Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Labcorp Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone keypad. At this time, I would like to turn the conference over to Mr. Chas Cook. Sir, please begin. Thank you, operator. Good morning, and welcome to Labcorp's Third Quarter 2022 Conference Call. As detailed in today's press release, there will be a replay of this conference call available via telephone and internet. With me today are Adam Schechter, Chairman and Chief Executive Officer, and Glenn Eisenberg, 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, which include a reconciliation of the non-GAAP financial measures to the GAAP financial measures discussed during today's call. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2022 guidance and the related assumptions, the proposed spin-off of the clinical development business, the impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial conditions, including the COVID-19 pandemic and general economic and market conditions future business strategies, expected savings and synergies, including from the LaunchPad initiative, acquisitions and other transactions, and opportunities for future growth. Each of the forward-looking statements is subject to change based upon various factors, many of which are beyond our control. More information is included in our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q and in the company's other filings with the SEC. We have no obligation to provide any updates to these forward-looking statements even if our expectations change. Now I'll turn the call over to Adam. Thank you, Chas. Good morning, everyone. It's a pleasure to be with you today to discuss our progress and our performance in the third quarter. I'll start with a few high-level comments about the quarter, then provide a brief update on the planned spin of our clinical development business before turning to our quarterly results and progress against our strategy. Diagnostics performed very well, with base business revenue growth of 3.7% over the last year and a 4% CAGR versus 2019. With Ascension in the fourth quarter, we expect full-year revenue growth of 6%-7%. Drug development base business fundamentals remain strong, and our expected full-year CAGR of almost 8% since 2019 is consistent with how we expect the business to perform. There were what we believe to be temporary issues that impacted our drug development performance in the quarter, which I'll discuss in more detail when outlining our results. Turning now to the spin of our clinical development business. We are off to a strong start since announcing the planned spin back in July. We were quick to establish a spin management office made up of dedicated people and external advisors with significant spin transaction experience. In addition, working with advisors, we're in the process of identifying members of the executive team, the Chief Executive Officer, and the board of directors of the new company. Finally, we are making good progress defining their transition service agreements and preparing the audited financial statements. With the progress to date, we are targeting completion of the spin with an accelerated timeframe of mid-2023, subject to satisfaction of certain customary conditions, including those related to the tax-free nature of the separation and the SEC process. Upon completion, we will create two strong independent companies through a tax-free transaction. We are excited by the opportunities the spin represents for the clinical development business. The new company will have the enhanced strategic flexibility and operational focus to grow, invest, pursue its priorities, and address market opportunities. Further, we believe both Labcorp and the new clinical development business will emerge from this transaction with the ability to better meet customer needs, drive sustainable and profitable growth, and deliver attractive shareholder returns. We plan to provide more information on our progress, including key leadership appointments, in the coming months. I'll now turn to third quarter performance. In the quarter, revenue totaled $3.6 billion, adjusted earnings per share was $4.68, and free cash flow was $270 million. Base business organic revenue for the enterprise, excluding COVID testing revenue, is up 1.4% year-over-year on a constant currency basis. This demonstrates the strength of our underlying business, particularly in diagnostics, in a very challenging operating environment marked by rising labor costs, labor shortages, and other inflationary pressures. In diagnostics, base business revenue increased about 4% year-over-year due to an uptick in demand in both routine and esoteric testing. We continue to see momentum in our hospital system business, and later I'll give an update on the Ascension integration, which is off to a very good start. In drug development, quarterly base business revenue in constant currency is flat versus the prior year. This is driven by a tough year-over-year comparison with less COVID-related work and the impact from the conflict in Ukraine. In central laboratories, there were timing-related challenges when looking at kits out, those that we sent to investigator sites, and kits returned, those that investigators send back to us to be analyzed. We believe investigators ordered significantly more kits than normal in the third quarter last year to overcome supply issues. This was in addition to the kits for COVID trials. The pace of investigators returning kits has not rebounded as quickly as we expected. We believe this is largely due to COVID-related impacts and the macro environment, and that it will return to normal levels over time. Both demand and orders in central laboratories continue to be very strong. In early development, we have strong demand for trial work as well as adequate capacity. However, the impact from our business was due to labor constraints. We are hiring as fast as we can, but like in many parts of the economy, finding labor has been difficult. Drug development base business margins for the quarter were 15%, an expansion from last quarter, but lower than anticipated due to the revenue in central laboratories and labor shortages in early development. We continue to see a healthy order flow and backlog in drug development, and the segment ended the quarter with a 1.25 trailing 12 month book to bill. Across diagnostics and drug