Labcorp (LH) Q1 2026 Earnings Call Transcript

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DATE

Thursday, April 30, 2026, at 9 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Adam Schechter
• Executive Vice President and Chief Financial Officer — Julia Wang
• Senior Vice President of Investor Relations — Dewey Steadman

TAKEAWAYS

• Enterprise Revenue -- $3.5 billion, representing a 5.8% increase, with 3.1% organic, 1.4% acquisition-driven, and 1.3% foreign currency growth contributions.
• Adjusted Operating Margin -- Expanded to 14.4%, an increase of more than 30 basis points, attributed to organic revenue growth.
• Adjusted EPS -- $4.25, increasing 10.6%.
• Free Cash Flow -- $71 million generated, compared to a cash outflow of $108 million in the prior year period.
• Diagnostics Revenue -- $2.8 billion, up 5%, composed of 2.9% organic growth, 2% from acquisitions, and a 0.2% foreign currency contribution.
• Diagnostics Segment Margin -- 16.6%, up 30 basis points, primarily from organic growth notwithstanding adverse weather.
• Diagnostics Total Volume Growth -- 2.5%, with 1.1% organic and 1.4% acquisition-driven; adverse weather reduced organic growth by an estimated 0.9 percentage points.
• Price/Mix Increase in Diagnostics -- 2.6%; organic price/mix contributed 1.8%, mainly through greater tests per assessment.
• Biopharma Laboratory Services (BLS) Revenue -- $781 million, up 8.2%, including a 5.5% benefit from foreign currency; organic growth was 3.7%, offset by a 1% decline from Early Development actions.
• Central Labs Revenue Growth (BLS) -- 11% reported, or 5% on an organic constant currency basis; Early Development revenue grew 0.7% organically in constant currency.
• BLS Segment Margin -- 15.5%, an increase of 60 basis points, with growth centered in Central Labs.
• BLS Backlog -- $8.6 billion at quarter end; $2.7 billion expected to convert into revenue over the following 12 months.
• BLS Book-to-Bill Ratio -- Quarterly was 0.94, with a trailing 12-month value at 1.04, projected to improve sequentially in the next quarter.
• Capital Deployment -- $202 million invested in acquisitions, $98 million for share repurchases, and $61 million returned as dividends.
• Cash Position and Debt -- $981 million in cash and $6.3 billion total debt; included closing of a $750 million term loan in advance of June debt retirement.
• 2026 Guidance (Revenue) -- Enterprise revenue growth expected at 5%-6.1%, with a 40 basis point foreign currency tailwind; Diagnostics revenue growth guidance at 5.1%-5.9%, BLS at 3.8%-5.4% (the latter includes a 150 basis point FX tailwind).
• 2026 Guidance (Adjusted EPS and Free Cash Flow) -- Adjusted EPS range $17.70 to $18.35, with a midpoint growth of approximately 10%; free cash flow guidance at $1.24 billion to $1.36 billion.
• Strategic Collaborations and New Products -- Nationwide partnership with Children’s Hospital of Philadelphia; AI-powered tools deployed with PathAI, Amazon Web Services, Datavant, and Optum.ai; launches include Labcorp Fentanyl Urine Visual Test and customizable OnDemand panels.
• Specialty and Consumer Growth -- Double-digit revenue growth reported in neurology (notably Alzheimer’s testing), oncology (supported by new liquid biopsy and MRD tests), and Consumer Health/OnDemand segment; MyLabcorp app with AI assistant set for May nationwide launch.
• M&A Pipeline -- Recent completion of Crouse Health’s laboratory asset acquisition; imminent closing on Parkview Health outreach assets; continued "active pipeline of hospitals and regional local laboratory deals."
• Impact of Adverse Weather -- $15 million revenue impact, primarily to Diagnostics, with organic volume growth estimated at 2% excluding this factor.
• Estimated ACA Exchange Impact -- A 30 basis point diagnostic volume effect is incorporated into full-year guidance; first quarter impact described as "immaterial."
• Expected Margin Expansion -- Both Diagnostics and BLS margin improvements forecast for the year, with larger increases in BLS due to Central Labs growth and Early Development efficiencies.

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RISKS

• Fuel price volatility could impact adjusted operating income by $5 million to $10 million for the year, though management states this amount is "manageable" and incorporated into guidance.
• Potential headwinds from weather are not explicitly forecast, and management indicates such volatility may influence outcomes within the guided revenue range for Diagnostics.

