Labcorp (LH) Q3 2026 Earnings Call Transcript

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DATE

Wed, Oct 28, 2026

CALL PARTICIPANTS

• VP, Investor Relations - Dewey Steadman
• Chairman and Chief Executive Officer - Adam H. Schechter
• Executive vice president and chief financial officer - Julia Wang

TAKEAWAYS

• Total Revenue -- $3.81 billion, representing 6.9% growth driven by organic volume and acquisitions.
• Adjusted EPS -- $4.78, an increase of 14.5% compared to the prior year.
• Adjusted Operating Income Margin -- 15.0%, expanding 60 basis points through organic growth and operating efficiencies.
• Diagnostics Revenue -- $2.95 billion, rising 6.5% behind 3.1% organic volume growth and 1.3% favorable price/mix.
• Diagnostics Adjusted Operating Income Margin -- 16.7%, a 40 basis point increase from the prior year.
• Biopharma Laboratory Services Revenue -- $866.7 million, growing 8.5% with Central Lab Services providing 11.5% growth.
• Biopharma Laboratory Services Adjusted Operating Income Margin -- 18.3%, expanding 180 basis points driven by organic growth and early development strategic actions.
• Trailing 12-Month Book-to-Bill -- 1.10, indicating sustained demand for biopharma laboratory services.
• Backlog -- $8.92 billion, representing a 3.9% increase compared to the same period last year.
• Backlog Conversion -- $2.82 billion expected to convert to revenue over the next 12 months.
• Free Cash Flow -- $412.2 million, up from $280.5 million last year due to working capital improvements.
• Updated 2026 Adjusted EPS Guidance -- $18.30 to $18.70, raised from the previous range of $18.10 to $18.55.
• Updated 2026 Enterprise Revenue Guidance -- 5.9% to 6.7% growth, representing a 50 basis point increase at the midpoint.
• Share Repurchase Authorization -- $1.4 billion remaining under the board-authorized program.
• Acquisition Investment -- $255.5 million deployed for acquisitions during the third quarter.
• BioReference Assets Revenue -- $260 million estimated in the first 12 months following a mid-2027 close.
• Myriad Prenatal Business Revenue -- $100 million estimated addition upon full integration following an early 2027 close.
• LaunchPad Initiative Savings -- $125 million, representing the full-year target for productivity improvements.
• PAMA Reimbursement Impact -- $125 million estimated reduction in Medicare reimbursement for 2027 based on the preliminary fee schedule.
• Diagnostics Acquisitions Contribution -- 2.2% to segment revenue growth during the quarter.
• Early Development Revenue Growth -- 0.4% as reported in the supplemental segment data.
• Central Lab Services Growth -- 11.5%, driven by healthy underlying demand and favorable timing of study starts.

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RISKS

• Schechter warned that "these payment cuts will threaten patient access to laboratory services," noting that the proposed CMS fee schedule could impact the viability of laboratories across the United States.
• Management noted that the preliminary PAMA fee schedule relies on data from only 2% of laboratories paid under Medicare Part B in 2024, creating limited representation of physician office and hospital outreach laboratories.

SUMMARY

Labcorp Holdings Inc. (NYSE:LH) reported financial results for the third quarter of 2026, highlighting growth in both diagnostics and biopharma laboratory services. Management reported a 6.9% increase in total revenue and expanded operating margins across the enterprise. The company reached agreements for three strategic acquisitions subsequent to the quarter, including assets from BioReference, Myriad Genetics, and Millennium Health. Executives reaffirmed their long-term outlook for 2026 to 2029 despite anticipated reimbursement pressures from proposed changes to the Protecting Access to Medicare Act (PAMA).

• CEO Adam Schechter stated, "Our specialty testing business continues to grow about three times faster than the broader diagnostics market."
• Management reported that the PGDx elio tissue complete CDx received FDA approval as a companion diagnostic for advanced melanoma.
• The company launched the FDA-cleared Elecsys pTau-217 blood test to expand access to Alzheimer's testing in primary and specialty care.
• Julia Wang noted that "Q3 represented the sixth consecutive quarter of margin progression across the enterprise."
• Labcorp became the only central laboratory provider with a wholly owned laboratory network across four continents following the MLM Medical Labs acquisition.
• The company announced a collaboration with Waters Corporation to offer the first commercial laboratory availability of the BD Onclarity HPV assay for self-collected screening.

INDUSTRY GLOSSARY

• PAMA: Protecting Access to Medicare Act, legislation that affects reimbursement rates for clinical laboratory tests.
• BLS: Biopharma Laboratory Services, a Labcorp segment focused on central laboratory and early development services for pharmaceutical clients.
• AOI: Adjusted Operating Income, a non-GAAP financial measure that excludes certain items like amortization and restructuring charges.
• Book-to-Bill: The ratio of orders received to revenue recognized, used as an indicator of future revenue.
• pTau217: A blood-based biomarker used in the detection and monitoring of Alzheimer's disease.
• MRD: Minimal Residual Disease, a term used to describe the small number of cancer cells that remain in the body after treatment.
• CDx: Companion Diagnostic, a test that provides information essential for the safe and effective use of a corresponding drug.
• CMS: Centers for Medicare and Medicaid Services, the federal agency that administers the Medicare program.
• LaunchPad: Labcorp’s enterprise-wide initiative focused on driving operational efficiencies and productivity improvements.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Q3 2026 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. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Dewey Steadman, VP, Investor Relations. Please go ahead.

Dewey Steadman: Good morning, and welcome to LabCorp's Third Quarter 2026 Financial Results Webcast. With me today are Adam H. Schechter, our Chairman and Chief Executive Officer; and Julia Wang, Executive vice president and chief financial officer. This morning, in the events section of the LabCorp investor relations website, at ir.labcorp.com. We posted both our press release and the supplemental financial presentation with additional information on our business and operations. We will also host a replay of this webcast on the IR website for 1 year. On today's webcast, we will focus on our adjusted non GAAP results for the third quarter of 2020, our capital allocation strategy, our updated financial guidance for the full year 2026.