development, our margins were negatively impacted by rising labor costs and other inflationary pressures. We are taking cost actions, and we're focused on improving margins. In addition, LaunchPad savings continue to help offset the impact of near and expected midterm headwinds. Glenn will provide more detail on the quarterly results in just a moment. COVID PCR testing volumes continued their decline during the quarter, totaling 2.2 million tests performed and averaging 24,000 per day. As we enter the winter amid concerns about rising COVID, flu, and RSV cases, we're maintaining adequate supply and capacity to accommodate current and future testing needs. Also, our scientists stand ready to respond as new variants arise. I'll now move to our enterprise strategy against which we're executing well by harnessing science, innovation, and technology and capitalizing on key opportunities that help us deliver for all stakeholders. Earlier this month, we announced the completion of transactions that established our comprehensive laboratory relationship with Ascension. Our strategic collaboration includes an agreement for Labcorp to manage hospital labs in 10 states and to acquire certain lab assets. At its core, the collaboration expands access to Labcorp's comprehensive capabilities and laboratory services for communities served by Ascension. I am pleased to report that the transition and the integration are going well, and we are now performing thousands of tests across the health system. This was a big undertaking, and I'd like to thank employees and leadership from Ascension and Labcorp who made the changeover as seamless as possible. In addition to the Ascension agreement, we're focused on accelerating our hospital and health systems business. We completed our acquisition of the outreach lab business and related assets of New Jersey-based RWJBarnabas Health during the quarter, and that integration is also progressing well. Our hospital and local lab acquisition and investment pipeline is very robust, and we see major opportunity now through 2023. Turning to oncology, we're furthering our position as a leader in this space through the addition of new testing and screening capabilities. We continue to see benefits from the Personal Genome Diagnostics and OmniSeq portfolios, including their leading liquid biopsy, tissue-based diagnostics, and kitting solutions. We have the broadest portfolio and capabilities in oncology diagnostics today, and we are well-positioned for growth. We are also pursuing relationships that accelerate our growth and enhance our portfolio. This quarter, the company formed a strategic partnership with MD Anderson Cancer Center Madrid to increase access to early-phase oncology clinical trials. We also entered a collaboration with Becton, Dickinson and Company to help match patients with critical and potentially life-changing treatments for cancer and other diseases. In addition to our progress in oncology, Labcorp is relentlessly focused on innovating and delivering our customers value, valuable solutions across all areas to help them achieve their goals. We enhanced our neurology offering in the quarter through the launch of a paraneoplastic and other neuro-autoimmune panels. Together with our previously announced tests for brain injuries and neurodegenerative disease, these panels round out our portfolio and give us a leadership position in neuro biomarkers to support customers. The company has seen growing demand for our at-home testing and collection options through Labcorp OnDemand, and our consumer product pipeline is strong. Our FDA-authorized combination COVID, flu, RSV at-home collection test continues to be important with the rise of respiratory virus cases expected this fall through the winter. Lastly, Labcorp's commitment to its employees continues to be recognized. We recently were named by the Forbes to its list of World's Best Employers. We also earned a top score on the 2022 Disability Equality Index. In summary, our base business fundamentals remain strong, and we are well-positioned to deliver sustained long-term value and growth. With that, I'll turn the call over to Glenn. Thank you, Adam. I'm going to start my comments with a review of our third quarter results, followed by a discussion of our performance in each segment, and conclude with an update on our full year guidance. For reference, we've also included additional business information that can be found in our supplemental deck on our investor relations website. Revenue for the quarter was $3.6 billion, a decrease of 11.2% compared to last year due to lower COVID testing and the negative impact from foreign currency translation. This was partially offset by organic base business growth and the impact from acquisitions. COVID testing revenue was down 70% compared to COVID testing last year, while the base business grew 0.7% compared to the base business last year. Organically, in constant currency, the base business grew 1.4%. Operating income for the quarter was $469 million, or 13% of revenue. During the quarter, we had $65 million of amortization and $54 million of restructuring charges and special items, primarily related to acquisitions, the proposed spin of the clinical development business, facility rationalization, and other LaunchPad initiatives. Excluding these items the adjusted operating income in the quarter was $589 million or 16.3% of revenue compared to $907 million or 22.3% last year. The decrease in adjusted operating income and margin was primarily due to a reduction in COVID testing and the impact from acquisitions. The benefit from organic base business growth and LaunchPad savings were essentially offset by higher personnel expense and other inflationary costs. The tax rate for the quarter was 16.2%. The adjusted tax rate was 22.8% compared to 24.4% last year. The lower adjusted tax rate was primarily due to benefits from increased R&D tax credits. We now expect our annual adjusted tax rate going forward to be approximately 24%. Net earnings for the quarter were $353 million or $3.90 per diluted share. Adjusted EPS were $4.68 in the quarter, compared to $6.82 last year. Operating cash flow was $374 million in the quarter, compared to $767 million a year ago. The decrease in operating cash flow was primarily due to lower cash earnings. Capital expenditures totaled $104 million, down from $118 million last year. We