SUMMARY

Management raised the midpoint for both enterprise revenue and adjusted EPS guidance for the year, reflecting confidence in organic and acquisition-driven growth across core businesses. The company highlighted specialty diagnostics and Consumer Health as primary growth drivers, citing double-digit expansion and expanded AI-driven capabilities. Capital deployment included nearly $100 million in share repurchases, while closing and pending acquisitions aim to further support network expansion. Leadership voiced expectations for continued improvement in both Diagnostics and BLS margins, with specific technology and operational initiatives named to boost efficiency. Several new strategic collaborations and product launches were called out, targeting both health system partnerships and consumer engagement.

• Deferred free cash flow realization is weighted toward the second half, consistent with historic seasonality.
• BLS book-to-bill is projected to rise sequentially, as timing effects from the prior quarter are expected to resolve and RFP momentum remains favorable.
• Guidance embeds the assumption of minimal ACA exchange-related diagnostic volume loss, as the full-year impact is retained at 30 basis points.
• Specialty revenue in neurology and oncology demonstrated double-digit growth, but reimbursement in areas like liquid biopsy and MRD was identified as an ongoing challenge potentially improving as additional data accrues.
• Upcoming Investor Day is scheduled for September 10 in New York City, signifying planned further communication of strategy and performance updates.

INDUSTRY GLOSSARY

• BLS (Biopharma Laboratory Services): Labcorp segment providing laboratory services to biopharmaceutical clients, including central laboratory and early development work.
• Central Labs: Laboratory facilities supporting multi-country, large-scale clinical trials and specialized testing services, primarily for pharmaceutical partners.
• MRD (Minimal Residual Disease): Testing that detects trace levels of cancer cells remaining after treatment, with relevance to oncology monitoring.
• PAMA (Protecting Access to Medicare Act): U.S. legislation setting reimbursement rates for clinical laboratory services, subject to periodic data-driven updates.

Full Conference Call Transcript

Dewey Steadman: Thank you, Didi. Good morning, and welcome to Labcorp's First Quarter 2026 Financial Results Webcast. With me today are Adam Schechter, our Chairman and Chief Executive Officer; and Julia Wang, our 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 a supplemental financial presentation with additional information on our business and operations. We will also post 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 first quarter of 2026, our capital allocation strategy and 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 and 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 our early development business.

Our remarks will also include forward-looking statements, including, but not limited to, statements about our updated 2026 financial guidance and the assumptions underlying that guidance, 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, strategic actions and partnerships and 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 Form 10-Q and 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'll turn the call over to Labcorp's Chairman and CEO, Adam Schechter. Adam?

Adam Schechter: Thank you, Dewey. Good morning, everyone. We appreciate you joining us to review our first quarter 2026 financial results and progress on our growth strategy. Before we begin, I'd like to officially welcome Dewey Steadman to Labcorp. Dewey joined us in March as Senior Vice President of Investor Relations and is a seasoned Investor Relations and Capital Markets leader across health care and finance. I'd also like to thank Christin O'Donnell for her leadership of Investor Relations function, and I wish her well as she takes on an important senior role in finance as part of our precision oncology and health systems division, both of which are strategic to our growth. Turning to our results.

We are off to a strong start in 2026 with continued momentum in both our Diagnostics and Central Laboratory businesses and significant progress across our strategic growth priorities. Our businesses remain strong due to our critical role in improving health and improving lives for people around the world. Our financial results were strong in the first quarter. At an enterprise level, revenue reached $3.5 billion, increasing 6%. Margins improved more than 30 basis points and adjusted earnings per share grew 11%. Looking at our segments, Diagnostics revenue increased 5%. Biopharma Laboratory Services revenue increased 8%, driven by strong growth in central labs of 11% or 5%, excluding foreign exchange. And our BLS trailing 12-month book-to-bill remains healthy at 1.04.

In the quarter, we advanced our strategic priorities, starting with being a partner of choice for health systems and regional local laboratories. These partnerships and acquisitions enable us to expand our patient and provider networks, increase access to our broad test portfolio, including leading specialty diagnostics and to drive volume growth. We recently announced a nationwide strategic collaboration with Children's Hospital of Philadelphia to expand access to cutting-edge diagnostics for pediatric patients. By combining CHOP's renowned pediatric research and clinical expertise with Labcorp's scientific capabilities and extensive reach of physicians and patients, this partnership will help bring advanced diagnostic tests to more children who need them.

We also completed our acquisition of select assets of Crouse Health's Laboratory Alliance of Central New York, a clinical anatomic pathology laboratory. And we executed an agreement with Crouse Health to manage their inpatient laboratories. We remain on track to close our acquisition of select outreach laboratory services across Indiana and Northwest Ohio from Parkview Health in the very near future. We continue to have an active pipeline of hospitals and regional local laboratory deals to support our long-term growth strategy. Next, we continue to progress on our strategic priority to lead in specialty testing across our key focus areas of oncology, women's health, neurology and autoimmune disease.

