Good day, and thank you for standing by. Welcome to the Q4 2025 Labcorp Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Christin O'Donnell, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good morning, and welcome to Labcorp's Fourth Quarter 2025 Conference Call. As detailed in today's press release, there will be a replay of this conference call available. With me today are Adam Schechter, Chairman and Chief Executive Officer; and Julia Wang, 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 business and operations, which includes a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures. Please see the use of adjusted measures section in our press release and Investor Relations presentation for more information regarding our use of non-GAAP financial measures. Additionally, we are making forward-looking statements. These forward-looking statements include, but are not limited to, statements with respect to the estimated 2026 guidance and the related assumptions, the projected impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial condition, including global economic and market conditions, future business strategies and expected savings, benefits and synergies from acquisitions and other strategic actions and partnerships 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, and good morning, everyone. We appreciate you joining us to review our fourth quarter and full year 2025 performance and our outlook for 2026. 2025 was a very strong year for Labcorp with over 7% top line growth, 13% adjusted EPS growth and with margins also improving by over 50 basis points. With the momentum that we have, we expect strong underlying business performance in 2026. As we look back at 2025, we made significant progress across our strategic priorities. We deepened our partnerships with health systems and regional and local laboratories by signing or closing 13 deals. The transactions we have closed in this area over the past three years have contributed to growth of more than $1 billion in revenue and have expanded access to our broad portfolio of routine and specialty testing. In the fourth quarter, we entered into an agreement to acquire select outreach laboratory services from Parkview Health. We completed our acquisition of select outreach assets from Community Health Systems, and we acquired select anatomic pathology assets from Incyte Diagnostics. Subsequent to the quarter, we completed our acquisition of select assets of Empire City Laboratories. We continue to have a very robust pipeline of opportunities, and we look forward to updating you on our progress. We also advanced our leadership in specialty testing with providers, health systems and pharmaceutical clients. They're increasingly turning to us for more complex and innovative laboratory testing. In fact, esoteric testing grew double digits last year. And when physicians choose Labcorp for specialty testing, they tend to use Labcorp for all of that patient's testing needs. This will continue to be a key growth engine, including in our central laboratory business, where utilization of specialty testing in clinical trials continues to increase. In 2025, we launched more…

Thank you, Adam. My remarks today will focus on our adjusted financial results. Please see our earnings press release and supplemental financial presentation for detail on our GAAP results. In 2025, we made meaningful progress on our strategic priorities and delivered strong financial results. In comparison to prior year, enterprise revenue grew over 7% and enterprise margins expanded over 50 basis points, driven by ongoing strong performance in Diagnostics and Central Labs. Our LaunchPad initiative also delivered savings for the full year, in line with our long-term target of $100 million to $125 million per year. Adjusted EPS grew 13% and free cash flow of $1.2 billion grew 10%. We ended the year with a strong trailing 12-month book-to-bill of 1.09, driven by Central Labs. Now turning to fourth quarter results. Revenue was $3.5 billion, an increase of 5.6% compared to last year, driven by organic growth of 3.8%, the impact from acquisitions of 1.2% and foreign currency translation of 0.6%. Adjusted operating income was $488 million or 13.9% of revenue compared to $423 million or 12.7% of revenue last year. The increase in adjusted operating income and operating margin was primarily driven by organic growth in Diagnostics and Central Labs. The adjusted tax rate was 22.5% compared to 22.4% last year. Adjusted EPS was $4.07, up 18% from last year. Free cash flow was $490 million compared to $665 million last year. The decrease in free cash flow was primarily driven by working capital timing. During the quarter, we invested $258 million in acquisitions, paid out $59 million in dividends and repurchased $225 million of stock. We continue to have a robust pipeline of potential acquisition opportunities that meet our financial criteria and will supplement our organic growth. In addition, our share repurchase program and dividend continue to be…

Thank you, Julia. I'd like to thank our Labcorp team members for their contribution to a very successful year. It's because of their commitment to our mission that Labcorp was recently named to Fortune World's Most Admired Companies list. In summary, we delivered strong financial performance in 2025. We made significant progress against our strategic priorities, and we expect strong performance in 2026. We remain focused on growth, disciplined execution and creating sustainable long-term value for our customers and our shareholders. We look forward to discussing our progress throughout the year. Operator, we'll now take questions.

