LH - Earnings call transcript Q3 2019 | Laboratory Corporation of America Holdings

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q3 2019 LabCorp Holdings Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session [Operator Instructions]

I would now like to hand the conference over to our speaker, Clarissa Willett, VP of Investor Relations. ahead. go Please

Clarissa Willett

welcome And third XXXX quarter Good to call. conference morning. LabCorp’s

there today’s available a Internet. in detailed will via press and call As conference release, be this replay telephone of

Officer; King, Financial Chief and John Covance and Dave President of Officer; are CEO Development. today Executive Vice me Chief With Executive Drug Glenn Ratliff, Eisenberg, and Chairman

our which This morning posted section presentation our call. a release press Relations additional both measures the investor with website non-GAAP relations operation, during our financial to in of the business information of reconciliation the on today’s and include measures Investor we at and an financial labcorp.com discussed GAAP

we Additionally, the the opportunities various savings factors with forward-looking statements respect and statements forward-looking to financial and on estimated synergies operating impact include, of and and These results, assumptions, but are XXXX expected for not related to, making are growth. limited guidance future statements. the

upon change, could and financial of is expectations is the that factors current various to based subject affect upon statements forward-looking results. Each our based

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

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

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

David King

with Thank growth. benefit quarter capabilities. topline power which delivered of across of And We demand solid morning, our strategic delivered saw another you, the Clarissa. again everyone. businesses LabCorp both combined good acquisitions excellent demonstrating the strong market

manage expenses continue to execute launch initiatives. We and also our pad aggressively

PAMA cash the diagnostics generated in earnings at and share managed million of and due Adjusted X.X% grew of per opening and As in headwind $XXX contracts of a despite to X% result, spite free we of the X.X%, year-over-year flow. a care revenue grew divestitures. impact

several capital disciplined acquisitions. executing tuck-in continued million We successfully allocation program shares $XXX and of repurchasing our

both a business acquisitions have on value remain pipeline units. focused and acquisition in strategic our robust We creating

trailing margin we revenue points an realized X.XX. across excelled stands X%, $XX.X over $XXX increased than XX more our of all expansion, XXX by Covance growth backlog billion at to by month basis measures. increased and book-to-bill sequentially Constant currency impressive billion

headwinds we market Normalizing strong X%, revenue the excluding and changes, the the and care grew Diagnostics for X.X%, in per another Despite acquisition expectations turned by our impact business. revenue within by are this of performance managed increasing volume divestitures X.X%, by something. we PAMA for performance experiencing, solidly

focusing to and medicines our level, successfully of and diagnostics enterprise delivery unified use drug the faster a At into class weaving by development to to we deliver patients on technology care. improve innovative free execution strategy are fold, creating diagnostics, the together world consistent value of

offered US with interest health pronged of both proposition XXX side the Today costs and partnerships systems gain examples we our Among system reduced systems and have continues continue bring partners. XX have health clinical to power to This two research trial recent of some meaningful their lab Covance this traction express in value health combined, health meaningful based system with the enrollment opportunities. testing the them to ability opportunities.

differentiator. In a quarter achieved to success. based marketplace the broad as customer by win using year-to-date the We and continue data in we

by enabled truly customer, combining This oncology value. win and a example, integrated deliver rate patient-centric on location a to our For focus insights, design Covance's our studies, unique sizable we data recruitment. tools and X population program principally from approach site to protocol LabCorp doubling approach patient win with us single

growth. of from XX% show diagnostics also year-over-year. diagnostics aspects Companion companion continue grew to nearly Revenue strong all

prove advantage. oncology on and in focus excelling a competitive companion our the to on the we both ability of businesses, commercialize, for develop, will support As sharpen approval diagnostics sustainable

highlights. diagnostics will this discuss quarter's I Now,

retaining our perform fields Our an managed who have done our exceptional care to a in teams the well, portfolio job continued to testament customers.

a to growth net the opening since The led the see the across of and last volume of to and rest reduction care of care continue volume X%, the managed revenue we stable in managed of quarter the contracts business.

acquired hospitals, health diagnosis clinical scope Foundation, and LabCorp with South the Medical across We finalized extended enhancing the businesses, to with new that systems several partnerships services. of in physicians region, partnering services Bend quarter. offers the health the concurrently offer We to patients system the pathology

which and lab and Primary improving care We outcomes also clinical New health for Jersey NJPCA data, and platform with we conditions. focusing care key with will partnership NJPCA achieve partner centers. comprehensive By will community help the base provide with value This intelligent secure Association, Care integrated objectives. represents our using physicians on patients chronic XX accessible

As in the BeaconLBS decision included the made in we Network. not we PLN UnitedHealthcare Lab Preferred with pilot be stated have renew UnitedHealthcare's floor. XXXX, and are Concurrently to proud the to

