Labcorp Holdings Inc.
08/01/2025 | Press release | Distributed by Public on 08/01/2025 11:26
Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In this Quarterly Report on Form 10-Q (Quarterly Report), Labcorp®Holdings Inc. together with its subsidiaries (Labcorp or the Company) has made, and from time to time may otherwise make in its public filings, press releases, and discussions by Company management, forward-looking statements concerning the Company's operations, performance, and financial condition, as well as its strategic objectives. Some of these forward-looking statements relate to future events and expectations and can be identified by the use of forward-looking words such as "believes", "expects", "may", "will", "should", "seeks", "approximately", "intends", "plans", "estimates", or "anticipates" or the negative of those words or other comparable terminology. Such forward-looking statements speak only as of the time they are made and are subject to various risks and uncertainties and the Company claims the protection afforded by the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from those currently anticipated due to a number of factors in addition to those discussed elsewhere herein, including in the "Risk Factors" section of the Annual Report on Form 10-K, and in the Company's other public filings, press releases, and discussions with Company management, including:
1.changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms in the United States (U.S.) healthcare system (or in the interpretation of current regulations), new insurance or payment systems, including state, regional or private insurance cooperatives (e.g., health insurance exchanges) affecting governmental and third-party coverage or reimbursement for commercial laboratory testing, including the impact of the U.S. Protecting Access to Medicare Act of 2014;
2.significant monetary damages, fines, penalties, assessments, refunds, repayments, damage to the Company's reputation, unanticipated compliance expenditures, and/or exclusion or debarment from or ineligibility to participate in government programs, among other adverse consequences, arising from enforcement of anti-fraud and abuse laws and other laws applicable to the Company in jurisdictions in which the Company conducts business;
3.significant fines, penalties, costs, unanticipated compliance expenditures, and/or damage to the Company's reputation arising from the failure to comply with applicable privacy and security laws and regulations, including the U.S. Health Insurance Portability and Accountability Act of 1996, the U.S. Health Information Technology for Economic and Clinical Health Act, the European Union's General Data Protection Regulation and similar laws and regulations in jurisdictions in which the Company conducts business;
4.loss or suspension of a license or imposition of fines or penalties under, or future changes in, or interpretations of applicable licensing laws or regulations regarding the operation of clinical laboratories, the development and commercialization of laboratory-developed tests (LDTs), and the delivery of clinical laboratory test results, including, but not limited to, the U.S. Clinical Laboratory Improvement Act of 1967, the U.S. Clinical Laboratory Improvement Amendments of 1988, the European Union In Vitro Diagnostics Regulation, and similar laws and regulations in jurisdictions in which the Company conducts business;
5.penalties or loss of license arising from the failure to comply with applicable occupational and workplace safety laws and regulations, including the U.S. Occupational Safety and Health Administration requirements, the U.S. Needlestick Safety and Prevention Act, and similar laws and regulations in jurisdictions in which the Company conducts business;
6.fines, unanticipated compliance expenditures, suspension of manufacturing, enforcement actions, damage to the Company's reputation, injunctions, or criminal prosecution arising from failure to maintain compliance with current good manufacturing practice regulations and similar requirements of various regulatory agencies in jurisdictions in which the Company conducts business;
7.sanctions or other remedies, including fines, unanticipated compliance expenditures, enforcement actions, injunctions or criminal prosecution arising from failure to comply with the Animal Welfare Act or applicable national, state, and local laws and regulations in jurisdictions in which the Company conducts business;
8.changes in testing guidelines or recommendations by government agencies, medical specialty societies, and other authoritative bodies affecting the development, validation, approval, clearance, commercialization, or utilization of laboratory tests;
9.changes in and failure to comply with the applicable regulations of pharmaceutical and medical device regulators affecting the approval, availability of, and the selling and marketing of diagnostic tests, including LDTs, drug development, or the conduct of drug development and medical device and diagnostic studies and trials, including regulations and policies of the U.S. Food and Drug Administration, the U.S. Department of Agriculture, the Medicine
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and Healthcare products Regulatory Agency in the United Kingdom, the National Medical Products Administration in China, the Pharmaceutical and Medical Devices Agency in Japan, the European Union, the European Medicines Agency, and similar regulations and policies of agencies in other jurisdictions in which the Company conducts business;
