Welcome to the Laboratory Corporation of America Holdings Third Quarter 2023 Earnings Conference Call. At this time all participants are in listen only mode. After the speaker's presentation there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program. Christin O'Donnell, Vice President of Investor Relations, please go ahead.

Thank you, operator. Good morning and welcome the Labcorp’s third quarter 2023 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 2023 guidance and the related assumptions, the impact of various factors on the company's businesses, operating and financial results, cash flows and or financial condition, 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 Schechter.

Thank you, Christin. Good morning, everyone. Today I'll cover our third quarter performance, and I'll discuss strategy which we reviewed at a recent investor day. In the third quarter Labcorp delivered strong year-over-year growth across the enterprise with acceleration or diagnostic laboratories and biopharma laboratory service businesses. Our growth is fueled by our ability to execute well and to deliver greater value for our customers, through our leadership in science, innovation and technology. We see strength in our businesses. We have enhanced financial flexibility, and a clear strategic focus, all of which enable us to end the year with significant momentum. Labcorp will continue to drive growth by expanding our base business, finalizing and integrating our hospital and health system and our local and regional laboratory transactions. And by advancing our leadership and high growth strategic areas, including specialty testing. Moving to our third quarter results in the third quarter revenue totaled $3.1 billion. Adjusted earnings per share was $3.38. And free cash flow from continuing operations, excluding spin related items was $227 million. Enterprise revenue increased 7% compared to their prior year. Diagnostics laboratories based business revenue continued exceptional year-over-year growth with a 16% increase driven by organic growth and progress in our hospital and health system strategy, including retention. Biopharma Laboratory Services had a strong growth in the third quarter of 8%. Enterprise based business margin was down 50 basis points compared to the prior year, primarily due to the mixed impact of retention. We continue to expect full year-base business margins to be flat to slightly up versus prior year, implying an increase in fourth quarter margins year-over-year. Then we'll provide more detail on our quarterly results, as well as a 2023 outlook in just a moment. Turning now to our Enterprise Strategy in the third quarter,…

Thank you, Adam. I'm going to start my comments with a review of our third quarter results, followed by 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 $3.1 billion, an increase of 6.6% compared to last year. Primarily due to organic based business growth and the impact from acquisitions, partially offset by lower COVID testing. The base business grew 14% compared to the base business last year, while COVID testing revenue was down 87%. Organically in constant currency, the base business grew 10.8% benefiting from the Ascension lab management agreement, which contributed approximately 4% of the organic growth. As a reminder, the Outreach business that we acquired from Ascension is treated as an acquisition while the lab management agreement is treated as organic growth, Ascension annualized on September 30th. Operating income for the quarter was $252 million, or 8.3% of revenue. During the quarter we had $56 million of amortization and $116 million of restructuring charges and special items due to the spin of Fortrea, COVID acquisitions and Launchpad initiatives. Excluding these items adjusted operating income in the quarter was $424 million, or 13.9% of revenue, compared to $491 million, or 17.1% last year. The decrease in adjusted operating income was due to lower COVID testing. The margin decline was also negatively affected by the mixed impact from the Ascension lab management agreement. Excluding these items margins would have been flat as the benefit of demand and Launchpad savings were offset by higher personnel expense. Our Launchpad initiative continues to be on track to deliver $350 million of savings over the three-year period ending 2024.…

[Operator Instructions] And our first question comes from the line of Kevin Caliendo from UBS. Your question please.

Sure. Guess I want to go into the book-to-bill in the sequential -- the commentary about Biopharma and cancellations. When did you start to see that? How meaningful is it? Is it across multiple customers? Any more color around what's happening with the orders in the Biopharma business cancellations, as much color as you can provide would be super helpful?

Sure, good morning, Kevin. So, if you look at the third quarter book-to-bill it was a bit light versus the prior quarter. And it was mostly due to small and emerging biotech. And it was mostly due to those customers in our early development, research laboratories. Large pharma, middle sized biotech, which is the majority of our customers in our central laboratories, which is the largest part of our biopharma segment, remain strong. And as I look at fourth quarter, I expect the book-to-bill in fourth quarter to be better than it was in the third quarter. If you look at the trailing 12 months, it was 1.12. And to me, that still remains pretty healthy. If you remember, last quarter, I mentioned that with a clinical development business now being a separate company. You would expect the book-to-bill to be lower. In particular, because in early development, most of those trials are very short-term, they can be one month, three months, they usually start and end in the same year that you have them. So, that's why I feel confident that we'll continue to see progress. I feel that the largest part of our business Central Laboratories remains very strong in RFPs, book-to-bill, and we just have to continue to try to find a way to change our mix a bit in early development. I'd like to move early development to work more with the midsize biotech, maybe some of the pharma companies versus having too much reliance on smaller emerging biotech companies. If you look at the revenue, I felt very good about the revenue in the bio pharma business with 8% revenue growth in the segment for the quarter. And we accept expect to see continued strength in revenue growth.