Nonetheless, including BeaconLBS approach for molecular PLN with UnitedHealthcare beginning UnitedHealthcare's offer their and networks the September. national continues consumers programs reflects in contract to on a basis. This national to

have fourth to UnitedHealthcare and will revenue the on negative in addition for with of optimistic revenue and the near-term are non-renewal we growth the next quarter molecular Although growth. has contract PLN; BeaconLBS opportunities about impact margin other Florida in and pilot year, national opportunities the the multiple

states XXX in want health consumer to now locations we partnership we retail other in expand open have end may to. to continue patient our Through so than toward front, the consumers locations XXXX. expand by rebuild nine the engage LabCorp progress and more accessibility, convenience when On where of XX rebuild continue our We and care. transparency the and access in XX they LabCorp-Walgreens the of

research available to the available In pursuing and environment. retail share supporting for collaboration enhancing health the consumers in related based are our ship-to-value and on addition, we and services opportunities health other focused expand goals year the in clinical of tools

platform to sample expanded many service enables Lab pay include tests patient and our online Covance by Pixel by shop directly. LabCorp significantly our to Pixel consumers We in collection LabCorp centers. for

offerings to XX Measles immunity been the add includes to now pleased platform more including of MMR than testing. with analytes. each and menu comprised response month, XXX initial packages continue The the test sand We��ve

our of our deliver and the which to create initiatives end customer employees. designed digitize of the a and We II are total relentless remain automate customers focus by experience LaunchPad business, $XXX track of XXXX. improve of on to our processes, Our savings for billion net productivity exceptional an drives all

Now, performance of segments. creation Covance's offerings in highly-targeted lines Covance The is focused is a business I discuss across unique highlights. strong Covance. of the customer and added of of Covance will the on growth therapeutic strong and with expertise result result multiple acquisitions business resulting value this all our dimensions building geographic expansion. quarter's capabilities strategic across enhanced

R&D early development is the the from through is key strengths Covance offer solutions around only commercial of our One the comprehensive globe. zero to services

spectrum to across our the strength fully Our partnership allows us support portfolios.

molecules early The in track services development the market clinical best is our development market momentum into from evidence continues which with of into the solid gain services, customers. of success moving which clinical to record our continues is

as in large well R&D biotech. establishes Shanghai only China. offer colleagues a Covance study oncology presence R&D than center in This factor China with opened winning expanded to critical newly in comprehensive as was in early our based Our more a a as commercial from X,XXX the services CRO through solutions development China

and supporting and Covance gene of exciting sponsors debilitating life-threatening the and area treatments diseases. also its for to continues focused therapy capabilities on developing strengthen cell

oncology. growth development, footprint enterprise unique already therapeutic solutions seen our pre-clinical capabilities the in areas. are Those superior major labs focus where China a for in Covance development. deliver to TCL central early We’ve clinical, to capabilities adopted entire offers these opportunities significant across and clinical opportunities across clinical geographic complex superior spend from early therapies late-stage including

on to execute continue the end the and million are We also in of Covance key our key $XXX the priorities to of through net initiatives savings track in deliver LaunchPad XXXX. these initiative priorities by

results $XX of the track net integration the net costs to to become a to In million validate and decision global short, sciences our Envigo end deliver Covance We of also and million player. from in $XX are to life on continues XXXX. by of deliver synergies deliver

In continue efforts performance health the once outstanding are of still grateful for quarter and the team strong our and and ahead. our their in LabCorp's improve will to reflected be performance closing, globe mission leadership efforts again I to XX,XXX and in consistently and am improve reflected around our to support third lives. Those colleagues years our in terrific

call to Glenn. turn over the I’ll Now

Glenn Eisenberg

Dave. you, Thank

Going on our update to review third our our results of discussion an of and guidance. with by start followed with performance a comments in XXXX quarter conclude my each segment

offset for an and quarter $X.X the increase of was year. of of growth Revenue currency X.X%, translation XX and divestitures acquisitions increase The points. X.X% by of billion, was of to over basis primarily partially organic revenue last X.X% foreign X.X% due

impact million compared negative for the or XX.X% points, the or income X.X%. revenue XX Operating revenue organic basis of million was $XXX to $XXX last quarter XX.X% grew year. of PAMA Excluding from

items, contingent special accrual and charges restructuring by breach, announced integration initiatives, partially of million $XX related had data we consideration the our quarter and LaunchPad the release previously the During to of acquisition. the prior vendor primarily offset for acquisition

Adjusted $XX $XXX income or million amortization charges last which XX.X% items well $ operating as excludes was restructuring to million $XXX as special revenue million of XX.X% and compared of or year.

acquisitions costs. benefited that of savings the offset LaunchPad higher operating and $XX income Adjusted growth, from and by essentially impact personnel organic PAMA were million from

increased rate reduction would compared and XX.X% was was quarter XX% year. last XX.X% margins excluding the the The The charges last adjusted basis compared PAMA, special have rate Excluding XX.X% tax XX for from year. points. to XX-basis-point amortization tax to

the in tax primarily tax rate Swiss adjusted a change rate. favorable due lower The was to

expect fourth company's XX%. tax rate the XX%, the full approximately quarter We rate a adjusted for year approximately to tax of implying be

million which were share. items Net to restructuring earnings for the quarter were amortization, diluted in the exclude X% $X.XX Adjusted last other year. per quarter, or charges and special $X.XX up EPS, compared $XXX

items, pertaining a earnings impact change the the in $X.XX unfavorable from favorable non-renewal Dorian in Swiss unusual from benefited contract to the Florida and $X.XX market. Hurricane tax reduction by $X.XX due a the to rate, the of BeaconLBS, quarter UnitedHealthcare benefit the from Adjusted $X.XX three

cash Capital working year. million of $XXX a last Operating the increase favorable cash in quarter or operating $XX earnings expenditures X.X% flow $XX or due The X.X% revenue was year totaled $XXX million cash ago. flow and million in compared higher capital. to to million to compared was

a was active the in As flow to We capital remained cash throughout allocation. quarter a quarter million compared last $XXX million year. free terms in $XXX of the result