These specialty areas are important growth drivers in both Diagnostics and Central Laboratories, with significant scientific overlap across the businesses. In fact, Labcorp supported the development of more than 85% of new drugs approved by the FDA last year, including in these important specialty areas. In the Diagnostic business, we expect these specialty areas to grow 2 to 3x faster than the broader diagnostics market. In neurology, we experienced double-digit growth, driven by our market-leading portfolio in Alzheimer's testing. Oncology also achieved double-digit growth, supported by the launch of several liquid biopsy tests and expanded access to MRD solutions over the past year.

Additionally, when providers choose Labcorp for specialty testing, we see them consolidating a greater share of their patients testing needs with Labcorp. As part of our growth in specialty areas, we're collaborating with Illumina to broaden access to advanced genomic testing in oncology, particularly in community care settings. We expanded nationwide access to the first FDA-approved companion diagnostics that helps identify platinum-resistant ovarian cancer patients who may benefit from Merck's KEYTRUDA, which can reduce the risk of disease progression and improve overall survival. In addition to these specialty areas, we continue to increase our portfolio with tests that address pressing clinical needs.

Recently, we launched the Labcorp Fentanyl Urine Visual Test, an FDA-cleared rapid screening test that delivers results in just 10 minutes and assesses possible fentanyl exposure for up to 48 hours. Moving to Consumer Health, where we continue to deliver double-digit growth. Labcorp OnDemand launched new tests in the quarter for insulin resistance and pancreatic function. We also introduced unique customizable men's and women's health tests, enabling consumers to design panels tailored to their needs. We are also expanding how consumers engage with Labcorp through MyLabcorp, our secure mobile app launching in May when it will be available to tens of millions of customers.

MyLabcorp brings an individual test results and health data together with clinical guidance into a personalized experience to help consumers better understand their test results. MyLabcorp's AI assistant will also help simplify appointment scheduling and payments. Additionally, we continue to make significant progress on our strategic priority to utilize advanced technologies, including AI and robotics to enhance customer experiences and to improve operational efficiency and productivity. Our recent progress includes an expansion of our collaboration with PathAI to deploy an FDA-cleared digital pathology platform across our national anatomic pathology labs and hospital laboratory collaboration. This platform embeds AI into everyday clinical decision-making by enabling pathologists to review and manage cases digitally, improve turnaround times and increase consistency of results.

A new AI-powered real-world data platform being developed in partnership with Amazon Web Services and Datavant to accelerate Alzheimer's research. By combining agentic AI with Labcorp's diagnostic and real world data, the goal is to improve patient recruitment for clinical trials and ultimately shorten drug development time lines. A strategic collaboration with Optum.ai to apply AI capabilities to streamline laboratory operations, improve efficiency and enhance the patient and provider experience, providing clear insights to patients about their health, test progress and next steps in care. For physicians, it will help in ordering clinically appropriate tests upfront, reduce administration delays and speed patient access to results. This work builds on a more than 20-year strategic relationship between Optum and Labcorp.

This work showcases our culture of innovation and the commitment of our employees. Their impact was recently recognized by Fortune, which named Labcorp to the list of most innovative companies for the fourth year in a row, highlighting our track record of scientific product and process innovations. We were also recognized as one of the 2026 World's Most Ethical Companies by Ethisphere, reinforcing our commitment to operate with the highest standards of ethics and integrity. With that, I'll turn the call over to Julia to discuss our financial results in greater detail.

Julia Wang: Thank you, Adam. We are off to a strong start in 2026. In the first quarter, enterprise revenue grew 5.8% and enterprise adjusted operating margin expanded more than 30 basis points to 14.4%. The majority of enterprise revenue growth was driven by organic growth in Diagnostics and central labs. The increase in adjusted operating margin was primarily driven by organic revenue growth. Adjusted earnings per share grew 10.6%, and we generated $71 million in free cash flow. Additionally, we remained active on capital deployment, investing $202 million in acquisitions as well as returning capital to shareholders through $98 million of share repurchases and $61 million of dividends.

We ended the quarter with $981 million in cash, $6.3 billion of total debt and $700 million share repurchase authorization outstanding. Our cash balance and debt position included closing on a $750 million term loan, prefunding the retirement of $500 million senior notes in June of this year. Moving to the specifics for the quarter. Enterprise revenue was $3.5 billion, up 5.8% from the first quarter of 2025, with 3.1% organic growth, 1.4% growth from net acquisitions and 1.3% from foreign currency translation. Adjusted operating income was $508 million or 14.4% of revenue versus $469 million or 14% of revenue last year.