10.changes in government regulations or reimbursement pertaining to the pharmaceutical, biotechnology and medical device and diagnostic industries, changes in reimbursement of pharmaceutical products, or reduced spending on research and development by pharmaceutical, biotechnology and medical device, and diagnostic customers;
11.liabilities that result from the failure to comply with corporate governance requirements;
12.increased competition, including price competition, potential reduction in rates in response to price transparency initiatives and consumerism, competitive bidding and/or changes or reductions to fee schedules, and competition from companies that do not comply with existing applicable laws or regulations or otherwise disregard compliance standards in the industry;
13.changes in payer mix or payment structure or process, including insurance carrier participation in health insurance exchanges, an increase in capitated reimbursement mechanisms, the impact of clearinghouses on the claims reimbursement process, the impact of a shift to consumer-driven health plans or plans carrying an increased level of member cost-sharing, and adverse changes in payer reimbursement or payer coverage policies (implemented directly or through a third-party utilization management organization) related to specific diagnostic tests, categories of testing, or testing methodologies;
14.failure to retain or attract business from managed care organizations (MCOs) as a result of changes in business models, including risk based or network approaches, out-sourced laboratory network management or utilization management companies, or other changes in strategy or business models by MCOs;
15.failure to obtain and retain new customers, an unfavorable change in the mix of testing services ordered, or a reduction in tests ordered, specimens submitted, or services requested by existing customers, and delays in payments from customers;
16.consolidation and convergence of customers, competitors, and suppliers, potentially causing material shifts in insourcing, utilization, pricing, reimbursement, and supply chain access;
17.failure to invest in or effectively develop and deploy new systems, system modifications or enhancements required in response to evolving market, business, and customer trends and needs;
18.customers choosing to insource services that are or could be purchased from the Company;
19.failure to identify, successfully close, and effectively integrate and/or manage acquisitions of new businesses or failure to maintain key customers and/or employees as a result of uncertainty surrounding the integration of acquisitions;
20.inability to achieve the expected benefits and synergies of newly acquired businesses, including due to items not discovered in the due diligence process, and the impact on the Company's cash position, levels of indebtedness, and stock price;
21.termination, loss, delay, reduction in scope, or increased costs of contracts, including large contracts and multiple contracts;
22.liability arising from errors or omissions in the performance of testing and other services or other contractual arrangements;
23.changes or disruption in the provision or transportation of services or supplies provided by third parties; or their termination for failure to follow the Company's performance standards and requirements;
24.damage or disruption to the Company's facilities;
25.damage to the Company's reputation, loss of business, or other harm from acts of animal rights activists or potential harm and/or liability arising from animal research activities;
26.adverse results in litigation matters;
27.inability to attract, retain, and develop experienced and qualified personnel or the loss of significant personnel as a result of illness, increased competition for talent, wage growth, or other market factors beyond the Company's control;
28.failure to develop or acquire licenses for new or improved technologies, such as point-of-care testing, mobile health technologies, and digital pathology, or potential use of new technologies by customers and/or consumers to perform their own tests;
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29.substantial costs arising from the inability to commercialize newly licensed tests or technologies or to obtain appropriate coverage or reimbursement for such tests;
30.failure to obtain, maintain, and enforce intellectual property rights for protection of the Company's offerings and defend against challenges to those rights;
31.scope, validity, and enforceability of patents and other proprietary rights held by third parties that may impact the Company's ability to develop, perform, or market the Company's offerings or operate its business;
32.business interruption, receivables impairment, delays in cash collection impacting days sales outstanding, supply chain disruptions or inventory obsolescence, increases in material cost or other operating costs, or other impacts on the business due to natural disasters, including adverse weather, fires and earthquakes; geopolitical crises, including terrorism and war; public health crises and disease epidemics and pandemics, including, but not limited to the continued impact of COVID-19; and other events beyond the Company's control;
33.discontinuation or recalls of existing products used in the performance of testing;