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

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

$XXX last billion leverage end at was our the from debt debt cash to end was was million, the quarter our balance $XXX the At gross X.X of Total quarter EBITDA. at times million second XX-month up quarter. and end, $X.X

performance acquisitions X.X% X.X%. of divestitures review of last organic I’ll X.X%, an of Diagnostics. growth to year for of segment X.X% due our Now beginning billion, $X.X the by and increase offset Revenue quarter was LabCorp compared partially with to

of the from X.X%, impact X.X%. Excluding negative increased revenue PAMA organic

X.X% was volume care divestitures by organic X.X%. excluding increased X% reduced and approximately changes. year, last managed volume of acquisition by over was the from Total volume volume X.X% was which Organic contract

managed changes, was care organic contract Excluding volume X.X%. up

by not agreements excluding As approximately include our Revenue due added PAMA contract. to management mix UnitedHealthcare which was reminder, per volume, the from and impact negatively basis favorable do divestitures XX the from have in our would of a volume increased per lab we requisition, growth. requisition revenue X.X% acquisitions, points by BeaconLBS points and basis X% hospital from to impacted non-renewal XXX the

Given the contract the in BeaconLBS requisition. the reflected impact is non-renewal business, the nature the from revenue of of per unfavorable entirely

expect of due to per in impact. quarter fourth the from requisition full we XXX BeaconLBS quarter basis such, an the revenue As unfavorable points impact approximately

compared $XXX due offset quarter revenue were million an which point LabCorp and $XX of the quarter, last to $XXX and negative income million benefit operating $XX or million first one to in XX.X% million income the or that of from discussed margin payroll adjusted Diagnostics' adjusted was decline decline impact additional in of in the the quarter. day operating payroll basis was XXX day The PAMA in XX.X% the year. for primarily we

end of In growth personnel savings savings merit deliver Diagnostics We LaunchPad the were from remain by and $XXX annual partially of higher costs, LaunchPad XXXX of initiatives. by addition, net on offset million increase. consisting our the to primarily organic track

research X%, transaction products of Development. Drug year, our last offset XX basis $X.X part for due increase of Now points. compared I to a the as million, of X.X% X.X% Envigo partially quarter by reduction translation and of the of to acquisitions Covance was organic due of X.X% Revenue foreign growth business currency review and the the divestiture will performance to of an

digits. single Excluding for to cash or $XXX year. revenue flows, Adjusted in high or lower $XXX was continue XX.X% revenue, grow organic million of mid-to compared the income operating to XX.X% the segment last million

organic demand, personnel support improvement point in were costs $XX due primarily basis XXX savings, LaunchPad higher adjusted income offset acquisitions The and million by in increase growth. operating to to margins partially

deliver by track from net on LaunchPad of initiative. remain savings $XXX Covance's end the million XXXX We of to

and billion of months, approximately XX was at trailing million, backlog the from the net For of quarter. X.XX, net end increase $X.X strong at respectively; book-to-bill and orders an last $XXX quarter million remained $XX.X the

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

discuss and currently allocation XXXX the guidance, from repurchases includes exchange assumes September as year XXth Now our repayment. I’ll share of capital foreign for debt the anticipated and remainder towards of impact rates acquisitions, the which

currency expect revenue This X% XX the This to of growth of foreign prior divestitures of translation points. our guidance basis negative X% is We impact of over of from revenue to billion. an XXXX approximately X.X% increase guidance over and X%. $XX.X X.X% includes

organic partially by guidance the of impact X% This includes compared down due increase of prior and XX% down billion. BeaconLBS We expect down offset revenue X% primarily is to points. foreign XX of the Diagnostic’s contract. XXXX an non-renewal UnitedHealthcare and LabCorp translation This to revenue growth, acquisitions of our basis X.X% from $X of to over approximately to guidance divestitures X%, decline negative to as the currency

guidance of also Drug point basis XXXX. to impact thoroughs reduction of to Organic revenue unfavorable X.X% translation, prior the We in is XXXX bringing X.X% over from X.X% due of basis revenue growth the to revenue of currency $X.X billion, midpoint from X.X% reduction over The expect foreign Development translation be guidance currency XXX full year to Covance X.X%. XX a negative of excluding X.X% growth to to is points. cash change the expected our

$XX.XX; EPS the compared X% of which guidance to range $XX prior of increase and of a to $XX.XX, $XX.XX as of and $XX.XX. X% a the adjusted range over Our of narrowing is - as guidance is narrowing an $XX adjusted $XX.XX; to XXXX to EPS

unusual from our midpoint the previously the guidance by We to are items. as offset and the holding growth mentioned of being organic benefit acquisitions is

non-renewal our to For billion, quarterly XXXX clarity, left provide quarter flow the be guidance. an our the $X.XX to only XXXX, only with with guidance includes $X.XX expected the Free BeaconLBS not implies adjusted million negative impact from narrowed range one $X.XX one quarter X% prior the XX% is although contract. and over was guidance we do that quarter EPS in guidance fourth $XXX increase cash which from to of of to of unchanged left

This concludes we'll remarks take and now our questions. Operator? formal

Operator

Instructions] [Operator Gill comes first Lisa question Thank with JPMorgan. Our you. from

Lisa Gill

having the morning. amount BeaconLBS as Good good and can on start going impact give I to about XXXX? probably Glenn, quarter fourth margin wanted a just margins about around follow-up we tightening think side. on really do the us we gave detail. the then you on How puts into But, what's going in on and think the about XXXX. to of takes Any in framework margin thinking side? you and some

that XXXX this kind then helpful? you fairly just framework early about else anything around an expand you would study give Hold be and of can as Can think we margins? margins XXXX us