The adjusted tax rate was 21.7%, lower than the 22.5% tax rate last year, driven primarily by benefits associated with equity-based compensation during the quarter. Despite this benefit, we continue to expect our full year adjusted tax rate to be around 23%. Adjusted EPS was $4.25, up 10.6% from last year. Free cash flow was $71 million compared to a use of cash of $108 million last year. The increase in free cash flow was primarily due to higher cash earnings. As a reminder, our first quarter is typically our lowest quarter for free cash flow. We continue to expect free cash flow in the range of $1.24 billion to $1.36 billion for full year 2026.

Looking into the segments, Diagnostic Laboratories delivered another strong quarter with 5% revenue growth to $2.8 billion. With that, we have 2.9% organic growth, 2% acquisition-driven growth and 0.2% contribution from foreign currency translation. Total volume growth was 2.5%, with 1.1% organic growth and 1.4% acquisition-driven growth. Volume was constrained by the impact from adverse weather, excluding which organic volume growth would have been closer to 2%. Price/mix increased 2.6%, with organic price/mix contributing 1.8%, primarily due to an increase in test per assessment. Acquisitions grew 0.6% and foreign currency translation contributed 0.2%. Diagnostics adjusted operating income was $459 million or 16.6% of segment revenue compared to $428 million or 16.3% of revenue last year.

Adjusted operating margin expanded 30 basis points, primarily driven by organic growth despite the impact from adverse weather. Biopharma Laboratory Services revenue grew to $781 million, up 8.2% compared to last year, which includes a 5.5% benefit from foreign currency translation. We delivered organic growth of 3.7%, partially offset by our Early Development strategic actions of 1%. In organic constant currency, Central Labs revenue grew 4.9% and Early Development revenue grew 0.7%. BLS segment adjusted operating income increased to $121 million or 15.5% of revenue compared to $107 million or 14.8% of revenue last year. Adjusted operating margin was up 60 basis points, driven by growth in Central Labs.

We continue to make progress on strategic actions in Early Development, which will be largely complete by the end of the second quarter. Our BLS segment ended the quarter with a backlog of $8.6 billion, and we expect approximately $2.7 billion to convert into revenue over the next 12 months. Our segment quarterly book-to-bill was 0.94 and is expected to improve sequentially in the second quarter versus the first quarter. Our trailing 12-month book-to-bill remains healthy at 1.04. Turning to our expectations for 2026. Our full year guidance assumes foreign exchange rates as of March 31, 2026. The guidance also reflects our current capital allocation assumptions, including the use of free cash flow for acquisitions, share repurchases and dividends.

We are raising the midpoint of the enterprise revenue range by approximately $30 million and the midpoint of the EPS range by $0.13. Looking at revenue, we expect enterprise revenue to grow 5% to 6.1%. This includes a tailwind from foreign currency translation of approximately 40 basis points. We expect Diagnostics segment revenue to grow 5.1% to 5.9%. This guidance assumes the majority of revenue growth comes from organic growth. We expect BLS segment revenue to grow 3.8% to 5.4%. This guidance incorporates the actions in Early Development and the tailwind from foreign currency translation of 150 basis points.

For the full year, on an organic constant currency basis, we continue to expect the Central Labs revenue to grow in the mid-single digits and for Early Development revenue to be relatively flat, with the second half being stronger than the first half. We continue to expect enterprise margin expansion with margins improving in both Diagnostics and BLS in 2026 versus 2025. BLS margin is expected to expand more than Diagnostics, reflecting continued strong top line growth in Central Labs and operating efficiencies in Early Development as we streamline the business. As an enterprise, we continue to benefit from our launchpad initiatives, which remains on track.

Our adjusted EPS guidance range is $17.70 to $18.35 with an implied growth rate at the midpoint of approximately 10%. As compared to prior guidance, we have narrowed the range and raised the midpoint by $0.13. Our free cash flow guidance range remains $1.24 billion to $1.36 billion, weighted towards the second half of the year, and we continue to expect capital expenditures to be approximately 4% of revenue as we are investing in the new strategic facility to support long-term growth in our Central Labs Services operations.

We expect to continue delivering profitable growth and strong free cash flow and drive disciplined capital deployment across acquisitions that support our strategy and complement organic growth while also returning capital to shareholders through share repurchases and dividends. We remain confident in our ability to deliver durable growth and long-term value for our shareholders. Now I'd like to turn the call back over to Adam for closing remarks.

