Good afternoon, everyone, and welcome to the Morgan Stanley Global Healthcare Conference. I am Erin Wright, the lead healthcare services analyst at Morgan Stanley. For more important disclosures, please see the Morgan Stanley Research Disclosure website at morganstanley.com/researchdisclosures. With that, we are happy to have Labcorp with us today, hot on the heels of their Investor Day last week. CEO Adam Schechter, as well as CFO Julia Wang are with us today. Thank you so much for joining us. Let us kick it off with just a bigger picture question on the back of the Investor Day. Some of your high-level takeaways that you wanted to drive home for investors. You reaffirmed the long-term kind of guide, or largely reaffirmed the long-term guide with some tweaks. Can you kind of break down some of those building blocks and how you think about the long-term for Labcorp? Absolutely, and good afternoon, everybody. Erin, thanks for having us. It is a pleasure to be here. Last week we had our Investor Day, and the first thing we did was we showed data on the last three years when we provided longer term guidance and showed that we were able to achieve exactly what we committed to achieving. The second thing we did was we reaffirmed our guidance for the rest of 2026, which we feel very strongly about, remains compelling, and we reaffirmed that guidance. The third thing we did was talk about our long-term strategy and provide longer term guidance for the next three years. If you look at that guidance, I believe it is a very compelling proposition. We have revenue growth of 5%-8% at the midpoint, double-digit EPS growth. We have margin accretion of 75 - 150 basis points, and we have very strong free cash flow. Then what we did was provide the strategy that shows us the path forward to achieving that growth compelling profile. The strategy focuses on several areas. One is to lead in specialty testing. We are primarily focused in oncology, women's health, autoimmune disease, and neurology. Each of those areas are growing significantly faster than the market. We gave some data on those areas that we can talk about if you would like to in a bit. To continue to win in the hospital, the local regional laboratory business, we have a very strong pipeline of potential acquisitions in those areas that will continue to give us growth. We said in the guidance that we expect 1.5%-2.5% of the revenue growth to come from those types of acquisitions. If you look at the last three years, it has been about 2.4% of the growth has come from those types of acquisitions. We talked about the importance of using technology and artificial intelligence in the majority of our business, and we are looking at it in three buckets. One, how do we improve the customer experience, thereby driving revenue? Two, how do we reduce cost, thereby improving margins? Then how do we think about transforming aspects of our business in a fundamentally different way in the future? Those three things are helping us reach the LaunchPad initiative, which we increased in this guidance versus prior guidance, where now we expect $125 million-$150 million of savings each year in the longer-term guidance that we provided. So I feel like it was a very successful meeting. We appreciated those that attended, and we've gotten very positive feedback on the longer-term outlook that we provided. Okay, great. You also reaffirmed your guidance for 2026 as well at the conference. Can you talk a little bit about some of those key drivers in terms of your expectations for enterprise revenue growth of 5.4%-6.3% in 2026? How is the year kind of playing out relative to your expectations and relative to the first half? How do we think about as we head into the second half and that cadence, some of the nuances we should be thinking about at the high and the low end of the range? Yeah. I'll give some feedback. I'll ask Julia to jump in with some specifics. I'd say overall, we feel that the momentum that we've entered the second half in is very strong. As I look at the guidance we provided, obviously there's just over three months left. I feel very strongly that reaffirming the guidance tells you we see a clear path forward to achieving the objectives that we've set forth for the rest of this year. The last thing I'll say is that we believe that the guidance and hitting the rest of the year guidance sets us up very well for next year and into the longer-term guidance year. Yeah. Hi, Erin. It's a pleasure to be here today. As you were saying that last week, we had an opportunity to reaffirm our guidance for 2026 on the full year basis. Essentially, at the midpoint, you are looking at a revenue growth of almost 6%, adjusted EPS growth of over 11%, along with continued margin expansion, as well as strong growth in free cash flow that is expected to be in line with our earnings growth. I think as Adam just mentioned, we are not only very much encouraged about where we are heading in wrapping up 2026. Equally importantly, this strong set of expectations is setting us up with a lot of momentum and as well as strength heading into the next three years, as we just laid out last week. Okay. How would you characterize the current just underlying utilization environment? What metrics do you look at internally that you think is the best gauge in terms of just underlying kind of health of utilization trends? Maybe it doesn't matter, maybe it's just because your drivers are broad-based and you have everything from advanced diagnostics or esoteric testing to other areas that are obviously key drivers for you. How would you measure that or gauge that right now? Yeah. The utilization environment remains strong, and we're talking