continue to expect full year capital expenditures to be approximately 3.5% of base business revenue. Free cash flow was $270 million in the quarter. During the quarter, we invested $459 million on acquisitions, paid out $65 million in dividends, and repurchased $400 million of stock, representing 1.5 million shares. At the end of the quarter, we had over $800 million of share repurchase authorization remaining. We continue to believe that our shares are undervalued, and our share repurchase program is an important part of our capital allocation strategy. At quarter end, we had $400 million in cash, while debt was $5.3 billion. Our leverage was 1.7 x gross debt to trailing 12 months EBITDA. Excluding COVID testing earnings, our leverage was 2.5 x, in line with our targeted range of 2.5x-3 x. Now I'll review our segment performance, beginning with diagnostics. Revenue for the quarter was $2.2 billion, a decrease of 15.7% compared to last year due to organic revenue being down 16.4%, partially offset by acquisitions of 0.9%. COVID testing revenue was down 70% compared to COVID testing last year, while the base business grew 3.7% compared to the base business last year. Relative to the third quarter of 2019, the compound annual growth rate for base business revenue was 4.3%, primarily due to organic growth. Total volume decreased 10.3% compared to last year, as organic volume decreased by 10.9%, partially offset by acquisition of 0.6%. The decline in volume was due to COVID testing, as base business volume grew 3.1% compared to the base business last year. Price mix decreased 5.4% versus last year, primarily due to an organic decline of 5.5%, partially offset by acquisitions of 0.3%. The lower organic price mix was due to COVID testing. Base business price mix was up 0.6% compared to base business last year, benefiting from higher esoteric test mix. Diagnostics adjusted operating income for the quarter was $440 million or 19.9% of revenue, compared to $775 million or 29.6% last year. The decrease in adjusted operating income and margin was due to a reduction in COVID testing, as lower COVID volumes caused margins to decline to approximately 50% for the quarter. We expect this margin level to continue through the rest of the year, which would put full-year margin at approximately 60%. Base business margins were flat versus last year as organic growth and LaunchPad savings were offset by higher personnel expenses and other inflationary costs. Now I'll review the performance of drug development. Revenue for the quarter was $1.4 billion, a decrease of 3.7% compared to last year, primarily due to foreign exchange translation of -3.4%. While acquisitions contributed 0.5% of growth, organic-based business revenues declined 0.7% compared to last year due to the negative impact from lower COVID-related work and the Ukraine-Russia crisis. Excluding these impacts, organic-based business revenue grew 3.8%. The central lab business continues to be the most impacted by lower COVID-related revenues and the impact from Ukraine-Russia crisis. Central lab-based business revenues were down 9.8%. However, excluding these items, organic constant currency revenue was up 4.1%, while on a comparable basis, early development was up 8.6% and clinical development was up 2.3%. In addition, clinical development was impacted by the loss of an FSP contract outside the U.S., earlier this year affecting third and fourth quarter revenue growth. However, recent wins including a large phase IV market access program, will support a return to higher growth in 2023. Reported drug development revenues grew 3.6% on a compounded annual basis compared to 2019. Adjusted operating income for the segment was $211 million or 15% of revenue, compared to $226 million or 15.5% last year. The decrease in adjusted operating income and margin was due to the reduction of COVID-related work in the Ukraine-Russia crisis. Excluding these issues, margins would have been up approximately 100 basis points compared to last year, as the benefit from organic growth and LaunchPad savings were partially offset by inflationary costs and the negative mix impact from acquisitions. We ended the quarter with backlog of $15.2 billion, and we expect approximately $4.7 billion of this backlog to convert into revenue over the next 12 months. Now I'll discuss our updated 2022 full year guidance, which reflects our year-to-date performance and fourth quarter outlook and assumes foreign exchange rates effective as of September 30, 2022, for the remainder of the year. The enterprise guidance also includes the impact from currently anticipated capital allocation, with free cash flow targeted to acquisitions, share repurchases, and dividends. We expect enterprise revenue to decline 6%-7.5% compared to 2021. This is a decrease at the midpoint from our prior guidance of 275 basis points, primarily due to the slower pace of central lab kits shipped and kits received, early development labor constraints, lower COVID testing, the delay in the Ascension transaction, and currency. This guidance now includes the expectation that the base business will grow 3%-4%, while COVID testing is expected to decline 57%-59%. We expect diagnostics revenue to decline 10%-11.5% compared to 2021. This guidance reflects a 25 basis points increase at the midpoint as the benefit from Ascension will be mostly offset by lower COVID testing demand. Diagnostics-based business revenue is expected to grow 6%-7%, an increase of 150 basis points at our midpoint due to Ascension now being reflected in the segment outlook while it was in our enterprise guidance prior to closing the transaction. At the midpoint of our base business guidance, the compound annual growth rate compared to 2019 is 5%. Note that Ascension will be dilutive to diagnostics AOI margin of approximately 100 basis points in the fourth quarter, but we expect margins to improve going forward as they are fully integrated. COVID testing is now expected to decline 57%-59%. We expect PCR volume to be between 15,000-20,000 tests per day in the fourth quarter. We are currently tracking at approximately 15,000 PCR tests per day. We expect drug development revenue to decline 1.5%-2.5% compared to 2021. This is a decrease at the midpoint from our prior guidance of 450 basis points, primarily due to the slower pace of kits shipped and kits received in central labs, labor constraints in early