Adam Schechter: Thank you, Julia. I'm pleased to announce that we'll be holding an Investor Day in New York City on September 10. We'll share more details as we get closer to the day. In summary, we had a very strong quarter. Our performance is the result of disciplined execution of our strategy, which positions us to deliver long-term sustainable growth, margin expansion and value for our customers and shareholders. Ultimately, our performance is a result of our employees' commitment, compassion and innovation, which continue to accelerate our mission to improve health and improve lives around the world. We'll now take questions.

Operator: [Operator Instructions] And our first question comes from Lisa Gill of JPMorgan.

Lisa Gill: I just want to go back here to the first quarter. Can you discuss the impact of weather in the quarter? And then thoughts around the ACA exchange and potential changes that are coming back there. I believe that you put a number around that previously. And so should I just think that -- what did we see in the first quarter? If we didn't see anything, are you still expecting that there could be some headwinds from those volumes as we move towards the rest of the calendar year?

Adam Schechter: Yes. Thanks for the question, Lisa. So if you look at weather in the first quarter, we estimate it was about a $15 million impact for the quarter. In general, if you look at that, it would impact the Diagnostics business, obviously, more so than the central laboratory business. We would expect that the organic volume growth would have been approximately 2% if it wasn't for the impact of weather.

Julia Wang: Yes, Lisa, in terms of your question, as it relates to the ACA impact, previously, we provided an estimate of 30 basis points to the diagnostic volume this year. Now the impact that we saw in the first quarter was really immaterial, although it is perhaps too early to be able to draw any firm conclusion. As we know, the year-to-date enrollment is slightly better than expectations. What we do continue to monitor is if the enrolled participants are indeed paying the premiums, and equally importantly, if that has been translating into the testing utilization by this insured group.

Now at this point, we continue to believe that the 30 basis point volume impact is a good estimate to work with, which is reflected in our full year revenue guidance for Diagnostics for 2026.

Operator: And our next question comes from Jack Meehan of Nephron Research.

Jack Meehan: I wanted to ask you about one of the big policy questions we've been getting at the moment, which is the new one that's related to the CRUSH initiative. Adam, what do you think this means for Labcorp in the lab industry broadly speaking? And is it possible you can share any color around any exposure to some of the codes that have been highlighted?

Adam Schechter: Yes. Thanks, Jack. So if you look at CRUSH, what CMS is attempting to do is to reduce fraud, to reduce waste and to reduce abuse. The process has been going on, frankly, for several months now. And we're supportive of any initiative that can create a level playing field within the industry and support what's right for patients. I mean nobody wants there to be abuse in the system. Health care costs are high, and we've got to find ways collectively to reduce those. And a good way to do it is to reduce any type of waste, fraud and abuse. Now we worked with our trade organization, ACLA, we submitted a comment letter in March.

And the letter encourages CMS to kind of be thoughtful in their efforts so that they can avoid unintended consequences such as impeding Medicare patient access to medically necessary laboratory testing, to prevent them from potentially punishing legitimate providers. So when I think about it, it makes sense to try to reduce the fraud and abuse, but we have to find the appropriate way to do that and not get in the way of what we're really trying to do, which is to improve patients' health and lives.

Operator: And our next question comes from Michael Cherny of Leerink Partners.

Michael Cherny: Maybe if I can go back to the volume side on Dx. Obviously, you mentioned some of the mix dynamics on test per requisition. As you think about the trajectory and what's embedded in guidance, what are the moving pieces that you see around that number against the backdrop of how share is progressing relative to just broader volumes? Any thoughts would be great.

Adam Schechter: Sure. And let me give some context, and I'll answer the question directly. So if you look at Diagnostics revenue, we had a 5% increase over last year, reached $2.8 billion. If you look at the organic growth, it was about 3%. Acquisitions were about 2%, and there's just a slight, slight impact from foreign currency. So if you go to volume growth, it was 2.5%. 1.5% was organic growth. That would have been higher, about 2% if it wasn't for the weather and about 1.4% was acquisition-driven. If you look at the price/mix, there was a good increase of 2.6% with organic price/mix being about 1.8% of that.

As I think about it, you are seeing substantial growth in the specialty areas like neurology, oncology, autoimmune disease and other areas that we're focused on. In those areas, you tend to see less accessions, but more test per accession and a higher price per test, particularly in areas like oncology. So I feel good about where we are. I feel like we've got momentum as we move into the second quarter and the rest of the year. I feel good about the mix of the business that we're seeing. We're focused on the higher-margin business where we can continue to get good volume but also at a good price and good margin.