34.a failure in the Company's information technology systems, including with respect to testing turnaround time and billing processes, the failure of the Company or its third-party suppliers and vendors to maintain the security of business information or systems or to protect against cybersecurity incidents such as denial of service attacks, malware, ransomware, and computer viruses, delays or failures in the development and implementation of the Company's automation platforms, or adverse effects from the use of or regulation of artificial intelligence (AI) and machine learning tools, any of which could result in a negative effect on the Company's performance of services, a loss of business or increased costs, delays in cash collections, damages to the Company's reputation, significant litigation exposure, an inability to meet required financial reporting deadlines, or the failure to meet future regulatory or customer information technology, data security and connectivity requirements;
35.business interruption, increased costs, and other adverse effects on the Company's operations due to the unionization of employees, union strikes, work stoppages, general labor unrest or failure to comply with labor or employment laws;
36.failure to maintain the Company's days sales outstanding levels, cash collections (in light of increasing levels of patient responsibility), profitability and/or reimbursement arising from unfavorable changes in third-party payer policies, payment delays introduced by third-party utilization management organizations, and increasing levels of patient payment responsibility;
37.impact on the Company's revenues, cash collections, and the availability of credit for general liquidity or other financing needs arising from a significant deterioration in the economy or financial markets or in the Company's credit ratings by Standard & Poor's and/or Moody's;
38.failure to maintain the expected capital structure for the Company, including failure to maintain the Company's investment grade rating, or leverage ratio covenants under its revolving credit facility;
39.changes in reimbursement by foreign governments and foreign currency fluctuations;
40.inability to obtain certain billing information from physicians, resulting in increased costs and complexity, a temporary disruption in receipts, and ongoing reductions in reimbursements and revenues;
41.expenses and risks associated with international operations, including, but not limited to, compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, other applicable anti-corruption laws and regulations, trade sanction laws and regulations, and economic, political, legal, and other operational risks associated with foreign jurisdictions;
42.failure to achieve expected efficiencies, benefits, and savings in connection with the Company's business process improvement initiatives;
43.changes in tax laws and regulations or changes in their interpretation;
44.changing global economic conditions and government and regulatory changes; and
45.risks associated with the impacts and expected benefits and costs of the completed spin-off of the Company's former clinical development and commercialization services business (Spin-off) Fortrea Holdings Inc. (Fortrea), including but not limited to factors that could adversely affect the Company's ability to realize the expected benefits of the Spin-off or the failure of the Spin-off to qualify as a tax-free transaction for U.S. federal income tax purposes.
Except as may be required by applicable law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Given these uncertainties, one should not put undue reliance on any forward-looking statements.
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GENERAL (dollars in millions)
For the three months ended June 30, 2025, the Company's revenues were $3,527.3, an increase of 9.5% from $3,220.9 for the corresponding period in 2024. The 9.5% increase for the three months ended June 30, 2025, as compared to the corresponding period in 2024 was due to organic revenue of 5.4%, acquisitions, net of divestitures, of 3.5%, and favorable foreign currency translation of 0.6%.
For the six months ended June 30, 2025, the Company's revenues were $6,872.4, an increase of 7.4% from $6,397.5 for the corresponding period in 2024. The 7.4% increase for the six months ended June 30, 2025, as compared to the corresponding period in 2024 was due to organic revenue of 3.7%, acquisitions, net of divestitures, of 3.6%, and favorable foreign currency translation of 0.1%.
The Company defines organic growth as the change in revenue excluding the year-over-year impact of acquisitions, divestitures, and currency. Acquisition and divestiture impact is considered for a 12-month period following the closing of each transaction.
On June 30, 2023, the Company completed the Spin-off. The Transition Services Agreement (TSA) dated June 29, 2023 between Fortrea and Laboratory Corporation of America Holdings (LCAH) expired on June 30, 2025 and all services provided under the TSA terminated on or before the expiration date.
On July 4, 2025, the U.S. government enacted in law the One Big Beautiful Bill Act (OBBBA), which includes provisions addressing regulations and federal funding affecting healthcare. These provisions include, but are not limited to, changes to Medicaid and the Affordable Care Act and could lead to revised regulatory requirements and reduced federal funding. The provisions of the OBBBA have different implementation timelines, with some effective in 2025 and others in succeeding years. The Company is currently evaluating the impact of the OBBBA provisions that address such regulations and federal funding to determine the full scope of the legislation's potential impact on the Company's business and operations.
RESULTS OF OPERATIONS (dollars in millions)
The following tables present the financial measures that management considers to be the most significant indicators of the Company's performance.
