharma time. data He the the the should the on an that development It's with piece primary to award part clinical finally, months, bit about central we had current And selecting XXX a Seven-year our XX talked early XX of anyone, we selected with top bookings experience business, three XX-month in sole sponsors. two. you trailing especially strong provider in where about those why ASC this took the dual development. partnerships of but to XXX capabilities we not actually some we to uncommon. is on agreed optional then, the years sponsor a chatted to award trailing due awards bookings sole plus That's five with seeing year, extension (XX:XX) have over really times we in are were with business, period. of X.XX when an ramp

in So as I what clarity get what's book-to-bills of hopefully X-K between in well stated on the the the on to get to. can you're what the as trying and that to terms you math

Eric W. Coldwell

I mean, us sounds well lot here truly your when guys future times... in and encouraging. it good X.XX about X.XX you've anecdotes you prepared sound just upbeat as you but a from go awards, as to a remarks given Yeah, of

John D. Ratliff

external. approvals, funding, Yeah, evaluation. positives FDA Chiltern based general now on that that of a like I'm in in based positive. surveys my versus my those segment, of we're here is our outs, decade and that. business the all The that like line internal there the based know with demonstrate seen but are bottom over there seeing increasing. industry I I industry. terms is I've I And in to plenty the ins participating the biotech on out And my in business. on debate there is to some acquisition, penetration on CRO

Eric W. Coldwell

bookings my guess the what it to get really point trying itself was I looks I for like. Yeah, I'm the all quarter is, to quarter is, a weak appreciate comments.

quarter. X.XX that prior X.X from quarter when currency factored the X.XX XX-month from times, in. XX-month We a the a to goes trailing alone your of times we adjustment, compared which was impact book-to-bill appreciate. that's to average Some the trailing a that But

what's So weak the want drive on to going what the was I future. fully just appreciate I to can know comments this quarter.

John D. Ratliff

performance, development From a segments. Early from And then to businesses. QX strength. the we happen it across QX. did the was uncommon, standpoint of but within those on of the shifting of consistent side, level pretty central lab had clinical a some and saw Not level clearly

Eric W. Coldwell

I comments. much. very the it. Got Thanks appreciate

Operator

Thank you.

comes next Muken the of from line ISI. of Ross Evercore Our question

open. Your now line is

Ross Muken

just morning, Good qualifier. on to just quickly want a maybe follow-up guys. with that I

you et possible just may like to later sort sort would awards suggesting of a may they that of is be that? when think process relevant the a re-signing with, XQ. want in around relationship, was strategic go what lumpy of whereas of strategic, if sort come a it through there larger given possibly of part certain which in Or you that delay explanation. the a see normally relative you're a you not some understand Q, So of is be I cetera, around partner year seems renewed to kind I key a it because

John D. Ratliff

is. we're on time, But a same at basis. the It contract

a until get strategic when into taking those big partnership bookings program transacted So we're the partnerships, these in that not actually gets contract. underneath we

So that you'll see time. through

terms into that in see You'll to and moving startup then of recruitment. full

David P. King

And it's Dave.

little add color to to that. Just a

significant year. major accomplishments, about next the are my ramp mentioned two we until but won't things in I to talked As start awards prepared remarks,

So you see those in will awards. future

now. them seeing not You're

is, a strong current in the kind a you're If off quarter going trailing when whammy less quarter, thing impact. terms it's just strong earlier point, see a you a quarter not XX, a of has you current about have that Eric's and of to a falls the other to think double The trailing obviously, XX.

So that when trailing at it's I quarter you're impact number. think it's not a looking to important one the XX-month recognize all

Ross Muken

where the are been There lab. there. from nice guess genomics your announcement interesting expanding for And sort I to was Dave. seems had it's while. in is business you've the be of a that like on profile. seems It morning consumer a helpful thoughts an maybe just lab this the boost That's It your overall of your kind and to business, additive going a quickly of with what GSK XXandMe. sort growth play on and

David P. King

Absolutely.

for We with think other things of have do continue And thought strategic we partners, our spend as lot we them data do just better We to growth, talking that collaboration other as of We a be a about, do terrific that with component what them important how but collaborators. also how organic nice a together. our consumers XXandMe. a we we build partner about association. can we of time they engage with brand with

Ross Muken

Thanks Dave. Excellent.