Glenn Eisenberg

Sure, Lisa.

say, all, on you fourth to non-renewal as we’re of the guidance obviously, if with We've the a quarter. going next your given But on obviously we just XXXX, do a general impact will question, our year. it to BeaconLBS, have kind quarter of as First provide our headwind, going the course. will report we normal we’re contract into that results, when fourth in

as that, overall headwinds within can just the work well either overcome you growth, earlier, business annualize of in obviously sense Dave So our commented of addition business. the as as to you will to that the have Beacon

have think the review in ahead, news in of the the couple XXXX, directionally, of with for business the overall it numbers. the others diagnostics this months, a as we've you of and the is preliminary first shared with as good that flat another Obviously just rule, essentially, care a but we now managed and impact But PAMA relatively year I with essentially year-on-year. the started general

Drug non-renewal, with having now, as or see look would to improved plus flat be Development year minus to into Beacon margins, expectation that again, expect XXXX, as in margins we diagnostics And well. Covance's down but would next we

David King

just Lisa, on clear its I in I to diagnostics. down. down to to want slightly Dave. slightly would flat Flat be that.

Lisa Gill

And that so to of think slightly as we about down. flat commentary

about this accretion also see the cost I of some talked Do quarter. coming we think, you XXXX? some to acquisitions it Is start for cutting?

in Like drivers the Diagnostics of what that whether headwinds about are or have or PAMA that it's of the we you think BeaconLBS some some still business? to offset the other

David King

Lisa, Dave. its

I think a the margin. you're correct; in acquisitions at obviously lower come

realize that as that, so synergies And will improve margins. are the

additional carried II, also LaunchPad over the both then within and We the impact continued the initiatives program. have

And will And offset some managed Glenn the said, that the February. changes, margin care contract basically pressure we're of so January, as annualize those experiencing. in we

but down there feel realistic end are in view takes, the day, at is the diagnostics. flat puts very that, confident So, we of slightly and to of XXXX a

Lisa Gill

That’s Thank very you. helpful.

Glenn Eisenberg

which And Lisa have while add margins. of of To of we the acquisitions end to annualization do just mix in to diagnostics that. that the

to good We see a continue for diagnostics. pipeline

So capital cash strong that benefits we expect, the as to opportunity redeploy we see that. an from in to with XXXX look flow additional

Lisa Gill

Okay. Thank you.

Operator

from with question And our next you. Meehan Thank Barclays. comes Jack

Your line open. is

Jack Meehan

morning. Good you. Thank

diagnostics side, moving So some could the I parts walk fourth of for wanted hoping continue the us I on you through was to the quarter.

the reached full you've year So for outlook diagnostics.

the the includes but there Is or from headwinds fourth thinking versus quarter? the model be other headwind we should what's for tailwinds But that also any better? BeaconLBS, just going about

Glenn Eisenberg

the first revenue side, fourth first with at But looking positive in Jack cut. quarter you as the see this we're a quarter. the Yes, I’ll guidance Glenn, on is take implied the

will if that a done acquisitions from have benefiting worth we're So will. quarter's we've you if will you the that full

the get so in just third we’ll that it And growth we've of commented benefit been as been business, We’ve organic day revenue from from that. essentially had in a get year. that the the would've of the normal earlier, call the half first as you in the offset benefit we quarter, revenue we'll divestitures actually headwind experienced quarter, that the experiencing that know within of demand also the annualized the we then the headwind day fourth the for

And do be year, but we topline throughout margins down in spectrum, have do look to in we the as good on we some quarter, year, to headwind we while do based the fourth quarter upon point, experience see but Beacon, we amount And we then your in the Initiative. expect growth. the to LaunchPad would it the also that topline any across expect upon this be quarter based least year down the first to Diagnostics expect continuation that of growth, again

Jack Meehan

all can't asking questions well. And That's help as Great. couple it XXXX of helpful. then a on

side here we today, how PLN then think managed on curious contracting Just for care just and you're you of be recent also the business? lab the feeling the as to terms of growth how in sit the pricing unit about some could meaningful

David King

Jack, its Dave.

in know, terms the of included So, in PLN. it. being you Obviously,

is -- as such is the are is undertaking offerings. very One of terrific United employers. that dollar of, initiatives opportunity. laboratories we some zero ASL supportive PLN the of selling And their United number they're a small for of to Healthcare some copays

us long move we PLN season, is what that provider. the to share away about a employers, is now providers will You very optimistic to this see lot a cost as high from we when in an know opportunity and among the quality the but higher right know cost uptake so lower selling the term feel we opportunity more

so PLN previously reiterate price with point downward our entering selected also was there just to part PLN, network. to in I when what want the of no were had remains United agreed we pricing the be out, adjustment we to that

unit everywhere flat is terms we is, proposition. price to unit In is a it services, what always say and basically, healthcare slightly down price, as of

to So price I expect think zero year, a XX typical points. see basis in to at would you unit negative

that mix requisition you are and test utilization. positive The in driven revenue per we know as report by

improves growth as as testing value higher in requisition. we testing the see in that growth revenue we So, see per reported esoteric

points price think unit doesn't down. singular to nature not it basic sort about year event that's unit out different? of year is the XXXX in we price which of a being how change flat But been And and XX ex-PAMA, any basis

Jack Meehan

Dave. you, Thank Great.