And just the confidence that it gets better next quarter, is that visibility? Is that just basically writing off some of the stuff that the cancellations are going to improve? Like what gives you that sense? Obviously, you can see more than we can, I'm just wondering what that is, that we can sort of rely on?

So, again, I'm just looking at the number of RFPs coming through our run rate, and so forth. And based upon what I see, as I sit here today. I expect us to have a better quarter and fourth quarter for book-to-bill in the third quarter. And sometimes book-to-bill is timing related you think you might get a trial the third quarter ends up falling to the fourth. I've always said to be careful to look at any one quarter when it comes to book-to-bill. And that's why we also provide the trailing 12 months. Yeah,

Thanks so much. Super helpful.

And our next question comes from the line of Lisa Gill from JPMorgan, your question please.

Thanks very much. Good morning. The other side of the business. Good morning when I think about the diagnostic side of business and the strong core growth. Just two questions there one, can you talk about where you are on managed care contracting and, you know, in helping them and the shift inside of care go into lower cost? Lab services like Labcorp versus, you know, and have inpatient etcetera. And then secondly, as we think about routine testing, are you seeing an increase in metabolic testing specifically, like A1c, as you think about the GLP, one praise?

Sure, this first one, you know, we're very pleased with the performance in the diagnostic sector, not just when you look at overall revenue, which includes Ascension. But when you look at the base business volume, if you look at that the base business volume was up 7.2%. And about 3.6% was from acquisition. So, it just tells you that the organic base business remains very strong. Our managed care contracting, we're in very good position. We've there finalized or are close to finalizing all of the contracts that were large and need to be renewed. And I would say, you know, there'll be a basically flat to slightly positive, which is a good place for us to be as we move into next year. So, I feel very good about that. You know, we look at metabolic testing. And then we look at all the different types of routine testing. And we haven't, yet we see that growing, but it's growing at consistent rates as it's grown before. And we still see our esoteric testing growing a little bit faster, but almost about the same as our routine testing. And if you look at like our metabolic testing, and so forth, we don't really see an acceleration there. And a lot of the metabolic testing is done in panels. And it's done with other tests, and so forth. So, I wouldn't expect to see a significant change necessarily, with the GLP ones moving forward. But the growth is very broad based. It's across geographies is across routine and esoteric testing. It's across all the different types of testing that we have. So, the underlying dynamics are very strong.

It’s very helpful.

And our next question comes from the line of Patrick Donnelly from Citi. Your question, please.

Hey, guys, thanks for taking the questions. Good morning, just a follow up on the early development side, you know, interesting to hear kind of maybe shifting towards a little bit new, newer of a customer base more towards the midsized. Does that, I guess, what does that entail? You just have to cater the offering a little bit more towards that customer base? And is there a little bit of disruption as that happens? Maybe just talk through how you think about moving the portfolio more towards that client base?

Yeah, absolutely. One of the things Patrick we're trying to do is to focus more on the specialty testing, and also thinking about how to expand internationally on things like companion diagnostics. When you think about a mid to large pharma company, as they develop more personalized medicine, they're going to want to have some type of diagnostic tool or companion diagnostic that they can use to develop to identify which patients are most apt to respond to the medicine, but also have it available ultimately, in the marketplace. So, where we're trying to go is to show pharma that they work with us early. We can help them develop their diagnostic tests. We have very strong capabilities and companion diagnostics, and developing specialty diagnostic tests. We can help them do their clinical trials to our Central Laboratories, and do all the companion diagnostic testing, and specialty testing. And ultimately, we want to be able to offer to them, that we can launch that test not only in the United States, but we can help them bring those specialty and companion diagnostic tests to other parts of the world. I think it'd be a very compelling discussion to have with pharma. And we're having some of those discussions as we speak.