Operator

Thank you.

of next comes of from line Suisse. question Our Credit Wright Erin the

guess Wilson sort Your Securities the that now on approval Credit - the curious of CRO bolt-on expedite in late And post noticed for Great, thanks. area. Thanks. of or recent bolt-on deals of be as you should whether with you are did now line is Suisse that? that as of Erin space? I areas I stage Chiltern in or kind synergy LLC I'm well real-world growing I capture. how view in open. in now acquisition Wright market, the impetus some the you elaborate position faster a did Chiltern guess I could it how Covance these positioned (USA) continuing CRO you you evidence, your FSP think

John D. Ratliff

real-world our stage to up. the The acquisition, good Chiltern the with the Sure. positions respect evidence, areas. did biotech feel we late with We move FSP,

final best of in leaderships of the best, that all integration. Organization's are stages actually very, the has done, picked, happened. that We very

flowing thing now, We the long with tent, poles if system respect July/August. that want have you organization through the call integrations et or that, processes, now intertwined in to cetera. only The truly, the to it are actually

as has Chiltern terms clinical. enhanced and had involve significant FSP those the the to the high-teens real of in us of the now since XX% areas. of terms with half. our in been in here, allows on capabilities. enterprise legacy fact on strength the to terms our the skill of stage That that XX% And the has from in now that the see Clearly, through XX% from that and now has the area. materially We kind now Ever on we revenue complete. added bid Covance go biometrics the skill to with to second monitoring opportunities is levels So organization, biotech Covance of the biotech up of ticked enterprise I've

believe that you relationship great. the progressing? from position. a And would follow-up, a we'll get further, Thanks. Wright leverage on later bit our so quick evidence and out - We came acquisition. capabilities, that talked effort? data that building there And side, in could focus stage well solution our the meaningful progressing Covance LLC potentially according say contributions post-marketing that potentially plan? how data it's Securities strength with (USA) virtual about you a when across Chiltern is then Wilson Suisse on real Walgreens from we And as little Walgreens then bit step greater trials? you And Okay, taking our do earlier, to think that Obviously, a So about the strengthened that a areas. Erin Credit real-world how

David P. King

think continue I the expand to footprint. Dave. we And – it's Yeah, obviously,

opening valuable throughout at year. consumers. these who a And more stores – LabCorp, reaching also locations We Walgreens bit new many see are not of partnership shop the that Walgreens. typically and channel We data this for these but have patients patients will of a quite as are showing new collected be new don't only we entering there are to

have that work done. getting of are time data showing at also lab same the they're We many filling the prescription patients a their

in theses consumer environment with want into in retail, to is are engagement on and went we we valid. we want this to the the all be which be care to a we health want which So create

where with and of of databases knowing of capabilities Covance, the I question. businesses condition both the their to There's terms and trials. It the and in we Wright have of of Wilson benefit comments being patients, Securities mentioned with LLC we accelerate. to what - our Erin are to substantial and following how virtual arms is creation the what Great, also Walgreens. valuable opposed course drugs can Credit large them key of treatment. in-depth Jack's and amount extensive disease valuable a with integration as of opportunity conversations very you. continuing terms about And virtual I for are be enterprise from the treatment one In course patients priorities of in response of in earlier controls trial they're that trials in terms individual (USA) think, But taking can thank Suisse

Operator

Thank you.

Goldman Donnelly of question next Our of Patrick Sachs. line from comes the

Your now line is open.

