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LH Laboratory Corp. Of America

Participants
Clarissa Willett VP, IR
David King Chairman, CEO & President
Glenn Eisenberg CFO & EVP
John Ratliff CEO, Covance Drug Development
Lisa Gill JPMorgan
Kevin Caliendo UBS
Jack Meehan Barclays
Ross Muken Evercore ISI
Dan Leonard Deutsche Bank
Erin Wright Credit Suisse
Ricky Goldwasser Morgan Stanley
Stephen Baxter Wolfe Research
Patrick Donnelly Goldman Sachs
Bill Quirk Piper Jaffray
Brian Tanquilut Jefferies
Donald Hooker KeyBanc
Kevin Ellich Craig-Hallum
Ralph Giacobbe Citi
Good day ladies and gentlemen - and welcome to the First Quarter 2019 LabCorp Holdings Earnings Conference Call. At this time - all participants are in a listen-only mode. Later - we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder - this call is being recorded.
I would now like to introduce your host for today's conference Clarissa Willett - Vice President of Investor Relations. Please go ahead.
Call transcript
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Clarissa Willett

Good morning and welcome to LabCorp's first quarter 2019 conference call.

As detailed in today's press release, there will be a replay of this conference call available via telephone and Internet. With me today are Dave King, Chairman and Chief Executive Officer; Glenn Eisenberg, Executive Vice President and Chief Financial Officer; and John Ratliff, CEO of Covance Drug Development. This morning, in the Investor Relations section of our website at www.labcorp.com. we posted both our press release and an investor relations presentation with additional information on our business and operations, which includes a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call. our slide we deck with our also connection Relations Investor on in earnings have call, furnished Historically Form X-K.

is presentations for financial Company. and the Investor it be business investors to Form and forward, our portion regularly we encourage that Going check and will X-K. posting We these the furnishing of on information not website Relations about monitor our them on expectation only our website

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

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

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

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

David King

and the begin highlights I'll good first Clarissa, by financial quarter. discussing you, Thank morning. of

first a start very We adjusted are off to of in quarter XXXX $X.X of strong with $X.XX. revenue EPS and billion

strategies; is with driven and the way diagnostics, Our world-class faster, and solid to growth delivered. result change the revenue to three delivering businesses results medicines by both of foundational were of strong technology underlying organic performance care bringing across and using patients execution new our

day the and and year. offset revenue of PAMA a one two our in based contracts. volume additional volume weather, increased in benefit fewer quarter basis of the ethnic largest of managed impact both loss exclusivity price with some by broad in during exclusivity than and and of Diagnostics Our partially organically the Horizon United loss business was reductions to due the negative grew despite points care and growth Organic from last by XX contracts and the revenue

I reminder, to management our count volume in a calculation, lab been X.X%. our to lab of lack we sales do outstanding Had proud not from our impact colleague included in management care reps of business phlebotomist, volume very the organic given approximately frequency. managed from volume to similarity to grow to grow careers, am that strong. of in our requisitions we testing checks effort the of hospital Diagnostics requisitions lab us our As core the continued business Covance growth every to would due organically of changes. terms volume to a agreements enabled have in

the X% reduced to Excluding negative pass-throughs, full-year guidance with our business impact the of revenue organically consistent of growth. X% grew

our expansion. with We finalized guidance, highly-strategic pleased of XXX deployed impressive capital with million several are and also share margin to basis transaction. Consistent of points acquisitions repurchase, a and bigger executed we $XXX the tuck-in

EPS $XX.XX pleased We expectations a first internal are performance, our exceeded range accordingly which are our to $XX.XX. increasing full-year our to quarter with guidance and

wide activities client pharma patient example call capture, diagonistics friendly. virtual This for drug. data electronic enterprise in project demonstrate services, service patient study is market cheaper design oncology study LabCorp our the trial patient review Covance faster, interest that and was gene long-term of reduce the scale, performance combined an that growing therapy top utilize of and center, access centers, centricity. innovative trials management breadth This more and another Covance patient a trial solutions XX capabilities sponsors' with we to burden. by and make on safety highlights. of I'll power I'll quarter's a the Now, data start follow-up pharma a awarded the of integration focused

all Genfit. companion companion quarter an dedicated selecting an sales force. last testing to biopsies innovative enterprise-wide In diagnostics the is trial clinical diagnostics partnership. seeking important this for advance their value marked agreement diagnostic commercialize move leader deliver major We versus leadership January, companion the year. Genfit our and of offering laboratory, that Horizon of network XX% to combined liver this trials and industry-leading diagnostic clinical Covance service. to through the quality, on we aspects clinical to therapeutic makes January NASH and research the in grew with Phase enterprise-wide utility to the In add focused announced LabCorp solutions capabilities Covance plans. have Revenue Genfit exclusives, bring commercialization diagnostics in for all invasive across than putting is blood-based the and uses Covance up with Diagnostics, position NASH short, been test. through available the them in supporting us in precision our trials Aetna opening United, involved area national important us innovation, We NASH as from in than test for Diagnostics market. in efficiency currently years, a enterprise from decided continue NASH recognized our options our XX of in and more validate first the more official diagnostics and liver and III medicine. In expertise an companion

losing plans. we to Although growth organic are performance our and pleased expected the with generate decline ability January, volume with two we saw exclusivity despite volume in our major