Operator

comes Thank with Caliendo you. the from Kevin of line our question And following UBS.

Your open. line is

Kevin Caliendo

doing little about to sure Hey, your more. that Because it bit here if guys. beacon quarter, and through right. quarter to a the looking assumes I this is the make I beacon. wanted fourth of that's just that diagnostic go I'm would guidance the for to for want thing margin full math at the we're XX% fall

our want the And impact. should -- in Is XXXX? And million basis of for $XX is quarters requisition will EBIT that’s just XXX a first points three to think that all per we how about revenue math at assumed line? maybe all it around falls falling it the to

David King

Yeah. No.

Glenn Eisenberg

I I’m add Covance I sorry. is XX%, might at That's than higher Diagnostics diagnostic that, apologize. - that's

David King

on But would beacon that you income. give and The the to. the then that rec no. the that margin rev revenue what part $XX Yes, you're impact to speaking associated operating would using X.X% call in obviously, million there's with fall it a to

And as higher business again we'll attractive we beacon overall, were about the to an that than that's earnings a diagnostics to have that make margins up. shortfall was but with talk

the saying down of through start. is the in to a again, quarter, margins are your business, than the it��s down business make in that the quarter fourth and up at you because growth less be part to least margin business that earlier, will margin look So will all of is year. but fourth that of the the while down again, beacon, we'll be said some annualizing additional decline that in in launch-pad the impact fair been savings as through we And proxy overall again

some when in can margin look coming at we do think ago, year factor a in. favorable our of you what XX.Xm than so kind better the actually I we that you And were will you margin see So this we expected.

Kevin Caliendo

Got it.

one quick thought. was Okay. on just helpful. The That we've And contribution Covance. bigger one, than is M&A

weakness. You talked some revenue about pass-through

organic at excluding pass Covance through seen should faster growth? pass weakness cycle Covance And we've in the point what we question, what I was the the segment? revenue - just

David King

Yeah.

excluding the mix, as variety pass pass-throughs, business I think factors pass-throughs of mix. Glenn press throughs high - in and just geographic then influence that without the And from include the to expect to release said grow mid standpoint, we study the we and stated that single-digit. lifecycle,

we I you’ll And will development, XXXX, the will mix right we through the bit will a think FSP little you see natural as the get content once now but be see of volatility early programmatic, more the it. versus a call XXXX see labs, of I year so

Kevin Caliendo

Great. That's very helpful. Thanks guys.

Operator

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

is open. Your line

Kevin Ellich

Good from I guess, prepared in about taking morning. go in remarks studies back customer Dave, single the Thanks for won questions. the oncology. nine comment to wanted to your a that the

Can the driving what's if bit customer you Who have us color other that? opportunities to and like a more give that? as was, you little

John Ratliff

data. manage, Yeah. much voice the don’t They’ve the Kevin, of customer, pharma patient provide inclusion seen the and efficiently John. they've effectively. the through and criteria is of but recruitment the We this in specific can customer seen more they exclusion and a that specific manner of trials value clearly this customers, quicker value the and strategy the large with

the doubling but oncology then principally has win from our dollars And rate area, area, well in in it also upped then magnitude as respiratory. the as so, then significantly, of NASH that that,

areas entire we therapeutic capabilities as well oncology seen very to other work areas we’ve strategies, therapeutic our out support. our as work our obviously, effectively and that broadening the But data and, that

Kevin Ellich

John. Thanks Great.

happy is your call, wanted been don’t retirement but last this know So, with great if Dave, to and working I you. it's just say

David King

Thank you, it. Kevin. Appreciate

Operator

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

open. is line Your

Ralph Giacobbe

being Dave, of Good go down. I did to on of unit your sort to slightly flat the price commentary comments want to Thanks. back morning. sort

I made a in is think you like it healthcare. that, comment

overly want sort specifically it, the look even unit I just the to type healthcare being as Medicare's across, pointed has because significant driver spectrum of, price X% clarify call sort to think of, trends. I that we of

least has if I'm and which more, increase by of been you can't not sort contracting? understand commercial, present, at proposition especially get So open network unclear open the how I evident guess, from don't value CPI, given the and you a obviously that still

David King

a think, creates But spent lab a right? a Yeah, hospital they and for structural have, be affect work this markets, competitive can saying the we direct would summarize with hospital into and disadvantage that a by their high Ralph. has sent the that of ability to realized market, on they from in us, all, particularly first a could acquisition I they dominant at that time level, of perspective, that, lot there. Because I just dictate of paid the pricing, the get does to to position, laboratory work more, many now market physicians physicians

able that’s every structural impediment idea that increases sort be to get So one of rate sort this of year. we market should to

for of example, where get laboratory your when you think to skew The second that drug business is pharma, going is, typical X% thing the about make price price. on that's costs that lap you your XX heavily I think, unit assessment statistic of encounter, increase a a price distorted a think XX% when you time because overall

seeing about think think durable laboratories, health, healthcare a broadly, flat think I If distributors, pharmacies, home leading think down increases, equipment, you're not seeing to think pricing about typical look medical and you are price to in case. being seeing price down services about at about contract about you're negotiations

year over actually opening. this years, So, accomplished over of proud last pricing the contracts this year the in very particularly with what unit and we've several I'm

price that readily replaceable get can you're then as else, offering go the comment others better somebody be we difficult service when a is when for seeing increase switched by a just make it's I should is would last in worse or to in. And and say

contracts keep price for say, part every And type -- increases, get I that them are relatively of are negotiating we our the part over we that's reason flat our we All to it will but that price don't said, contracting strategy. increases, cost-of-living unit they time. able year, of call

we hope just It's some I proposition of explain complicated So, get that a the But a that’s helpful of I obviously, dynamics those increase. very it's a not think market why. price topic. and are simple