Revenues
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Dx | $ | 2,748.8 | $ | 2,524.9 | 8.9 | % | |||||||||||
| BLS | 784.8 | 707.0 | 11.0 | % | |||||||||||||
| Intercompany eliminations and other | (6.3) | (11.0) | 42.7 | % | |||||||||||||
| Total | $ | 3,527.3 | $ | 3,220.9 | 9.5 | % | |||||||||||
Dx revenues for the three months ended June 30, 2025 were $2,748.8, an increase of 8.9% over $2,524.9 in the second quarter of 2024. The increase was due to organic revenue of 4.5% and acquisitions, net of divestitures, of 4.5%, partially offset by unfavorable foreign currency translation of 0.1%.
Dx total volume, measured by requisitions, increased by 4.9% as organic volume increased by 3.4% and acquisition volume, net of divestitures, contributed 1.5%. Price/mix increased by 4.0% due to acquisitions, net of divestitures, of 3.0% and organic growth of 1.1%, partially offset by unfavorable foreign currency translation of 0.1%.
BLS revenues for the three months ended June 30, 2025, were $784.8, an increase of 11.0% over $707.0 in the second quarter of 2024. The increase was due to organic growth of 7.8% and favorable foreign currency translation of 3.2%.
Cost of Revenues
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Cost of revenues | $ | 2,481.1 | $ | 2,294.5 | 8.1 | % | |||||||||||
| Cost of revenues as a % of revenues | 70.3 | % | 71.2 | % | |||||||||||||
Cost of revenues increased 8.1% during the three months ended June 30, 2025, as compared with the corresponding period in 2024. Cost of revenues as a percentage of revenues during the three months ended June 30, 2025, decreased to 70.3% as compared to 71.2% in the corresponding period in 2024. This decrease was primarily due to increased demand as the Company leveraged the growth of its revenues.
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Selling, General, and Administrative Expenses
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Selling, general, and administrative expenses | $ | 579.3 | $ | 557.8 | 3.8 | % | |||||||||||
|
Selling, general, and administrative expenses as a % of revenues
|
16.4 | % | 17.3 | % | |||||||||||||
Selling, general, and administrative expenses as a percentage of revenues were 16.4% and 17.3% during the three months ended June 30, 2025, and 2024, respectively. The decrease was primarily due to increased demand as the Company leveraged the growth of its revenues and a decrease in costs related to the Spin-off of Fortrea, partially offset by higher personnel costs and the impact from Invitae.
Amortization of Intangibles and Other Assets
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Amortization of intangibles and other assets | $ | 68.3 | $ | 62.2 | 9.7 | % | |||||||||||
The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to June 30, 2024.
Restructuring and Other Charges
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Restructuring and other charges | $ | 4.1 | $ | 11.6 | (64.4) | % | |||||||||||
During the three months ended June 30, 2025, the Company recorded net restructuring and other charges of $4.1. The charges were comprised of $15.1 in contract termination costs, $9.4 related to severance and other personnel costs, and $7.3 in facility-related costs. The charges were adjusted by the reversal of a previously established liability of $26.4 in unused facility-related costs and $1.3 in unused severance-related costs.
During the three months ended June 30, 2024, the Company recorded net restructuring and other charges of $11.6. The charges were comprised of $9.2 related to severance and other personnel costs and $2.7 in facility-related costs. The charges were adjusted by the reversal of a previously established liability of $0.3 in unused facility-related costs.
Interest Expense
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Interest expense | $ | 57.1 | $ | 47.6 | 20.0 | % | |||||||||||
For the three months ended June 30, 2025, interest expense increased 20.0% as compared with the corresponding period in 2024. The increase was primarily due to a higher average amount of total debt outstanding during the three months ended June 30, 2025, when compared to the three months ended June 30, 2024.
Equity Method Loss, Net
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Equity method loss, net | $ | (1.7) | $ | (0.3) | (477.1) | % | |||||||||||
Equity method loss, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the healthcare industry. The increase in equity method loss for the three months ended June 30, 2025, as compared with the corresponding period in 2024, was due to incremental losses from investments.
Other, Net
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Other, net | $ | (32.7) | $ | 19.5 | (268.3) | % | |||||||||||
The change in Other, net for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, is primarily due to investment losses of $31.3 recorded during the three months ended June 30, 2025, compared to investment losses of $1.5 for the corresponding period of 2024. In addition, there was a $22.4 decrease of transition services fees charged to Fortrea for the three months ended June 30, 2025, as compared with the corresponding period in 2024, related to administrative and information technology systems support. The costs to provide these transition services are included in operating income, but the service fees are included in other income.