projected, offset were Aetna As the stable of January, partially United rest volumes by gains, in we declined quarter. but Horizon the the throughout and

pleased while LabCorp reflects promise delivered providers. laboratory working United innovations that and and network. be forward patients closely deliver with has and quality, specialty-branded We long delivering We United in to of on convenience services, providers. partnership laboratory deep selected to access industry-changing look to fully selection value of network outstanding laboratory all also preferred and a preferred that laboratories its were LabCorp's and to the with the UnitedHealthcare

benefits to providers LabCorp. choosing see our fundamentals financial increasingly strong of patients remained the and So Diagnostics business and

they We be of continue our patients meeting where strategy served. want to

XXX track this least of at markets. on new partnership sites have states to metropolitan end the major including by LabCorp-Walgreens and year, in several locations Our is

at target XXXX. XXX track of We achieve are by least also on our locations to

We continue on CRO. offerings next-generation Walgreens to and and engagement, a patient discuss the broader wellness health collaboration creation with of a

service During new quarter, the we and sample convenience in LabCorp-Walgreens access or at-home-kit and to LabCorp access consumer-initiated and offering collection states will testing will or the LabCorp. will LabCorp enhance to locations where phlebotomy-based add by centers will of testing Pixel an expand is and option Pixel enable to This number second by available them one consumers use giving options convenience the visit patient of by for available.

an on to and with create tools LabCorp. consumer convenience improved focused experience in investing continue also We technology

PreCheck point the LabCorp LabCorp positive well accurate received also mobile-optimized all standard Walgreens XX% new service Express overall checking and XX% convenience locations. with with Our responses in to been PSCs is Express has combined positive in the LabCorp surveys of patients, with when of in reservation. our by

the to and During our neurology. testing enhanced quarter, recognized further for our we in acquiring next-generation by customers sequencing value a MNG complex leader Diagnostics,

expanded important investment Diagnostics push also area. which increasingly in our an combined and collaboration of the us in major We OmniSeq, with oncology positions therapeutic assets Covance the into for growing a

quarter Finally, Phase our on initiatives. LaunchPad we in significant made the progress II

model. improving end pass-throughs acquisition. XXXX Diagnostics excluding continues rationale capabilities, organic into leadership, a single-digit our a deliver and $XX book-to-bill the last data the total Covance's end-to-end plus productivity on mid-to-high the track expansion XXX digitizing operating for focused operating points. on by infrastructure to initiatives are automation billion global and overall backlog, through Investments net to of of growth, over enterprise, revenue analytics, validate have million of the We performance of expertise and and savings basis months of the therapeutic $XXX of translated X.XX process XX margin

recruitment selection are but capabilities, nowhere near copied data much Our and critical equal. for a asset strategies site patient

and diagnostics gene are solutions, genomic as now companion industry seeing in tremendous the and immunology, growth We leader testing. therapy, and in such sell are other immunotoxicology

and opportunity enhance Covance's This acquisitions. the exciting During work the we acquired from adds today discovery which preclinical creates Bioresearch, development. more in cell acquisition area depth We of growing in through MI oncology and preclinical and therapy continued quarter, move clinical drug testing. for and brings strategic specialized gene capabilities an offerings to to rapidly to

a global Clinical swap regulatory multi-year renewable a with non-clinical we or services research provides strong agreement. our capabilities, supply commitment while with maintaining business and access to to approach transaction Covance unique agreed through Regulatory a RCRI, research with to to clients bigger CRO innovative acquire innovative collaborative focused also with expertise. research an This transaction models announced The demonstrates April, We end-to-end solutions. and providing stage Envigo. In device consulting Research enhanced Institute early

the II program, and building development of our of clinical of the study integration. All This were We on the approach, to take provide comprehensive capabilities we the were in new in also molecule. adopted market Phase and investing customers oversee which biotech same Chiltern development designed. design process III the on trial the Phase did to a to for are solutions, clinical acquisitions particular capabilities growing design strategic the grow molecule part of cardiovascular an awarded a win best advantage recently program is of work to demonstrate demand we example best the in awarded once enhance around as study opportunities. conduct selecting its development Covance's its these a and the how We supporting Covance consulting

due earned device its device win our medical medical business. group Our product largely recently and diagnostics device to largest end-to-end ever study

us device Chiltern the Preclinical a Innovations, we have device expertise. acquired capabilities, Covance RCRI is customers for It our includes CRO, been therapeutic who asking and now Medevice CRO trial device combination legacy last our capability. Our preclinical year, long device for powerful

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

of synergies on also end in million are track the Chiltern realize the to by from $XX integration XXXX. of cost We

and increasingly service delivering be delivery model competitive more enables studies. global and winning to us Our

and our and give robotic these us automation the sciences and tools are industry, for Our capabilities. quality improved enhanced enhancing times need the life cost headwinds. succeed acquisitions our the of intelligence speed laboratory In the global but global reducing The despite for operations, brought challenging Chiltern clients. added and footprint to we artificial Covance efficiency and capabilities GSTM our closing, Sciformix to process

came these differentiated before possess In leaders to a our unique company, amazing who celebrate we and capabilities tribute XXth a demonstrate, remarks replicate. as visionary anniversary competitors and the our we us. will October, As that milestone great an cannot