[Operator Instructions] And our first question comes from Michael Cherny of Leerink Partners.

This is actually Dan Clark on for Mike. Just wanted to ask on 2026 guidance. How are you kind of thinking about the contributions from price and margin -- price and volume, excuse me, kind of at the high and low ends of the range at this point?

Yes, sure. So first of all, if you look at our 2026 guidance, we expect another very strong year. And we expect that with the midpoint of our revenue growth being about 5.4%, and we expect both segments to perform well. I think you're probably referring to the volume in the Diagnostics segment. If you look at Diagnostics, we're expecting the revenue to grow 5% to 6%, and we expect the majority of the revenue growth to come organically. And if you look at the guidance, we assume about half of the organic growth will come from volume and about half will come from price/mix, pretty similar to what you saw this year.

Dan, to add to that, I'd like to provide some color on our margin trajectory under a broader context. I would say that as an enterprise, we have been highly focused on delivering strong top line growth while driving operating efficiencies, which translates into margin expansion. In this regard, we are really pleased with the progress that we made in 2025, which positions us with positive momentum as we head into this year. So for full year 2025, we expanded our enterprise margin by over 50 basis points, and the margin growth was supported by both segments, with Diagnostics margin being up about 50 basis points and BLS margin was up 40 basis points. If you step back, look at the key drivers of the margin expansion, it was really coming from the strong top line growth, coupled with disciplined expense management and continued execution of our LaunchPad initiative. Looking forward to 2026, we actually expect another year of meaningful margin improvement by both segments. I would also add that if you look at the contribution in terms of margin progression versus last year, we expect the BLS segment to improve more than the Diagnostics segment as we continue to drive strong top line growth in Central Labs while streamlining the ED business. So all in all, we are pleased with the margin progression, and we believe it positions us for continued success in 2026.

Great. Just a quick follow-up. How should we think about contributions from Invitae this year, given that you did a pretty good job integrating it thus far?

Yes. So the Invitae integration went extraordinarily well. And in fact, it's so integrated, it's almost impossible to pull out any longer because if you look at the Invitae lab, for example, in San Francisco, we now are running tests that historically ran in some of our diagnostic labs. If you look at the sales forces, they're now completely combined. So we expect strong revenue growth as one of our specialty areas. We expect that to grow to 2 to 3x faster than the overall market. But we won't be breaking out Invitae any longer specifically.

And our next question comes from Kevin Caliendo of UBS.

The fourth quarter organic volume was lighter than normal, up 1%. Was there anything in particular to call out there? It was sort of one of your -- given the volume trajectory that you saw in the guidance what you imply in '26, it seems an outlier, but I just want to understand it a little bit better.

Yes. Let me give you some specifics on that, Kevin. So first of all, if you start with the Diagnostics revenue, it was $2.7 billion, around 6% growth versus last year. The organic growth was strong. It was 4.1% and the acquisitions were about 1.5%. If you then kind of break it back further, the volume increased 2.2% and organic volume was about half of that, acquisitions was the other half. If you look at the organic volume, there were two things to look at that impacted it. First of all, there were lower referrals from a large consumer genetic client who experienced financial challenges during the fourth quarter. And there was just a little bit from weather. If you just adjusted for those two, Kevin, it would have been over 2% growth, which is consistent with the full year. As we think about 2026, we expect strong growth in the Diagnostic business of 5% to 6%, 5.5% at the midpoint. And that assumes about half of it will come -- or the majority of the revenue will come organically. And if you look at the organic growth, about half will come from volume, half from price mix, about the same as this year.

So that one customer that was just -- a fourth quarter, it sounds like that's really the issue here, and that was a fourth quarter thing that's not going to continue or no longer...

That's correct.

And our next question comes from Ann Hynes of Mizuho.

So when you look at your 2026 guidance, where do you think maybe you're being the most conservative? And alternatively, where do you think the biggest risks are?