Understood, thanks. And then maybe just on the margin piece, you know, obviously, you guys gave a pretty detailed guidance at the Analyst Day, maybe just near term, if you could talk through the moving pieces that sounds like you know, pricing relatively stable, but just the moving parts as we work our way into the end of the year, and then ‘24. And then just think high level about the margin piece. Thank you.

Thank you. Yeah, I'll ask them to jump in as well. I'd say the largest impact of margins, as I think about 2024 is PAMA. And we've built in about $80 million, almost $80 million of downside into our base case, assuming that PAMA comes next year. We're still trying to see, working with our trade group if there's a way to get the SALSA legislation approved. We have bipartisan support, but we had that last year. So, it's very hard to get things approved right now. We're also going to see if there's a way to delay for another year the implementation, but for our base case, we're assuming that there's about an $80 million impact that would negatively impact the margins next year. That's why we gave the long-term guidance. And we said it's 100 to 150 basis point increase over the time period. We said most of that will be after 2024. Because in 2024, we have to overcome PAMA. Let's wait and see if PAMA doesn't come or if it's delayed, then we'll have some upside there for sure.

Yeah, Patrick, just I guess, as you look to the two businesses, we feel good about where we are with the margins, they continue to improve on a base business level. As we think about going into the fourth quarter. We commented that within the biopharma side, we expect margins to be up in the fourth quarter and year-on-year, such that for the full year, there'll be flat to slightly up. In diagnostics, obviously, we have seasonality that impacts margins of fourth quarter sequentially, margins will be down, but they'll still be up year-over-year. So, that we expect diagnostics margins for the full year, to be up slightly, even after absorbing the negative impact from the Ascension mix. As Adam commented in the 100, to call it 150 basis point margin improvement that we expect over the next three years. We commented that the first-year margins would be relatively flat, we have around a 70-basis point headwind, if you will, between the combination of lower COVID testing, as well as the PAMA headwind that that Adam commented, but that's reflected still in the three-year expectation that margins would grow that 100 basis points to 150 basis points.

Understood. Thanks, guys.

And our next question comes from the line of Jack Meehan from Nephron Research. Your question please.

Good morning, Jack.

Good morning, want to stick with the macro environment on the diagnostic lab side, Adam, are you seeing any recessionary signals at all in terms of the testing getting ordered? And then maybe on the flip side, hearing any change in the tenor of your hospital conversations around consolidation opportunities?

Yeah, Jack. So, you know, when you look at the macro dynamics, I would say for testing, it remains strong. And when you look at the volume that we're seeing, it remains very strong as well. And it's broad based across the country and esoteric and routine testing. If you go back to historical recessionary periods, the diagnostic business tends to continue to do well through those periods. So, I feel pretty confident that we're going to continue to be see strength there. When it comes to hospitals. You know, I've talked about how the hospital health system but also local and regional laboratory acquisition possibilities remain extraordinarily strong. And I think it's because they're struggling in the economic environment, with reimbursement with wages, and other things. And they're looking for ways that they can get some capital, but also look for people that are like experts in hiring, the types of jobs that we hire for managing the type of people that we manage. So, I think the macro environment for the health systems and for these local smaller regional laboratories is very strong for us to continue to find ways to do business development and find visual partnerships. So, it's actually a good environment for us to compete. But obviously, we want our hospital systems to remain solvent and, you know, they have a lot of things that they have to do to continue to be successful.

Great. And, Glenn, at the Analyst Day for 2024. You laid out some initial thinking it would be slightly below the 8.5% to 11%. EPS CAGR range. Just curious if anything, you know, in terms of the orders on the biopharma lab side or just anything else changes the way you're thinking about that? Thanks.

Yeah, no, Jack. Again, when we basically reaffirmed kind of our outlook for this year as well as our three years when we were at the Analyst Day, we knew there was some softness we had experienced within early development earlier. So, that continues, but as Adam said, kind of offset by the strength that we're seeing with on the Central lab side. So, for Biopharma, and for Diagnostic segments, we feel very good. So, if you look at call it that 8.5% to 11.5% EPS target over the next three years, the CAGR, we still feel very good about that, realizing that for 2024, because again of the headwinds from less COVID testing and PAMA, you'd have around 800 basis point headwind to EPS in 2024. So, still positive EPS growth year-on-year even with those headwinds, but lower than, if you will, the range that we had, but again, that three-year range includes that expectation for 2024.