specifically about diagnostics right now. But if you look at our central laboratory business, I look at the book-to-bill, which remains very strong in that business as well. When I think about utilization, obviously, I look at volume. When I look at volume, I not only look at the way we describe volume, but I also look at tests per accession. We continue to see an increase in tests per accession, and I think we're seeing that for two reasons. One is the specialty business. We reported last week for the first time that when we look at our specialty testing, patients in those areas tend to get 50% more tests per accession than the average patient. We've seen a shift in our mix of business, where esoteric business back in 2024 was about 38% of our revenue total. It's now about 41%. So you're seeing the mix shift, and that mix shift is helping with the test per accession. The second reason I believe you're seeing an increase in test per accession is that there are a lot more new tests that physicians can use to help better diagnose patients. A good example of that is cholesterol testing. If you would've gone back five or seven years ago, a doctor would test your total cholesterol, your LDL, your triglycerides, your HDL. Today, they want to understand your ApoA-I, your ApoB, maybe even HDL subtypes. It gives them more information to better diagnose the patient, but also to better determine what treatment might be most appropriate for those patients. So, the test per accession increase, I think is durable and will continue over time, and that's another metric that we look at for looking at utilization. Okay, great. So sounds like you think a lot of this is durable, especially as we head into 2027. Can we talk a little bit about some of those factors that we need to keep in mind? PAMA, ACA, Medicaid, utilization, which we just talked about, and specialty testing as well, which seems durable, but in central lab demand trends, and then you'll also annualize some. Sorry, I'm bringing a lot in here. Annualize some of your early development actions as well. Yeah. Can you high level? Yeah I know you're not giving 2027 guidance, but high level think about this moving. I'll give you some context, then I'll ask Julia to add additional context. As we look at 2027 and the longer-term guidance, there are certain pushes and pulls. When I think about the headwinds that we could face, obviously PAMA remains something that we're watching closely. We built PAMA into the guidance ranges that we provided last week. We put in the assumption that it'll occur next year, but I remain cautiously optimistic that working with our trade organization, with Democrats and Republicans in the Senate and Congress, that we'll be able to get the RESULTS Act to move forward. But we'll continue to watch that as that's obviously a headwind. The second thing we watch closely is the number of patients that lose insurance entirely. In general, if a patient's on Medicare, Medicaid, Medicare Advantage, private pay, as long as they have some type of insurance coverage, we find a way that we can be successful with those patients. When a patient loses all their insurance, that's when we watch very closely, and we tend to have a headwind. I don't think that's likely because you're in an election year this year, and then two years from now you'll be in another presidential election. I don't think anybody wants to be in a situation where they were 15 years ago, where there's a large number of people in the U.S. without access to healthcare. For the tailwinds, there's a few things. One is the timing and amount of business development. So we've said that the range is 1.5%-2.5%. Our pipeline is very strong, and the question is how fast can we bring some of that pipeline to fruition? If you look at the last three years, we actually were at the higher end of that of 2.4%, so that could certainly be a tailwind for us. The second thing is our specialty testing. We talked a lot about things that we're doing in oncology and other areas. If we can get reimbursement in some of those oncology testing areas or other specialty areas quicker, that would be a tailwind with us as well. We certainly have multiple paths of growth that I see that can get us to that longer-term guidance, and I think that the tailwinds actually are greater than the potential headwinds. Yeah. Maybe to add some additional color, I would start with the ACA impact. Our exposure there is limited. In total, that volume is less than 5% of our diagnostic business. We shared in the past that we expect the impact in 2026 full year is about 30 basis points to the volume for diagnostics. We remain to believe that's the appropriate estimate at this point in time. Post 2026, we are not anticipating a huge year-over-year increase beyond this estimate at this point in time. The related topic to ACA is really a discussion about the bad debt. In our particular case, our payer mix has remained relatively stable over time, and our bad debt management for the diagnostic business has been effective. The historical benchmark has been about 5% of the diagnostic revenue, and we've been able to continue to track at that historical level. The one additional comment as it relates to bad debt is over the past couple of years, we've made significant investment in really strengthening our collection infrastructure as it relates to the revenue cycle management, inclusive of the digital capabilities to really bill and collect. So we continue to manage our collection efforts effectively and efficiently. The last comment is really around the whole Medicaid comment that Adam already shared some color on. Overall, as a percentage of our revenue for diagnostics, Medicaid