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Labcorp Q1 Revenues Down 6 Percent

NEW YORK – Laboratory Corporation of America on Thursday reported a 6 percent year-over-year decline in Q1 revenues.

Labcorp's revenues for the quarter ended March 31 were $3.90 billion, down from $4.16 billion in the same quarter last year and below the consensus Wall Street estimate of $4.00 billion.

Organic revenues were down 6 percent while currency translation pushed revenues down by less than 1 percent. Acquisitions contributed revenue growth of less than 1 percent, the Burlington, North Carolina-based firm said.

In the company's diagnostics division, revenue for the quarter was $2.45 billion, down 11 percent from $2.76 billion in the same quarter last year. Organic revenues were down 12 percent, driven by a 15 percent drop in COVID-19 testing partially offset by a 3 percent rise in the company's base business.

Total volume, as measured by test requisitions, was down 5 percent, with organic volume also down 5 percent. COVID-19 testing volume was down 9 percent, while base testing volume rose by 3 percent.

Revenues for the company's Covance unit, which focuses on drug development, were $1.46 billion for the quarter, up 1 percent from $1.44 billion in Q1 2021.

On a conference call following the release of the Q1 results, Adam Schechter, Labcorp's president and CEO, said the Omicron variant had significantly impacted the company's business during the quarter.

He noted that Labcorp's base testing posted progressively better revenues each month of the quarter. Meanwhile, the company averaged 70,000 molecular COVID-19 tests per day, a number that has since declined, Schechter said, adding that it expects COVID-19 testing volumes to continue to fall through the remainder of the year.

He said the company is, nonetheless, maintaining the capacity to process 300,000 COVID-19 molecular tests per day "pending supplies and labor."

Schechter also highlighted the launch in February of Labcorp's OnDemand Digital Health Platform, which allows customers to purchase tests online. He said the offering was focused on preventive wellness and health monitoring, women's health and family planning, and men's health, and that the company plans to add to the menu throughout the year.

Labcorp also entered into several strategic relationships with hospitals and health systems during the quarter, including a deal with South Carolina-based Prisma Health and a deal with New Jersey-based Atlanticare to acquire portions of its outreach lab business. Labcorp has also agreed to purchase the outreach business of St. Dominic Memorial Hospital in Jackson, Mississippi, Schechter said.

He said that the company's "pipeline of acquisition and investment targets remains robust, and that should result in a very active 2022."

Net earnings attributable to Labcorp for the quarter were $491.6 million, or $5.23 per share, compared to net earnings of $769.6 million, or $7.82 per share, for Q1 last year. The company's adjusted EPS was $6.11, beating the analysts' average estimate of $5.98.

The company's SG&A expenses were $464.1 million, up 8 percent from $429.8 million in the same quarter last year.

Labcorp reported $1.23 billion in cash and cash equivalents as of the end of the quarter.

The company revised its full year 2022 guidance, projecting a revenue decline of between 1.5 percent and 5.5 percent and adjusted EPS of between $18.25 and $21.00 along with growth in its base testing business of between 4 percent and 6 percent and a decline in its COVID-19 testing business of between 60 percent and 70 percent.

Previously, it projected revenue ranging from a loss of 1.5 percent to a loss of 6.5 percent and adjusted EPS of between $17.25 and $21.25 along with growth in its base testing business of between 3.5 percent and 6 percent and a decline in its COVID-19 testing business of between 60 percent and 75 percent.

In Thursday morning trading on the New York Stock Exchange, Labcorp's stock was down 7 percent to $253.33.