Good day, and thank you for standing by. Welcome to Labcorp's Fourth Quarter 2024 Conference Call. Please be advised today's conference being recorded. I would now like to hand the conference over to your speaker today, Christian O'Donnell. Please go ahead. Thank you, operator. Good morning. And welcome to Labcorp's fourth quarter 2024 conference call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schechter, Chairman and Chief Executive Officer; and Julia Wang, Executive Vice President and Chief Financial Officer. 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. Please see the use of adjusted measures section in our press release and Investor Relations presentation for more information regarding our use of non-GAAP financial measures. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements regarding the estimated 2025 guidance and related assumptions, the spin-off of Forteo Holdings, Inc., and the projected impact of various factors on the company's businesses, operating and financial results. Each of the forward-looking statements is subject to change based upon various factors, many of which are beyond our control.

Thank you, Christian. Good morning, everyone. We appreciate you joining us as we review our 2024 performance and share our outlook for 2025. Today, I'm also joined by Julia Wang. Julia joined us as Executive Vice President and CFO this past December. As you know, Julia has succeeded Glenn Eisenberg, following his retirement announcement. Julia's experience in both diagnostics and pharmaceuticals has already been very valuable to Labcorp. In 2024, our market-leading diagnostics and biopharma laboratory services businesses made meaningful advances in our strategy through organic growth, transformative acquisitions, and continued commitment to science, innovation, and technology. Looking back in 2024, we executed well on our strategic priorities. We advanced our role as a trusted partner to hospitals and health systems by closing or signing 10 transactions. We advanced our position in key high growth markets, including oncology, women's health, neurology, and autoimmune disease. We also introduced new important diagnostic tests to meet significant unmet medical needs. We expect to continue this momentum in 2025. Turning now to our fourth quarter financial results. We performed very well across diagnostics and biopharma laboratory services, driven by strong underlying demand. Revenue in the quarter was $3.3 billion, an increase of 10% compared to the fourth quarter of 2023. Diagnostics and biopharma revenue each grew by approximately 10% in the quarter. Adjusted EPS of $3.45 was up 5% year-over-year. Free cash flow from continuing operations was $665 million. As we look ahead to 2025, we expect enterprise revenue growth of 6.7% to 8% and improving margins across both diagnostics and biopharma. As part of our focus on autoimmune disease, we launched a multiple sclerosis monitoring profile. We announced the commercial availability of an H5 bird flu molecular test as well as the first companion diagnostic assay to identify gastric cancer patients eligible for targeted treatment. We also experienced continued adoption of Labcorp Diagnostics Assistant by health system clients and their physicians. In closing, 2024 was a strong year for Labcorp as we continued to execute against our enterprise strategy and we are well positioned for continued growth in 2025. I want to thank our 70,000 employees for their hard work and dedication. Additionally, we recently made it to Fortune Magazine's World's Most Admired Companies list for 2025, a testament to the efforts of our team. Lastly, I would like to extend my gratitude to Glenn for his contributions during his tenure as CFO. He remains as a special adviser to ensure a smooth transition that positions Labcorp to further accelerate our strategy in 2025. Please join me in wishing Glenn and his family all the best in his retirement. With that, I'll turn the call over to Julia.

Thank you, Adam. Hello, everyone. I'm really excited to be with you today. My experience across broader healthcare has been very helpful as I jumpstarted my new role. I have been truly inspired by the strength of our business fundamentals and the tremendous impact that Labcorp has on the patients we serve. Now I will focus my comments on our financials, starting with our fourth quarter results, followed by our performance in each segment and conclude with an update on our full year guidance. Revenue for the quarter was $3.3 billion, an increase of 9.8% compared to last year. Operating income for the quarter was $217 million, which is 12.7% on an adjusted basis. We had $120 million of restructuring charges and special items. Excluding fixed items and amortization, adjusted operating income was $423 million. Our adjusted tax rate was 22.4% compared to 19.5% last year. We expect our adjusted tax rate for 2025 to be approximately 23%. Net earnings from continuing operations for the quarter were $144 million or $1.70 per diluted share. Our free cash flow guidance range for 2025 is $1.1 billion to $1.25 billion.

You talked about margins stepping up year-over-year. Can you give us a sense of what underlying margins are embedded in your guidance?

If you look at the Diagnostics business, the revenue grew 10.2% and it was driven by strong organic growth of 5% and acquisitions of 5%. The margin was down due to weather and days, with the impact of Invitae being more significant. However, we feel confident about margin expansion in both businesses as we expect Invitae to be slightly accretive in the second half of the year with no additional weather impacts anticipated.

Could you give us an update on how your pipeline deals look and how active you expect to be as you integrate everything from last year?

We feel good about the acquisition pipeline. We are committed to the dividend, seeking hospital local laboratory deals that meet our financial criteria. Overall, I think we have a very good pipeline of deals.

Our guidance does include the impact from anticipated capital allocation utilizing our free cash flow for acquisitions, share repurchases, and dividends. We ended last year with a net debt to EBITDA ratio of about 2.2 times, demonstrating additional balance sheet flexibility to pursue share repurchase or M&A opportunities.

Can you provide more detail on the organic growth rate for Diagnostics, especially in relation to esoteric testing?

The growth in esoteric testing, particularly in oncology and women's health, has been three times the typical growth rate. We're optimistic about our market share gains through hospital deals and the strength of our specialty tests. Our discussions with payers have been positive.

Could you characterize the backdrop across Biopharma and provide an update on the NHP business?

The Biopharma sector is healthy, with a strong revenue growth forecast. Approximately 85% of contributions come from backlog. We expect margins to expand in Biopharma services as demand increases.

Could you provide an update on the Invitae acquisition, especially in relation to MRD assay reimbursement?

Integration of Invitae is going well, and we expect revenue to grow by more than 10%. We are focusing on leveraging the best assets from both companies in terms of MRD capabilities.

What are your thoughts on the regulatory landscape, particularly regarding lab-developed tests?

We are prepared to launch our programs and will navigate the regulatory environment as it evolves. Our focus remains on ensuring we can provide critical testing to patients. Thank you, everybody, for joining us today. We appreciate your time and we look forward to updating you on the first quarter of 2025 in April.