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Provision for Income Taxes
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
|
Provision for income taxes
|
$ | 66.4 | $ | 62.1 | 6.9 | % | |||||||||||
|
Provision for income taxes as a % of earnings before taxes
|
21.8 | % | 23.2 | % | |||||||||||||
The decrease in the effective tax rate for the three months ended June 30, 2025, as compared to the three months ended June 30, 2024, was primarily attributable to incremental tax benefits on the vesting of employee stock plan awards and the recognition of previously reserved uncertain tax benefits.
Operating Results by Segment
| Three Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Dx segment operating income | $ | 482.8 | $ | 441.5 | 9.3 | % | |||||||||||
| Dx segment operating margin | 17.6 | % | 17.5 | % | 0.1 | % | |||||||||||
| BLS segment operating income | 123.3 | 107.4 | 14.8 | % | |||||||||||||
| BLS segment operating margin | 15.7 | % | 15.2 | % | 0.5 | % | |||||||||||
| Segment operating income | 606.1 | 548.9 | 10.4 | % | |||||||||||||
| General corporate and unallocated expenses | (139.2) | (180.3) | (22.8) | % | |||||||||||||
| Amortization of intangibles and other assets | (68.3) | (62.2) | 9.7 | % | |||||||||||||
|
Restructuring and other charges
|
(4.1) | (11.6) | (64.4) | % | |||||||||||||
| Total Operating income | $ | 394.5 | $ | 294.8 | 33.8 | % | |||||||||||
Dx operating income was $482.8 for the three months ended June 30, 2025, an increase of $41.3 over operating income of $441.5 in the corresponding period of 2024, and Dx operating margin increased 10 basis points year-over-year. The increase in operating margin was primarily due to an increase in organic demand, partially offset by the impact of Invitae.
BLS operating income was $123.3 for the three months ended June 30, 2025, an increase of $15.9 over operating income of $107.4 in the corresponding period of 2024, and BLS operating margin increased 50 basis points year-over-year. The increase was primarily due to an increase in organic demand and operating efficiencies.
General corporate and unallocated expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology. General corporate and unallocated expenses were $139.2 for the three months ended June 30, 2025, a decrease of $41.1 compared to corporate expenses of $180.3 in the corresponding period of 2024, primarily due to costs related to the Spin-off of Fortrea that were incurred during the three months ended June 30, 2024, but did not reoccur in the corresponding period of 2025.
Revenues
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Dx | $ | 5,378.4 | $ | 5,004.6 | 7.5 | % | |||||||||||
| BLS | 1,506.1 | 1,417.9 | 6.2 | % | |||||||||||||
| Intercompany eliminations and other | (12.1) | (25.0) | (51.6) | % | |||||||||||||
| Total | $ | 6,872.4 | $ | 6,397.5 | 7.4 | % | |||||||||||
Dx revenues for the six months ended June 30, 2025, were $5,378.4, an increase of 7.5% over $5,004.6 during the six months ended June 30, 2024. The increase was due to acquisitions, net of divestitures, of 4.7% and organic revenue of 3.0%, partially offset by unfavorable foreign currency translation of 0.2%.
Dx total volume, measured by requisitions, increased by 4.0% as organic volume increased by 2.2% and acquisition volume, net of divestitures, contributed 1.8%. Price/mix increased by 3.5% due to acquisitions, net of divestitures, of 2.8% and organic growth of 0.9%, partially offset by unfavorable foreign currency translation of 0.2%.
BLS revenues for the six months ended June 30, 2025, were $1,506.1, an increase of 6.2% over $1,417.9 during the six months ended June 30, 2024. The increase was due to organic growth of 5.2% and favorable foreign currency translation of 1.0%.
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Cost of Revenues
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Cost of revenues | $ | 4,878.2 | $ | 4,573.8 | 6.7 | % | |||||||||||
| Cost of revenues as a % of revenues | 71.0 | % | 71.5 | % | |||||||||||||
Cost of revenues increased 6.7% during the six months ended June 30, 2025, as compared with the corresponding period in 2024. Cost of revenues as a percentage of revenues during the six months ended June 30, 2025, decreased to 71.0% as compared to 71.5% in the corresponding period in 2024. This decrease was primarily due to increased demand as the Company leveraged the growth of its revenues.