Our GAAP results and a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures are available in today's earnings release the supplemental financial presentation. Please see the use of adjusted measures section in the supplemental presentation for more information regarding our use of non-GAAP financial measures. In today's remarks, the term organic growth excludes the impact from acquisitions, divestitures and currency. As well as other strategic actions taken in the early development business. Our remarks will also include forward looking statements including but not limited to, statements about our updated 2026 financial guidance and long-term financial outlook, and the related assumptions of each.

The expected impact of various factors on our business, operating and financial results, cash flows and financial condition, global economic and market conditions, our future business strategies, the expected savings, benefits, and synergies from acquisitions and other transactions partnerships. Our potential opportunities for future growth. Each of these forward looking statements is subject to change based upon various factors many of which are beyond our control. More information is included in our most recent annual report on Form 10 k and subsequent quarterly reports on Forms 10 Q and in the company's other filings with the SEC. We have no obligation to provide any updates to these forward looking statements even if our expectations change.

Now I will turn the call over to LabCorp's Chairman and CEO, Adam H. Schechter. Adam?

Adam H. Schechter: Thank you, Dewey. Good morning, everyone. We appreciate you joining us today to review our third quarter 2026 results. LabCorp delivered another strong quarter 7% revenue growth driven by volume, margin expansion across the enterprise, and 14.5% EPS growth. Our results reflect disciplined execution, as we drive continued momentum in diagnostics, and biopharma laboratory services. With these strong results, we are increasing our 2026 guidance. Before turning to the specifics of the quarter, I want to briefly address PAMA. We are disappointed by the recent announcement on the proposed fee schedule changes related to PAMA. Which is expected to reduce Medicare reimbursement rates for hundreds of laboratory tests beginning in 2027.

The preliminary fee schedule is not fully representative of the broader commercial laboratory market. The proposed rates rely on data from only 2% of all laboratories paid under Medicare part b in 2024. And very limited data from physician office laboratories and hospital outreach laboratories. In our view, these payment cuts will threaten patient access to laboratory services They will negatively impact patient care and innovation. And they will impact the viability of laboratories across The United States. We previously considered PAMA related reimbursement pressure in developing our 26 to 29 long term outlook. And we are reaffirming that outlook today.

With our strong underlying business momentum, our strong biopharma laboratory business, and the business development opportunities before us, along with our Launchpad initiatives, we remain very positive about the future. LabCorp continues to support the RESULTS Act a solution with strong bipartisan support that would encourage a sustainable and innovative laboratory diagnostic system in The United States. Now let's turn to our strong financial performance for the third quarter. Revenue grew 7% to $3.8 billion AOI margin expanded 60 basis points to 15%. Adjusted earnings per share grew 14.5% $4.78. And free cash flow was $412 million. Moving to our segments, Diagnostic revenue increased 6.5% to $2.9 billion. 8.5% to $867 million driven by continued strength in central laboratories.

Our BLS book to bill was 1.13 in the quarter and 1.10 in the trailing 12 months. Julia will talk more about our strong results and increased 2026 guidance in just a moment. At our Investor Day, we laid out the next phase of LabCorp's strategy, and the priorities we believe will drive attractive growth over the long term. Beginning with leading and specialty testing, As new therapies emerge, particularly in high growth specialty areas like oncology, neurology, autoimmune disease, women's health. LabCorp's testing solutions are integral for drug development, diagnosis, therapy selection, and ongoing disease monitoring. Our specialty testing business continues to grow about 3x faster than the broader diagnostics market.

Importantly, this growth creates a halo effect for our core laboratory business as physicians often order specialty tests alongside other LabCorp tests for their patients. Driving volume growth across both specialty and core diagnostic testing. During the quarter, we expanded our leadership position across important high growth specialty areas. In oncology, we meaningfully advanced precision medicine. We announced FDA approval of a companion diagnostic supporting patients with advanced melanoma, This approval supports treatment decisions for both patients and providers, demonstrates the capabilities of our PGDX platform. Strengthening our position in companion diagnostics. This platform can support future companion diagnostic opportunities. And we are seeing increased interest from our biopharma clients.

We also announced a collaborative clinical study with the Knight Cancer Institute at Oregon Health and Science University. Evaluating LabCorp's PlasmaDetect genome MRD test. To detect muscle invasive bladder cancer reoccurrence. A significant clinical challenge despite advances in treatment. Moving to neurology. New therapies, blood based biomarkers, and an increasing understanding of neurodegenerative disease, enabling earlier diagnosis, more informed treatment decisions, and improved patient care. LabCorp is a leader in this space. And our neurology portfolio spans Alzheimer's disease, Parkinson's disease, ALS, multiple sclerosis, epilepsy, stroke, and other neurological conditions. Subsequent to the quarter, we launched an FDA cleared pTau217 test for Alzheimer's disease available in both primary and specialty care settings.

This launch will help bring Alzheimer's testing to clinical practices. Enabling earlier and more accessible detection. This test will also strengthen our position in 1 of the fastest growing areas of specialty testing. Beyond our specialty focus areas, we continue to leverage science, and innovation to address many important health care needs. For example, we launched the hepatitis d reflex test to support earlier detection of the most severe form of viral hepatitis. We announced a collaboration with Waters Corporation, positions LabCorp as the first commercial laboratory to offer the FDA approved BD Onclarity HBV assay. Across clinician, and self collected screening options. Including in clinic patient service center and at home settings.

Focusing now on the priority of being a partner of choice for health systems and leading pharma, Partnerships and acquisitions expand access to testing capabilities and allow us to bring the benefits of scale science, and operational excellence to customers. During the quarter, acquired MLM Medical Labs, expanding our global central laboratory capabilities This acquisition establishes LabCorp as the only central laboratory provider with a wholly owned laboratory network across 4 continents. North America, Europe, Asia, and Africa. We also partnered with the National Association of Community Health Centers. To strengthen leadership development support practice improvement, and advance community health initiatives. Across the nation's community health center network. Subsequent to the quarter end, we signed 3 acquisition agreements.