is about 8%, but on the enterprise level, it's less than 6% of our overall revenue. As you can imagine, as we develop our long-term planning process, we actually calibrated across a range of scenarios in our operating environments. But because of our payer diversification, our scale, that makes the impact more manageable than otherwise. As Adam shared already, based on what we know today, we believe the impact is manageable and contemplated in our three-year outlook. Of course, as we continue to progress to get ready to set the guidance for 2027, we expect to provide an update at that point in time based on what we know at that point in time. To answer the second part of your question, which is the central labs. Our central laboratory business remains very strong. When you look at the central laboratory business, we are a leader. We work with almost every large pharmaceutical company and biotechnology company with our central laboratory and our other biopharma laboratory businesses. One of the things that you look at, obviously, is where your business comes from. The vast majority of our business in central lab, over 70%, is from large pharma, large biotech, and is focused on phase III trials. Those are very durable businesses. Pharma would cut many other things before it would ever try to cut a phase III trial because that's the lifeblood of the organization over time. The book-to-bill remains very strong for the central laboratory business, so that gives us a good sense not only for this year, but as we go into the following years. Many of those trials are multiple-year trials. Many of the phase III trials could be three-year trials, for example. So, we feel like we've got good line of sight, and that we're right in the sweet spot of where we want to be with the central laboratory business. Julia, you mentioned some on the bad debt and what you're doing on that front, but can you talk a little bit about the nature of your relationships with health systems and hospitals right now? What are they feeling in terms of your exposure to bad debt across that relationship in particular? Are you seeing any shifts there? No, in terms of our exposure to the health system, it has remained in line with our historical level. We have not seen an uptick in the exposure in that particular regard. Okay. When I think about all these drivers, whether it's the increase around specialty and central lab business, and the refined mix across your biopharma businesses, just more holistically, we got the question, was there room for potential upside to even your long-term targets that you've laid out there to achieve? I think you want to be prudent in how you think about that. There are some moving pieces, and you do have PAMA in there as well. Is that sort of the right way to think about it? Yeah, like I said, I think that we've got a lot of tailwinds. I feel very confident in the guidance that we provided. I want to provide guidance that was realistic, that was credible, that I saw a clear path forward, and I saw multiple growth opportunities to help us get there. Building PAMA in, we're still assuming it's about a $100 million impact. Historically, I said it was $80 million, then I said maybe $80 million - $100 million. As our volume went up, I still used the old methodology, but just kind of increased based upon that. Could it be $90 million and not $100 million? Well, let's see how many customers submitted data to the agency. Could it be $110 million versus $100 million? We have to still run the analysis once we have the actual data. But $100 million is a good placeholder, and that's what we used. Within our guidance, we're assuming we overcome that. If PAMA doesn't come, obviously, that would be very helpful to us achieving that guidance and probably more towards the upside than the downside. Yep. Since you brought up PAMA, I'll just shift to that a little bit. You're still going to push for the results. Yes Right? In any event, even if this does get pushed through. Remind us of when your latest thinking on when we get the next- Yeah data point on PAMA. Yeah. What I would say is that I've spent the last couple of weeks talking to senators, congressmen and women, Democrats, Republicans, and everybody I've talked to is very supportive of the Results Act. People truly realize that the implementation of PAMA has been flawed, and therefore, we have a lot of support. We're still waiting for a CBO score, which will be important for us to understand the magnitude. But the people I talk to have said that they will support it irrespective of what the CBO score is, assuming that it's reasonable, which we expect it would be. We're working very closely with our trade organization, ACLA, A-C-L-A, and they have been really getting a lot of support for the Results Act, not just in Congress and the Senate, but also with other trade organizations, with other groups of organizations that will be supportive of results as well. So I'm cautiously optimistic that there's a path forward. We have to wait to see what the CBO score is. We have to wait to see what package of bills will be passed by the end of the year that could be attached to, but we certainly have a lot of support for it, and I feel very good about that. If we don't get the Results Act, of course, we'll continue to argue and try to find a path forward for a delay, which we've gotten for the last seven years. But that would be secondary. The first and foremost thing that we think we should do is find a path forward. I talked to a senator the other day. I said, "Every year for seven years, I've called you now to ask for your support on the same thing, and let's finally get this to happen so I don't