We daily value five success their well. our positioned these our and as the inspired years XX,XXX are the service, decades. to well and to the foundational leadership and relentless to colleagues we XX exceptional ideals With been next around dedication of innovation are those in mindful globe, have succeed commitment that over our quality, dedicated

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

Glenn Eisenberg

billion, our on first focus XXXX with Company's currency commentary decrease you, guidance. and X% of a of while provide results, Thank for year. due organic compared recently last as on quarter X.X% conclude Envigo. transaction update from on was today unfavorable well announced to the our X.X%. growth, added quarter $X.X Dave. at the of Revenue My as the translation was X.X%. revenue with foreign of I'll comments will Acquisitions an X.X% additional the to impact grew divestitures decline This

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

million the The to tax income During compared to and special compared the The million, income, special was acquisition $XX XX.X% and well was personnel of and and rate, items, operating as charges restructuring demand XX.X% operating quarter for XX.X% due by related offset $XXX The primarily savings. pricing adjusted excluding amortization and from was charges LaunchPad higher $XXX costs, charges revenue XX% special adjusted PAMA adjusted amortization, items compensation. to million of due last of million to year. was rate had XX.X% in of tax we lower LaunchPad a $XX year. and decline The XX.X% which year. to result or the last stock-based and integration. tax last impact quarter, compared primarily excludes as margin to primarily was rate partially tax higher as or Adjusted restructuring initiatives

flow the in items, Company's special compared which for the other facility flow quarter expansion, $XXX expenditures quarter optimize capital X.X% earnings the $XX down cash XX%. offset due to investments be to full to $X.XX quarter, increase increased operating in in and automation decrease million and cash to last diluted $XX The the expect by Operating partially ago. was rate to $X.XX adjusted year Adjusted a and year. million working due million Net support between lower technology earnings, X% XX% $XXX or EPS, share. of primarily per year. million tax Capital X.X% demand was exclude revenue favorable continue compared capital. charges in $XXX expenditures The was or last million We year for amortization, compared in to primarily restructuring or margins. were to and to the cash were totaled

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

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

As gross March X billion of end debt end EBITDA. was had times and authorization million end, under billion balance share of quarter was was program. to at months $X from our XXst, leverage remaining XX $XXX million at down last we quarter $X.XX At Total the $XXX our repurchase of XXXX. debt cash our

$X.X was year. XX organic divestitures decline of segment review billion, of X.X% with added Acquisitions our points. beginning basis grew foreign X.X%. X.X% to currency due for decrease translation last to of and while a I'll LabCorp Now was Diagnostics. approximately X.X% quarter The Revenue compared revenue the performance

from negatively by the impacted and organic volume points, changes, by care basis was XX of Excluding XXX constrained approximately negative which last contract managed increased over Organic impact increased points. by revenue year X.X% PAMA volume basis X.X%.

of per one Additionally, the X.X%. revenue by requisition excluding due from impacted offset unfavorable Revenue of by negatively weather day partially decreased to points requisition divestitures was X%, less impact volume Revenue includes by of impact basis per PAMA. XXX favorable the X.X%.

XX% expenses, was margin revenue Excluding compared Diagnostics The divestitures PAMA, decline income million income or PAMA $XXX favorable per revenue quarter mix. and offset the from LaunchPad to operating X.X% by year. due security by requisition operating partially negative million million, XX.X% last of $XXX impact $XX approximately increased primarily or to LabCorp for adjusted divestitures, personnel and to adjusted was in and the savings. of costs cyber due

partially having impact one-time payroll and by less quarter. negative in of of revenue benefit this day quarter the legal last was along offset the the not settlement favorable addition, realized weather less the In day one with year, one

are of year-over-year we margins three-year $XXX they year. throughout year, net While XXXX. from initiative less PAMA, are expected on increasing deliver primarily to throughout savings million expected We to to end the LaunchPad savings track LaunchPad the of the as remain quarter decline decline benefit by due the to each from

of contributed points. unfavorable was to the the On currency I'll added Covance performance billion, to X.X% a review X.X% year basis Now, XXX for and compared quarter of $X.X drug a of last Revenue translation development. due increased basis, decrease constant of organic by currency the X.X%. acquisitions growth impact revenue X.X%, as

excluding in and Pass-throughs, fourth we factors in growth. As geographic including translation. quarter, offset our $XX on to were due adjusted currency savings, negative personnel mix. income rate XXX point negatively down improvement volume X% study segment client last which foreign impacted XX.X% was $XXX of preferences, X%. below and income with full-year And in business organic operating for compared by in lifecycle, The million variety or influence to revenue the margins be revenue A was pass-throughs, was organic operating call, growth $XXX earnings range timing demand, and year line acquisitions of Adjusted the year. first primarily noted to the guidance pass-throughs organic mix we currency guidance to partially Company's costs. of million expected primarily Covance's range and basis growth the translation, our full the increase to impact or due revenue quarter million quarter XX% higher in LaunchPad of quarter

$XXX to end slightly million structure origin revenue, net initiative LaunchPad to the of impacted quarter three-year benefited and relative on the currency We earnings track from our XXXX. revenue. While our of deliver remain by Covance's of savings during the translation negatively cost margin given

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

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

XXXX allocation assumes cash repurchases capital year from the discuss which includes the for March of our free and foreign impact with remainder and rates I'll guidance, being XX, used acquisitions. XXXX, flow exchange of share the Now, for as