Each of which is expected to meet our financial criteria. Of being accretive to adjusted EPS in the first year and returning the cost of capital by year 3. The timing of each of these is subject to regulatory approvals and customary closing conditions. These include an agreement to acquire select assets of BioReference laboratory testing business. An agreement with Myriad Genetics to acquire the prenatal health testing business which includes the Prequel, Foresight, SneakPeek, and first gene tests. And an agreement to acquire Millennium Health, an accredited specialty laboratory with more than 15 years of experience in drug testing and surveillance. We continue to have a strong pipeline of partnership and acquisition opportunities.

That support our long term growth strategy. We look forward to discussing those with you in the future. Moving to personalized health solutions. Which encompasses both precision medicine and consumer health. In addition to several new companion diagnostics, we also launched solutions that help consumers better understand, manage, and improve their health. In the quarter, 140 panels and tests across many conditions provide insights to consumers to understand their health over time. We also announced a collaboration with Thrive Global to launch the Thrive5 Health test on LabCorp on demand. A test that combines lab results with other health biomarkers to help improve cardiometabolic health. In addition to the results, consumers received personalized educational content. And a practical action plan.

These examples demonstrate the value of LabCorp's lab testing capabilities to deliver more meaningful insights for consumers. Shaping our future through technology and innovation continues to be a focus of our organization. Our advanced technology solutions include the MyLabcorp app, test finder, and increased automation in our laboratories using robotics, digital pathology solutions to improve customer experiences, enhance productivity, and help transform our business. In the quarter, our essential laboratory service business launched the next generation of LabCorp Global Trial Connect. Helping pharmaceutical sponsors and investigator sites more effectively navigate growing clinical trial complexity. Reinforcing our commitment to delivering differentiated technology enabled solutions for our customers.

The strength of our technology strategy and continued focus on innovation was recognized by Forbes. Which named LabCorp to its list of America's best employers for tech workers. With that, I will hand it over to Julia to discuss our financials in more detail.

Julia Wang: Thank you, Adam. Our third quarter results represented strong and continued progress against our strategic priorities. Enterprise revenue grew 6.9% versus prior year. Adjusted operating margin expanded 60 basis points primarily driven by organic revenue growth, and operating efficiencies. Adjusted earnings per share grew 14.5% and we generated $412 million in free cash flow These results demonstrated the earnings leverage in our business. As solid organic growth, disciplined execution, and productivity improvement translated into margin expansion and double digit earnings growth. We remain active in capital deployment. With $256 million in acquisitions, and $58 million in dividends. We ended the quarter with $262 million in cash, and $5.9 billion in total debt.

As approved by our board of directors, we currently have approximately $1.4 billion remaining under our share repurchase program. Providing continued flexibility to return capital to shareholders Moving to more details on the quarter, Enterprise revenue was $3.8 billion up 6.9% from the third quarter of 2020. Organic revenue growth was 5.5%. Net acquisitions contributed 1.5% of growth. Partially offset by foreign currency translation of 0.1%. Adjusted operating income was $517 million, or 15% of revenue. Compared to $513 million or 14.4% of revenue last year. The adjusted tax rate was 22.9%. In line with last year. We continue to expect our full year adjusted tax rate to be nearly 23%. Adjusted EPS was $4.78. up 14.5% from last year.

Free cash flow was $412 million compared to $281 million last year. The increase was primarily driven by improvement in working capital. Partially offset by planned increases in capital expenditures. Our strong cash generation provides continued flexibility to invest in the businesses while maintaining a disciplined approach to capital deployment. Turning to our segments. Diagnostics laboratories continued to perform well. Revenue was $2.9 billion up 6.5% compared to the prior year. We delivered organic revenue growth of 4.4%, consisting of 3.1% volume growth and 1.3% favorable price mix. Largely driven by higher tests per session. Acquisitions contributed 2.2% to revenue growth. Diagnostics adjusted operating income was $492 million or 16.7% of segment revenue.

Compared to $450 million or 16.3% of revenue last year. The combination of healthy organic growth and continued operating efficiencies drove 40 basis points of margin expansion in diagnostics As Adam mentioned, subsequent to the quarter end, we entered into agreements to acquire select assets of BioReference, Myriad Genetics' prenatal health testing business and Millennium Health, In addition to being strong strategic fits, each of these transactions is expected to meet our acquisition financial criteria. Of being accretive to adjusted EPS in year 1 and returning cost of capital by year 3. As typical with all of our acquisitions, we expect these transactions to become more accretive over time as we fully integrate.

Related to the BioReference transaction, we would expect to generate $260 million of revenue in the first 12 months. At an adjusted operating margin slightly higher than the diagnostic segment average. Resulting in approximately $0.15 of adjusted EPS including financing costs. We currently expect a mid-year 2020 close. Subject to regulatory approval and customary closing conditions. As it relates to the Myriad Genetics transaction, we expect to add approximately $100 million in revenue. And to be slightly accretive to adjusted EPS in year 1, and to reach average diagnostic segment margin by the end of year 2. Once fully integrated. We currently expect an early 2020 close subject to regulatory approvals and customary closing conditions.

BLS revenue was $867 million up 8.5% compared to last year. Organic constant currency revenue growth was 9.6%. The strong organic growth was partially offset by the strategic actions in early development of 1.2% and acquisitions offset the impact of foreign currency translation. Within the BLS segment, on organic constant currency basis, Central Lab Services delivered strong revenue growth of 11.3%. And early development growth of 5%. The strong growth in central lab was essentially driven by a healthy underlying demand. While favorable timing related to study starts in the quarter also contributed. BLS segment adjusted operating income was $159 million or 18.3% of revenue. Compared to $132 million or 16.5% of revenue last year.

Adjusted operating margin expanded 180 basis points driven by organic growth and operating efficiencies from the strategic actions we have taken in early development. Our BLS segment ended the quarter with a backlog of $8.9 billion We expect approximately $2.8 billion to convert into revenue over the next 12 months. Quarterly book to bill was strong at 1.13. Translating into a strong trailing 12 month book to bill of 1.10. The combination of robust organic growth, significant margin expansion, and healthy book to bill reinforces our confidence in the trajectory of BLS. Turning to our full-year 2026 guidance, Strong year-to-date execution and continued business momentum give us increased confidence in our outlook.