have to make the same call next year." I think everybody wants to do that. That's the logical path forward. It just doesn't always end up logical in Washington at times. Okay. I'll shift a little bit. How is Invitae tracking relative to plan as it relates to revenue growth, profitability, accretion, now that it's fully annualized? What is the normalized growth rate from here and any other surprises or cross-selling opportunities to call out? Yeah. Invitae has been a real success for us. It's been a success from revenue growth, from operating income growth, from launching new products, including new MRD products. We achieved our objectives to make it accretive after the first year. We actually beat our internal expectations in terms of timing. It is fully 100% integrated into the organization right now. In fact, we can't even break it out fully anymore because we've moved some tests that we performed at Labcorp into the Invitae labs. We've moved some of the people that were supporting Invitae products to also support Labcorp products. The company is fully integrated right now, so you can't really break out the operating income any longer. What I would say is that everything that we had committed to do, we had done at least on time, if not faster than what the commitment was. Okay. I think oncology was a huge focus at the Investor Day. I feel like it's an area that's underappreciated for Labcorp. I wish you'd break out just a little bit more for us, as I always want more. Okay you continue to expand in the oncology portfolio, ColoSense, Plasma Detect, Genome MRD, a lot of companion diagnostic opportunities as well. What parts of that are going to be the most material for you? What are you most excited about? What will kind of move the needle, and what do you need to get in terms of evidence generation reimbursement or physician adoption milestones to get there? There's no doubt that oncology remains a very important area for us, for both our CLS business, but also for our diagnostic business. If you look at our CLS business, over 50% of the trials that we're running are in either oncology or in neurology. It just tells you that there's a lot of new products coming in those areas. Therefore, when those new products come, they're going to need diagnostic testing along with those products, either to help decide who needs the product or to help decide whether the product worked, if there's side effects from the product, or if the disease comes back. We are working in all aspects of those trials, so we have a good insight to where the future market is going. When we think about oncology, we think about it in two ways. One is, what can we do to help drive our oncology business? We have solid tumor analysis that we do. We also have liquid analysis that we do. When it comes to liquid biopsies, there's three parts. There's screening, there's therapy selection, and then there's molecular residual disease. Does the disease come back? We are focused on developing primarily within therapy selection and molecular residual disease. I think those two areas will be the fastest to reimbursement, will show the greatest ability to reduce cost to the healthcare system, and therefore, those are areas that we're working on developing certain products. We actually showed our pipeline of MRD products across tumor types, and I think we have one of the broadest, if not the broadest, kind of pipeline of MRD across tumor types and across stages of cancers. The second way I think about oncology is important as well, because I don't think about it as just the oncology test. I think about it as the oncology patient. Nobody could develop all the MRD tests that will be needed for oncology because there's so many tumor types, there's so many stages. We want to have them all available on our test menu. Whether I develop them myself, whether we license them, whether we acquire them. To us, we want to make sure that we have the test that the patient needs, not just for oncology, but when we actually work with the oncologist for that oncology patient for the oncology test, we get all the other tests that that patient may need. When you think about an oncology patient that is on an immunotherapy, they are getting a lot of tests for that first year of immunotherapy, and it is not just the test for MRD, is the disease coming back. It is ALT, their liver, it is their kidneys, it is what is happening with their RBCs, their WBCs. For us, the most profitable test is the next test that we run on the same blood sample that we have already collected. Because all of our infrastructure and our service centers to take the blood, to deliver the blood, to analyze it, is all fixed costs. Therefore, the incremental tests are actually valuable to us. We only want to do incremental tests that make sense, that the physician orders and prescribes, but physicians tend to prescribe many more tests for an oncology patient than for a patient that is not ill. For us, it is all about the patient, and we would like to have all the tests available for that patient, whether we develop them ourselves or make them available. Does that make sense? Yep. Yeah. I think that is an important point in terms of how much economic value these add and the quality of kind of the customer base, especially when you compare to sort of consumer and some other areas. Just quickly on also on the specialty testing side, you call out neurology, you call out women's health, other areas, which outside of oncology would you also be highlighting in terms of the biggest opportunity for Labcorp? They are all opportunities. It is interesting, neurology is actually the smallest, but if you look at Alzheimer's disease, it is growing