development, and further currency translation headwinds. We expect the base business to decline 1%-2% compared to 2021. Foreign currency translation negatively impacts our growth rate by 280 basis points. In addition, the growth rate is constrained by lower COVID-related work in the Ukraine-Russia crisis. At the midpoint of our base business guidance, the compound annual growth rate compared to 2019 is 7.7%. Our guidance range for adjusted EPS is $19.25-$20.25, a narrowing of our prior guidance range of $19-$21.25. At the midpoint, our guidance is lower by $0.38 due to lower COVID testing. In the base business, the decreased revenue outlook for drug development is being offset by additional cost control measures and the lower effective tax rate. Free cash flow guidance is now $1.25 billion-$1.4 billion, down from our prior guidance of $1.7 billion-$1.9 billion. The decline in the cash outlook is due to lower projected cash earnings and higher working capital requirements. The lower cash earnings include the expected decrease in adjusted net earnings, the proposed spin and acquisition-related costs, as well as the timing of cash tax payments. The higher working capital requirements, which are timing related, primarily relates to drug development receivable collections as the company continues to work to improve Days Sales Outstanding. Said differently, DSOs remained flat over the past quarter, but our guidance had assumed improvement in the second half of the year. In summary, our diagnostics business continued to perform well while our drug development business fundamentals remained strong in a challenging environment. We expect to drive continued profitable growth in our base business for the fourth quarter, while COVID testing volumes are expected to decline from the third quarter. We expect to continue to use our free cash flow generation for acquisitions that supplement our organic growth while also returning capital to shareholders through our share repurchase program and dividends. Operator, we'll now take questions. Ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. Again, if you have a question or comment at this time, please press star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Jack Meehan from Nephron Research. Mr. Meehan, your line is open. Thank you. Good morning. Good morning. Adam. Good morning. Wanted to dig into the drug development business and just could you talk about what's changed in terms of the business trends since the second quarter? You know labor and shortages has come up a lot in the discussion. Just talk about. I don't know if there's a way to quantify or some metric around the level of pressure you're seeing today versus back in July. Glenn, you called out an FSP cancellation. Just when did that take place? Is there any color you can give around the size of that? Yep Hi, Jack I'll go first. You know first of all if you look at drug development overall, and you look at our new guidance at the midpoint, the full year growth would represent 7.7, almost 8% CAGR since just 2019. That's about what you would expect for the business. What's changed, frankly, is that we're seeing a larger than expected impact from kits in central laboratories. That's the most significant change. What happened last year was investigators ordered more kits than they typically would because there were some supply issues. For example, butterfly needles were in short supply for a period of time. Some of the test tubes that we need that go on those kits were in a short supply. Typically, when an investigator would order a kit, we'd be able to get it to them in two or three days. With the supply issues, sometimes it was taking quite a bit longer than that. Once we had supply of kits, the investigators were ordering many more than what they actually needed. It was almost like hoarding of the kits. That's very difficult to track. It's very difficult to know exactly how many they're using at any period of time versus the number of kits that they have. At the same time we were sending out a lot of kits because of the COVID trials. The COVID trial kits were coming back to us very quickly because they were enrolling very fast. We were sending them out to massive numbers of investigators because everybody was focused on those COVID trials. It kind of masked the return rates of the kits for non-COVID related trials. As we sit here today, what we're seeing is the kits going out in the third quarter of this year were about 30% lower the number of kits that we sent out in the third quarter of last year. It's pretty significant, and we get paid for each kit that goes out. Even more significant, the number of kits coming back to us are not at 2019 levels yet. We actually make most of our money on the kits that come back to us because that's when we perform all the tests on the samples that come back to us. Now we believe that's temporary. We think it's you know sometimes when there's COVID issues like in Europe and so forth, it slows down the kits coming back. There could be some labor issues at the sites that are slowing down the kits coming back to us. The kits will come back to us, the trials will enroll, so we think it's a temporary timing issue. The reason we didn't flag it before now is when we looked at the beginning of the summer, the kits coming back to us were actually starting to increase, so we felt like they would continue to increase. Unfortunately, they leveled off very quickly, and they've not increased again since that time. Again, we believe it's temporary, and we're working on it, but it's certainly something that's new based on what we've seen in third quarter, and we've expected that to continue in our guidance in fourth quarter. At the same time, the other issue we have is just labor. I mean finding labor is hard right now, particularly for frontline and other important personnel that you need in your laboratories. It's not only hard to find them, but once you find them, training for something in the laboratory takes a lot longer than most other workers. It takes them a while before they become fully productive. When it looked at our early development business, that business looks great in terms of orders in terms of our capacity in terms of RFPs. The issue that we're facing there is we just can't get all the studies up and running as fast as we'd like because we're needing more personnel. We're doing everything