LABCORP HOLDINGS INC

Previous wording

The Company has made in this report, 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 “Summary of Material Risks” and “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:

Current wording

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:

Previous wording

changes in government and third-party payer regulations, reimbursement, or coverage policies or other future reforms in the 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 (PAMA);

Current wording

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;

Previous wording

changes in and failure to comply with applicable government regulations or policies 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 and Healthcare products Regulatory Agency in the United Kingdom, the National Medical Products Administration in China, the Pharmaceutical and

Current wording

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 (FDA), the U.S. Department of Agriculture, the

Previous wording

Medical Devices Agency in Japan, the European Medicines Agency, the European Union, and similar regulations and policies of agencies in other jurisdictions in which the Company conducts business;

Current wording

Medicine 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;

Previous wording

failure to obtain, maintain, and enforce intellectual property rights for protection of the Company’s products and services and defend against challenges to those rights;

Current wording

failure to obtain, maintain, and enforce intellectual property rights for protection of the Company’s offerings and defend against challenges to those rights;

Previous wording

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 products or services or operate its business;

Current wording

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;

Previous wording

discontinuation or recalls of existing testing products;

Current wording

discontinuation or recalls of existing products used in the performance of testing;

Previous wording

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 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;

Current wording

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;

Previous wording

changing global economic conditions and government and regulatory changes;

Current wording

changing global economic conditions and government and regulatory changes; and

Previous wording

risks associated with the impacts and expected benefits and costs of the completed spin-off of Fortrea, including but not limited to factors that could adversely affect the Company’s ability to realize the expected benefits of the spin-off, the failure of the spin-off to qualify as a tax-free transaction for U.S. federal income tax purposes, and potential exposure to unexpected claims, liabilities, or costs under the Company’s agreements with Fortrea and/or otherwise in connection with the spin-off; and

Current wording

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, the failure of the Spin-off to qualify as a tax-free transaction for U.S. federal income tax purposes.

Previous wording

The Company defines organic growth as the increase in revenue excluding the year-over-year impact of acquisitions, divestitures, and currency. Acquisition and divestiture impact is considered for a twelve month period following the close of each transaction.

Current wording

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.

Previous wording

BLS revenues for the three months ended September 30, 2024, were $737.7, an increase of 2.6% over $719.1 in the third quarter of 2023. The increase was due to organic growth of 2.0% and favorable foreign currency translation of 0.6%.

Current wording

BLS revenues for the three months ended March 31, 2025, were $721.3, an increase of 1.5% over $710.9 in the first quarter of 2024. The increase was due to organic growth of 2.6%, partially offset by unfavorable foreign currency translation of 1.1%.

Previous wording

Cost of revenues increased 7.8% during the three months ended September 30, 2024, as compared with the corresponding period in 2023. Cost of revenues as a percentage of revenues during the three months ended September 30, 2024, increased to 72.4% as compared to 72.2% in the corresponding period in 2023. This increase in cost of revenues as a percent of revenues was primarily due to higher personnel costs and the impact of the Invitae transaction, partially offset by demand and LaunchPad savings.

Current wording

Cost of revenues increased 5.2% during the three months ended March 31, 2025, as compared with the corresponding period in 2024. Cost of revenues as a percentage of revenues during the three months ended March 31, 2025, decreased to 71.7% as compared to 71.8% in the corresponding period in 2024. This decrease in cost of revenues as a percent of revenues was primarily due to increased demand and LaunchPad savings, partially offset by higher personnel costs.

Previous wording

Selling, general and administrative expenses as a percentage of revenues was 17.3% and 17.2% during the three months ended September 30, 2024, and 2023, respectively. The increase is primarily due to higher personnel costs and the impact from Invitae, partially offset by LaunchPad savings and demand.

Current wording

Selling, general, and administrative expenses as a percentage of revenues was 16.3% and 16.0% during the three months ended March 31, 2025, and 2024, respectively. The increase is primarily due to higher personnel costs and the impact from Invitae. partially offset by LaunchPad savings and increased demand.

Previous wording

During the three months ended September 30, 2024, the Company recorded net restructuring and other charges of $18.0. The charges were comprised of $19.3 related to severance and other personnel costs. The charges were adjusted by the reversal of a previously established liability of $1.2 in unused severance-related costs and $0.1 in unused facility-related costs.

Current wording

During the three months ended March 31, 2025, the Company recorded net restructuring and other charges of $6.4. The charges were comprised of $7.6 related to severance and other personnel costs. The charges were adjusted by the reversal of a previously established liability of $1.1 in unused facility-related costs and $0.1 in unused severance-related costs.

