01—Abstract
Summary
Summary of the 8-K filed April 25, 2024. Cited figures are marked; the original filing is the authoritative source.
Laboratory Corporation of America Holdings reported first quarter 2024 results on April 25, 2024, with revenue of $3.18 billiona, up 4.6% from $3.04 billion, and diluted EPS from continuing operations of $2.69 versus $2.34.
Adjusted EPS was $3.68b versus $3.46. Organic revenue grew 2.3%, driven by a 4.2% increase in the organic Base Business, partially offset by a (1.9%) decline in COVID-19 PCR testing. Operating cash flow from continuing operations was a use of $29.8 million, compared with $185.7 million generated in the prior-year quarter, and free cash flow from continuing operations was a use of $163.6 million.
The company ended the quarter with $99.3 millionc in cash and $5.09 billion in total debt, and invested $259.2 million in acquisitions. The company raised the midpoint and narrowed its full-year 2024 adjusted EPS guidance to $14.45 to $15.35, from $14.30 to $15.40. Revenue guidance was narrowed to 4.8% to 6.4% growth for the enterprise, with Diagnostics Laboratories at 4.8% to 6.0% and Biopharma Laboratory Services at 3.7% to 5.7%.
Free cash flow guidance was unchanged at $1.00 billion to $1.15 billiond. Management highlighted five acquisitions announced or completed year to date, including the winning bid for select Invitae assets and an agreement to acquire select BioReference Health diagnostic assets.
The company also announced a planned holding company reorganization effective May 17, 2024, under which Labcorp Holdings Inc. will become the publicly traded parent on a one-for-one basis, with the common stock continuing to trade on the NYSE under the symbol "LH." A quarterly dividend of $0.72 per share was declared, payable June 12, 2024, to stockholders of record on May 28, 2024. The filing notes the recently completed spin-off of the Clinical Development and Commercialization Services business, now Fortrea Holdings Inc.
02—Key points
Key Highlights
- Q1 2024 revenue of $3.18 billion rose 4.6%, with Base Business revenue growing 6.7% and COVID-19 PCR testing declining (1.9%).
- Diluted EPS from continuing operations was $2.69 versus $2.34; adjusted EPS was $3.68 versus $3.46.
- Full-year 2024 adjusted EPS guidance was raised at the midpoint and narrowed to $14.45 to $15.35; free cash flow guidance remained $1.00 billion to $1.15 billion.
- Free cash flow from continuing operations was a use of $163.6 million in the quarter, compared with $107.5 million generated a year earlier, as operating cash flow turned negative and capital expenditures rose to $133.8 million.
- Diagnostics Laboratories adjusted operating margin declined to 16.9% from 18.5%, while Biopharma Laboratory Services margin improved to 14.1% from 11.1%.
- Backlog in Biopharma Laboratory Services reached $7.90 billion, and the company expects about $2.46 billion to convert to revenue over the next twelve months.
- A holding company reorganization will create Labcorp Holdings Inc. as the new parent effective May 17, 2024, with the stock continuing to trade under "LH".
03—Questions
Frequently Asked Questions
Did Labcorp beat its first-quarter 2024 results and change its outlook?
Revenue of $3.18 billion and adjusted EPS of $3.68 both rose from the prior-year quarter, and the company raised the midpoint and narrowed its full-year adjusted EPS guidance to $14.45 to $15.35. Revenue guidance was narrowed, with enterprise growth now 4.8% to 6.4%, and free cash flow guidance was left unchanged at $1.00 billion to $1.15 billion.
Why was operating cash flow negative in the quarter?
The filing attributes the decline in operating cash flow from continuing operations, a use of $29.8 million versus $185.7 million generated in the prior-year quarter, to lower cash earnings and the timing of working capital requirements. Accounts receivable increased by $187.1 million, and accounts payable and accrued expenses decreased.
What drove the change in the company's segment results?
In Diagnostics Laboratories, adjusted operating income declined to $417.9 million from $441.5 million due to lower COVID-19 Testing, weather, and the mix impact from lab management agreements. In Biopharma Laboratory Services, adjusted operating income rose to $99.9 million from $73.6 million, driven by organic growth and LaunchPad savings, partially offset by higher personnel costs.
What does the holding company reorganization mean for shareholders?
The company intends to implement a new holding company structure on May 17, 2024, with Labcorp Holdings Inc. replacing Laboratory Corporation of America Holdings as the publicly traded parent. Stockholders will automatically receive shares of the new parent on a one-for-one basis with the same rights, and the stock will continue to trade on the NYSE under "LH."
What is the company's balance sheet position at quarter end?
At March 31, 2024, the company reported cash of $99.3 million and total debt of $5.09 billion. During the quarter it invested $259.2 million on acquisitions and paid $62.1 million in dividends.
04—Continue