As a result, we are raising the midpoint of our 2026 enterprise revenue range and adjusted EPS range by $65 million and $0.18, respectively. The increase in our outlook reflects a stronger underlying business performance partially constrained by approximately $10 million in incremental foreign currency headwinds versus our prior guidance. Enterprise revenue is expected to grow 5.9% to 6.7%. Which represents a 50 basis point increase at the midpoint. The guidance includes a 30 basis point benefit. From foreign currency translation versus a 40 basis point benefit in our prior guidance. 5.5% to 6.2%. This is a 20 basis point increase at the midpoint. We continue to expect the majority of the growth to be driven by organic performance.

BLS segment revenue is expected to grow 7.4% to 8.4%. We have raised the midpoint of our BLS revenue guidance by 190 basis points. Primarily driven by continued strength in central labs The current guidance includes a 130 basis point foreign currency tailwind compared with a 150 basis point tailwind in our prior guidance. For the full year, on an organic constant currency basis, We now expect central lab revenue to grow in the high single digits and continue to expect early development to grow in the low single digits. We continue to anticipate enterprise margin expansion for the full year 2026 driven by both diagnostics and the BLS relative to 2025.

At the enterprise level, Launchpad continues to deliver productivity improvement. And remains on track for the $125 million full-year savings target. Our adjusted EPS guidance range is $18.30 to $18.70. An implied growth rate at the midpoint of 12.5%. Our free cash flow guidance range remains $1.24 billion to $1.36 billion We continue to expect capital expenditures to be nearly 4% of revenue. Our full year guidance assumes foreign exchange rates as of 09/30/2026. The guidance also reflects our current capital allocation assumptions. Including the use of free cash flow for acquisitions, share repurchases, and dividends.

As we look towards 2027, based on the preliminary fee schedule proposed by CMS, we estimate the impact of PAMA to be approximately $125 million. And we expect to offset a portion of that impact. With our underlying business momentum in diagnostics, strong biopharma business, business development opportunities, and Launchpad initiatives. We remain very positive about the prospects of 2027 and we look forward to providing 2027 guidance in February. Now I will turn the call back to Adam for closing remarks.

Adam H. Schechter: Thank you, Julia. Let me close with a few takeaways. First, we delivered another excellent quarter. With strong revenue growth, margin expansion and double digit adjusted EPS growth. Second, we are translating the strategy we laid out at investor day into execution. Strengthening our leadership in specialty testing, expanding strategic partnerships and acquisitions, accelerating personalized health solutions, and leveraging technology to improve performance. And third, as a result of our performance, for revenue and EPS, we are increasing the midpoint of our full year guidance and expect to move into 2027 with solid momentum. We are confident in our strategy.

We are encouraged by the opportunities ahead of us and we are well positioned for continued strong performance moving forward. we will now take questions.

Operator: Operator, Question, please press 11 on your telephone, and wait for your name to be announced. Thank you. To withdraw your question, please press 11 again. In the interest of time, we do ask that you limit yourself to 1 question. Please stand by while we compile the Q&A roster. And our first question comes from Erin Wilson Wright of Morgan Stanley. Your line is open.

Adam H. Schechter: Good morning, Eric.

Erin Wilson Wright: Good morning. So I have a question about margins and margin progression and next year and kind of where things land, just given in the context of PAMA and the 75 to 150 basis points of margin expansion over 3 years that you laid out at the Investor Day, And also, you know, looping in sort of the acquisitions that you recently announced, how do you think about that margin cadence, particularly into 2027? Can you expand margins next year? And what are some of those moving pieces on that front if PAMA is implemented and obviously those deals close? Thanks.

Adam H. Schechter: Yep. Thank you, Erin, for the question. And, you know, the good news is we have a lot to talk about here. We have continued strong momentum in our business. If you look at our diagnostic business, you look at margins, we have increased our margins for many quarters in a row now. And we expect, if you put PAMA aside, that we will continue to improve those margins as we move into the future. Obviously, we will wait to see what happens with PAMA and the RESULTS Act. Obviously, the year that PAMA's introduced, we will do as much as we can to offset PAMA. I think we have 4 strong levers to do that.

The underlying diagnostic business, the strength in our biopharma laboratory business, the LaunchPad initiatives that we will continue to push really hard, particularly in a PAMA year, and also the business development opportunities that we have announced. And we have others before us. So all those things will help offset the impact of PAMA. But, obviously, the year that PAMA is implemented will be a tougher year than the other years. It will get easier after the PAMA years. It also depends on the timing of the business development and when we close those deals. We expect each 1 of them to be accretive in the first year, so they should be helpful in terms of accretion.

But it takes a bit of time before the margins get to our average margins. For example, the Myriad deal, which is a great deal, would not have margins reach our average margins until the end of year 2. So it would take a little bit of time for the margins to get there, and it really depends on the exact timing of those deals. For example, for the Myriad deal, we expect it to happen in early 2020. So we will provide exact guidance in February of next year. But what I will say is we are confident that we are moving into 2027 with momentum.

We reaffirmed our guidance today even after giving what we expect PAMA to be in year 1. So it tells you that we are confident in the margin expansion over time.

Julia Wang: Hi. Good morning, Eric. Maybe to add a bit more color as it relates to margin, we are very pleased with the progression we have made as an enterprise. Actually, Q3 represented the sixth consecutive quarter of margin progression across the enterprise, inclusive of the 2 operating segments. The other fact I would share is that when you step back and look at the fundamental drivers of our margin expansion, it really boils down to strong organic growth for both operating segments particularly in the leading diagnostic and CLS business. it is our relentless focus on operating efficiencies through our Launchpad initiative.

And of course, this year, we also benefited from the strategic actions that we have taken in early development. And as Adam also shared just now, when you look at 2027, we really have multiple levers that we can pull, whether through the continuous strength in diagnostics or continued momentum in BLS. But the business development will be another lever in addition to our focus on launchpad, which we will be leveraging advanced technologies to help us fundamentally driving the cost out of the system in a sustainable way. So, all in all, we are looking forward to wrapping up 2026 with really strength and go into 2027 with momentum. So stay tuned for more guidance coming in February 2027.

Thank you.

