Labcorp Holdings Inc. (LH) Earnings

Management highlights

### Core Enterprise Financial Results - Total Q2 2026 enterprise revenue grew 5.8% year-over-year to $3.7 billion, with 4.2% organic growth, 1.2% growth from net acquisitions, and 0.4% benefit from foreign currency translation. - Adjusted operating margin improved 70 basis points to 15.8% of revenue, with adjusted operating income reaching $589 million. - Adjusted earnings per share grew 14.9% year-over-year to $4.99, and free cash flow was $314 million (the year-over-year decline was driven by working capital timing and planned capital expenditure increases). ### Specialty Testing Leadership Expansion - Collectively, core specialty areas (oncology, neurology, autoimmune disease, women's health) delivered double-digit revenue growth in the first half of 2026, supporting new customer wins. - Recent oncology portfolio launches and expansions include: nationwide launch of FDA-approved at-home RNA-based colorectal cancer screening test ColoSense with Medicare and expanding commercial coverage; a clinical trial collaboration with Fox Chase Cancer Center to evaluate MRD detection for early-stage lung cancer; expanded nationwide access to Roche's FDA-approved prostate cancer companion diagnostic; and a new advanced DPYD genotyping test to identify chemotherapy toxicity risk. - Outside oncology, the company secured Medicare coverage for NASH Next (its blood-based NASH/MASH detection test) starting mid-August, and expanded nationwide access to the first-in-class non-invasive kidney transplant graft injury surveillance test MyoLaris KT-DX. ### Strategic Partner Growth & Acquisitions - Completed two acquisitions in Q2: select outreach laboratory services from Parkview Health (Indiana/Ohio) and Tribal Diagnostics (a clinical laboratory serving Oklahoma/Texas communities). - Re-awarded a global Department of Defense contract to provide laboratory testing for service members and their families, with a robust pipeline of future partnership and acquisition deals aligned with long-term growth strategy. ### Consumer Health Growth & Innovation - The consumer business continues to deliver strong double-digit growth, driven by demand for consumer-initiated testing and digital experiences. - Recent launches include: Marker by LabCorp Genetic Health Panel (offering combined biomarker and genetic testing via LabCorp OnDemand); Canada's first at-home self-collection hormone tests for female fertility and male testosterone; the AI-powered MyLabCorp app, which has already reached millions of downloads, supporting appointment scheduling, result viewing, and AI-powered health insights. ### Technology & Digital Transformation - Broadened collaboration with Epic to make over 6,500 LabCorp diagnostic tests available on Epic's Aura platform, simplifying provider access to LabCorp's advanced and specialty diagnostics. - Improved patient service center experience via expanded appointment availability, streamlined scheduling, and proactive rescheduling support.

Guidance

- Full-year 2026 enterprise revenue guidance is raised to a 5.4% to 6.3% year-over-year growth range, with a 30 basis point increase at the midpoint, and includes a 40 basis point benefit from foreign currency translation. - Diagnostic segment full-year revenue growth guidance is 5.3% to 6%, with a 20 basis point increase at the midpoint, with the majority of growth expected to come from organic performance. - BLS segment full-year revenue growth guidance is 5.5% to 6.5%, with a 140 basis point increase at the midpoint driven by sustained central lab strength and an improved early development outlook; guidance includes a 150 basis point tailwind from foreign currency translation. On an organic constant currency basis, BLS now expects low single-digit growth for early development (up from prior expectations of roughly flat growth) and maintains mid-single-digit growth guidance for central lab. - Full-year adjusted EPS guidance is narrowed and raised to a range of $18.10 to $18.55, with a 30 cent increase at the midpoint, implying over 11% year-over-year growth at the midpoint. - Full-year free cash flow guidance remains unchanged at $1.24 billion to $1.36 billion, with capital expenditures expected to equal approximately 4% of total revenue. - Management continues to expect full-year margin expansion for both segments, with BLS expected to deliver larger margin expansion than Diagnostics, consistent with prior guidance. The full-year adjusted tax rate is still expected to be approximately 23%. - The board approved a $1 billion increase to the share repurchase authorization, bringing total outstanding authorization to $1.4 billion.