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

LabCorp expect the from includes guidance. This to We Diagnostics of translation to X% unchanged our of approximately from impact $X negative XXXX of from divestitures XXXX revenue be negative X% down XX billion, prior as to impact and currency compared basis the guidance points. X% revenue

X% revenue drug guidance. prior of growth billion, $X.X to to guidance compared expected Organic impact prior XXXX be basis XX excluding negative XXXX. our basis over guidance. over to Covance to expect translation This also development unfavorable is from includes growth, points of of is X% up the points, XX X% X% of unchanged approximately We which revenue our currency revenue pass-throughs,

compared EPS $XX.XX, guidance of $XX.XX. to X% increase an to XXXX. $XX to increase to of X% in an $XX.XX guidance prior adjusted our is This of $XX.XX is Our

Our guidance $XXX to is last billion free flow million year, our prior compared cash from $XXX unchanged $X.XX to guidance. million

the our provide commentary some transaction recently I'll Now, announced with Envigo. on additional

As $XXX them is attractive. our we meets now flow during The expect cost as transaction's expects In to the will purchase to $XX by paying is to Operator? cash Envigo's financed the questions. which transaction, note. year expected years. The we financial price non-clinical of in cash comprised first of and and transaction our earnings over capital service hand exceed in concludes and year of contract one criteria, and while a Dave $XXX three-year research remarks of on million the of The is million deliver midyear, research in strategically million LabCorp noted, will both and transaction, close through net two transaction $XXX will three. selling Envigo to formal debt. receiving form this Company cash models purchase synergies bank and it million stated net our service be accretive we financially Envigo business, in be cost This The to take business. and

Operator

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

is line open. Your now

Lisa Gill

in Is Thank year plan Is we included anything -- expect close transaction? guidance Good with anything there updated can included you. there Envigo. for to the -- morning. just if you I it start mid the

Glenn Eisenberg

Yes, Lisa.

obviously Covance's guidance EPS obviously of have We in guidance range but revenue X% will. year's also May, total we you the is -- if range, the includes earnings there. what of accretion to roughly enterprise, of the to in the and half worth growth benefits similarly Envigo's revenues X% in The be expect of

flow know, you As when of for we expected that free expected earlier talked guidance use cash we that under at established as billion share and debt repurchases first the to our of guidance scenario. looking down about paid be the be midpoint with to to acquisitions, we've $X a combination used our no

the quarter, remainder tuck-ins realized which capital as that have repurchases advance other So million of so as well still included the M&A, the in been of is case plus through allocation our in to the providing call additional of allocation, initially, and of be working year $XXX of full an when it, the on the capital in Envigo, for benefit it additional, first have that we well did reflected was gave we factored it we the as still year. obviously, we our share guidance in

Lisa Gill

about smaller being do here XXXX? starting by to other out acquisitions play where a the PAMA competitor just how driver those then PAMA you big about think we a felt Are and your see call a didn't in and really consolidation And closest week. follow-up. on And hear think we're hospital last talk earnings you allocating as seeing lot that drive potential now that about that you about capital, that to being talked is Great. outreach I Dave, labs? as

David King

smaller to Lisa, every the and very is impact that look significant PAMA on than and Obviously, providers acquisitions it's on lab pipeline, fit of Yes. evaluate But strategic -- significant financial stated potential us. at. robust and of acquisition a more on our We continue we criteria. is based there

mentioned And so, mentioned quarter, we investment we in we the MNG, Envigo. mentioned as the you mentioned we saw RCRI, in OmniSeq,

lab how financial is overall on it's -- So we where to other best consolidation, would best us where the about think that smaller you or now patients. is, know PAMA, which home not the PAMA filed is nursing good not positive cuts, opportunity I thing I only bankruptcy. services to make beneficiaries. Medicare on labs impact be for that a PAMA our That's points allocate fit and The criteria. we for terms comment a and provider strategic is is the important unserved the We even of going for lab and be on to and the feel an going capital of meet industry underline to population largest for stated see regardless continued access in

as PAMA potential are about we to talk negatives price. have significant the even positives, reductions in our So that to just remember also beyond we there

Lisa Gill

Thank I you. that. appreciate

Operator

Thank you.

Our of Kevin from the comes next UBS. line with Caliendo question

now line Your open. is

Kevin Caliendo

much existing you also bit Great, growth can customers. little details especially growth there thank some Covance's. for margin On might Envigo, opportunities and to around also also And their that maybe you just and overlap the about of exist expected with if profile historical any the profile get or Envigo's cross-sell of kind a and call. talk sort thanks very compared

John Ratliff

overlap as percentage even Sure, on John. my early area is more the of I'll And though minimal They're in concentrated of has that. that great They well. this side. take is customer and the terms much development biotech

a in capacity sense of as they lot We tight If level look that have at not positive the you capacity. a we and look overlap. the customer are at side, a actually of that on

than the development, we deal, did of higher upside. know is because the but than way there's any of that we more there the margins the cross-sell, at and the unquote. the cross-selling did you Covance same look opportunities, take revenue we at mentioned I early not corporate of So margin capacity overheads, Their quote is higher on the also time upticks.

of a wise, gave revenues profitability will early profitable you in be for development, the so terms the full the area And year. it for and Glenn