the fastest. We have a very broad portfolio of products for Alzheimer's disease. I think that that is going to be a very important area for us as we move into the future. Adam commented earlier that test per accession has been a favorable contributor to our overall revenue growth for diagnostics. Last week during Investor Day, we talked about the fact that when you look at the number of tests per accession for the specialty testing requisitions, it is actually coming in at least 50% more than the average reqs. From that standpoint, to your point, it is absolutely been very conducive to the growth, both from a revenue perspective as well as the drop-through to the bottom line in terms of the economics for the profitability improvement. Is there any metrics you can give us on that front in terms of that relative profitability and, because higher tests per req, that obviously drops through nicely for you, but anything you can give us in terms of how that drops through? Yeah. The way we think about it is we have a fixed infrastructure in place. To the extent that with any single collection of the sample, if we could just drive one more test out of that collection, then that drop-through to the profitability is just really at a contribution margin that is much, much more compelling than the segment margin for diagnostics. I think the other fact I would share is if you look at last year, as an enterprise, we expanded our margin by 50 basis points. In the first half of this year, we delivered another 50 basis points of margin expansion, and we also shared during the second quarter release call that for full year 2026, we expect it to be another year of meaningful margin expansion. The contribution from the test per accession, in addition to operating efficiencies, are definitely contributing to that outcome and the value creation for the company. Okay. We get a lot of questions on consumer, and how do you think about the consumer health business going forward and direct-to-consumer testing and more proactive initiatives around preventative care? How do you play into that? How do you take a balanced approach when it comes to internal offerings and investments relative to external partnerships? Yeah. There's no doubt that consumers are playing a much more active role in their healthcare today than they have in the past. If you look, to us, it's not just the testing, but it's also the consumer experience. If you look at MyLabcorp, which is our new portal for patients to get their results, they can actually get answers to their questions, or they can get questions to ask their physician. We've actually made it much more user-friendly so that the consumer can get answers to the things that are most on their minds. As I think about the consumers, we have Labcorp OnDemand, which continues to grow very strong, double-digit growth. There we offer well over 100 different types of tests, including bundles of tests that physicians or that patients can acquire directly from Labcorp, things like women's health panel or men's health panel. There's many different types of panels that they can order, and that continues to grow well. We're involved in things like Amazon. If you look at their One Medical, we're there. If you look at Mendel, we're there. If you look at Ancestry, if you look at 23andMe, these are all areas that we're interfacing with consumers and running tests for consumers. We're going to continue to evaluate areas where we can be with the consumers. We've not yet moved into areas like the wearables and so forth. The main reason why is we've seen the price decrease that's occurring over time in those areas, and we have other growth drivers and platforms such as our central laboratory and our specialty business that we think is a better return for us. I don't see a floor to the price decreases as I sit here today. I reserve the right to move into those markets if we start to see stability, if we start to see where it would make sense to us in the future. But at this moment in time, we've not participated in that area of the market. And presumably, that could be an area that it's not like a lot of these are necessarily exclusive, and it could be competitive. It can be very competitive, and a lot of the wearable and other companies have come to us to ask if we participate. It's just at the current price and seeing the price decreases that I've seen over time, I think we have other better growth opportunities before us. Okay. Switching to biopharma quickly here. You recently announced an acquisition of MLM Medical Labs. Can you speak to the rationale, how that fits into the long-term biopharma strategy and just bigger picture, the long-term biopharma strategy? It's obviously evolved a lot over the past several years. So where do we stand now? What's the right mix? What does Labcorp look like five, 10 years down the road in terms of the business mix? Yeah. So, there's no doubt that the biopharma laboratory service business is a good, durable growth business for us. It's primarily driven by our central laboratory. That's the vast majority of that business. And the central laboratory is a good business. We are the leader in that business. We do have a global footprint. The acquisition that we announced with MLM actually gave us an additional laboratory in Europe, but also in South Africa. And many of our large pharma customers enroll quite a few patients in South Africa for multiple reasons, but that's a place that we heard from our customers would be good for us to increase our presence. So that was the reason we did that relatively small strategic acquisition. As I think about that business, it's going to continue to have good growth. I can see