Segment performance

1. Diagnostics Segment: Q2 2026 revenue was $2.9 billion, an increase of 5.5% year-over-year. This segment contributed 78.4% of total enterprise revenue. Organic revenue growth was 3.6%, with 1.8% organic volume growth and 1.8% organic price/ mix growth; net acquisitions contributed 1.9% additional growth. Adjusted operating income was $523 million, equal to 18% of segment revenue, and adjusted operating margin expanded 50 basis points year-over-year to 18%, driven by organic growth and operating efficiencies. 2. Biopharma Laboratory Services (BLS) Segment: Q2 2026 revenue was $836 million, an increase of 6.5% year-over-year. This segment contributed 22.6% of total enterprise revenue. Organic constant currency revenue growth was 6.2%, with 7.6% growth in central lab services and 2.7% growth in early development. Adjusted operating income was $142 million, equal to 17% of segment revenue, and adjusted operating margin expanded 130 basis points year-over-year to 17%, driven by organic growth and operating efficiencies from completed early development strategic actions. The segment ended the quarter with a backlog of $8.7 billion, with a quarterly book-to-bill ratio of 1.14 and a trailing 12-month book-to-bill ratio of 1.03.

Risks & headwinds

- A projected 30 basis point headwind to diagnostic segment volume from ACA/Medicaid coverage changes remains incorporated into full-year guidance, with a 20-30 basis point headwind recorded in Q2 2026; this payer cohort accounts for a very small share of total diagnostic volume, so the overall impact is limited, but the company will continue to monitor the situation closely. - Potential implementation of the PAMA laboratory payment cut remains a regulatory risk, though the company has strong bipartisan support for the Results Act legislative fix, and is prepared with a contingency plan if PAMA goes into effect. - While at-home self-collection is a growing industry trend, it is not expected to replace in-person phlebotomy for complex testing requiring larger blood volumes, requiring the company to maintain dual delivery models to meet patient needs. - Bad debt from patient responsibility (co-pays, deductibles, direct-to-consumer testing) has remained stable and in line with historical levels, but healthcare industry peers have noted recent deterioration in collectability, which the company will continue to monitor.

Analyst Q&A

• Q: The analyst asked for context on underlying diagnostic utilization, and confirmation if the prior projected ACA/Medicaid headwind is still included in updated guidance. /

  A: Management confirmed total diagnostic revenue grew 5.5% year-over-year, with 3.6% organic growth, and specialty testing growing faster than routine testing. Oncology patients, a core focus, require far more tests per patient than average, driving ongoing growth in tests per accession. The 30 basis point full-year ACA headwind assumption remains in guidance, with a 20-30 basis point headwind recorded in Q2. This cohort makes up a very small share of total volume, so the overall impact remains limited.

• Q: The analyst asked how current organic volume growth compares to market and peer performance, and whether the company is consciously avoiding lower-margin business to prioritize profitable growth. /

  A: Management noted 3.6% organic diagnostic growth is well above the overall market growth rate of 1-2%, driven by strong performance in primary care and hospital reference testing (where LabCorp is growing faster than the overall segment). The company prioritizes higher-margin, high-growth specialty areas and only pursues deals that meet strict profitability criteria, leading to simultaneous strong top-line growth and consistent margin expansion, with five consecutive quarters of margin expansion across both segments.

• Q: The analyst asked for decomposition of BLS revenue growth, separating early development restructuring impacts from end-market improvement, and additional context on BLS booking trends. /

  A: Management confirmed BLS grew 6.5% year-over-year, with 70% of segment revenue from central lab, which delivered 7.6% organic constant currency growth. Early development is now up 3% organic constant currency, an improvement from prior years, driven by more on-time study starts and a consistent strong win rate on RFPs. The strong quarterly book-to-bill of 1.14 was driven primarily by central lab, which bodes well for future revenue, as central lab bookings convert to revenue over future years.

• Q: The analyst asked how the company is balancing DTC consumer testing growth with profitability, and its overall DTC strategic positioning. /

  A: Management confirmed LabCorp OnDemand is already delivering strong double-digit year-over-year growth, with over 200 biomarkers available across cancer screening, men's/women's health, allergy, and wellness. The upcoming Marker by LabCorp launch will add genetic testing to create a single trusted destination for combined biomarker and genetic testing. The company only pursues DTC offerings that meet strict margin requirements, and evaluates potential partnerships with external DTC companies based on their profitability profile.

• Q: The analyst asked for an update on early adoption and reimbursement of the newly launched ColoSense colorectal cancer screening test. /

  A: Management noted ColoSense is the first FDA-approved RNA-based at-home colorectal cancer screening test for average-risk adults over 45, filling an unmet need for patients who do not currently get screened. Early adoption signals are encouraging, with positive reception from the American Cancer Society (which included it in guidelines) and existing Medicare coverage. Broad payer coverage expansion takes time, so the company remains focused on expanding access, and it is too early to give full long-term adoption projections.