Patrick Donnelly

requisition drivers understand obviously, Maybe Thanks. a PAMA dynamics confidence your talk side, there in just just improvement and Great. trends, and headwind, also then revenue forward? first a the per for the the but as level moving Certainly lab the there looking you can through at while. one on decline

David P. King

Yeah, it's Dave.

bit think I you So broke I requisition. up a but question revenue little your per think was

by that PAMA the And acquisition for the me revenue saying let more accounted impact start on total than so decline. per

Okay, so acquisition per we revenue up. out, take PAMA would if have been

of have it and mix, price number therefore The is XXandMe the other said price as a than to mixes valuable though revenue for per lower point test us us. our average on point acquisitions, requisition even impact factors is inside it and contributes an collaboration obviously; test we down a volume. that at have are It strategic times, a mix, highly

headwinds and effect for Aetna, of So not I impact previously, also managed our any on managed price. wouldn't that the until stable. take care so We're the the pricing front pricing obviously, that impact next care. first will of have talked is which we've seeing about United say pricing from And not perspective year on would

PAMA recap, if comments, been out further up. price if the have to I'll but So ask any back to and recap, you of would then equation, Glenn

Glenn Andrew Eisenberg

covered you've think I it, Dave.

Patrick Donnelly

than M&A a lab the been industry And then may develop bit side to anticipated. have consolidation allocation. maybe capital story one just The Okay. on on slower

as you can year the progresses? conversations through margins acceleration in pipeline just any more So there, the PAMA as squeezes a talk bit hospitals with

David P. King

Sure.

we of robust enumerated return years, opportunity there within every pipeline fit, have of on recovering are evaluate factors strategic cost on of all and capital, before. healthy metrics M&A is we capital and so the are that invested Obviously, our three opportunities. key a So accretion, which based number interesting the our

getting the think I table thinking strategic seeing to in they with There of trying Novant, are quarter what – and so anchor there be to that say In but options to and whole they the materialize St. terms to it's people we we're partnerships include the they're view are data, PAMA take they take we time These laboratory. services. was of just with seeing they on to difficult include I will mean. on front hospitals a earlier of used the key us health range might manage take yeah, the everybody than a we of systems, as impact that lab I of and a commented are what but broad Mount deals health their that – include that Sinai Providence significant think their include deals opportunities number testing, there we consequences first what system in over is. timing the again, was in And about strategic predict are have some are call, assets. interested Joseph, PAML. going systems, the lab the and was And pathology, year, reference we more it

Patrick Donnelly

Thank you.

Operator

Thank you.

the comes Ralph question Giacobbe next from Our line of of Citi.

now line Your open. is

Ralph Giacobbe

C, drug vitamin Good go Thanks. Dave, called apologize I pressure hep I if your commentary through out like all based guess monitoring. growth bit categories. your strong you you across did sounded organic but morning. earlier, little on this, late, was a joined said and so it yesterday I specifically in Quest D

sort categories. you to you policy these seeing cited if just out of not than pressures of see color sort of Again, changes more any that within macro those categories? within can it of Thanks. just you saw any sounded specifically denials company-specific. they are then call higher I sort And us those and one, So, wanted and or give

David P. King

Ralph. Thanks,

some because close minutes a do this the I I top the hour, getting it's want we're of industry, couple though of is even the think created uncertainty spend across merited. think to don't which on So I to

and we all, of I first So, between think volume it's important distinguish that revenue.

revenue. denials changes not volume, and affect policy So do they affect

respect with of our vitamin tests test say drug monitoring in could three quarter. three those monitoring, D for up and those each C, I and up the of Now was categories: of medical was hepatitis the that categories drug quarter, volume medical in substantially to all

that's So volume.