Operator: And our next question comes from Lisa Gill of JPMorgan. Your line is open.

Adam H. Schechter: Good morning, Lisa.

Julia Wang: Good morning, Lisa.

Lisa Gill: I want follow-up on those comments on the business development side. Adam, you have done 4 deals here in the last couple of weeks. Can you maybe just talk about what you are seeing currently in the pipeline, number 1? 2, we have had some questions from investors about the margin progression some of these acquisitions because inside of some of the current companies, they are not accretive. So can you maybe help people to understand, is it that you just convert that to the contracts you have with managed care, and that is why you have the visibility around how the margin profile will look for the business development.

And then just lastly, anything else you would wanna share as we think about M&A pipeline as we go into 2027? Is it increasing? Do you see incremental opportunities? You know, just how do we think about business development?

Adam H. Schechter: Sure. Thank you, Lisa. So first of all, the pipeline remains strong. And it is interesting, I have been talking about the strong pipeline for some time now. And, you know, several people said, Adam, you keep talking about it. 1 of these deals is going to happen. I think this just shows you cannot control the exact timing of deals. But when the pipeline is strong, the deals will come. We have other deals in the pipeline. I am excited about that pipeline. We expect to have more announcements in, you know, the future as we move forward. The pipeline remains strong.

The interesting thing about PAMA, where on the 1 hand, it has a significant impact to us in 1 year, I think it also increases the pipeline for business development I think smaller hospital laboratories, regional local laboratories, they are going to struggle a lot with PAMA, and it really does cause them to rethink about their business. The second question regarding the individual deals and margin expansion I would say each of these deals are a little bit different. You know, MLM is a deal that was for our central laboratory business. It expands our capabilities.

It gives us a presence in a part of the world where clinical development is very strong, and it is very a separate part of our business that is integrating that deal. If you look at the other 3 deals, we will start with the Myriad deal, which I think is a very good deal for us because it is in women's health. it is an area we know well. It brings new tests to us. The first gene, the Prequel, the foresight, the SneakPeek, they are all good women's health products that we can add to our existing portfolio of products. And, you know, we already have sales forces, I think that together we can reach more patients.

We can improve access. We can bring new tests that we do not currently have to the patients that need those tests and the physicians that want those tests. So it will actually be a very competitive environment of which we can now compete much more effectively with these tests than before. It will be accretive in the first year. It folds in nicely to a business we know how to run. We have done deals with Myriad before, so we know how to work with them and how to integrate So it is an exciting opportunity for us. If you look at the Millennium deal, that is a part of our business. it is a separate business unit.

We do very well in that business. But this increases our presence in parts of the country that we do not have a presence in or we do not have a strong presence right now. So it is a business we know how to run. it is a business we have been involved in for many years. And it just expands our geographic footprint and enables us to be more competitive, improve access parts of the country that we do not have as much access today. And if you look at the BioReference deal, you know, we have done 2 deals with them already. We know how to work with them very well.

We have worked with them on integration, so we know how to integrate with them very well. They have presence in parts of the country that we are not as strong in, so it increases our relevance in parts of the country where we want to increase our presence. Increases access, and we know how to work with them to integrate the business well into our existing business. So the timings, we tried to give you a sense of what those timings were. Myriad, early 2020. BioReference, mid-2020. Millennium later this year. And then based upon the timing, we would expect that margins would be accretive to earnings in the first year. Margins would improve over time. Thank you.

Operator: And our next question comes from Ann Hines with Mizuho. Your line is open.

Adam H. Schechter: Good morning, Ann.

Ann Hynes: Good morning. Thank you. Staying on that women's health topic. I know we have seen some meaningful changes in cardiovascular screening recommendations. From the American College of Cardiology. I think in March, they expanded testing for high-certain-risk patients. But yesterday, they really expanded recommendations for women's cardiovascular health. When major organizations like this do change the recommendations, how should we think about the potential impact for you Do physicians typically change their ordering patterns quickly? Is there, like, a leg. a lag time and adoption time? And just from a insurance perspective, so are some of these tests covered, and do they usually start covering them because of these organization's recommendations? Thanks.

Adam H. Schechter: Yes. No. Thank you, Ann. I think women's cardiovascular health has been something that I have personally been focused on for a long time, and I am glad to see that it is now being focused on by these additional societies and so forth. it is an underdiagnosed disease, particularly in women, It goes undiagnosed in the way in which it presents itself, cardiovascular disease. I think there is a lot more that we can do to enhance the health of cardiovascular health of women. So it is nice to see that the societies will move in that direction. I would say many physicians have already moved in that direction, have already begun to screen women for cardiovascular.

They teach women how cardiovascular disease presents very differently at times in women versus men. And I think that we have seen a movement to actually improve cardiovascular health in women already. Separate and distinct from that, when societies provide recommendations I do think it is a way for us to reinforce with payers the importance of paying for those tests. I do believe that physicians will tend to prescribe more of those tests faster when they become a core recommendation of a very strong society. Or group of highly thought of physicians and thought leaders. So I do think it is helpful.

Although when you do 750 million tests per year, it is hard to pull out any type of change like this. I do think that it is for the benefit of women. I do think it will help us over time. Thank you.

Operator: And our next question comes from Eric Coldwell of Baird. Your line is open.

Adam H. Schechter: Good morning, Eric.

Eric Coldwell: Good morning, and congrats on a really nice results in Outlook. I am probably going to deliver my worst question of the quarter here because this is a lot. So we actually like your deals. You have been very clear about the capital deployment, but I have been particularly concerned about the bio reference, the BRL deal. Because we do have their financials. We know the revenue that you expect. and we have a reasonable estimate on cost of capital, etcetera, etcetera. And it was very hard for me to initially come up with year 1 accretion on that deal, particularly when the first quarters are typically, you know, well below what your exit rate is post synergy.

So help me figure out what I am missing here. Know, is there, like, a tax benefit driving that 15¢ of accretion? Because you know, at face value, rough scratchpad on the math, it looks like you are actually guiding to a year 1 operating margin of something like 22% or 23%. To get to $0.15 of accretion and I am just. You know, tell me what I am missing on this because that is quite frankly, a lot better than I expected.