Ralph Giacobbe

Okay. my anyone's to? What in other All noted guess did enough. question, was related here income fairly fair have quarter. up Yes, right. the that the in follow line, but I sizable swing it as quick I a

And sort can and Thanks. of be run item may of us you moving help that the rate annual forward? line

David King

is at you what you that income, were said? Ralph, other

Ralph Giacobbe

or income, think Yes, went expense net, from of in favorable other negative couple to million the the $XX I other million dollars positive?

David King

Yes. in was see divestiture GAAP will period, adjusted it the at versus of Food you the of the business. a - this the gain the call on essentially look that year million the when kind No, our you $XXX our reconciliation - ago Solutions and of

And our of had quarter see a as we primarily again of the same, gain are venture it - impact our $XXX in excluded the fund. well from million even in both as as-adjusted million charge, million there the due call the was results. $X.X of you'll That to the from that reconciliation gain this $X.X around that year, benefit -- third net

So, other minus relatively income/net is plus or flat.

Ralph Giacobbe

change, Thank Okay. on that thought can saw offline, follow-up you. offline. sequentially that I can we Maybe because we follow-up I but

David King

Okay. Thank you.

Operator

with our And question Piper Jaffray. from Quirk you. following comes Thank Bill

open. line is Your

Bill Quirk

Great. Thanks. Good morning everybody.

LabCorp that Covance augmented the the Diagnostics certainly for So, being are business. appreciate ongoing I by revenue around guess comments synergies helped the or --

clinical about revenue synergies thoughts to trials win wondering other thinking any of that Dave I the i.e. going there? to access terms direction, business, leveraging Covance's - in was diagnostics directing

David King

good morning. Yes,

partnerships the comments, I both in site directions. mentioned in As Covance benefits the provide prepared

we health manage is clinical - a cost. reduce just you help you help systems your because seen can us cost, to as more it opportunity than So, to we can the you positive trials lab gives offer lab

can and We also bring manage help your we like opportunities. you can costs introduce lab revenue you this

way in And business instance.. very clear business supports that the and Covance so I think diagnostics the

Glenn Eisenberg

And to diagnostics manner. capabilities and when side hybrid with the you the virtual get capabilities trials those side, as into access patient it market well of of central a allow centers the the do is also coupled trials, Covance much analytics, efficient virtual you in the say hybrid strong areas with the service as clinical CRO lab more

way that's And parts the multiple enterprise. of so another of of utilization

Bill Quirk

we could periodically, bit from a - LabCorp I there Covance? little way the is maybe about Understood. you’ve guess as from Covance impact to follow-up, And is LabCorp, historically talk guess, benefit I -- quantified again to any

speaking, of following any And just there? others Thanks a United and beyond guys. the on update broadly then secondly there around lot chatter is PLNs suite,

David King

yes. Well,

the grown in X% best Covance currency grows growth the the to to enterprise, you adjust for this and businesses topline I to quantify was the quarter think benefits that and when way to is constant the almost X%. grew divestitures

line the So strong is top it's as combination that the result growth businesses. I of think the of a pretty

conversations Nobody similar. On the payers. we rolled something to with continue P&L have out has other

we'll successful, is think interest great there see what it if is and I followers. in United doing

Operator

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

open. now Your line is

Erin Wright

Thanks. question better demand biopharma? smaller I and a seeing segment trends had broader just or demand across in where versus pharma are you underlying CRO large foodservice trends Covance. And FSP on the or

any demand Thanks. quarter? of sort view? nature been have in in changes trends that meaningful of there new the have And outsourcing sort you've of in seen changes Or the any business changes in you your that wins

David King

of business terms in a great wins quarter broad-based. and they Had were

was terms development NR wins sector rates. has based it broad within development the of clinical. is, so, our of to in see terms increasing pharma, that in order of as with significance the labs of biotech that's and we so the been respect With that, segmenting as where portfolio well majority and early vast And

we FSP. strengths terms see do We respect well And versus trends sides. the see as of FSP on to as then do with wins strength both the programmatic the in programmatic, the

data, think be I at look FSP you if the higher. might market slightly

at terms we the penetration a But positive in that with flowing, is of X.XX, in business of obviously our way seeing business. development standpoint broad-based last results. XX of look course the and business or burn labs clinical the early in central a the is that the very quicker and from the way and the is But good business

Erin Wright

Okay. or relationship both Great. terms Wallgreens too? Thanks. of business give of us from And CRO side update on the as can in well an then a you with Thanks. perspective lab

David King

Erin. It's Dave.

we Walgreens, roll continue remarks out mentioned a to side, As prepared Walgreens. in the the we from the diagnostic

into integrating around have rollout of We to we patient from of patient side beyond XXXX. what to update move and call continue we PSC of the we on experience very trials, expect integrated where to virtual get the data, the that continue discuss an Wallgreens relationship recruitment, commentary we of positive the as kind aspects the

Erin Wright

you. Thank Okay.