those medical we more We seeing, like Many players. for policies, using with in control curbing instruments don't abuse as restrictive effort have much particularly spend. are of Now, lab as seen they fraud by revenue, players payers and are as years, are us the to coverage more limited policies monitoring, compliant agree and Quest those that their preauthorization implemented policies. blunt they affect just drug policies, and at but aimed we policies, payment non-compliant an affect in

in so our and they So a genotyping C an hepatitis we portfolio is in decline hepatitis and on And we C in are and our volume did obviously, C more something see event. not we will to any a genotyping, have would C total small any write-offs hepatitis significant and was that also denials comment those fact, a have overall. those volume yes, revenue did on is And up fraction debt. impact But hepatitis in not impact recapitulate, specifically but of in genotyping, see increases they I areas, on a three. the affect seeing we bad slow hepatitis total volume quarter growth. very declines all C in say revenue volume of with denials and saw

of we hope with verification, Ralph, tests I those helps how saw that terms So performing. in

Ralph Giacobbe

Yes been of it you've And like a gating the expansion? point. broader of relationship, wider relationship then sounds one pretty the Walgreen there this to and one, with factor much happy more kind Is quick just helpful. of that's with a sort

David P. King

is a far process of the The expansion about significant only we gating of store partnership. and down in road factor are the build-out, the and selection talking

Ralph Giacobbe

so Great. Thanks much.

Operator

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

now is line open. Your

Dan Leonard

you. Thank

Thank in side. of how NIPT the for business, Another product-specific thinking you that your lab you. the trends on expansion of and Can the the question on about update us potential average-risk coverage? sizing you're

David P. King

growing Sequenom we growth terrific was strong acquisition is volume complement and to continue Gary's well nicely. NIPT and to The to I'll Yeah, as NIPT there closer see our as women's it. across probably portfolio, then health. start

happen to support In did come groups Gary, over the which I terms of that think And, the out But average-risk, think groups of meeting. in statement payer their physician last not there in we coverage of average-risk I the better test. screening, that optimism anything with of of I time, is average-risk some physician was utilization testing growing. the that see prenatal for will of non-invasive or a patients stronger add think to test expect further there? favor

Gary M. Huff

I'd just there is health say seeing our and industry-leading thing women's good great portfolio. testing, a we regards growth the are complement one to to it NIPT in

as more a component. drive key the leverage our we becoming to we promising. continue So it's women's reimbursement and health And landscape growth, see

Dan Leonard

you. Thank

Operator

Thank you.

Our next the from Goldwasser of Stanley. Morgan Ricky question comes line of

button. Goldwasser is open. Morgan now line Again, your Your check Stanley. Ricky, Ricky please mute of

is open. now line Your

David P. King

go just question, Let's the to next please.

Operator

All right.

Craig-Hallum. of Kevin Ellich next Our is question

open. now is line Your

Kevin Ellich

Dave. Hey,

talked been questions. pretty how quantify lot's is about. quick A growth Organic strong; much guys two XXandMe? Just from you contribution came did

David P. King

the to good how it quarter. XXandMe. organic not say, contributor We was Kevin, quantify Quarter-over-quarter, growth than a obviously, did from much strong contributor. would came morning. less prior of a I it's

meaningful the less growth So, sequentially, to it was organic than XQ.

Kevin Ellich

capital And flow Free you. expenditures, was maintained. saw Thank Glenn, a Understood. guidance increase. then, we cash little

things there should Just looking for? wondering we be should CapEx how about big think Are going any we forward.

Glenn Andrew Eisenberg

past that we a growth business. guidance is we're to Kevin, we're year our which see X.X% spend tracking guidance, much higher about than around we're range. for revenue much invest of But tracking thought. our why we the maintaining gave the would where original talked years When pretty opportunities if we be on which this pretty the we good of

Kevin Ellich

guys. Thanks, Great.

Operator

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

line is now Your open.