So obviously for our you a the for half-year. feel gives guidance

Kevin Caliendo

growth between side. into there some just If just bit looks would about terms backing the Got correctly, not fair X.X%. from that other being smaller each was it, And share managed of existing question, little think that United managed contracts, on taken numbers imply from one basis you If care got about it surprised and XX I I about that Aetna? other, that smaller my we thinking Quest Great. if provided a had is like it headwinds at Diagnostics this it. I you the was about that of what organic care look contracts into network if but from is, number, the only main -- point we than we it anticipated. guess what around it Is the what back talked assessment? sort and it's points. about that sort we how Labs. in I that's talked from, and guess we of here Is should

David King

know business. Yes. the very We agree talked we front with value that was in brings retain number of LabCorp customers Glenn impact then and the what were as my in I of outstanding to demonstrate I with prepared you in the think, pleased and the getting about. to gave what you, points. about basis of that continuing team, net XX absolutely remarks, our our retention a I did United mentioned I job don't an Quest talked and business

that in from business. again to job bottom with the the outstanding We strong was the And quarter. in throughout business division of actually to Northeast retention the increase and retaining are and very team continued pleased top the Horizon the in an everybody growth particularly has our Aetna division

for stable very So oncology. coming a where with it's from. with and health, disease, pleased I would organic are quarter overall with infectious say, like exited the me the are about fact particularly in growth volumes that the where situation we with hypothesize areas But we genetics, the and we hard women's to are broad-based

So pleased in demand, just from our quarter we're perspective, a very which Diagnostics, strong of terms in about.

Kevin Caliendo

Great. much. Thanks so

Operator

Thank you.

of with from question line the next Jack Meehan Our comes Barclays.

Your line is open. now

Jack Meehan

are what think Dave, mentioned incentives promise good of preferred Thanks, lab think how lab? physicians morning. happens versus to some preferred patients choose for the the Bit do and July Xst going on and of to curious, be January you the network. you you strong the Xst do economic

David King

preferred that year the volumes initiating minimal there'll or so impact year the likelihood the into is haven't that in anticipate significant is the Well, be lab in and network built anything think significant obviously we of a I would and impact middle any guidance there.

lab I we think the depend benefits, long-term, it's Xst, lab for into selling design in the with in but for benefit January summer the it's the network the employers together, out-of-network see benefit pushing managed if what as preferred tied go of are and lab their are network and the a well opportunity design, preferred this Jack, tied benefits on the care are lot network, cycle, what employees preferred us. significant through we fall is implementation as and of going to on how the

Jack Meehan

little on you what Great. than was little anything we nitpick a looking maybe front? Covance health And a anything were cancellation got a The bit. bit side, funding out talk the then little just of environment, notable the bookings the pushed there lighter and about on for. that were Can the

John Ratliff

This is Jack. John,

cancellations, if measurable And no of the we last down look, full, of difference environment do so know health ticked a environment the at strong, looking XX we year in in strong funding X.XX, terms and XX% the strong, the you last a look biotech lose bit I health still the the things still X.XX, at to I comparative when you're months. said have of

out of terms and the clinical. kind in of early labs development, to win certain is environment of terms into booking a and the bookings look areas, that's did more across the our In all normal very still second quarter We our but of phenomenon. healthy rotate healthy of and

the So still about positive environment.

Jack Meehan

Thanks, Great. John.

Operator

you. Thank

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

Your now is line open.

Ross Muken

Good morning, guys.

How in building So, Covance had just I hard quarter, business, of out as are the of like but transactions and capture little about good. to layering good in quarter, progress you leverage feels LaunchPad able pretty a margin kind great enhancement and terms pass-through, LaunchPad guess, is into in sort this least kind seems both from then to sort Where a very the lower in still you type plan? being phase the led to at synergy just outside it you really back where historically ramping obviously, progression, some this fits margin sort of Envigo in of about new these the we LaunchPad of momentum. are think and the tease as on you how getting underlying of benefit think infrastructure XQ mix that the to early obviously, that about of of facility? that of probably kind the came have thinking its

David King

Yes.

you'd out if we in into the our you to break basis think up but well invite I million an the terms don't XXX LaunchPad, know obviously of on I mentioned even still do terms more had have our $XXX of in the that objective years. margins by way of We year, three on that. I you We're math, $XX million you in off. revenue, are points. pass-throughs, the be lower over

expect you of Envigo will long be $XX we're profitability term, at margins. up, level peer finally, then full be the up looking and in mind had terms is and be we that in revenue, year; you'd If but us our XXX wait margins to points, up for to are basis margins million more up

Ross Muken

I market you of obviously bit but comment the there Helpful. but just year seen least that at and a instability guess, lab expectation obviously any just forecasted into has where we've for any a in updated of there, consequence. sort been sort genomics the decline of anything there of or thoughts probably pretty And volatile terms had then on side, full that your is? DTC for how fits better, wasn't on really of

David King

in the it's the Dave. was genomics Ross, from benefit business. There Yes, quarter a slight direct-to-consumer

organic will growth flat forecast throughout significant we a continue be year, the will to anticipate slightly so to We year. down for the that to there it don't benefit be and full

Ross Muken

helpful. Great, Dave. that's Thanks,

Operator

Thank you.