into the future with that business better than most because of the number of trials that are multiple-year trials. It is also right in the sweet spot of pharma with phase III trials, and we are seeing more and more products move into phase III. I feel very good about the growth of that business into the future. At the same time, we have an early development business. The early development business is a small piece of our overall business. It is about 6% of our revenue, even less than that in OI. We have moved that into a mindset of how do we increase the profitability of the business? We did a couple of strategic actions last year where we were able to downside or divest smaller parts of our business that were not strategic, and we reduced that business on an annual run rate by about $50 million of revenue, but it also was accretive to earnings slightly. You can see we made some really smart moves in that business, and it made it more profitable. I expect that business will continue to be a smaller part of our business over time, where the central laboratory will continue to be a bigger, more important business for us over time. Okay. Margins, you gave some long-term margin targets in terms of margin expansion over the next three years. I guess, what gets you there to those targets in terms of biopharma versus diagnostics, and how do we think about that trajectory in terms of breaking it down? Yes, you are right. We laid out for the next three years, from 2027 - 2029, we expect the margin expansion to be between 75 -1 50 basis points by the end of 2029. In terms of the pathway to get there, first of all, I would say we expect both segments to be contributors, like they have been in the last few years. Second of all, in terms of the key levers behind that margin growth, it starts with the top-line growth, as well as our ability to leverage the operating base that we have from an infrastructure perspective. As we shared, if you look at our global scale, look at our focus on specialty, look at our ability to really drive the increase in tests per accession, all of those are going to be very conducive from a drop-through perspective. In addition to that, early on, Adam touched upon our operating efficiency drive through the LaunchPad program. We expect to deliver annual savings of $125 million- $150 million every year over the next three years. That, of course, is going to be meaningfully driven by technological advancements and our investments across our network, including areas like lab automations, customer-facing solutions, revenue cycle management, digital pathology, microbiology, just to name a few areas of investments. We are looking for areas where they are clearly aligned with our strategic priorities from a business perspective, but also we can clearly measure the return for the consumers, the customers, the patients, and the shareholders. All in all, we believe that we have multiple proven levers that we can pull, both from a top-line operational efficiency perspective to deliver against the margin expansion expectation for the next three years. On capital deployment, how is the deal pipeline shaping up? I think it's always missed a little bit that whether it's PAMA or pressures across health systems or otherwise, you're a solution provider as well in terms of offering lower cost, high-quality laboratory services. In that context, how is the deal pipeline relative to this time last year? How do we think about it going forward and the opportunities you see? Yeah. There's no doubt that the deal pipeline is very strong. When I look at both the hospital deal pipeline but also local regional laboratory deal pipeline, it's as strong as I've seen it, frankly. As I look forward, it's interesting, if PAMA does occur, there's certainly a short-term impact, but Labcorp will be just fine. We'll be able to grow through that over time. The smaller local regional laboratories, some of the hospital laboratories will really struggle. I think it would actually increase our pipeline and be a tailwind for us over time if PAMA were to occur. All in all, we're rooting for the Results Act. We're supporting the Results Act, and we think that's the right path forward. In a strange kind of way, PAMA actually, over time, could be a tailwind for us from a business development pipeline perspective. Overall, our guidance assumes 1.5%-2.5% will come from inorganic growth. For the last three years, we've been at the higher end of that. The pipeline remains strong, and stay tuned. Yep. Okay. I hate to leave this for the last 30 seconds or so, but you spent a good portion of the Investor Day talking about technology investment and AI. What were some of the highlights that you would like people to take away from that discussion? Yeah. I would say we are fully invested in AI and technology. It is incorporated into our guidance. It is incorporated into everything that we think about with LaunchPad, and we think about it in three ways. One, what can we do to improve the customer experience? What can we do to reduce short-term costs? Then what can we do over time to transform our business? We have multiple levers in each of those areas. I remain excited about the technology. I think that it will help reduce healthcare costs overall. I think that it will improve speed and turnaround time. At the same time, I think it is going to allow us to get personalized insights into people's health that we have not been able to do before. So I think technology will always be a big part of our strategy, and I am excited about where we are going. Okay, great. Thank you so much for the time. Really appreciate it. Thank you. Nice to see everybody. Thank you. Thank you, everybody.