And our next question comes from the line of Eric Coldwell from Baird, your question, please.

Good morning. Thank you I have two, the first one may be a bit confusing. So, bear with me, your largest competitor and early developments given some interesting color around their cancellations, and talked about how a majority of those cancellations they've experienced were predicated on awards that were made a year ago, two years ago stuff that was, you know, clients pre booking stuff when they were concerned about capacity and access in the future. You're talking more about small clients. And it sounds like maybe this is more recent stuff. But I'm curious if you could talk at all about the aging of the cancellations, how long ago were these awards made? And is this something more in the moment? Or perhaps just clean up from past client activity that was abnormal? And then --

Thanks for that clarification, we're seeing a similar thing that primarily with NHP trials that were, when there was supply issues, people started to get in line much earlier than they typically would to ensure that they could run their trials as fast as they could. Now that we have supply and so forth, as those clients studies are ready to go, they're not necessarily ready to go. Or they're thinking about their pipeline and other priorities, and so forth, because they booked these spots so far ago. So, that's the primary reason that we believe we're seeing these cancellations in early development.

And then can you talk at all about gross awards in early development was that book-to-bill above one or below one this quarter?

So, if you look, overall, if you just look at the quarter would have been below one. But as again, with early development, I don't think book-to-bill is really a good way to look at that business. Because when it comes to early development, they're one month trial, three months trials, maybe six-month trial, so you can burn through those in the same year. Very quickly, I look at the book-to-bill, you know, because I think it's a historical way to look at the business. But EPS is very small compared to Central Laboratory and the vast majority of our Accentual laboratory work remains very strong. So, that's why I feel confident, as I look at the numbers of the future, because of the size of our Central Laboratory, the mix of customers and Central Laboratories more towards pharma, and big biotech and the book-to-bill it remains pretty good.

Okay, thank you for that, Adam. And I was just hoping you could talk a bit about the FDAs LDT proposal here and maybe help us with some quantification of what your LDT mix looks like by revenue or volume or any color, commentary on what you see progressing with the proposed rule at the FDA. Thank you.

Yep, absolutely. So, you know, we were supportive of legislation called valid last year that would have given FDA oversight for laboratory developed tests. And it was unfortunate that it didn't get passed last year, had bipartisan support, we were supportive. It's disappointing that legislation didn't go through. So, we're supportive of working with the FDA to find ways for them to give appropriate oversight. We think that our science or innovation or technology capabilities actually differentiate us. And if you look at the rigor that we go through with our laboratory developed tests, we think we do the vast majority of what they would be asking for anyway. Working with ACLA, our trade organization, what we're worried about is if you take legislation that had an intended purpose, for one thing, and then you try to apply it to another thing, you have to be very thoughtful about that. The good news is the FDA has asked for comments, and we're going to provide comments and thoughts. At the end of the day, if it's fairly done, meaning that all laboratory developed tests have to do the same thing across big labs, small labs and everything else, as long as they can get these filings done quickly so that people have access to new innovations in a timely manner, like they do today. We believe that it will be minimal impact to us in terms of the amount of money or spend because we do a lot of that work anyway. With that said, it's less than 10% of our volume. So, laboratory developed tests are not a significant portion of our volume. But sometimes they are the most important test for new specialty areas. And trying to get those to patients quickly is what's most important for them.

Adam with less than 10% of volume, I would assume the revenue contribution would be higher because they are as you just stated, a bit unique at the testing so could you talk --

It's less than 10% of the dollars to when I say less than 100% of the value is. It's less than 5%, frankly. And then the dollar is less than 10%.

Perfect. Thank you so much.

And our next question comes from the line of Tim Daley from Wells Fargo, your question please.

So, first one on diagnostics, I think organic bass, this price mix, excluding Ascension was roughly 320 bits, if I just kind of back out the numbers. You know, if you break that out from like, like-for-like price versus mix impact for us in the quarter? And how is, standalone price been trending versus last quarter last year? I mean, healthcare would be great.

Sure. Hey Tim, this is Glenn. That's right, we would agree that your 320 is in line with the, call it the organic price mix favorability excluding the impact that we would get from Ascension. You know, from a pricing standpoint, we continue to say pricing is kind of flat, maybe a little bit of a headwind. You heard Adam earlier in the future with the renewals of the managed care contracts, you know, that actually is a positive for us. But most of the time that favorability in our price mix continues to be on the mix side, we continue to see favorability in our tests per session, you know, whether the payer mix test mix with a lot of things esoteric relative to routine. So, we continue to experience good favorable price mix, but more on the mix side.