And I think that's why you're seeing such good improvement in our margins as well. So net-net, I feel confident in the guidance that we've provided, and I feel good about the momentum to get there.

Julia Wang: And Michael, maybe to just build on what Adam just shared, if you look at our updated guidance for the Diagnostics revenue for full year 2026, the midpoint growth is 5.5%, and we continue to expect the majority of that revenue growth to be coming from organically.

Operator: And our next question comes from Patrick Donnelly of Citi.

Patrick Donnelly: Can you talk a bit more about the bookings trends you're seeing in BLS? If you guys can break down what you're seeing in ED versus central lab in the quarter, that would be helpful. And then you commented that quarterly book-to-bill, you're expecting it to be up sequentially 2Q versus 1Q. Can you just talk about what's driving that confidence? Is that improved conversations with customers recently? And any color there would be helpful.

Adam Schechter: Yes, absolutely. So I feel very good about the progress and the momentum that we have in our BLS business. We had an 8% growth over last year, and it was about 4% from organic revenue. If you kind of look at the 2 businesses, you see the BLS segment is going well, but the Central Labs are actually driving the growth. Central Labs grew 11% or 5% if you look at it on an organic constant currency basis. And then the Early Development business was relatively flat. We still make a lot -- we made a lot of progress on our strategic actions in Early Development, and those will be completed by the end of the second quarter.

So I feel good about the momentum. It enabled us to raise the midpoint of the guidance for our BLS segment. As I look at the quarterly book-to-bill, we had a very strong quarter in fourth quarter last year. If you look at our trailing 12 months right now, it's at 1.04. The quarter was about 0.96, but we stated that -- 0.94, but we stated that we expect sequential growth in the second quarter. That's based upon the 0.94 being mostly driven by timing. Some of that fell into fourth quarter versus first quarter, some of that fell from first quarter into second quarter. We are having a good RFPs. We have a good win rate.

And as I look at the rest of the year, I expect to have a book-to-bill that will remain above 1. I've always said you want to have a book-to-bill above 1. But then it's also a tale of 2 cities. If you look at Early Development, you'd expect that book-to-bill to be below 1 because a lot of the business can be gotten and then actually occur within the same year. The CLS business is typically above a 1.0. If you look at the trailing 12 months, that's what you would see if you look at the 2 separate businesses. And the CLS business is mostly longer-term, larger-scale trials.

Those trials are continuing to come to RFP, and I feel very good about our ability to win those trials. So I have confidence in the book-to-bill as we move through the rest of the year. That's what made me feel confident to raise the midpoint of the BLS guidance.

Operator: And our next question comes from Tycho Peterson of Jefferies.

Tycho Peterson: Wondering if you could just touch a little bit more on esoteric testing. I think MRD, you've obviously expanded the indication portfolio in breast, lung, Stage III colon. So maybe just touch on the reimbursement pathway there for the different buckets. And then Alzheimer's, I know you did the Roche deal for the primary care market. How are you thinking about that versus specialists?

Adam Schechter: Yes. Thanks, Tycho. So as I look at the specialty areas, I feel very good about our momentum. I feel good about our scientific leadership, and I feel good about the trends moving into the future. We focus on 4 key areas: neurology, oncology, autoimmune disease and women's health. And in each of those areas, we're continuing to lead with the types of tests that we're bringing into the marketplace. You specifically mentioned neurology. Neurology is growing, particularly in Alzheimer's disease, all of neurology is growing, but it's being driven by our success in Alzheimer's disease.

We don't yet break out the individual segments, but it's getting to be at a point where at some point, we will break it out because it is growing so quickly. If you look at the tests, we are a leader in that field, in the number of tests, the types of tests and our ability to have large scale to bring those tests to a primary care setting. As you mentioned, in oncology, we continue to bring new tests to market. We continue to feel good about our science. When we think about liquid biopsies and solid tumors in oncology and tissue test, we remain a leader.

And in those areas, the reimbursement aren't necessarily quite where we'd like them to be at the moment. But I think over time, as we collect more data, we run more trials, the reimbursement will get there. But what's important to note is when you win in these areas, many of these patients require a lot of tests outside of just the specialty tests. So an oncology patient that is being treated for cancer, they get tests for their white blood cells, red blood cells, their liver, their kidneys.

So when we tend to win the specialty tests, we also tend to get all the other tests that a physician might want for that patient and find appropriate for that patient. So our success in the specialty areas also leads to additional success in the overall marketplace.

Operator: And our next question comes from Elizabeth Anderson of Evercore ISI.

