01—Abstract
Summary
Summary of the 10-Q filed April 30, 2024. Cited figures are marked; the original filing is the authoritative source.
Laboratory Corporation of America Holdings (Labcorp) reported first-quarter 2024 revenues of $3,176.6 milliona, up 4.6% from $3,037.8 million a year earlier, with organic revenue growth of 2.3%, acquisitions contributing 1.8%, and favorable foreign currency translation adding 0.5%.
Operating income was $321.3 millionb, down from $329.8 million, as higher selling, general and administrative expenses ($508.4 million, up from $457.2 million) offset revenue gains. Net earnings attributable to the company were $228.0 million, or $2.69 per diluted share, compared with $212.9 million, or $2.39 per diluted share, in the prior-year quarter. Diagnostics (Dx) operating margin fell to 16.9% from 18.5%, reflecting lower COVID-19 testing, adverse weather and lab management agreement mix, while Biopharma Laboratory Services (BLS) operating margin improved to 14.1% from 11.1%.
Cash position weakened sharply: operating cash flow from continuing operations was negative $29.8 millionc, capital expenditures were $133.8 million, and acquisitions cost $259.2 million, leaving cash and cash equivalents at $99.3 million at March 31, 2024. Total debt classified as short-term borrowings and current portion of long-term debt rose to $2,041.5 million, and the company stated it expects to refinance $2,000.0 million of debt coming due in the next 12 months. The company also disclosed a pending purchase of select Invitae assets for $239.0 million, a planned holding company reorganization under the name Labcorp Holdings Inc. effective May 17, 2024 (trading under the existing symbol "LH"), and continued litigation exposure, including a Ravgen patent verdict and several privacy and labor class actions.
02—Key points
Key Highlights
- Revenues rose 4.6% to $3,176.6 million; organic growth was 2.3%, with acquisitions adding 1.8% and favorable currency adding 0.5%.
- Diluted EPS was $2.69 versus $2.39 a year earlier; net earnings attributable to the company were $228.0 million versus $212.9 million.
- Operating income declined 2.6% to $321.3 million as SG&A expenses rose to 16.0% of revenues from 15.1%.
- Dx segment operating income fell to $417.9 million, with operating margin down to 16.9% from 18.5%, due to lower COVID-19 testing and adverse weather; BLS operating income rose to $99.9 million with margin of 14.1%.
- Operating cash flow from continuing operations was negative $29.8 million, versus $185.7 million a year earlier, while capital expenditures reached $133.8 million and acquisitions totaled $259.2 million.
- Short-term borrowings and current debt rose to $2,041.5 million; management expects to refinance $2,000.0 million of debt due within 12 months.
- A holding company reorganization creating Labcorp Holdings Inc. is planned for May 17, 2024, with common stock continuing to trade under "LH" on a one-for-one basis.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2024, Labcorp Holdings kept $0.07.
- Revenue$3.18B100.0%
- Cost of revenue−$2.28B71.8%
- Gross profit$897.3M28.2%
- Operating costs−$576.0M18.1%
- Operating income$321.3M10.1%
- Interest, other & tax−$93.3M2.9%
- Net income$228.0M7.2%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2024filed April 30, 2024Financial Statements
Q1 FY2024 against Q1 FY2023
| Line item | Q1 FY2024Q1 FY2023 | Change |
|---|---|---|
| Revenue | $3.18B$3.04B | +4.6% |
| Cost of Revenue | $2.28B$2.19B | +4.2% |
| Gross Profit | $897.30M$850.10M | +5.6% |
| SG&A Expenses | $508.40M$457.20M | +11.2% |
| Operating Income | $321.30M$329.80M | −2.6% |
| Interest Expense | $46.90M$50.70M | −7.5% |
| Net Income | $228.00M$212.90M | +7.1% |
| EPS (Basic) | $2.71$2.41 | +12.4% |
| EPS (Diluted) | $2.69$2.39 | +12.6% |
| Shares Outstanding (Basic) | 84.10M88.40M | −4.9% |
| Shares Outstanding (Diluted) | 84.70M89.00M | −4.8% |
05—Questions
Frequently Asked Questions
Why did operating income decline even though revenues grew?
Operating income fell to $321.3 million from $329.8 million because selling, general and administrative expenses rose to $508.4 million from $457.2 million, mainly due to higher personnel costs and a reduction in COVID-19 Testing revenues. Amortization of intangibles also increased to $60.1 million from $53.4 million.
Why was operating cash flow negative this quarter?
The company stated that continuing operations used $29.8 million of cash, compared with providing $185.7 million a year earlier, primarily due to lower cash earnings and the timing of working capital requirements. Accounts receivable increased by $187.1 million and accrued expenses decreased by $156.9 million.
How is the company addressing its upcoming debt maturities?
The company reported $2,041.5 million of short-term borrowings and current portion of long-term debt, including $1,000.0 million of 3.60% senior notes due 2025 and $1,000.0 million in 2024 notes. It anticipates refinancing the $2,000.0 million of debt coming due in the next 12 months and had $957.6 million of available borrowings under its revolving credit facility.
What is the Invitae transaction and how large is it?
On April 24, 2024, the company was named the winning bidder for select assets of Invitae, a medical genetics company being auctioned through a voluntary bankruptcy process. The purchase price is $239.0 million, and closing is anticipated in the third quarter of 2024, subject to court approval, customary conditions and regulatory approvals.
What does the planned holding company reorganization mean for shareholders?
The company intends to implement a new holding company structure on May 17, 2024, named Labcorp Holdings Inc., which will replace Laboratory Corporation of America Holdings as the publicly traded entity. Stockholders will automatically receive shares on a one-for-one basis with the same rights, and the stock will continue to trade on the NYSE under the symbol "LH".
06—Continue