Appreciate that. And then my second question is on the direct consumer, so good to see a continued menu and expansion. This quarter with the announcement, just can you update us on the revenue mix within consumer? Where was it this quarter? What are you expecting, as a piece of that ‘23 guidance? Thank you.

Yeah, no problem, Tim. So, direct to consumer advertising remains important. Wait for us to enable consumers to monitor and take care of the health. If you look at the dollar volume, especially if you take out the testing for COVID is still very small, and it's not worth it's not material enough to actually break out the numbers. We see it growing very substantially. But it's not necessarily at a point where we would break it out and give specific numbers for it. I think when it comes to consumer testing, we're going to see a lot more rope as we go through the years. At some point, if it reaches that material threshold, Tim will certainly start to break it out.

Yeah, I appreciate time. Thank you.

Yeah. Thank you.

And our next question comes from the line of Erin Wright from Morgan Stanley, your question, please.

Thanks. Hi, good morning. I know you mentioned the base margin improvement sequentially in the fourth quarter. But are you seeing the need in one of your competitors, as mentioned in that mentioning this, but stepped-up investments in labor? And just the current utilization environment? Maybe that some of the seasonality you were talking about in the fourth quarter, but how are you just thinking about the labor environment right now? Thanks.

Yeah thanks, Erin. So, labor environment is tough across industries, across countries. I mean, there's no doubt that the good news is, you know, I look at our retention rates. And if you look at retention from 2019, we saw a significant loss of people and our actual turnover rate was up substantially in 2021 and 2022. If we now look at 2023, we've seen those rates come down in our biopharma business, they've come down almost to the 2019 levels. If you look at our diagnostic business, they're not yet at our 2019 levels, but they're getting closer. And you know, we expect there to be continued progress there. But we have had to pay a bit more in certain areas, we've had to be competitive in the marketplace. It does impact the margins. But at the same time, that's why we've been so aggressive with Launchpad. And we're on track to deliver the $350 million of Launchpad savings that we discussed in the past. We also at Investor Day talked about a $100 million to $125 million year reduction through Launchpad. And we also mentioned that we have an increase in our margins over the ‘23 to ‘26 period of 100 to 150 basis points, mostly coming after the PAMA year in 2024. So, most of that in ‘25 and ‘26. So, at the end of the day, we realized we've got to find ways to reduce costs. So that we can offset some of the pressure that we're facing when it comes to, you know, the wages and so forth.

Okay, thanks. That's helpful. And then on the early development business, just to enlighten the environment in some of the volatility you've been there. And what you've been talking about in terms of the Biopharma landscape, but you know, has anything changed in terms of your commitment to the business at this point? Is that an area that you'll continue to evaluate? Thanks?

Yeah, thanks Erin. You know, again, it is a very small part of our business. I mean, if you look at the business as a percent of Labcorp, it's very small, it's less than 10%, frankly. And if you look at it as a percent of the biopharma business, it's maybe 30% or so. So, at the end of the day, it's really Central Laboratory that drives our success and Biopharma. At the same time with the strategic things that we're trying to do with companion diagnostics. And work with pharma earlier, bringing those companion diagnostics to Central Laboratories, and then ultimately bring them to the marketplace. Strategically, I still think it makes sense. And I still think that we could do a lot of other things with our early development that helps us in the broader, bigger business that we have. And we continue to evaluate all things.

And our next question comes from the line of Pito Chickering from Deutsche Bank. Your question please.

You've got Kieran Ryan on for Pito. Thanks for taking the question. Just a quick one here. I just wanted to see how you guys are tracking on taking out some of the stranded costs after the span, I believe you were talking about targeting 25 million of the 45 million at the industry rate. So just wanted to see if there's any update there?

Yeah. All right. So, we're on target, we said we have this 25 million by the end of this year. So the runway next year, that would be taken out. But I think the most important piece is that that's not enough. And if we're going to do that, plus, we have to do more. So, as I said, we're on track for a $350 million Launchpad initiative. And we've committed to 100 million to 125 million per year, in the outer years, as we look at a long term forecast that includes $25 million of stranded costs, but it just tells you we've got to do a lot more.