of question next with Bank. Our Deutsche from comes Dan the Leonard line

is now open. line Your

Dan Leonard

you. Thank

Just a clarifications. couple of

total Covance; guide have thought that Glenn, is little would on which I deals XXX X$ -- X%, and itself, you revenue off by more did to the you X% suggest than guide Envigo a is other bps. be revenue X% well. to M&A is bit that organic as mentioned would First some the about

So can help me? bridge you for that

Glenn Eisenberg

right. you're Dan, Sure.

the half revenues took a or million growth. of around pro guess Envigo which I XXXX would X.X% $XX forma, of just around the be expected Covance rounded, year's worth You

so the currency then in that first quarter, growth business headwind, occurred strong you that we the will, the and headwinds in about. as be the of including to of you're So we're our we're having issue have business we underlying the from acquisitions have organic you the but then in going we're and to M&A the Covance done benefiting range, providing pass-through still if a well benefit the Envigo, as added that growth that is some organic talked going by in underlying

Dan Leonard

$X.XX out in I'm in Okay, thank by that? the of guide or Did back trying $X.XX. to bridge follow-up. repurchase periods my terms you to after you. then pacing pull anything And future of share of you beat like EPS anything increase

Glenn Eisenberg

No.

I performed think remarks, we expected We commented both on that, had. early as his side Dave than the guidance Dan, original did the businesses. well frankly in that we managed better care it's, we across in

remainder in year unchanged. the the of of and that the guidance reflection that our range the earnings is quarter of really remains in first reflection So the for our we did a improvement well outlook

Dan Leonard

Okay, thank you.

Operator

Thank you.

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

now is open. line Your

Erin Wright

Great.

what side, an bill large demand trends and nature and business quarter? biopharma across small the wins of book the On flow trend you would XXX Covance basis the new broader characterize on and and to just the both ASC how RFP was Thanks. quarterly in

John Ratliff

RFP strength months, nice the on of RFP kind of last the The good but all terms terms you but upticks segments. side. of and record in the on see in clinical, was early look terms XX quarter, lab publishing the not that flow flow X.XX segments different a business We're you was that's nice the of X.XX development, levels and in line in quarterly, if in across in that strong can this on

Erin Wright

it you the be it was impact more as XX United guidance. thereon progression side, that in should the your on of if contemplated And thinking underlying all lab relates expectations, initial internal the assuming the Thanks? point be is and than about great. be lab then here, and previous network a as United to how trends we here particularly preferred in -- were Okay, pricing your organic quarterly speaking in seems also, rate well? measured volume basis should this more that's correct, roll-off the it -- then that to to Is the we

David King

adjustment There of Dave. no the networks. lab it's in preferred Erin, United terms was price

remain we is United negotiated There that price renewal no price adjustment. and the same. of part the So as have the contract has further at

progression the In in don't there of progression. change organic volume, to any significant of be I expect terms that

as the of quarter actually I growth we started year. what stable. United to of you've see and some representative the in Horizon the said, Aetna the quarter think and out quarter that again think I we in seen you'll pretty see first terms We so of end of the during came is probably and what at

Erin Wright

Great. Okay. Thank you.

Operator

you. Thank

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

is line open. now Your

Ricky Goldwasser

morning. good Hi, Yes.

in going movement So the quarter, the managed the to in the in expect side happen I in you care the past of said lab Dave, share just the that noted earlier back you trends most year. to

you muted you're that share more Your the that than or are the comments even call on the suggested seeing retention shifts expected.

today hand, said to that the week they your the share in move up the On anticipate pick second call on last other competitors half. to

aren't of be the later changes marketplace or would seen are kind that what kind in you the it that year? it, suggest most seeing that of confidence? in we've to So accelerating versus going normalized the gives the like What of you

David King

Ricky. morning, good Yes,

-- competitors sessions where As, numbers what me progression we our country across what I single based on Horizon, the see tell year we I United, a what every said. don't on said was basis we the very know then that and of January What saw opening and we out contracts in time the holidays. early that February in exactly account drop-off January January, we the rate. and the normalized came is we March, monitor seasonality me all I numbers the to tell to run a and by Aetna in know the is stable major day came were the makes we're just for and we were last at projected

have we throughout. little nice In quarter would probably and started increasing a volume more we than progressed trend a terms slowly over the that liked, but saw Aetna, I

confidence at what trends where just balance the and are and year. looking that's I'm where will So me for the gives and think we for numbers be I of

Ricky Goldwasser

then And follow-up question Okay. on just Walgreens. with the relationship

the at you I think the end can be you year. sites by XXX said of

drawing LaunchPad that's As this these and are conjunction that case, it is should to later savings if for think XXXX? also LabCorp centers, of close in about think the going we like you of year, kind opportunity as is saving open you should or sites, standalone about through the cost part we separate but the in

David King

Yes.

patient say areas demand, But you at on are we the some than Again, isolated based an up be out. standalone and our proposition, service geographic on I look do this Walgreens don't centers of so service based times, we as on may and swapping patient XXX showing move center patient know we based points saying them there at centers closing PSCs based many about volume staffing would some for access rather think area strategy that locations. people into as So do opening in about closed of looking part network service part we on is Walgreens. more that think Walgreens general how wait when a our better as

them all is to if cost swap. there, no savings there's cost XXX of standalones terms close it basically the if even the cost even In Walgreens, savings, just we -- close the and move

that side. to equation savings cost shouldn't So consider be part of the you either on

Ricky Goldwasser

you. Thank Understood.