Elizabeth Anderson: I was wondering if you could update us on your thoughts about the PAMA survey that starts tomorrow. What are you hearing in terms of hospital participation? And how do you sort of see that impacting potential updates to PAMA later in the year for next year? And then also, any updates you have on the RESULTS Act progress?

Adam Schechter: Absolutely. And obviously, this is something we spend a lot of time thinking about. We spent a lot of time with our trade organization, and we spent a lot of time in Washington talking about the importance of the RESULTS Act. And we continue to push for the implementation of the RESULTS Act. We think that is the right appropriate best path forward. Our trade group, ACLA, has been doing a lot of advocacy. And I can tell you, there is an understanding across the Senate, across Congress that a long-term permanent fix needs to be enacted.

In terms of what we're waiting for results, we're really waiting for a CBO score, which could give us a sense of the likelihood of approval. We're waiting for CMS to do the technical assistance on the bill. So there are several steps that we're still waiting for. So in the meantime, we continue to make sure that we submit the data according to the law, which we will do. And the impact of PAMA of the RESULTS Act does not go through this year and PAMA actually comes to fruition next year, the impact to Labcorp will be highly dependent upon the number of other laboratories, including hospital laboratories that report their data.

The more that report, the lower the impact will be for Labcorp because we are a very high quality but lower cost with broad reach laboratory. So there's a lot of work being done to encourage laboratories in hospitals and other settings to report their data, we just don't have any insight yet. As you mentioned, the reporting is just about to begin as to how many people may or may not report the data. But of course, Labcorp will.

Operator: And our next question comes from David Westenberg of Piper Sandler.

David Westenberg: So I wanted to talk on the consumer testing environment with Labcorp OnDemand. And of course, you're launching the MyLabcorp app in May with the AI assistant. So just given the fact that this has been growing double digits in Consumer Health, and it is a strategic priority, could we see some investments from you over the next couple of years and some DTC efforts? And how should we think about the magnitude of that growth and the expenses there? And how should we think about ROI?

Adam Schechter: No, absolutely. It's an important question, and we spend a lot of time looking at the consumer market. As you mentioned, Labcorp OnDemand continues to expand, continues to grow, and it's growing strong double digits. And we continue to bring new tests to marketplace through OnDemand. We now have over 200 biomarkers in categories like men's and women's health and cancer screening, sexual health, longevity, and those are all available as we speak today. We already do some advertising to consumers, particularly through social media and other areas for OnDemand.

And I would expect that business to continue to show good strong growth, and we will continue to invest in bringing new products to market and into the appropriate advertising to consumers where it makes sense. We also continue to look at the other parts of the consumer business. We've decided at this moment, there are some parts of it that although there is strong volume at the current pricing and not knowing the floor of the pricing that we're not necessarily going to compete at this time. We'll continue to evaluate that.

But we see so much growth opportunities in the specialty areas, in the areas where there's significant medical unmet need, where we can win scientifically with what we can bring to market with new tests and in those areas where they have great reimbursement but also have higher prices and margins that we continue to focus in those areas. We continue to focus on the business development pipeline that we have and the hospital deals that we're doing, and we have a very long, broad pipeline of those types of deals. So as I think about the future, I am optimistic about our growth prospects before us and the strategic priorities that we've put in place.

Operator: And our next question comes from Michael Ryskin of Bank of America.

Michael Ryskin: I want to ask on LaunchPad initiative and just sort of margins throughout the year. Can you just give us an update on progress there? And you saw 40 bps of margin expansion in the first quarter, continue to point to expansion throughout the year, I think, across both segments. We would just love to hear your comments on pacing through the year, ability to take cost versus just top line volume benefits.

Adam Schechter: Sure. I'll start with giving you a sense of LaunchPad, and then I'll ask Julia to talk a bit about the margins. If you look at LaunchPad, we're on track. We continue to make strong progress. And a lot of what we're doing right now is thinking how do we use technology, including artificial intelligence, robotics and computation to help us reduce costs but also to improve the customer experience, things like MyLabcorp that we're launching to help patients understand their lab results better, their health better and so forth. So as I start to think about AI, I think about it in multiple ways. One, what can we do to improve customer experience?

What can we do in order to try to drive revenue? The second thing is how do we drive operational efficiency from it? Or how do we change processes? And you've seen us talk about certain things that we're doing with digital pathology and microbiology and things that we're doing in cytology, all these things will help to reduce costs over time. We've talked about things that we're doing with billing using artificial intelligence in order to reduce bad debt. And I think all of those things will help us with things over time. That's a revenue generator.

So as I look at the future, a lot of the costs coming out will be driven by technology, and then I'll ask Julia to give you a little more information about the margins.