Got it. Thank you. And then just real quick on the Biopharma side, just wanted to check is there as we head into ‘24, is there any seasonality that we should be aware of there? And does that change at all after the spin versus pre spin or not? Not too much call out? Thanks.

Yeah, I like to that answer question. In general, I don't see that there'll be a significant shift, in terms of we've always had some seasonality. And if you look at like Central labs, for example, they always start off a little bit slower in the first quarter, because a lot of pharma are starting to get their studies running in third quarter, sometimes a little slower as Europe comes back after vacation. But net-net, you know, there shouldn't be any significant changes to what we've seen in the past.

Yeah, that's right. And the numbers that we've provided historically have been restated for the company we are today. So, you can look at our enhanced disclosures that we have that you'll see some historical numbers. But the other interesting thing is, the seasonality of the two segments are a little bit counter to each other. So, it actually when you look at it from an enterprise level, mutes the seasonality for each of the businesses.

And our next question comes from the line of Derik de Bruin from Bank of America, your question, please.

Good morning. This is John on for Derek. Wanted to revisit the PAMA issue there. I recognize that your guidance is assuming the PAMA impact as a base case, and you've talked about the 70 basis points of headwind between PAMA and COVID. But in the case of a delay, would you allocate that 80 million benefit that will turn into a benefit now between maybe letting it trickle down to margins versus investments?

Yeah, we're going to push for the vast majority of it to come down to margin. I mean, there might be some incremental minor investments, but we've got almost $80 million into the plan, and I would expect the vast majority of that to come down.

Appreciate it. And then with the ATN profile, could you comment on? What sort of reimbursement you've been able to negotiate with the payers versus what you're getting from the CMS? And I know, early earlier, you talked about the LBT tests as a volume, it's less than 5% and a sale that's less than 10%. But still curious if you plan on taking it for the FDA approval, or if there's going to be any sort of disruption there. Thank you.

Yeah. So, at this point, we don't think there'll be any disruption to the ATN profile, we've launched it into the marketplace. You know, some managed care organizations are starting to reimburse others we're in discussions with, but a lot of the reimbursement in that area is from providers and the health systems and so forth. So, we expect we'll have good reimbursement from those areas as we go forward. It's still relatively new tasks, we’re still have physicians, learning about the panel and so forth. So, it will take time, but over time, we expect it to be reimbursed well.

Thank you. That's all.

And our next question comes from the line of Brian Tanquilut from Jefferies. Your question, please.

Good morning. I guess I'll start, Adam, as I think about a comment that your competitor made yesterday, like contract renewals. Just curious what you're seeing on your side in terms of contracting with payers, and your kind of like rate trends there as we think about upcoming rehabs and contracts?

Yeah, absolutely. Brian. So, you know, we've renegotiated the majority of our contracts were really, really finished. And, really close on one last one. But they ended up being very good negotiations, very good discussions, we think that ultimately, it will be flat, maybe slightly positive. So, I feel really good about that.

Got it. And then Glenn, you've talked about a three-year kind of like margin goals of 100 basis point to 150 basis point improvement, as we think about the moving parts between labor Launchpad. And I think we're getting questions from people asking, you know, when do we see the flow through of all that, and improving it in volumes to the margin line? How should we be thinking about that?

Well, again, a lot of the, the expectation is that we're looking at good top line growth. So, we would expect to leverage off of that Launchpad savings that we've identified as well, and then being offset by labor and potentially continued inflationary environment. You know, for us, we talk a lot about labor, because it represents around 50% of our cost structure. So, we're very focused on it. And as Adam said, we are seeing some improvement in the attrition levels, but it's still higher than where it's been in the past. And there's a cost to that, let alone just the labor wage rates inflation, if you will, but all that's been factored in. So, to the extent we can continue to drive the top line that we feel confident about, and realize the Launchpad savings, which we feel confident about, we equally expect to see that margin improvement.

Awesome. Thank you.

Thank you. This does conclude the question-and-answer session of today's program, I'd like to hand the program back to Adam Schechter for any further remarks.

Thank you. Thank you all for joining us today. Hope you can tell that we remain very optimistic about the prospects for Labcorp as we continue to execute, and we execute well on our strategy, and that we believe our strategy is going to continue to drive substantial shareholder value. Hope everybody has a good rest of the day.

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.