we can. If you look at Madison, Wisconsin, we have a large lab. We actually have buses wrapped in Labcorp, you know, talking about come, you know, to one of our career centers because we're trying to hire as many people as we can as fast as we can. Then I'll turn it to Glenn for the other question. Yeah Hey, Jack. Yeah we commented that the FSP is impacting or the loss of the contract impacted our results in the quarter. The loss of it was actually earlier in the year, but the impact of it winding down really didn't impact our first half results. Really more of a third quarter, fourth quarter impact. For the quarter, it was around call it $22 million that we would have had in there a year ago for the contract. It negatively, I recall it was around a 3% headwind for the clinical development business, and roughly half of that would be a headwind for the drug development segment. Again as we commented as well, we've been really pleased with the recent awards that we have. As we think about going into 2023, you know, the lost contract there will be replaced by other orders that we're getting. Jack, the thing I'd add to is you know overall we feel good about the business fundamentals in both diagnostics and drug development. The RFP inflow is strong, our wins are strong, even our ability to offset, as Glenn just said, the loss of that FSP with new wins and a large market access win that we have. The fundamentals are strong. We believe these are a temporary issue. Great. As a follow-up you know it's that time of year, everyone's focused on 2023. I was wondering if you could just talk about puts and takes on EPS for next year. I think the COVID math at 60% margin suggests that could be a $5 headwind. Not sure if you agree with that. Think there's also probably some upsides with growth in Ascension. You know I look at the street forecasting $18. Just any color on forecasting would be helpful. Yeah. I'll give you some color. I'll ask Glenn to jump in, and we'll provide more complete guidance, obviously, in February. First of all, what we're focused on, we wanna execute the spin as fast and as effectively as we possibly can. We are focused on that. We've accelerated to the middle of next year, and we're doing everything we can to move quickly there. Second, when you think about Ascension, and not just Ascension, some of the other hospital deals are really big and important to us. We're focused on integrating them, and they're gonna represent strong growth opportunities, and it's gonna represent significant revenue growth opportunities. What we're focused on in diagnostics is the inflationary pressures that will remain, and we've got to find ways to reduce costs and to improve our margins. These hospital deals are gonna impact our margins negatively in the beginning, and over time, we'll be able to take costs out. When you do these hospital deals, the most important thing is business continuity for the hospitals at that time. In addition to that, we have PAMA headwind, obviously. We're working to see if there's a new way to think about PAMA, which is SALSA. We're not putting that in our base case at the moment, but by February, we should have a very good idea of where we are there. We have other things that Glenn can talk about. Yeah. No. Overall, maybe first kind of at a high level Jack, that when you think about kind of the headwinds as we go into 2023, and Adam kind of alluded to, and you did as well in your opening comments. You know COVID testing you know we'll know more obviously when we give our guidance in February, but the assumption is that it's gonna be down pretty materially next year. It's you know, following the trend that we've seen. Again, we'll have a better assessment when we give our guidance. To your point we did around 60% margin on COVID testing this year. And again, we've talked about the going forward 24% tax rate now. A big variable, again, as Adam commented on, is PAMA. You know, we've looked at around a $80 million-$100 million, if you will, range of an impact. But again, by the time that we give our guidance, we should know whether or not PAMA will be in the numbers for next year or not. We'll see. Then just the additional headwinds from the current inflationary environment and the labor constraints. Having said that we really see a lot more positives than the headwinds that we're seeing. You know the demand levels, especially the momentum that we've seen in the diagnostics business, not only have we seen volume levels pick up sequentially each quarter, but even through the months of the quarter. The expectation is that that will continue into the fourth quarter and continue into 2023. When you think about the correlation while we're giving up high margin COVID testing, normally if the expectation is that will be down to low levels, bodes better for the base business within diagnostics as well. Similarly, Adam commented on you know the level of demand in drug development isn't the issue per se. You know, it's more the kits issue that we said really hasn't come back to 2019 levels, and it's really the only aspect of even drug development, and it's really just the kits that are being returned. The expectation is the demand is there the backlog's strong, the conversion that kits return should come back to more normalized levels, and then hopefully with the labor capacity issue abates a bit as well. You add to that another strong year of focus on cost measures, LaunchPad initiatives, another strong year of free cash flow generation, that will add to a good pipeline for acquisitions, let alone returning our capital. When you stir it all together, we're actually pretty optimistic for 2023 where we sit today, from a top line perspective from our ability to drive margin improvement, realizing that we'll have headwinds from PAMA potentially, as well as the annualization of Ascension will be a little bit of a margin headwind as well. Those combined with capital allocation, we feel actually pretty optimistic as we go into 2023. Operator, next question. Thank you. Ladies and gentlemen, in an effort to get to as many people in the queue as possible, we ask that you please limit yourself to one question. One question only, please. If you have additional questions, you may jump back into the queue. Our next question or comment comes from the line of Erin Wright from Morgan Stanley. Just stand by. Ms. Wright, your line is