Selling, General, and Administrative Expenses
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Selling, general, and administrative expenses | $ | 1,125.3 | $ | 1,066.2 | 5.5 | % | |||||||||||
|
Selling, general, and administrative expenses as a % of revenues
|
16.4 | % | 16.7 | % | |||||||||||||
Selling, general, and administrative expenses as a percentage of revenues were 16.4% and 16.7% during the six months ended June 30, 2025, and 2024, respectively. The decrease was primarily due to increased demand as the Company leveraged the growth of its revenues and a decrease in costs related to the Spin-off of Fortrea, partially offset by higher personnel costs and the impact from Invitae.
Amortization of Intangibles and Other Assets
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Amortization of intangibles and other assets | $ | 137.9 | $ | 122.3 | 12.8 | % | |||||||||||
The increase in amortization of intangibles and other assets primarily reflects additional amortization for assets acquired subsequent to June 30, 2024.
Goodwill and Other Asset Impairments
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Goodwill and other asset impairments | $ | - | $ | 2.5 | (100.0) | % | |||||||||||
The impairment charges for the six months ended June 30, 2024, were primarily due to the decommissioning of a robotic asset.
Restructuring and Other Charges
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Restructuring and other charges | $ | 10.5 | $ | 16.6 | (37.6)% | ||||||||||||
During the six months ended June 30, 2025, the Company recorded net restructuring and other charges of $10.5. The charges were comprised of $17.0 related to severance and other personnel costs, $15.1 in contract termination costs, and $7.3 in facility-related costs. The charges were adjusted by the reversal of a previously established liability of $27.5 in unused facility-related costs and $1.4 in unused severance-related costs.
During the six months ended June 30, 2024, the Company recorded net restructuring and other charges of $16.6. The charges were comprised of $15.1 related to severance and other personnel costs and $1.8 in facility-related costs. The charges were adjusted by the reversal of a previously established liability of $0.3 in unused facility-related costs.
Interest Expense
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Interest expense | $ | 113.1 | $ | 94.5 | 19.8 | % | |||||||||||
For the six months ended June 30, 2025, interest expense increased 19.8% as compared with the corresponding period in 2024. The increase was primarily due to a higher average amount of total debt outstanding during the six months ended June 30, 2025, when compared to the six months ended June 30, 2024.
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Equity Method Loss, Net
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Equity method loss, net | $ | (2.0) | $ | (0.2) | (716.4) | % | |||||||||||
Equity method loss, net represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry. The increase in equity method loss for the six months ended June 30, 2025, as compared with the corresponding period in 2024, was due to incremental losses from investments.
Other, net
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Other, net | $ | (33.7) | $ | 39.5 | (185.2) | % | |||||||||||
The change in Other, net for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, is primarily due to a $41.5 decrease of transition services fees charged to Fortrea for the six months ended June 30, 2025, as compared with the corresponding period in 2024, related to administrative and information technology systems support. The costs to provide these transition services are included in operating income, but the service fees are included in other income. In addition, investment losses of $34.7 were recorded during the six months ended June 30, 2025, compared to investment losses of $5.7 for the corresponding period of 2024.
Provision for Income Taxes
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
|
Provision for income taxes
|
$ | 128.6 | $ | 131.2 | (1.9) | % | |||||||||||
|
Provision for income taxes as a % of earnings before taxes
|
22.2 | % | 23.2 | % | |||||||||||||
The decrease in the effective tax rate for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily attributable to incremental tax benefits on the vesting of employee stock plan awards.
Operating Income by Segment
| Six Months Ended June 30, | |||||||||||||||||
| 2025 | 2024 | Change | |||||||||||||||
| Dx segment operating income | $ | 910.3 | $ | 859.4 | 5.9 | % | |||||||||||
| Dx segment operating margin | 16.9 | % | 17.2 | % | (0.3) | % | |||||||||||
| BLS segment operating income | 230.2 | 207.3 | 11.0 | % | |||||||||||||
| BLS segment operating margin | 15.3 | % | 14.6 | % | 0.7 | % | |||||||||||
| Segment operating income | 1,140.5 | 1,066.7 | 6.9 | % | |||||||||||||
| General corporate and unallocated expenses | (271.6) | (309.2) | (12.2) | % | |||||||||||||
| Amortization of intangibles and other assets | (137.9) | (122.3) | 12.8 | % | |||||||||||||
| Goodwill and other asset impairments | - | (2.5) | (100.0) | % | |||||||||||||
| Restructuring and other charges | (10.5) | (16.6) | (37.6) | % | |||||||||||||
| Operating income | $ | 720.5 | $ | 616.1 | 17.0 | % | |||||||||||
Dx operating income was $910.3 for the six months ended June 30, 2025, an increase of $50.9 over operating income of $859.4 in the corresponding period of 2024, and Dx operating margin decreased 30 basis points year-over-year. The decrease in operating margin was primarily due to the impact from Invitae, partially offset by increased organic demand.
