Laboratory Corporation of America Holdings (NYSE:LH) Q2 2023 Earnings Call Transcript

Brian Tanquilut: Hey good morning, guys. Just one question. I really appreciate the color that you’ve shared on the – on your progress or success with hospital partnerships. Just curious what those incremental conversations are with, and what the pipeline looks like? And what are hospitals looking for now as they try to figure out lab strategy and who to partner with because obviously you’re not just the only one looking for deals in this space? Thanks.

Adam Schechter: Yes. Thanks Brian and good morning. We’re excited about the success that we’ve had with the hospital partnerships. I mentioned the three just in this last quarter that we were able to move forward with Jefferson legacy and an additional part of Providence. And the pipeline remains very strong. As I look at the pipeline of potential hospital [indiscernible], I’m excited about the opportunities before us. I think the hospitals are looking for several things. First and foremost, you have to be able to give them patient continuity. They need to make sure that there’s no impact to their patients if they do a laboratory agreement. Second thing is science innovation technology; they want to find ways to actually get better science, get better information faster so that they can get better patient care as they move forward.

The third thing that they’re obviously looking for is to ensure that there is the ability to kind of have a long-term relationship. So I mentioned Providence, a 20-year relationships, these are long-term deals. They take a long time to get up and running and you want to make sure you choose the right partner that’s going to be a long-term partner. And as I look forward into the future, this will be a significant area of focus for Labcorp as I think it represents a tremendous growth opportunity.

Brian Tanquilut: Awesome. Thank you, guys.

Adam Schechter: Yes. Thank you.

Operator: Thank you. [Operator Instructions] And our next question comes from Kevin Caliendo with UBS. Your line is open.

Adam Schechter: Good morning, Kevin.

Kevin Caliendo: Good morning guys. Thanks for taking my question. I just want to make sure I understand the bridge. You said that your guidance is unchanged, excluding Fortrea and excluding the ASR, which is going to start sometime in the third quarter. But that also includes $45 million of stranded costs, $25 million of which are going to come out, and maybe higher labor expenses. I guess is there anything else? Is there any contribution from Enzo or lower COVID or anything else that’s changed from your assumptions when you provided it in April? Just trying to bridge to get to where we are and if those are the only inputs that we should be thinking about?

Adam Schechter: Yes, go ahead, Glenn.

Glenn Eisenberg: Yes. So, hi, Kevin. So you’re right. So as we went back and obviously looked at the current outlook, we said that overall at the enterprise level consistent at the midpoint with revenues, earnings, cash flow and we obviously talked a bit about some pluses and minuses within the businesses that made up that at the enterprise level, where we were excluding Fortrea, when you work down to the earnings similar. So we had the earnings that we would have had in our outlook. We backed out the earnings in April, if you will, taking out Fortrea, but obviously we had the cash from the spin that we added back in there. And so from an earnings and then similar cash flow at the $900 million free cash flow from continuing ops, again, excluding spend, excluding Fortrea; so all of those would have been in line with the expectations that we had in April.