Operator

Thank you.

next question from Research. the of comes Our Stephen Wolfe Baxter line with

open. is line now Your

Stephen Baxter

estimated compares Hi. Thanks the We you detail Can understand little to The get transaction. we helpful. estimated it And on type more what and is and $X.XX are for assumptions quantify Chiltern? the paid at similar in cash pretty question. expectations the the least us and guidance. I comparable financing multiple of you split accretion for be commentary. was multiple then would would help of debt was what how embedded maybe added to hoping Envigo the the to probably have Chiltern between the

in square Covance the Thanks. So side. moving the trying to parts

Glenn Eisenberg

Hi, Stephen, this is Glenn.

that about a than segment see we total we you standpoint, net space. well. things, of provided in cut. or higher agree combined the our provided also very Let revenues would our in have that business stronger strong This comparable first than we from has multiple to market the multiple meets or very margins, The our the purchase and on financial Couple even up development me take the drug as but basis deals We what price accretion Obviously, early transaction, would much in one, the earnings deal came talked is line. the noted obviously that. John development we criteria.

guidance the billion midpoint, that at our So cash reflected we be be as year. it the to deploy all billion in free that we $X flow said we will our accretive. is expect to It would this that all earnings accretive is $X the

financing it, So that already. bulk had that your was we cash guidance the was I will question, think obviously generate of the and part hand obviously last we cash And already as flow at of year. into use stage, we of in on this our was the bank the the later debt free

that pay is of will have will be cash. that would that $XXX obviously So use million, we debt the enable transaction transaction. the would the down us finance to total, In the cash any to net

million first flow did of that flow some cash of for the arguably additional in in free rest cash addition it, the leaves the million year $XXX we to, deployment. capital free call quarter, for still the $XXX-ish continued So

Stephen Baxter

you. thank Great,

Operator

you. Thank

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

is line Your now open.

Patrick Donnelly

how on just hospital Thanks. trends. maybe it seemed last bit there nature, trended an referral just Obviously, give visibility front going on that for but the little year, and late us you, a forward? Great. XQ Dave, noise in you can transitory one update of

David King

agree Patrick, you. I with Yes.

continued December kind think a stability year. quarter. we I in it saw of October, We and throughout actually a pickup saw the that in was November transitory last event

Patrick Donnelly

just of the seems update pricing and just recently commercial the on at It update of contract looking you've And conversations factors? margins, of had side outside but just external then can the outside stable those on by an commercial Okay, on the great. commercial maybe environment PAMA some us the you shifts.

David King

data for commercial reductions Obviously, I And pricing reduced double-edged deals into on the the big going because trying And more but this are stable. as we I essentially although environment beneficiaries. are pricing in then to for obviously price we're yes, for into the data next through and delay, next roll of the as PAMA, reduced which say, remind collection. Sure. going the long would you to partners process completed. run, there is roll lead through our patients contracts for to collection access price generally across the them, in is demand are Again, a before, commercial cuts sword that's Medicare commercial the board mentioned

and price we're the commercial where comfortable is the I the we're pricing we I So -- out think discussions. stable are with think coming -- contract environment very in

Patrick Donnelly

Appreciate it. Great.

Operator

Thank you.

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

now is open. line Your

Bill Quirk

Great, everyone. morning, Good thanks.

John, Dave, or on comments with had potential mind you CRO next-gen comments. would elaborating you mentioned you some your the that off, about First Walgreens I David guess

some details Just that. like timing, additional things

David King

and data, spend genesis, combine but Sure, the Bill. on our companies of mobile a data, overseas discussing a global speed, This locations, that ability is data, it's facilitate two costs. performance, obviously terms we're improving prescription significant reduce in don't to want to is the with of about because the it is idea topic trial that to time talked the site laboratory I lot Walgreens. which all things quality their particularly we've of network in

scale, that on conceptionally, and something there size of early is global given our the in So, terms substantial opportunity think combined it's we that stages discussions. but is this

Bill Quirk

Understood. follow-up. just then a And as

are within capabilities this medical CRO Covance, device Your comments at Thanks. you seeing at of at of recent what some net the to capturing about look the share that point additional build-out the space? segment

David King

good We on in shape that. think based we're

and stage, we've of you has regulatory consulting at The want that Chiltern really that hand CRO. what the as well together then later an device now to is capability, look the side our industry. has the cardiovascular, example; has an the We capability preclinical. to of therapeutic strengthened respect core now you is PMI putting expertise; to with If we capabilities Covance, added Covance, together end-to-end in and all unmatched that end-to-end legacy as the put device core that RCRI the that capability call strong finally, had it,

Bill Quirk

Got it. Thank you.

Operator

Thank you.

question Our with Jefferies. next line of Brian comes from the Tanquilut

is open. line now Your

Brian Tanquilut

questions my answered All Thank were you. .

David King

you. Thank

Operator

line of the from Matt comes question next with Our Larew Blair. William

Your line is now open.