BLS operating income was $230.2 for the six months ended June 30, 2025, an increase of $22.9 over operating income of $207.3 in the corresponding period of 2024, and BLS operating margin increased 70 basis points year-over-year. The increase was primarily due to organic demand and operating efficiencies.
General corporate expenses are comprised primarily of administrative services such as executive management, human resources, legal, finance, corporate affairs, and information technology. Corporate expenses were $271.6 for the six months ended June 30, 2025, a decrease of $37.6 over corporate expenses of $309.2 in the corresponding period of 2024, primarily due to costs related to the Spin-off of Fortrea that were incurred during the six months ended June 30, 2024, but did not reoccur in the corresponding period of 2025.
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LIQUIDITY AND CAPITAL RESOURCES (dollars in millions, except per share data)
The Company's cash-generating capability and financial condition typically have provided ready access to capital markets. The Company's principal source of liquidity is operating cash flow, supplemented by proceeds from debt offerings. The Company's senior unsecured revolving credit facility is further discussed in Note 6 Debt to the Company's Condensed Consolidated Financial Statements.
The Company's cash flows were as follows:
| Six Months Ended June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net cash provided by operating activities | $ | 639.1 | $ | 531.3 | |||||||
| Net cash used for investing activities | (430.1) | (578.1) | |||||||||
| Net cash used for financing activities | (1,107.1) | (221.7) | |||||||||
| Effect of exchange rate changes on Cash and cash equivalents | 26.7 | (3.2) | |||||||||
|
Net decrease in Cash and cash equivalents
|
$ | (871.4) | $ | (271.7) | |||||||
Cash and Cash Equivalents
Cash and cash equivalents at June 30, 2025, and 2024, totaled $647.3 and $265.1, respectively. Cash and cash equivalents consist of highly liquid instruments, such as time deposits, and other money market investments, which have original maturities of three months or less.
Cash Flows from Operating Activities
During the six months ended June 30, 2025, the Company's operations provided $639.1 of cash as compared to $531.3 of cash provided during the same period in 2024. The $107.8 increase in cash provided by operations in 2025 as compared with the corresponding 2024 period was primarily due to higher earnings.
Cash Flows from Investing Activities
Net cash used for investing activities for the six months ended June 30, 2025, was $430.1 as compared to $578.1 for the six months ended June 30, 2024. The decrease in cash used for investing activities for the six months ended June 30, 2025, as compared to the corresponding period in 2024, was primarily due to a decrease in business acquisitions and lower capital expenditures, partially offset by an equity method investment in SYNLAB during the six months ended June 30, 2025.
Capital expenditures were $203.9 and $262.0 for the six months ended June 30, 2025, and 2024, respectively. Capital expenditures for the six months ended June 30, 2025, were 3.0% of revenues, primarily in connection with projects to support growth in the Company's core businesses, facility expansion and updates, and further acquisition integration activities.
Cash Flows from Financing Activities
Net cash used for financing activities for the six months ended June 30, 2025, was $1,107.1 as compared to $221.7 for the six months ended June 30, 2024. The change in cash flows from financing activities for the six months ended June 30, 2025, as compared to the six months ended June 30, 2024, was primarily due to the Company's $1,000.0 payment of the 3.60% senior notes due February 2025 and a $100.0 increase in common stock repurchases, partially offset by proceeds of $225.0 from the Company's accounts receivable securitization facility.
In addition to Cash and cash equivalents, at June 30, 2025, the Company had $1,000.0 of available borrowings under its revolving credit facility, which, as amended on June 27, 2025, does not expire until 2030. Under the Company's credit facilities and indentures relating to the Company's senior notes, the Company is subject to negative covenants limiting subsidiary indebtedness and certain other covenants typical for investment grade-rated borrowers, and with respect to the credit facilities, the Company is required to maintain certain leverage ratios. The Company was in compliance with all covenants under the credit facilities and the indentures related to the Company's outstanding senior notes as of June 30, 2025. The Company expects that it will remain in compliance with all covenants associated with its existing debt obligations for the next 12 months.