Previous wording

Equity method income (expense) represents the Company's ownership share in joint venture partnerships along with equity investments in other companies in the health care industry. The decrease in equity method expense for the nine months ended September 30, 2024, as compared with the corresponding period in 2023, was partially due to the sale of the Company's interest in one joint venture and the acquisition of the remaining interest in another joint venture during 2023.

Current wording

Equity method (loss) income, 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 losses for the three months ended March 31, 2025, as compared with the corresponding period in 2024, was due to losses from investments made prior to 2025.

Previous wording

The change in Other, net for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, is partially due to a decrease of $4.3 of transition services fees charged to Fortrea related to administrative and IT systems support. The costs to provide these services are included in operating income but the service fees are included in other income. In addition, the Company recorded investment losses of $1.6 for the three months ended September 30, 2024 compared to investment gains of $4.0 for the corresponding period of 2023. Foreign currency transaction losses of $10.0 were recognized for the three months ended September 30, 2024, as compared to losses of $2.8 for the corresponding period of 2023.

Current wording

The change in Other, net for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, is primarily due to a $19.1 decrease of transition services fees charged to Fortrea 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.

Previous wording

The year-over-year decrease in the effective tax rate for the three months ended September 30 is primarily attributable to the relative geographical mix of earnings among domestic and foreign entities resulting in favorable foreign rate differentials along with year-over-year increases in the U.S. research and development tax credits.

Current wording

The decrease in the effective tax rate for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, is primarily attributable to incremental tax benefits on the vesting of employee stock plan awards.

Previous wording

Dx operating income was $387.4 for the three months ended September 30, 2024, an increase of $1.1 over operating income of $386.3 in the corresponding period of 2023, and Dx operating margin decreased 130 basis points year-over-year. The decrease in operating margin was due to the Invitae transaction and the unfavorable impact of weather and days.

Current wording

Dx operating income was $427.5 for the three months ended March 31, 2025, an increase of $9.6 over operating income of $417.9 in the corresponding period of 2024, and Dx operating margin decreased 60 basis points year-over-year. The decrease in operating margin was due to Invitae and the unfavorable impact of weather.

Previous wording

BLS operating income was $120.9 for the three months ended September 30, 2024, an increase of $11.9 over operating income of $109.0 in the corresponding period of 2023, and BLS operating margin increased 120 basis points year-over-year. The increase was due to organic growth and LaunchPad savings, partially offset by higher personnel costs.

Current wording

BLS operating income was $106.9 for the three months ended March 31, 2025, an increase of $7.0 over operating income of $99.9 in the corresponding period of 2024, and BLS operating margin increased 80 basis points year-over-year. The increase was due to organic demand and LaunchPad savings, partially offset by higher personnel costs.

Previous wording

General corporate, unallocated expenses, and other 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 $172.5 for the three months ended September 30, 2024, an increase of $2.9 over corporate expenses of $169.6 in the corresponding period of 2023, primarily due to costs related to acquisitions and personnel costs.

Current wording

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 $132.4 for the three months ended March 31, 2025, an increase of $3.5 over corporate expenses of $128.9 in the corresponding period of 2024, primarily due to higher personnel costs.

Previous wording

GENERAL (dollars in millions, except per share data)

Current wording

LIQUIDITY AND CAPITAL RESOURCES (dollars, except per share data, in millions)

Previous wording

The Company's cash-generating ability 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 believes that its balances of cash and cash equivalents and borrowing capacity, along with cash generated from operations, will be sufficient to satisfy its cash requirements, cash dividends, and share repurchases over the next twelve months and beyond. The Company's senior unsecured revolving credit facility is further discussed in Note 7 (Debt) to the Company's condensed consolidated financial statements.

Current wording

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.

Previous wording

In summary, the Company's cash flows from continuing operations were as follows for the nine months ended September 30, 2024, and 2023, respectively:

Current wording

The Company’s cash flows were as follows:

Previous wording

Cash and cash equivalents at September 30, 2024, and 2023, totaled $1,517.3 and $727.9, respectively. Cash and cash equivalents consist of highly liquid instruments, such as time deposits, commercial paper, and other money market investments, which have original maturities of three months or less.

Current wording

Cash and cash equivalents at March 31, 2025, and 2024, totaled $369.4 and $99.3, 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.