open. Great, thanks. Where are we now in terms. Is this utilization across the diagnostic segment compared to the pre-COVID baseline? What are you seeing right now in terms of mix? Are there any sort of structural changes that we should be thinking about longer term? Just follow up on 2023 and how you're thinking about base organic diagnostic volume heading into that time period. Do you anticipate that we see a complete normalization in utilization trends? Is it a build to that? Why or why not would that happen? Thanks. Hey, Erin, this is Glenn. I'll start on that one. Again, one of the really positive things that we have seen is that the volume levels have recovered within diagnostics, that we continue to see good growth, this year, obviously over last, but also compared to 2019. We're tracking from a volume standpoint call it a little bit over 1% kind of CAGR compared to where we were. Clearly more room for growth, which is why as we enter into 2023, we feel that volumes will continue to pick up, as we go through more of the recovery. When you look on the price mix side, which again has also been positive tracking to kind of more, you know historical levels, plus or minus kind of 1% growth. We talk about there's always kind of the pricing pressures that we see, but we get positive on price mix because of mix. We continue to see our esoteric and routine businesses growing, but esoteric growing at a faster pace, which helps our mix. Acquisitions have tended to help our mix as well. Actually, when we think about now the large lab hospital management agreement we have with Ascension, as you know, we treat that as price as opposed to volume. You'll see a pickup from that aspect as well as that becomes in the numbers and annualized. Acquisitions overall, we continue to see a slight improvement in our tests per session. A lot of positive momentum on the price mix side as well as the volume side. Erin, this is Adam. I feel very good about the diagnostics volume, and we're heading into next year with real strength. Our focus next year is gonna be a lot of how can we improve margins and reduce costs. That'll be a big focus for us because we realize that the volume's gonna grow extraordinarily well with these hospital deals, and we just have to make sure we get the margins to improve as fast as we can there. Okay, thank you. Thank you. Our next question or comment comes from the line of Patrick Donnelly from Citi. Mr. Donnelly, your line is open. Hey, guys. Thank you for the question. Maybe another one on the drug development side, just specifically on early development. You know, you guys saw a sequential step down there. I don't think that's happened in a couple years. Just wanted to dive into that a little more specifically, what you're seeing there. Were there supply chain issues? Maybe talk about the demand environment and again, kind of the outlook on that piece because again, I don't think we've seen a sequential step down a little bit there. Yeah, no thanks for that question, Patrick. I mean we feel really good about our early development demand. In fact, our orders are good, our book to bill is good, our RFPs are good. One of the biggest issues is that if a customer comes to us right now, we can't start the study as fast as we'd like. We're into next year, well into next year already. The biggest issue we're facing in early development is just labor, and trying to get enough people so that we can get as many studies up and running as possible is the real fundamental issue. We're facing it in early development laboratories around the world. It's not specific to the United States. We have huge efforts underway to try to hire as many people as we can. The second issue with labor is that, bringing people into early development laboratories takes time. They have to be trained really well. Even as you hire people, it takes them longer than typical for them to be productive in a way that somebody that's been in our lab for a year is. The issue that we're facing in early development is a labor issue. Thank you. Our next question or comment comes from the line of Eric Coldwell from RW Baird. Just a second. Mr. Coldwell, your line is open. Thank you. Good morning. Good morning, Eric. Following several similar questions, so maybe a bit redundant but hoping we can get more specific. On drug development, could you talk about the overall cancellation rate and then parse that out across each of the segments? Could you actually give some demand metrics? I know you've talked about good orders, wins, RFPs, etc., but do you have any metrics you could actually share in terms of dollar volume increases across the segments or pipeline comments? Then is it possible when you talk about cancellations, could you parse out cancellations that you're seeing due to actual client decisions not to go forward with the drug at all versus possibly, you know, share loss, contract losses, things like the FSP? Just wanting to get to more of a market cancellation rate versus a share cancellation rate if that's a possibility. Thanks very much. I'll start, Eric, and good morning. I'll ask Glenn to add some context. We've not seen an increase in cancellation rates across any of the three segments. In fact, we're seeing the number of RFPs increasing as a percent year-over-year across the different segments. Demand feels pretty good. In terms of share loss, you know, we lost the one FSP that we're gonna more than offset with wins that we have. Things come in and they come out of our book-to-bill all the time. It's gonna impact us in the third and fourth quarter, and then we'll more than offset that as we go into next year with the wins that we have. If you look at the backlog, it's relatively flat as the order growth in the quarter was offset by currency due to the strength of the dollar. The cancellation rates are in the low single digits, and it's been that way for a very, very long time. I don't know, Glenn, if you wanna add anything. No, I mean, I think that hits it. We do provide, and Eric is, you know, obviously some key metrics that we think addresses that. The level of orders that we have per quarter, the book-to-bill. Again, we talk about kind of the 1.2 or greater is really what we look for in order to hit kinda mid-to-high single digit growth rates. Obviously, their trailing twelve is at a 1.25, so that continues to do well. The backlog, as Adam said, you know, is