Adam H. Schechter: Yeah. So, you know, once again, BRL is a company that we have worked with. We have done 2 deals with. So we understand their systems. We understand their cost structure. Understand the way in which they do business very well. And when we looked at the business, they are in geographies where we think we can increase access. We can bring, you know, our kind of testing capabilities more broadly, and they are in areas we are not as strong in where they were strong. Overall, when gave the revenue estimate, we have included the impact from PAMA that could be in there. We have included some other things.

In terms of where the revenue we expect to be in the first year Versus what they might have reported before. But we also have a very good handle on what their cost structure is and what that would look like in our hands versus in their hands. I do not know, Julia, if there is anything you would add to that.

Julia Wang: Yes, I think you said it well.

Eric Coldwell: Julia, I appreciate any comments you make. I guess I just wanna, like, I think if I remember, they have something like 80 service centers. Are you planning to just do, like, big consolidations here? Drive all of their volume to your lab in the area. I am just anything you could help us with on the synergy path and the cost path would be would be helpful to assuage some of the concerns that at least I had.

Adam H. Schechter: So over time, when it comes to the service centers, where there is overlap, we will decide which service center is best to keep. So it could be that we closed down some LabCorp service centers, could be that we closed down some BRL. But where there is overlap, we would look obviously to have synergies. We also will be able to look at the capacity in their laboratory, the capacity that we have in our laboratory, both of which are close to each other, and where we were going to expand because of our business development growth opportunities, we might not have to expand in areas that we had before.

Or we will look to say, are there synergies there as well? So it could be a reduction of the expansion that we were planning based upon the number of deals that we have done in this part of the country. So I think that you will find synergies across the business, Erin. In addition to that, I just believe when you look at contracting and stuff like that, there is always things that are helpful. Yeah.

Julia Wang: Good morning, Eric. I believe Adam has covered the ground. Think the only thing I would say is that, as Adam already said, because we have had this long term partnership with BioReference, with 2 prior acquisitions already having been successful integrated and demonstrated our ability to really deliver against our expectation as it relates to return on investment. So we are feeling very comfortable with the outlook that we put out there as it relates to the first year contribution. And actually, if you step back and look at the few transactions we have just announced, subsequent to the quarter end.

They are all tuck in nature, whereby we have a very strong track record of successfully integrating them into our extensive operating scale and infrastructure and then being able to really drive synergistic value through both growing the top line and also optimizing the cost structure. So we look forward to updating you as we continue to make progress. But we are confident of our ability to really continue to drive acquisitions to contribute 1.5% to 2.5% revenue growth to our overall growth trajectory but also continue to drive more accretion over time as we fully integrate those transactions.

Adam H. Schechter: And the last thing I would say, Erin, is when you look at our procurement capabilities, you look at our cost based upon scale of what we do, all that comes into play and is helpful as well. Thank you.

Eric Coldwell: Thank you very much, guys. Great job with the quarter.

Adam H. Schechter: Yep. Thank you. Thank you.

Operator: And our next question comes from Michael Cherny of Leerink Partners. Your line is open.

Adam H. Schechter: Good morning, Michael. Good morning, Lisa.

Michael Cherny: Thank you so much for the question. 1 just quick housekeeping and 1 additional question. First, just on the change in revenue guidance, can you just remind us how much is from M&A in terms of what is built into the update for the year? And then relative to PAMA, Adam, I think we all hear you completely on your view on the RESULTS Act and the logic behind it. That being said, it is a tough environment in DC. Just give us a flavor as you think about the offsets for 2027, what the organization is starting to do now to prepare for that? Yeah.

Julia Wang: Good morning, Michael. Let me start addressing the questions related to the guidance you raised. I would say that the raise in guidance is driven by strength in the organic performance of our business. So if I break it down segment by segment, starting with BLS, we raised the midpoint of our guidance by 190 basis points, $59 million on an absolute basis. And in addition to strength in organic performance, particularly in CLS, we also shared in the release that we have about 10 basis points of FX headwind when you look at this guidance versus prior guidance. And that FX impact was actually offset by expected contribution from the MLM acquisition that we closed in September.

And then if you were to move to the diagnostics segment, we raised the midpoint of our guidance by 20 basis points and $22 million on an absolute basis. I would say there is a little bit expectation about potential revenue contribution from the Millennium Health acquisition, which we expect to close later in this year, but it is very minimal. In the scheme of things, I would really consider that as immaterial.

So in short, we are raising the midpoint for the full year from a revenue perspective by 50 basis points, $65 million and if you neutralize FX, it would be a raise of 60 basis points and $75 million all driven by strength in the organic performance of our businesses.

Adam H. Schechter: And then regarding PAMA, obviously, we remain disappointed by the recent announcement. But in our base case, we are going to assume that PAMA happens next year. That is a $125 million impact from the traditional Medicaid, Medicare segment. We are still cautiously optimistic about results. We will still continue to fight for that. We will fight for delay if results does not get passed this year. But in our base case, we want to assume that it does happen next year. If you look at the 4 things that we are doing to offset it, 1, is the underlying diagnostic business is strong, and we will continue to focus on it. The volume looks good. Our strength is there.

So the underlying business, we expect to remain strong. The second thing is our BLS business. Continues to remain strong, and we are going to continue to focus on that to grow that business The book to bill looks great, so that is another way to offset part of it. Our Launchpad initiatives, we are accelerating. And we are already focused on that. We have things underway that we are putting in place in fourth quarter to prepare for first quarter. We will give you the exact amount, but you saw at Investor Day, we raised our expectation of what we expect for LaunchPad from prior guidance. So it is meaningfully higher now than it has been in the past.

And we are accelerating our efforts as we speak today. And then the fourth thing is the business development, which you have seen us announce for business development things in the past month or so, and there is more to come. We are continuing to have very strong pipeline. there is a lot we can do there. You cannot accelerate those per se, but we continue to focus on those other opportunities. And I would expect that there is more to come in the not too distant future. Thank you.

Operator: And our next question comes from Luke Sergott of Barclays. Your line is open.

Adam H. Schechter: Good morning, Luke.