Unidentified Conference Call Participant

for are mind guys. for I is to guys you wanted the What Thanks. Matt in-home Hi, in key success good there? my measuring this morning This ask Thanks Larew. for Pixel. questions. taking that on how your you strategy [indiscernible] guys have you year in targets about are and

David King

is Morning, -- Dan, this . Matt Dave

to over and and to in have potential menu screening a home. tool, reach expand with patients the time, wellness goal the collaborators a test the and is is to our Pixel So

population plan plans. patient as care have that aware health the of of and the set run, to some be their acutely important the needs conditions going I an going example, in that partners patients. are partners own we managed -- or the tool increase some when to for long are sort risk, are departments an think you risk taking about, our be think in houses their the population for our home-bound patient And result, that hospital especially of a of it's at

the but So the strategy, to reach be want need where about home, with part again, opening meeting Pixel long refer to which and they very how a important served. they patients we're in and comments the basis where think the we we we of with game playing our

Unidentified Conference Call Participant

you. thank Great,

Operator

Thank you.

comes with question the next from Our KeyBanc. of Hooker line Donald

now is line open. Your

Donald Hooker

most my been Hi. may morning. Good answered, have I Great. but be... guess just of questions

David King

Hi, Donald ...

Donald Hooker

Hello?

David King

to static is try on your disconnecting you there dial in, dial in. think to and of may I question, just back have we'll back a you lot want but take line, the

Donald Hooker

Can will you right. me All now? try I again. hear

David King

No.

Donald Hooker

drop off. right. I will All sorry. am I

Operator

Kevin with of Our next Ellich from Craig-Hallum. the question comes line

is line Your open. now

Kevin Ellich

Kevin. you Can it's Dave. hear Hi, me,

David King

Yes. Good Kevin. morning,

Kevin Ellich

here... the is Thanks. long I know call

David King

comment, to want the hour. I Yes. of top we are at the

let dials your it have if four the so back, he short. people we in plus has Don answer, fairness, keep -- and try We queue question been if in have three back please

Kevin Ellich

So that, I on for but from contracts you on hopped PAMA floating-rate PAMA? could any that and late, or again about sorry Medicaid indirect impact seeing talk

David King

we when Advantage. guidance, is includes is quarter and last estimate said it in as and gave managed our fee-for-service on whatever for impact from all We impact the as PAMA Medicaid the well there Yes. Medicare plans the of

and of we that have in call in impact those and revenue all-in on the both -- out the is dollar amount. terms the identified the impact So impact

Kevin Ellich

thanks. Okay,

Operator

you. Thank

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

Your line open. now is

Ralph Giacobbe

Thanks, morning. good

or pay I that of but your there's kind there would of just been comfort of think debate sort for thoughts sales to being reps some hold on will take or questions repercussions going on about that, level love I of some sort around sort not there's ability whether to actually there. they commission that hear know forward. and Thanks.

David King

Yes.

was tactics year, that SUPPORT So understand there were to continue part unintentional adopted was related the to and testing made management. were we changes that be I some were some to aimed what by abusive in misguided the floor perceived was at believe Act and that on Covance's toxicology pain language as last that

congressional that is and leadership address was to legislator's to of be committees acceptable by to at the sure make DOJ with legislative amendment the that being have Justice. Department fix in would legislative to working the the over-inclusiveness evaluated of submitted would as Department as that been been the of There well We part. the Justice language the has language of jurisdiction

to resolve, estimate don't we be going good that have a this to the on get optimistic Ralph, continue we we're So and timing.

Ralph Giacobbe

Okay. Thank you.

Operator

you. Thank

Our the De of of comes America. Bank next Derik from with line question Bruin

open. line is now Your

Unidentified Conference Call Participant

today. is [indiscernible] Derrick for this Hi,

Just a you couple of Thank quick taking ones. question. the for

to get on on about? from growth last year? the pass-through clarity revenue if year's looks pass-through we Just revenue the some if that last including the benefited CRO CRO Is from CRO So included side want want pass-through. talked growth the just organic like -- growth I confirm what that's to the guide

-- as a see to any follow-up, And you is of just trying give to if apples-to-apples basically Envigo? Thank can the in wanted if color from Covance. EBITDA on just terms -- growth I provide then So incremental the EBITDA you. see

Glenn Eisenberg

is so thing to retrospective that to in greater regard year's we the we this kind share put the in and Envigo, This Glenn. will are of of full expect than first were numbers you new standards only the we of periods included. method at impact of would take for margins XXX, again, EBITDA With be comparative claim pass-throughs the close with when time the margins I'll they ASC segment. so EBITDA the included mid-year is last operating also it The we that, the adopted that cut. the we prior in have accounting, income but the would purposes, adjusted

benefit segment obviously So you'll that are the pretty to to the to John margins give see attractive and closure, earlier you as some alluded perspective upon in start of margins. margin reflected the

Unidentified Conference Call Participant

just then And Sorry. follow-up one

David King

no, no. no, no, No,

I'm but sorry, one. time. asked past the You we're

Unidentified Conference Call Participant

All right. Great, you. thank

David King

you. Thank

Operator

you. Thank

I would queue the turn time. to this in Dave to for King at questions remarks. like further no the have now any further back We call

David King

challenging quarter, the of your us proud to in you our proud this both am much. XX,XXX I Thank I businesses this pleased on environment. around We very want call of of joining for our people a how and the world. appreciate the and effort extremely morning. I'm of the performance reemphasize

a So day. have thank great you very much and

Operator

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

You have all a disconnect. great Everyone may day.