up 6% year-over-year. The cancellation rates overall remain fairly steady. Again as Adam said, kind of the low single digits is a normal process. You know, we have you know, the normal gives and takes if you will. The issue with the FSP contract and why we highlighted it for this quarter was not that it really had an impact kind of on the book-to-bill because we have stuff coming in stuff coming out but it was an existing contract so that we lose the revenues, if you will, on a year-over-year basis, even though new orders coming in would offset let's say the cancellation, but the startup for those revenues will be you know not in the current quarter. If I can just do one follow on. Is it possible to give us some sense of how understaffed you are in early development? Like, what number of people are you looking to hire globally, and is it more technician or is it more you know what area is it? Are these vets? Are these pathologists? Are these you know what type of people are you looking and how many are you looking to hire? Yeah. Eric, I'd say two things. One is it's mostly the entry-level positions. It's not necessarily pathologists or veterinarians, although we're always having turnover, but the big issue is in the entry-level positions. The reason I'm not gonna give you a percent is because it's not just the positions that we're filling, it's how long it's taking us to get people up to speed and trained. What I can say is that with the work that we've done to increase our hiring rates you know we've seen huge increases in the number of people that we're able to interview with the number of click rates on our sites because we've been doing a lot more through social media to try to hire people. We are seeing that we are able to pick up demand but it's still gonna take us some time to train. You know, to get a really good laboratory technician fully trained could take up to you know, four months, sometimes even longer, depending on how skilled they need to be. Got it. Thanks very much. Yeah. Thanks, Eric. Thank you. Our next question or comment comes from the line of A.J. Rice from Credit Suisse. Stand by. Mr. Rice, your line is open. Okay. Thanks a lot. How are you guys? We talked a couple of times about the inflationary pressures. That's been something we've been talking about all year, but it sounds like you think that might be an incremental headwind next year. I guess I'd love to just flesh out because, I mean, I could see you think it's persistent, but persisting next year what you're seeing this year. To describe as an incremental headwind, I'd be interested to know where that's at. It sounds like the offset, you know one of the offsets has been the LaunchPad initiatives. Is it tougher to come up with those kinda savings programs? Are you finding it, you know that's been going for a while. Are you finding it a little more challenging to find meaningful savings opportunities under that program? Yeah. No, thanks for the question, A.J. You know, first of all, I'd say it's just continued inflationary pressure. But we're seeing it in a lot of areas of our cost structure. You're seeing it in materials, people-related expenses, supply chain, and a tight labor market. We're just focused on maintaining operational continuity while also managing through these headwinds. There's not like this new issues that we're facing, we just believe they're gonna be continued issues that we're facing. The LaunchPad program, as you said, is helping us mitigate these costs. We have plans in place. We have a path forward. We know how we're going after the LaunchPad initiatives. When we give you a number, we give that number with knowledge of how we're gonna go after it and how we're gonna get it. The key now that we're working on is how can we accelerate some of those savings, not do we know where they are. We know where they are, and some of them are in process improvements, some of those are in automation. Some of those take time, and we're trying to find ways to accelerate all of them. Okay, great. Thanks a lot. Thank you. Our next question or comment comes from the line of Kevin Caliendo from UBS. Mr. Caliendo, your line is open. Thanks. Thanks for taking my question. Can we talk a little bit about the impact Ascension's making and how to think about it? You gave us some numbers for Q4 in terms of the volumes and then also the margin pressure. Are the costs related to starting, is that one time in nature, or is it just a lower margin business that's gonna have an adverse effect on the margins going forward? I know it closed in October, so is that a full quarter? Like, should we think about that as a full quarter, or would it be more magnified going forward? Like, how should we think about the impact? Yeah. I'll give you some context, Kevin, and I'll ask Glenn to jump in and so forth. You know, first of all, we just closed the deal on September thirtieth. Typically, that business is lower margin business to start with. When we take over these laboratories, the most important thing that we do is ensure that the physicians can order and we can perform the test seamlessly, if not better than what they had before. We don't take out costs, we don't change systems, we don't change supply chain in the beginning. We just transition over the work with minimal disruption. And then over time, we use our scale and our capabilities to reduce their costs and improve the margins. This is more about making sure that we do this the right way. This is a massive undertaking, and we wanna make sure that there's no disruption to the patients and the physicians first and foremost. The margins are very low in the beginning, and then over time, they get better. They never reach our historical margins in diagnostics because it's just always gonna be to some degree lower, but it'll certainly get better over time. I'll ask if Glenn has any additional context. Yeah, no. The only thing I'd add to that is that when we think about the hospital system deals, and Adam kind of alluded to it, very attractive deals financially when we look at kind of return on invested capital, just a different profile. The in-hospital lab management agreements that we have are really a fee-based, so as a percent of revenues, it's a headwind to the overall revenues. The outreach labs that we acquire have margin profiles similar to or enhance the overall margin for the diagnostics group. But given