At June 30, 2025, the Company had outstanding authorization from its board of directors (Board) to purchase up to $1,080.4 maximum value of Company common stock, par value $0.10 per share (Common Stock). The repurchase authorization has no expiration date.
For the six months ended June 30, 2025, the Company paid $121.5 in Common Stock dividends. On July 10, 2025, the Company announced a cash dividend of $0.72 per share of Common Stock, or approximately $60.6 in the aggregate. The dividend will be payable on September 11, 2025, to stockholders of record of all issued and outstanding shares of Common
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Stock at the close of business on August 28, 2025. The declaration and payment of any future dividends will be at the discretion of the Board.
Guarantor Information
In 2024, the Company, LCAH and U.S. Bank Trust Company, National Association (the Trustee) entered into a seventeenth supplemental indenture (the Seventeenth Supplemental Indenture) to the indenture, dated as of November 19, 2010, between LCAH and the Trustee (2010 Indenture). In addition, the Company, LCAH and the Trustee entered into the 2024 Indenture on September 23, 2024 (the 2024 Indenture, together with the 2010 Indenture, the Indentures). The Seventeenth Supplemental Indenture, among other things, provides for the full and unconditional guarantee by the Company of LCAH's obligations under the 2010 Indenture, and each series of senior unsecured notes issued and outstanding thereunder, and the 2024 Indenture provides for the full and unconditional guarantee by the Company of LCAH's obligations, and each series of senior unsecured notes issued and outstanding, thereunder (collectively, the Labcorp Holdings Guarantees). Also, the Indentures permit the Company to satisfy LCAH's reporting obligations so long as the Labcorp Holdings Guarantees remain in place and the Company's Condensed Consolidated Financial Statements and other information comply with the requirements of Rule 3-10 of Regulation S-X.
At June 30, 2025, there was $3,092.7 and $2,000.0 aggregate principal amount of issued and outstanding senior notes of LCAH, issued under the 2010 Indenture and the 2024 Indenture, respectively, that are fully and unconditionally guaranteed by the Company. Accordingly, pursuant to Rule 3-10 of Regulation S-X, separate consolidated financial statements of LCAH have not been presented. As permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, the Company has excluded the summarized financial information for LCAH because the assets, liabilities, and results of operations of LCAH are not materially different than the corresponding amounts in the Company's Condensed Consolidated Financial Statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.
Credit Ratings
The investment grade debt ratings from Moody's and S&P Global Ratings contribute to the Company's ability to access capital markets.
Off-balance Sheet Arrangements
The Company does not have any variable interest entities or special purpose entities whose financial results are not included in the Company's Condensed Consolidated Financial Statements and the Company does not have any off-balance sheet financing other than normal, short-term leases and letters of credit.
Other Commercial Commitments
The Company has outstanding debt instruments. At June 30, 2025, the Company had total future payments of $5,618.2, with $500.4 of payments due within 12 months.
The Company has leases for patient service centers, laboratories and testing facilities, clinical facilities, general office spaces, vehicles, and office and laboratory equipment. At June 30, 2025, the Company had total future payments for short-term and long-term leases of $1,166.0, with payments of $225.9 due within 12 months.
In connection with the pending acquisitions of select assets of the laboratory business of BioReference Health and select assets of the outreach business from Community Health Systems, Inc., the Company expects to pay up to $420.0, which includes $32.5 of consideration contingent on performance. The Company expects both transactions to close in 2025, subject to customary closing conditions and applicable regulatory approvals. See Note 3 Business Acquisitions and Dispositions to the Company's Condensed Consolidated Financial Statements for additional information.
At June 30, 2025, the Company had provided letters of credit aggregating approximately $103.3, primarily in connection with certain insurance programs which are renewed annually.
Based on current and projected levels of cash flows from operations, coupled with availability under its revolving credit facility, the Company believes it has sufficient liquidity to meet both its anticipated short-term and long-term cash needs for the next 12 months and the reasonably foreseeable future; however, the Company continually reassesses its liquidity position in light of market conditions and other relevant factors.
CRITICAL ACCOUNTING ESTIMATES
There have been no material changes to the critical accounting estimates that appear in Part II - Item 7 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.
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Labcorp Holdings Inc. published this content on August 01, 2025, and is solely responsible for the information contained herein. Distributed via Edgar on August 01, 2025 at 17:26 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]