David King

So hour. at before the we are XX minutes

get So we have like to six We’d questioners everybody. in the queue. to

and question one it follow-up please again. one and ask Thank questions asked, let's been So also your if has don’t you. please

Operator

Thank you.

with from Our Eric comes question Baird. Coldwell next

open. is line Your

Eric Coldwell

Thanks, David.

You made questioner. it the easy for topic, my so on me because next there in actually hit leave to I'll it

Just luck so your endeavors. wanted Thanks to future in good say much.

David King

pleasure. a you, Eric. been Thank It’s

Operator

Thank you.

with question from comes Hooker KeyBanc. Donald Our next

line open. is Your

Donald Hooker

Good morning.

quarter for at years. pass-through for trial this couple those to pre-clinic a work have talked have I last about Covance guys clinical and increasing businesses many you two from guess you quarter Covance. So

reason you there pass some there in on in or why you something are Is in years? versus going in what there more now the doing? seeing are guess prior I through science Is

John Ratliff

This is Donald. John. Yes,

so have late in later large early or then that development terms content we movement stage of greater much within the – a are penetration. whenever moves stage of early a in And the you biotech then

level demand to that say within of the bio that the our a enhance there side bridge the side on moves on as whether early regulatory X within the first to bring that's science Phase areas capabilities pure we or whether also area. across moves whether that development that I'd into that is and the clinical the or we put organization

forward latter up is So clearly the first the tremendous.

XXX We a there opportunities right now. have over

David King

them And were its And of, development, organization who much Paul’s coming, I about John Dave integrated a say, to that's of the why think reason pull these The much to and mind about and more really lab. Covance silos. expanded some early worked thinking organization. attracting prior organization thought of Covance about and opportunities through In for and have under is thought only more historically Don, the I we've John kind of across development part silent success. that to scope was leadership and my the the

Donald Hooker

you. Thank

Operator

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

line open. Your is

Mark Massaro

be volumes managed basis XXX but care the was guys. from might question. the Hey, here, about you for points. Thank splitting I impact hairs

that's of quarters think about a potentially XXXX, and continuing talked we small I'm its United. your First couple maybe on about large more was getting add that about a confidence XX your because about lives difference, becoming more from expectations a to as challenge basis little points. better competitor asking trend seeing or Recognizing

So any feedback there would helpful? be

David King

Dave. Yeah, Mark it's

XXX, I XXX. been - I in like in was it’s because look XX, the which it's January my mean, and first change then February it's more XX, actually basically we mind it XX, is know flat. think think XX, XX, than over quarter started I XX the in

say is definitely trend can stable. I So a the

losing not are We care.

United rates have and been Horizon quite steady. for participation Our

of And same in terms opportunities. have the future, the we growth

the talk networks We are about. in same competitors that our

tests age, number there us it’s so of for greater the utilization the and of is the population, aging technologies. And reasons one introduction people tests are lab the of new optimistic markets very I demographics, as feel that the of

well those providers. like of are of the long-term All Lab Network the favor cost lowest innovating Preferred things quality, highest support the things as that growth as in

job So proud we we've field care managed this it. year and ground the and a feel we're The about done terrific really great the has team the what in of in contracting. done

Operator

William next Blair. our question Matt comes And you. Larew Thank from with

Your is line open.

Matt Larew

constraining my Hi, question. dynamic some several in mention good laboratory on years. Dave of next thanks broader the the you just taking the and morning for

be whether a Walgreens providers a your your of that setting, of to reshaping or be hospital driver retail are you're Just long-term early with of with terms it enough the share competitors? scale to replicated of know up you something or wanted whether could more in some can't by footprint that

the then average in is a whether change to partner with interest Thanks. to second, year sort of step hospital And of PAMA, of willingness you? sort you're think and or this starting labs you see and the second if

David King

Sure.

much marketplace. talked dynamics affecting the ways - and smaller second industry is the becoming are first. or of the I we’ve the about Yes the So being of smaller challenges providers the more are question It – think some the with PAMA labs facing. of well recognizing

are which through going along misguided home very range as back Patient limited good the way it's not patients. unfortunate situation am been lay say, to again hard reverse it's to a to of we to lawsuit in to has thing being implemented I by continue this patients access services I’ve the work is and without nursing very said, for and left CMS.

and new about to is thinking offices. in more of then our to offerings terms more a doctor’s footprint the to lot setting, the existing the retail doctor's come think the footprint. want a In of I service patient in complementary replacing lot or being Patients if just Walgreens the Walgreens opportunity office centers opportunity don’t

make afternoon, to not same come drug to store. are that Walgreens have fasting we whom to time, are who going At want patients or of a use the who are in the - are there make of lot not the able to to

and Mostly people and prescription their labs the them done with the the slip there. opportunity leave office to the to lap provide pick-up we doctor's prescription fill get

Walgreens as more So in care I think health I other think also retailers monitoring services. broadly start and offering broader

opportunities on retail, So further of the in clinic and these things CBS is they met. on patient so to being work and lead had we retailer, focus going retail to the much for for and want the clinics urgent many growth be care to are us consumer the we all that's in in why and where

Matt Larew

Thank you.