Luke Sergott: Morning. I just wanna talk on the biopharma services and the demand that you guys are seeing. You had really strong pickup there in bookings. I understand it was a little bit easier comp, but really nice acceleration there. And so your conversion is also kinda picking up as well. Can you just walk through the dynamics where you are seeing the where you are seeing the demand? Is there, like, any particular indication or therapy and just give us a. An overlay of how that visibility into that continuing through the beginning of next year?

Adam H. Schechter: So if you look at central laboratory business in particular, it is very strong growth. And in the quarter, the growth was driven by healthy underlying demand, also had some favorable timing related to study starts in the quarter, but it is mostly the underlying demand. As you look to the book to bill, as you said, it is strong. And I would say that it is strong in both our central laboratory business but also in our early development business. In our central laboratory business, it is driven by large pharma. And it is driven by not only oncology and specialty areas where we have seen growth from the past, we are seeing an increase in cardio metabolic areas.

And when you look at the GLP ones and number of different trials and types of trials, we are seeing some accelerated opportunities in that area as well. When it comes to early development, we are seeing that the funding environment looks pretty good. it is driven by smaller biotechnology companies, but we are trying to change that a bit by getting more large pharma business in that area. And we are beginning to see some early signs of success in doing that. So in summary, both businesses are doing well. The business is driven by central laboratories. Central laboratories book to bill looks really strong. Specialty areas, particularly oncology, continues to grow.

But we are also seeing more growth in areas like cardiometabolic.

Luke Sergott: Great. And then a follow-up on that. I mean, as you guys look the demand continues to pick up. Can you talk about what you are seeing from capacity expansion in the industry and if that is you know, how tight is that getting? And then, obviously, would augur well from a pricing perspective as we think about the out years.

Adam H. Schechter: Yeah. So, you know, as I look at our capacity, we continue to have plenty of capacity. So we have a very large footprint. We have central laboratories now in 4 continents as wholly owned subsidiaries. But we also have access to other parts of the world. And we are increasing our access in other parts of the world like for example, in Latin America. So our geographic presence our ability to have these large laboratories gives us capacity for even more growth as we go into the future. So I am not concerned about our ability to take on new business. In fact, we are looking for as much new business as we can get moving forward.

Luke Sergott: Great. Thank you.

Julia Wang: And then, Look, earlier we shared that we are in the process of building a state of the art lab facility in Indianapolis. Actually, that is in response to anticipated continued strong momentum growth, particularly for the CLS business. So we are in the middle of that engagement right now, and that is reflected in our capital expenditure for this year and next couple of years.

Luke Sergott: Great. Thank you.

Adam H. Schechter: Thank you.

Operator: And our next question comes from Tycho Peterson of Jefferies. Your line is open.

Tycho Peterson: Good morning. Adam, I want to follow up on the Myriad deal. You are buying the assets after the management team talked about a 60% revenue decline. Share loss, some payer friction, and that was all before the CLFS rate proposal, which, you know, is an additional drag on revenue. So, you know, why is now the right time to do that deal, and why are you the right partner to turn around, you know, that business?

Adam H. Schechter: Yeah. No. Great question, Tycho. We feel very comfortable and confident in taking over that business. In fact, it is a very strong business for us today. But they have, in particular, the first gene test, which we think has tremendous opportunity. So it is newly launched. it is an innovative single gene NIPT solution. It screens for chromosomal conditions, select single gene disorders, maternal carrier status, and RHC compatibility. So it is gonna compete really well in the fastest growing part of the segment. Where we do not necessarily compete today.

So taking our strong existing tests and infrastructure and relationship with customers and our scale, now combining it in particular with this new test, which will compete in a very competitive part of the market, I think bodes well for us to be the right group to launch that. And also the right time to launch it because that market is still being defined, and we think we could be a winner ultimately.

Tycho Peterson: Okay. That. that is helpful. And then 1 quick follow-up on BLS. You know, appreciate all the momentum and strength you are seeing, especially on the pharma side. I guess, as we think about biotech funding getting a little lighter here, how do you think about the impact there on early development?

Adam H. Schechter: Yes. So, again, the early development business, much smaller, much less important part of our business, but it is performing well right now. We have made some good strategic moves. We are seeing our RFP strong there. The study starts are strong there. We are trying to kind of switch more of our load to larger pharma, and we are seeing some early signs of success. So I feel good about where we are today.

Tycho Peterson: Okay. Thank you.

Adam H. Schechter: Thank you.

Operator: And our next question comes from David Westenberg of Piper Sandler. Your line is open.

Adam H. Schechter: Good morning, David.

David Westenberg: Good morning, Adam and Julia. So I am gonna ask a question about PAMA. I prepared for a bunch of questions on Myriad and Prestige and all that, but it seems to be a lot on acquisitions. So I am I am gonna pivot to PAMA. I am sorry if the question's bad because I was preparing for something else. But I wanna talk about PAMA from kind of a multiyear perspective. We know the worst part is obviously in year 1, which is the 2027. Though it does look like a number of tests are above that 15%, which kinda suggests there could be some headwinds in 2028 and 2029.

Can you talk about the strategies both from a LabCorp perspective and kinda how you anticipate industry might change in the way they are thinking about contracting or discipline or, you know, any other approach that the industry and at LabCorp is going to take to maybe think about if lab. if indeed PAMA is the law of the land, how does the industry might evolve and you evolve in terms of discipline and all that other kind of thing?

Adam H. Schechter: Yeah. No. Thank you for the question. And you know, the majority of the impact is in 2027, the first year. And, again, that assumes that PAMA actually happens. Which is our base case, but we are still cautiously optimistic about results and or delay. There are incremental impacts in 2028 and 2029, but they are meaningfully less than what 2027 would be. And I believe they are manageable, and they are within what we should be able to manage in our ongoing running of the business. As I think about over time, we continue to decouple other parts of our contract from referring to the fee schedule, and we will continue to do that.

But I feel like 2027 will be the biggest impact, and we can manage through the outer years.

David Westenberg: Thank you.

Operator: And our next question comes from Derik de Bruin of Bank of America.