Donald H. Hooker

Great.

synergy now, of of kind stage business? you're both the of few owning what any a pull-through a And from of development the So your are early of kind Covance businesses? years you one seeing Covance thoughts are question to business around at maybe high Curious those the at into the if acquisition late level. kind

John D. Ratliff

This is John.

are pull-through. we In terms of seeing

are That's we're into seeing BioA from tox of pharmacology] pull-through what terms the pharm actually I business, [clinical in business tracking. We Phase our areas. clin the

of is from We terms due up on that we are early is diligence that be have have level do to move areas actually But this I products seen into a terms and that that stage. a III, the – the how pharm a development that stage are place pharm in is that II, upticks now in we pushed terms into should and we research, the areas It in the increase. early get Phase either CMC areas, our in in or those of terms clinical some of IV. then scientists move development differentiator. falloff Obviously, group clin have and rejected of then seeing into a in Well, actually BioA early organization clin clear of do businesses. there of put then development

all actually three. CRO are that We does the only

Donald H. Hooker

Thank you.

Operator

Thank you.

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

is open. now line Your

William R. Quirk

of move me. And network, that to the have to little this long then a for a over step lab Thanks. more And obstacles ones several some before bit quick quick is sort see talk years. Two business you structural Thanks. in presumably Great. function just you how happens? about speaking follow-up. can Dave, I

David P. King

Sure.

structural the is obstacles benefit. that of have an One plans out-of-network

customary that and of changes and do have charges bring off in to or they out-of-network responsibility, off nothing of to do until at if benefit billed can of plan I'm can an there or balance. And usual charges and by we design, patient labs that have you that really and the pretty behavior So write they're or non-compliant billed XX% else writing XX% XX% for network. employer where is we Quest pays a out-of-network into I well the work have anybody willing

happen work Bill. healthcare providers of to overnight, care great sustained effort it's to that reward and benefit question to the It's require going for their that's managed bringing something a design to not the compliant encourage the setups is on this employers and a patients industry, into So and encourage part going behavior structural and network.

William R. Quirk

Okay, the got in can clarification, just rev rev PAMA terms rec? PAMA, a quick separate you what then negative was And specifically rec of Thanks. excluding effect appreciate on was the it. up

Glenn Andrew Eisenberg

would is over time. be PAMA Glenn. around for Bill. the Yeah, year we've period from pro What would and that million, is said be of pretty This full impact $XX the the that rata

So Whereas basis said, roughly get that. Dave you call I think you to to can it, get around, points. XXX

the the more year-over-year. So of impact negative accounted decline PAMA point really basis than from the for XX decline,

William R. Quirk

Thank you. it. Got

Operator

you. Thank

of line the from Blair. Amanda Murray comes William of question (sic) next Our [Murphy]

is line Your open. now

Max Smock

Max my taking This Thank actually for Hi. is on Amanda. you for question.

quick few for me. a Just ones

David P. King

no, No, two. no, quick hour. you We're past no, ones. no, is Two get. the what XX Two

Max Smock

limit Got I to you. it just Yeah, was – two.

if XXandMe. the into were was Just one of back that seeing of a holiday quick terms on you volume any the half wondering I the you've in moved year? now past slowdown season

David P. King

it's a our that's directed think not question it kind volume better trends. us, of their position to I XXandMe to comment than is on

Max Smock

I your just Got wondering about guidance, in as the a bit was moving much towards of I that late increase opposed about to an updated – it. we existing how color. of the maybe the that little guidance then Appreciate And in a to sales? stage, was talked Covance increase and pull-through shift bit wondering was kind little backlog of

John D. Ratliff

so in truly, was late it currency, clinical but because bit an stage, in Max, fees. pass-through, in stage, but the investigator fees, would It's offset investigator more the much in but more by that would it it be was so it clinical a of be pass-through uptick that little

Max Smock

Thank it. Got you.

Operator

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

Your now line open. is

Ricky R. Goldwasser

now? hear you can Hi, Yeah. me

David P. King

Yes.

Ricky R. Goldwasser

Great.

