01—Abstract
Summary
Summary of the 10-Q filed October 29, 2024. Cited figures are marked; the original filing is the authoritative source.
Labcorp Holdings Inc. (LH) reported third-quarter 2024 revenues of $3,282.0 milliona, up 7.4% from $3,056.8 million a year earlier, and nine-month revenues of $9,679.5 million, up 6.0%.
Net earnings attributable to Labcorp Holdings Inc. were $169.3 millionb for the quarter, versus $183.3 million in the prior-year period, and diluted EPS from continuing operations was $2.00 versus $2.11. For the nine months, diluted EPS was $7.13 compared with $6.19 from continuing operations a year earlier. Growth was driven by organic revenue of 4.2% in the quarter and acquisitions, net of divestitures, of 3.1%.
Management attributed the margin pressure in the quarter to higher personnel costs and the Invitae transaction, and Dx segment operating margin fell to 15.2% from 16.5%. Cash flow and balance sheet activity were significant during the period. Operating cash flow from continuing operations was $808.6 millionc for the nine months, up from $622.7 million, while capital expenditures rose to $377.8 million and acquisitions totaled $751.2 million.
Labcorp issued $2,000.0 milliond of senior notes due 2030, 2032 and 2034 and used the proceeds to redeem or repay the 2.30% notes due 2024, the 3.60% notes due 2025 and $350.0 million of revolver borrowings. Total debt rose, with long-term debt at $5,352.1 million at September 30, 2024, compared with $4,054.7 million at December 31, 2023. Cash and cash equivalents increased to $1,517.3 million from $536.8 million.
The filing also notes ongoing litigation, including a Ravgen patent verdict and several privacy and employment class actions, which the company says it will vigorously defend. It describes an agreement to acquire a 15% minority interest in SYNLAB for approximately $155.9 million, expected to close in early 2025. The board authorized a new $1,000.0 million share repurchase plan on July 24, 2024, leaving $1,355.4 million available as of September 30, 2024.
02—Key points
Key Highlights
- Third-quarter 2024 revenues rose 7.4% to $3,282.0 million, driven by organic revenue growth of 4.2% and acquisitions, net of divestitures, of 3.1%.
- Third-quarter net earnings attributable to Labcorp Holdings Inc. were $169.3 million, or $2.00 diluted EPS from continuing operations, compared with $183.3 million and $2.11 a year earlier.
- Nine-month operating cash flow from continuing operations was $808.6 million, compared with $622.7 million in the prior-year period.
- Diagnostics Laboratories (Dx) segment operating margin declined to 15.2% in the quarter from 16.5%, which management attributed to the Invitae transaction and unfavorable weather and days.
- The company issued $2,000.0 million of senior notes due 2030, 2032 and 2034, and used the proceeds to redeem or repay maturing debt and $350.0 million of revolver borrowings.
- Labcorp agreed to acquire a 15% minority interest in SYNLAB for approximately $155.9 million, with closing anticipated in early 2025.
- The board adopted a new $1,000.0 million share repurchase plan on July 24, 2024, and authorization remaining at September 30, 2024 was $1,355.4 million.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Labcorp Holdings kept $0.05.
- Revenue$3.28B100.0%
- Cost of revenue−$2.38B72.4%
- Gross profit$904.4M27.6%
- Operating costs−$650.3M19.8%
- Operating income$254.1M7.7%
- Interest, other & tax−$84.8M2.6%
- Net income$169.3M5.2%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 29, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.28B$3.06B | +7.4% |
| Cost of Revenue | $2.38B$2.21B | +7.8% |
| Gross Profit | $904.40M$851.20M | +6.3% |
| SG&A Expenses | $568.60M$525.50M | +8.2% |
| Operating Income | $254.10M$252.30M | +0.7% |
| Interest Expense | $50.40M$50.30M | +0.2% |
| Net Income | $169.30M$183.30M | −7.6% |
| EPS (Basic) | $2.02$2.12 | −4.7% |
| EPS (Diluted) | $2.00$2.11 | −5.2% |
| Shares Outstanding (Basic) | 84.00M86.60M | −3.0% |
| Shares Outstanding (Diluted) | 84.40M87.00M | −3.0% |
05—Questions
Frequently Asked Questions
How did Labcorp perform in the third quarter of 2024?
Revenues were $3,282.0 million, up 7.4% from $3,056.8 million in the third quarter of 2023. Operating income was $254.1 million, compared with $252.3 million, and net earnings attributable to Labcorp Holdings Inc. were $169.3 million, compared with $183.3 million.
Why did earnings per share decline despite revenue growth?
Diluted EPS from continuing operations was $2.00, versus $2.11 a year earlier. The filing shows that Dx segment operating margin fell 130 basis points, due to the Invitae transaction and unfavorable weather and days. Cost of revenues as a percentage of revenues rose to 72.4% from 72.2%, primarily due to higher personnel costs and the Invitae transaction. Interest expense was roughly flat and income tax expense was lower.
What debt activity occurred during the period?
Labcorp issued $2,000.0 million of senior notes due 2030, 2032 and 2034, with net proceeds of approximately $1,982.1 million. The proceeds were used to redeem or repay the 2.30% senior notes due 2024, the 3.60% senior notes due 2025 and $350.0 million of revolver borrowings. The company also received $300.0 million under a new accounts receivable securitization facility with PNC Bank, National Association.
What acquisitions did Labcorp complete or announce?
During the nine months ended September 30, 2024, Labcorp acquired several businesses for cash of approximately $751.2 million, including Baystate Medical Center, Providence Medical Foundation, Westpac Labs, and selected assets of Invitae Corporation and BioReference Health. It also agreed on September 17, 2024 to acquire a 15% minority interest in SYNLAB for approximately $155.9 million, with closing anticipated in early 2025.
What are the main legal matters disclosed?
The filing describes several matters, including a Ravgen patent case in which a jury awarded damages of $272.0 million and the court granted enhanced damages of $100.0 million, which the company strongly disagrees with and is appealing. It also discloses class actions related to the AMCA data security incident, Medicaid billing litigation in Texas, and privacy-related website tracking suits. The company says it will vigorously defend these matters and that other pending proceedings are not expected to be material.
06—Continue