Julia Wang: Yes. Michael, we are really pleased with our margin progression. Over the past few quarters, we have been disciplined and consistent in driving margin expansion across the entire enterprise, including both segments. As you can see in the release this morning, in the first quarter, our Diagnostics segment margin was improved by 30 basis points versus prior year, primarily driven by organic growth despite the impact from adverse weather. As we look to the full year 2026, we continue to expect another year of margin improvement in Diagnostics, supported by strong revenue growth as well as operating efficiencies, including LaunchPad initiatives that Adam just shared.

Now as you move to the BLS segment, in the first quarter, the margin was improved by 60 basis points versus a year ago. And this improvement was primarily benefiting from the strong top line growth in Central Labs, which, as you may know, is the more profitable business within the segment. Now on a full year basis, we continue to expect the BLS margin to improve more than that for Diagnostics as we continue to benefit from organic growth in Central Labs and the strategic actions that we are taking in ED.

All in all, I would say that the margin expansion across the enterprise inclusive of the 2 operating segments is expected to contribute to the double-digit EPS growth guidance at the midpoint for full year 2026 that we just updated this morning.

Operator: And our next question comes from Luke Sergott of Barclays.

Anna Kruszenski: This is actually Anna Kruszenski on for Luke. I wanted to go back to margins actually. If you could talk about maybe what you have baked in, in terms of potential inflation on fuel costs and if you have anything baked in on additional weather headwinds for later in the year? And then lastly, on that weather point, curious if you could talk about how -- like what percentage of appointments that had to be canceled you were able to recapture like later in the quarter or in 2Q?

Adam Schechter: Okay. I'll start with the last one first, and then I'll ask Julia to talk a bit more about the margins. If you look at the weather impact, the way I think about that is approximately 20% to 25% of our business goes through our service centers. And we know who has appointments, we know who has requisitions, and we get the vast majority of those patients back over time because we know who they are. But the other 70% to 75% goes through physicians' offices. There, we don't necessarily know who has appointments. We don't necessarily know the doctor's availability to take on those additional patients.

So that's a bit harder to go after until those requisitions are available within the system.

Julia Wang: Yes. Let me start with the fuel cost. So obviously, we've been closely monitoring the situation, and we currently actually expect a minimal impact to our business. Of course, the oil and gas prices have been dynamic. And our diagnostic logistics network does include a fleet of vehicles and [indiscernible], but we have been shifting to hybrid vehicles over time, which helps us mitigate this risk to a certain degree. And if you just look at the fuel prices in early April, the estimated AOI impact is approximately $5 million to $10 million this year. We believe this impact is manageable, and we have reflected that in our updated guidance.

I think the other question you had is really related to weather assumption for the balance of the year. Now just as a practice, we generally do not bake in explicit assumption for weather for our forecast simply because it's something a little bit difficult to really project. But with that being said, as you heard us sharing earlier, if you look at our full year revenue guidance for our Diagnostics business segment, we are looking at revenue growth of anywhere between 5.1% to 5.9% with a midpoint of 5.5%. So I think when you think about certain factors that could potentially move us within that range, weather could be one of the factors.

With that being said, of course, we continue to have a very robust M&A pipeline. And to the extent that we continue to make progress and depending upon the timing, that could actually be another factor that moves us a little bit towards the high end of the range. So all in all, I would say that at this point in time, we are comfortable with the range that we are providing, and we are encouraged to head into the second quarter of this year.

Operator: And our next question comes from Erin Wright of Morgan Stanley.

Erin Wilson Wright: So how would you describe the deal pipeline right now? Like what are you seeing in terms of the pipeline, both in terms of acquisitions as well as partnerships, outreach deals otherwise? Like given just the landscape that we're in, the uncertainties and seeing -- are you seeing an acceleration or building pipeline of these types of deals with health systems or otherwise? And how does it maybe compare to this time last year?

Adam Schechter: Yes. Thanks for the question. Our pipeline remains very strong. And I wouldn't say it's accelerated versus this time last year. It was strong this time last year. I've spent quite a bit of time talking with different folks in health systems across the country. And I think you're right, they are struggling right now, and they are looking for ways to partner and for ways for us to work with them. And I don't think that is going to stop anytime soon.

In fact, if PAMA is implemented in January, although there will be a short-term impact during the year to us, I think over time, it actually will increase the pipeline of deals because these local regional laboratories are under a lot of stress already. The hospital system laboratories are under stress already, and I think that would just make it more difficult. So stay tuned. I expect we'll have some more deals that we'll be talking about in the future, and I look forward to talking about those.

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

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