the size of Ascension and the size of the in-hospital lab management agreement, it tends to. This is a higher percentage of in-hospital than a typical even hospital system deal we would do. We commented that it would be around 100 basis points negative impact to us in the fourth quarter. As Adam said, with the expectation that margins will grow as we integrate it into 2023 and beyond, but it'll have less of a headwind, you know, in 2023 as the margins pick up above what the first quarter would affect us. The net effect, you didn't really call it out as a headwind or a tailwind for 2023. Should we assume that from a EBITDA perspective net-net it's neutral then? From an EBITDA perspective, call it the first quarter. The fourth quarter, first time we have it is kind of neutral. It'll be positive from a profitability standpoint next year. Again, as you look at our financial criteria for acquisitions and these lab partnerships, we look for you know for them to be accretive to earnings year one, earn cost of capital by year three, and have a very attractive IRR. Ascension is no different. The first full year of ownership, positive to earnings and cash flow accretion, we'll earn our cost of capital at least by year three as an overall transaction. We're excited about it, but with the acknowledgement that from a return on revenues, it'll be dilutive to diagnostics margins. Got it. Okay, that's helpful. Thank you, guys. Yep. Thanks, Kevin. Thank you. Our next question or comment comes from the line of Rachel Vatnsdal from J.P. Morgan Chase. Ms. Vatnsdal, your line is open. Great. Great. Good morning, Rachel. Thanks for taking the question. Yeah, good morning. Just following up on the drug development side. You've talked a bit about the kit stocking dynamic. Last quarter, you said that was a $30 million revenue headwind. Can you just quantify how much of a headwind it was this quarter? And then what's assumed within guidance for kit stocking heading into 4Q and early next year as well? Yes. I'll take the second part first, Rachel. We're assuming that the kits coming back to us do not improve for the rest of this year. We've not seen improvement, therefore, for the rest of this year, we're assuming no additional improvement from where we are, which is slightly lower than the 2019 levels. In terms of kits out the door, they're actually at 2019 rates as we sit here today. When I say 2019, I take 2019, and I put, you know, projected 4% or 5% growth on that each year. When you get to this year, we're where you would expect us to be if we grew a 4% or 5% CAGR since 2019. Kits out the door look good, and they're back to where they need to be. We wanna get some more time under our belt, see as the kits start to come back to us faster, and we'll provide more information for 2023 when we give 2023 guidance. For the rest of the year, we've taken out significant growth in kits back to us. Yes. Rachel, to your comment, it obviously continues to be at roughly that level on what we would call COVID-related. Roughly half of the cost impacting us from a revenue standpoint would be the kits, so call it around $25 million impact during the quarter year-over-year. Similarly, the lower vaccine and therapeutics related to COVID would have the same amount of impact on the revenues for the quarter. Thank you. Again, ladies and gentlemen, if you have a question or comment at this time, please press star one one on your telephone keypad. Our next question or comment comes from the line of Mr. Derik de Bruin from Bank of America. Mr. de Bruin, your line is open. Good morning, Derik. Hi, good morning. This is John Treadwell on for Derik de Bruin. You did a good amount of share buybacks in the quarter, and you're continuing to target hospital deals and local lab deals. Are there any additional areas that you're looking to prior to the Covance spin? Also I wanted to ask if you're seeing any trends in bad debt and then if you have any expectations there. Thank you. Yeah, I'll answer the first part. So, you know, if you look at our capital allocation, we continue to be committed to our dividend. We continue to look at these hospital and local laboratory deals. They help us with our growth and our core. They're accretive first year to return the cost of capital quickly. We continue to believe we are undervalued, so share buybacks will continue to be a big part of our capital allocation, and we still have over $800 million that are available to us. Yeah. John, on the bad debt, again, not seeing really any change. Again, drug development, you know, we normally don't have any bad debt issues in the diagnostics side. It's been at a fairly steady state. I would say probably see a little bit of an increase now that the HRSA for the COVID testing. So when you look at our 50% margin that we did in the quarter, let alone expected in the fourth there's a little bit of that associated with it. But as a general rule, bad debt continues to be you know consistent with what we would've experienced in the past. Gotcha. Thank you for that. Just one more. Has the turnover for frontline workers stabilized, or do you see any additional need to reinstate retention program bonuses or anything like that? I would say it continues to be an issue with labor almost everywhere that I look in the economy and, frankly, around the world. I don't think it's getting worse, I just think it continues to be the same. At this point in time, we're doing a lot of work on what we can do to retain people attract people but we're facing very similar issues that other healthcare companies, but also even more broadly than that, are facing. Yeah. John, when you look at our difference between our reconciliation and our financial statements that we send, we do break out retention. You'll see, as Adam said, you know we continue to use that where needed, but overall not a material issue. All right. Thank you. Thank you. I wanna thank everybody for joining us today. You know, I believe that we have a lot to be excited about when we look at the future in the coming year, and that we're going to make continued progress. We know what we have to get done, and we're gonna get it done. I wanna welcome our associates from Ascension, and I wanna once again thank our employees around the world for carrying out their critical mission to improve health. Have a nice day, everybody. Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.