Sorry for that before.

take comment Aetna And you specifically United pricing that from wanted a the So talked until revenue that effect about will requisition. go when you back to to you not Dave, said per I and impact next year. made

impact we get a of think how investors about and we questions the pricing on should component these lot on the Aetna, from of United from So relationships.

you when whether talk you merely about a expectations reflection So about XXXX is price or for factor and a this is well? can financial just impact, your volumes, the clarify as of

David P. King

discussion. were negotiations that as during that United said with pricing we a of said the if were said, increase, we up very and time contract pleased had the of we we So the opened discussed of we the the the as both. at the would pleased renewal, outcome price with And expect we also we very

impact United inference. factoring out see next that. leave respect year, gain. versus be the the the leave impact price be the So Aetna impact. contributor you you I'll balance We're conclusions to to the I'll the and we profitability from to a draw will own as the volume to we how draw lost how With your will that and revenue loss not

Ricky R. Goldwasser

that you give pick different XXXX, how back back long to go And that of just just follow-up is But you might know great. or the give not I take around it's Okay, And perspective in to share the to – going to talk be help then too did then? volume, say about very can maybe framework? That's in to cadence maybe XXXX. helpful. you that some what that terms can this a us up us time early it you there, volume with us

David P. King

you were XXXX, have only the around memories. we so only in maybe I think the ones and I Ricky,

XXXX. say just we because with all January of prior were both to XXXX, of situation United in change first in the let different So network me

a network. quarter saw XXXX. quarter in significant that the be contract in XQ would of made of movement XXXX, into has the over. switching a leading a first the was LabCorp very but October United volume announcement Quest of in So network, XXXX the We fourth was of

pretty was XQ of substantial it pretty impact XXXX then in is in XXXX, substantial competitor and XXXX. network in XQ This the not XQ off. time the our So in tapered

rates. see shift does XXXX, the first consequently, will is, to expect what volume if of increase don't because all, So of because shift, it happen we an United will out-of-network in of XQ

think, so that's patients an patient the obviously in put of would the Second responsibility, see increase not, and patient will anybody's that all, in middle I goal here.

which to what's the of don't movement bulk half of XXXX. that in largely expect the quarter XXXX, first in So of but quarter somewhat impact then certainly quarter, move in probably will first we the the fourth the move the be of significant expect in to we XXXX and means going second

Ricky R. Goldwasser

Thank helpful. you. very That's

Operator

Thank is for call like King the hand have any for closing back all remarks. I'd we the to time you. to questions. Dave That

David P. King

the us Well, our you again situation outstanding very of this with pleased ransomware Wish joining performance colleagues to day. again, we're good morning. performance the in the appreciative our for the you Very call appreciate of quarter. and

Operator

does in conclude thank gentlemen, conference. That you and program. today's Ladies for today's participating

You have may disconnect. day. Everyone a all great

Scott Frommer	Laboratory Corp. of America Holdings
David P. King	Laboratory Corp. of America Holdings
Glenn Andrew Eisenberg	Laboratory Corp. of America Holdings
Gary M. Huff	Laboratory Corp. of America Holdings
John D. Ratliff	Laboratory Corp. of America Holdings
Jack Meehan	Barclays Capital, Inc.
Lisa C. Gill	JPMorgan Securities LLC
Eric W. Coldwell	Robert W. Baird & Co., Inc.
Ross Muken	Evercore ISI
Erin Wilson Wright	Credit Suisse Securities (NYSE:USA) LLC
Patrick Donnelly	Goldman Sachs & Co. LLC
Ralph Giacobbe	Citigroup Global Markets, Inc.
Dan Leonard	Deutsche Bank Securities, Inc.
Kevin Ellich	Craig-Hallum Capital Group LLC
Donald H. Hooker	KeyBanc Capital Markets, Inc.
William R. Quirk	Piper Jaffray & Co.
Max Smock	William Blair & Co. LLC
Ricky R. Goldwasser	Morgan Stanley & Co. LLC

Laboratory Corporation of America (LH) 25 Jul 182018 Q2 Earnings call transcript