Lou Li: How are you? Thank you for squeezing me in. I guess, maybe I will ask a question back to the organic growth and then the price mix in the quarter. The volume growth seems very good, like, very healthy. The price seem to be slightly lower versus 2Q. I wonder if you can talk about kind of like the growth driver within the volume And then maybe just anything to call out on the price list. Thank you.

Adam H. Schechter: Yeah. So if you look at the diagnostic business, it was very strong. We had 6.5 percent growth over last year. The organic growth was 4.4%. It was 2.2% that came from acquisitions. If you look at the organic growth, 3.1% was organic volume growth, which was very strong, and that is what we would like to see. Organic price mix growth was 1.3% and it is driven by what we wanted to be driven by, which is an increase in test per accession and we expect test per accession to continue to increase as we go over time. If you look at any 1 quarter, I would not look at any trend.

You are gonna see fluctuations between organic volume and organic price mix quarter over quarter. But over time, we expect them both to be strong.

Julia Wang: Yes. And maybe a bit more consideration If you look at esoteric revenue as a percentage of our total diagnostic revenue. It was about 38% in the first quarter 2020 and in the third quarter of this year, it went up to 42%. So, clearly, you can see the strength of our strategy and our execution And then when you look at the full year guidance for Diagnostics, at the midpoint, the revenue growth was 5.9%. And we continue to expect the majority to be coming from organic performance. And within that, we expect the volume growth to slightly outpace price/mix durability. Thank you.

Lou Li: Thank you.

Operator: And our next question comes from Kevin Caliendo of UBS. Your line is open.

Adam H. Schechter: Good morning, Kevin.

Kevin Caliendo: Good morning, Lisa. Good morning, Lisa. Thanks for getting me in. Really happy about all the color on the deals that you had. It was just interesting to me that they are really has not been a traditional hospital deal announced. I am just wondering if this is more your own preference around what is happening in the marketplace and where the opportunity lies, or is it just the availability of assets that are out there? Or is it just simply people are waiting on PAMA and wanna know what the rules are gonna be and what the economics look like?

Adam H. Schechter: Stay tuned. You know, again, you cannot control the timing of deals. The pipeline looks strong. The pipeline looks strong for a hospital deals, for partnerships, local, regional laboratories. They are just timing things. So I would say that the deal pipeline continues to be strong. I do think if PAMA comes, it could get even stronger. But know, stay tuned, and there is a lot that we are working on. it is a strong pipeline.

Kevin Caliendo: Appreciate that. Thank you.

Adam H. Schechter: Thank you.

Operator: And our next question comes from Elizabeth Anderson of Evercore ISI. Your line is open.

Adam H. Schechter: Morning, Elizabeth.

Elizabeth Anderson: Hi. Good morning. Thanks so much for the question, Adam and Julia. Maybe a 2-parter. Just any updates in your assumptions around the ACA impact on the business? And then 2, any reasons why we would not continue to see the traditional 4Q seasonal step up in BLS given some of the things you highlighted in 1 of the earlier questions? Thank you.

Julia Wang: Hi. Good morning, Elizabeth. In terms of the ACA impact, it was a slight headwind of about 30 basis points of diagnostic volume in the third quarter. Which was essentially in line with the second quarter, and we continue to expect a similar level of impact in the fourth quarter. Of course, we have already incorporated this into the updated guidance that we just provided this morning. Also important to note that this particular insured population accounts for a very small percentage of our overall diagnostic volume. it is less than 4 to 5% overall speaking.

And then in terms of the cadence for the BLS business, I would say that if you look at the release we just shared this morning, we have raised the midpoint of our guidance to the degree that at this moment, we expect on a organic constant currency basis, the CLS business to grow high single digits. And then the early development business to continue to grow in low single digits. So based on the strength and the momentum, we feel good about that guidance. And we look forward to continue to march forward to deliver against that expectation.

Elizabeth Anderson: So, yeah, that made sense. And that would continue in bookings too. I am sorry if my question was unclear.

Adam H. Schechter: You know, again, we expect continued strength in bookings, but quarter over quarter does vary quite a bit. Sometimes things get moved into a quarter. Some things get moved out of the quarter. And especially with pharma at the end fourth quarter, you never know what pharma will be thinking. So the underlying book to bill, we expect to remain very strong.

Elizabeth Anderson: Very fair. Thank you.

Adam H. Schechter: Thank you.

Operator: And our next question comes from Jack Meehan of Operon Research. Your line is open.

Adam H. Schechter: Good morning, Jack.

Jack Meehan: Morning, Adam. Good morning, Lisa. Thanks for squeezing me in. Adam, I was wondering just on the topic of PAMA, can you remind me the actions that you have taken to disconnect the non Medicare business from the fee schedule and just wanted to confirm the $125 million estimate. Does that assume any bleed through to other payers?

Analyst: How are you handling that?

Adam H. Schechter: Yeah. No. Thank you, Jack. So the $105 million is a traditional Medicare Medicaid. You know, we have done a lot to try and decouple that over time. And, you know, we are going to continue to work on that. But the additional impact to me are things that you just manage within your day to day business, and that is what we would expect to do. And you always have some pushes and pulls that you work on. So $125 million is the traditional Medicare, Medicaid. There is some spillover into other parts of the business. We are gonna manage that as we would manage other parts of our business.

Jack Meehan: Excellent. If I can squeeze in 1 more, any updates on your progress toward launching the MRD test? And have you chosen which sequencer you are planning to launch that on? Thank you.

Adam H. Schechter: So we are continuing to make progress. On the MRD test. You know, in fact, we just announced a collaboration with Knight Cancer Institute at Oregon Health and Science University. And that was a clinical study that is evaluating Plasma Detect Genome, MRD Ultra, and it is really looking at recurrence for patients with muscle invasive bladder cancer. So we are continuing to look across the portfolio of MRD opportunities. This is just another example of us building data in order to support reimbursement over time. I remain very excited about our portfolio of products. And to my knowledge, I do not believe we have finalized working with any 1 machine yet at this point in time. Appreciate it.

Thanks, Adam.

Operator: Thank you. This concludes our question and answer session and also today's conference call. Thank you for participating and you may now disconnect.

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