Operator

with of from you. Derik of line comes And America. the Thank De our following Bank question Bruin

open. is Your line

Derik De Bruin

question. Hi. Good morning for thanks and the

volumes going – other there obviously number a year, back think about just the and from probably just potentially quarter So, contract last headwind fourth hospitals a a in-sourcing of such weather. from and DTC shipped to was the

trying just when trying And various I where and what’s – – worse what’s this? we I year? get trying am going last trying time it outlook about trying what just am I'm then the am infect just out impact the understand in So look I where you – at are at am to to the when headwinds this normalizing compared understand to better - think XQ to annualized and just figure this? you to just for start I to

sort mean, the is obviously only better and of switch, And a compare United would gotten it obviously That's mean, from on the be and contrast something's question. I my now it – got something but great? quarters Thanks. full of – got impact contract I just And better?

Glenn Eisenberg

a have contract. last up we you first with did organic To offset good in softness the standpoint, Glen. But the about point, Yeah, I'll opening have fourth really in again, This this you when year. the one. year's managed take being think growth Derik. from care volume the quarter we is

full of a our LaunchPad initiative. year impact have We

in a We will our call done the additive been there quarter fourth would of to are annualization revenue year, have of to this day. benefit that the The year. we've have not it that’s fourth quarter be that – of last a going the acquisitions divesture of in

and well growth, but pluses good you expect as know, still the the – this our of that's again, to that would've but even of of from off ago, margins, decline us year down, albeit fair a PAMA. all good year. amount we seen minuses year year-on-year So as see setting next up for you we margin we But least perspective driven move into

David King

Derik. Its Dave.

impact this or the major last And unusual I think hospital hospital the last the quarter. the factors spoke year then any that seen in quarter did volumes that far, the so fourth change testing. we volumes about we genetic year were fourth two direct-to-consumer any in point at haven’t and way year in

direct-to-consumer basically the to down. - continue that flat said and we to businesses as say And we've modeled

status will in XQ items being that if call the out you the are last those year we headwinds. of is So the

Operator

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

is Your open. line

Ricky Goldwasser

morning. Good hi. Yeah,

are growth of some you highlighted your talked to with opportunities you back going Dave multiple payers. so there about comments prepared other BeaconLBS, that And when for

involved can what maybe type are you discussions share us you of with So with?

payers from we - What is a the also value-add? to easier But to we you -- BeaconLBS kind if And versus what's do decide think adopt Lab when payer of want perspective? a a to payer Network. Preferred perspective, need do also from want

conference have in very, them in comments diagnostic said -- margin around your down as when we view next question slightly you very with our back and what being flat I year for that then bullish. line to met for we follow-up And September last in just is,

that things in r question have that your off - outlook you comments on So kind of did help or help already that that you transpired my is since back of follow-up my year? other into the that in positive maintain exit question that September next Beacon factoring into

Dave King

I’ll start. Ricky. morning, Good

revenue didn't growth. talk comments of in I other said prepared the payers. BeaconLBS I has First all, specifically opportunities multiple about for

specialty are payers, physicians, with want there clinical some with to that - that systems adhere multiple ACO's to other large There want to with manage practices testing. opportunities health multi-disciplinary internally --with guidelines opportunities are for utilization but

a in proposition there significant by the certainly value were was was realized. will much savings so there huge some works. - success higher say There Certainly utilization the market is So from it from adherence was BeaconLBS Florida. way and But I level perspective about my management. physician of push-back network

the the decision that PLN was decision and programs on comments, a And it national basis. was strategic and a part offer I United in my view their prepared made as to the said BeaconLBS consumers networks including in to on

systems based it's use pursuant cost by any enhance It’s the as evidence to particularly testing utilization, or opportunity to the manage of looking opportunity BeaconLBS provider payer or think opportunity non-network at of testing to guidelines. high – providers. I for health an an So

to about And the about patient test with test they the at opportunity performed. cost the engage going test service to are it's the educate what an point physician the right have to when to them it’s selection and directly choosing

So we opportunities - non-renewal why are the about optimistic that's the think I Florida. in revenue despite for BeaconLBS

one. to that the of Glenn, terms on In want comment margin you

Glenn Eisenberg

our into provide down, we slightly in kind talk which obviously when margin to Ricky, will we more the year, were color XXXX. of Yeah. together September, as we for next go outlet flat again and did know, you

the just factors which of bandwidth a relative our to is giving wide range time a that we’re you non-renewal why expectations. of in, the one come contract is little is for outcomes, margin There potential the of we the obviously knew that bit of obviously at

Operator

your you. back Thank call not turn showing speakers further will And time. at any the this I remarks. further to I'm now any questions over for

Glenn Eisenberg

Thank you.

David King

so there's here, learned years that no could which I LabCorp journey it. and to passion, one it about is want is about history guess it and October think talk on to X, the telling we an preparation of we've of amazing Company, I amazing pursue is you where thing In pretty XX end. anniversary begin Well, here, a we as with when when celebrated we that a valedictory do have XXth little what

this an And I support growth want of incredible I've transformation at amazing been part I the your of And the way. at thank am you company. to of end encouragement journey; process privileged in play for to all your an along a and enormously and

am great leaving in hands. I the company

around our the the success and and Glenn and colleagues outstanding XX,XXX for Adam We Schechter long this the term in about LabCorp of opportunities and and of John, better world. course, validity succeeding leadership have team, business, couldn't the Covance our I leaders long and dedicated strategy. term of entire feel and terms Paul, proven

of know leaders. while the and day. Thank every LabCorp you burn I I brightly the will of So wish one keeping isn't Godspeed. good good flame our luck that of next you generation and torch

Operator

gentlemen, Ladies this call. concludes today's and Thank participating. conference you for

disconnect. You may now

Laboratory Corporation of America (LH) 24 Oct 192019 Q3 Earnings call transcript