Previous wording

During the nine months ended September 30, 2024, the Company's continuing operations used $808.6 of cash as compared to providing $622.7 during the same period in 2023. The $185.9 increase in cash provided from operations in 2024 as compared with the corresponding 2023 period is primarily due to higher cash earnings.

Current wording

During the three months ended March 31, 2025, the Company’s operations provided $18.5 of cash as compared to using $29.8 of cash during the same period in 2024. The $48.3 increase in cash provided by operations in 2025 as compared with the corresponding 2024 period is primarily due to timing of working capital requirements.

Previous wording

Net cash used for investing activities from continuing operations for the nine months ended September 30, 2024, was $1,157.2 as compared to $816.2 for the nine months ended September 30, 2023. The change in cash used for investing activities was primarily due to an increase in business acquisitions and higher capital expenditures during the nine months ended September 30, 2024. Capital expenditures were $377.8 and $286.4 for the nine months ended September 30, 2024, and 2023, respectively.

Current wording

Net cash used for investing activities for the three months ended March 31, 2025, was $336.0 as compared to $393.1 for the three months ended March 31, 2024. The decrease in cash used for investing activities for the three months ended March 31, 2025, and 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 three months ended March 31, 2025.

Previous wording

Net cash provided by financing activities from continuing operations for the nine months ended September 30, 2024, was $1,326.6 as compared to net cash used for financing activities of $1,112.5 for the nine months ended September 30, 2023. The change in cash flows from financing activities from continuing operations for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to $2,000.0 of proceeds for new debt securities, and $300.0 of proceeds for the AR Facility, offset by the $600.0 payment of the 3.25% senior notes due September 2024.

Current wording

Net cash used for financing activities for the three months ended March 31, 2025, was $839.7 as compared to $11.7 for the three months ended March 31, 2024. The change in cash flows from financing activities for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, was primarily due to the $1,000.0 payment of the 3.60% senior notes due February 2025, partially offset by proceeds of $225.0 from its accounts receivable securitization facility.

Previous wording

At September 30, 2024, the Company had $1,517.3 of cash and $1,000.0 of available borrowings under its revolving credit facility, which does not mature until 2026. 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 at September 30, 2024. The Company expects that it will remain in compliance with all covenants associated with its existing debt obligations for the next twelve months.

Current wording

At March 31, 2025, the Company had $369.4 of cash and cash equivalents and $1,000.0 of available borrowings under its revolving credit facility, which does not mature until 2026. 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 March 31, 2025. The Company expects that it will remain in compliance with all covenants associated with its existing debt obligations for the next 12 months.

Previous wording

For the nine months ended September 30, 2024, the Company paid $183.0 in common stock dividends. On October 10, 2024, the Company announced a cash dividend of $0.72 per share of common stock for the fourth quarter, or approximately $61.0 in the aggregate. The dividend will be payable on December 13, 2024, to stockholders of record of all issued and outstanding shares of common stock as of the close of business on November 26, 2024. The declaration and payment of any future dividends will be at the discretion of the Company’s board of directors.

Current wording

For the three months ended March 31, 2025, the Company paid $61.6 in Common Stock dividends. On April 10, 2025, the Company announced a cash dividend of $0.72 per share of Common Stock, or approximately $61.2 in the aggregate. The dividend will be payable on June 11, 2025, to stockholders of record of all issued and outstanding shares of Common Stock at the close of business on May 29, 2025. The declaration and payment of any future dividends will be at the discretion of the Board.

Previous wording

In connection with the Reorganization, the Company, LCAH and the Trustee entered into a seventeenth supplemental indenture (the Seventeenth Supplemental Indenture) to an indenture, dated as of November 19, 2010, between LCAH and the Trustee (the 2010 Indenture). In addition, the Company, LCAH and the Trustee entered into the 2024 Indenture (the 2010 Indenture, together with the 2024 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 financial statements and other information comply with the requirements of Rule 3-10 of Regulation S-X and the Exchange Act (Regulation S-X).

Current wording

In 2024, the Company, Laboratory Corporation of America Holdings (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.

Previous wording

As of September 30, 2024, there was $4,492.9 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, we have 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 consolidated financial statements and management believes such summarized financial information would be repetitive and would not provide incremental value to investors.

Current wording

At March 31, 2025, there was $3,610.6 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, we have 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.

Previous wording

The Company’s investment grade debt ratings from Moody’s and from Standard and Poor’s (S&P) contribute to its ability to access capital markets.

Current wording

The investment grade debt ratings from Moody’s and S&P Global Ratings contribute to the Company’s ability to access capital markets.