Yes. Thanks, Ann. So as I look at the enterprise guidance for 2026, I feel really good about it. And if you look at the -- it's really 4.7% to 6% revenue guidance and the EPS guidance implies about a 9% growth at the midpoint. If you look at the pushes and pulls, I'll focus on diagnostics first. We expect the utilization environment to be healthy. We're seeing these industry trends that I talked about before, aging population, a number of tests that people are getting, lots of positive trends in that direction. But of course, slightly higher or lower organic volumes could move us within the range to the high end. If you think about the underlying business and business development pipeline, that's strong and the timing of M&A could impact us one way or the other. So we have a very strong pipeline of M&A, but we're going to continue to see how quickly we can turn that pipeline into revenue. If you look at biopharma side, if you look at the Central Labs, we expect to see solid organic mid-single-digit growth, and you can see the strong trailing 12-month book-to-bill that will support that. And that's a very backlog-driven business. So I feel good about the guidance. If you think about early development, we expect to see organic growth relatively flat for the full year. It will be driven partly by how quickly we either consolidate or we've already sold the $50 million of impacted revenue. We expect that to impact us started in the fourth quarter, but the majority will be done by the end of the second quarter. And it's just the timing of that, that can impact us a bit one way or the other. Those would be the big pushes and pulls.

And just as a follow-up, do you think there's any change to the competitive landscape in the diagnostic business? And when you look at like the break of test, I know there's like a lot of these consumer tests happening. How do you view your market share in those type of consumer tests versus peers?

Yes. So I continue to believe that the diagnostic market is strong and that we will outperform, continue to perform slightly better than the overall market growth of the market. When I think strategically of where we're focused, first and foremost, we've talked about the hospital deals and the strong pipeline that we have. Those hospital deals in the past few years have contributed to more than $1 billion of growth. Those hospital deals are overall about our average margin, and there are things that we can implement well and integrate well. So we're going to continue to focus there. I talked about specialty testing, and we launched over 130 new tests last year. The majority of those were in the 4 areas of women's health, oncology, neurology and autoimmune disease. We see those areas growing 2 to 3x faster than the overall diagnostic market. So that's going to continue to be a growth engine for us, good margins. But in addition to that, when you have a specialty patient that uses your specialty test, the physician tends to use all of our testing for the patients' needs there. So it has a really good return for us. Then when I think about consumer business, if you look at our Labcorp OnDemand, we've launched over 200 different biomarkers in areas like women's health, men's health, longevity. We will continue to focus and launch new tests there. We have our Ovia Health, which helps the women throughout the stages of her life, and that's doing very well. And then we have our consumer genetics testing, which is also continuing to do well. If you look at those three together, we have very strong growth. We don't break out the dollar amount yet. It's not yet at that level where I believe it's critical to break out. But with the growth rates that I see, I expect that we will break that out at some point into the future. Where we haven't necessarily been focused is on the other areas of consumerism and some of the wearables and so forth. And those areas, we look at the pricing environment, we look at the margin environment, and we have so many things that we focus on in the other parts of our strategy. I feel that we have just tremendous opportunity before us with the focuses that we have in the areas.

And our next question comes from Jack Meehan of Nephron Research.

First question is on PAMA. Adam, I would love to know how you think this is going to play out this year. Are you prepared to submit in the survey that's going to take place in a few months? And what do you think happens once the data reads out some time in the fall?

Yes. Thanks for the question, Jack. The first thing I'd say is we were pleased that the PAMA was delayed this year. I think it shows that people really understand that the way in which it was intended to be in the marketplace is not the way in which it has been if we continue to use it in the original design. But it's not enough. I mean we're still going to continue to advocate for the RESULTS Act. And that, to me, is the right answer to the problem that we have. And we're going to continue to work with our ACI trade organization to advocate for the passage of that bill this year. Of course, if we need to submit the data, we will submit the data and we'll be prepared to submit the data. It's hard to understand exactly what would happen because we don't know how many other people will be able to submit the data and what that may or may not show. But under all circumstances, I still believe that the RESULTS Act is the right way for us to enable the -- frankly, the government to achieve the objectives that they put place in the beginning of what they were trying to achieve with PAMA. So to me, that's the right answer.

Okay. And one unrelated follow-up. You mentioned investments in the central lab business within CapEx this year. I was wondering if you could just give us an update as to what's going on there and how that's in your footprint or just where those investments are getting directed?

Yes. Jack, maybe I can start by sharing a bit of our thought around the CapEx investment in 2026 in general. And then I'd like to really invite Adam to comment a bit about the business considerations and the footprint planning for central lab in particular. So for 2026, we commented that we are expecting the CapEx investment around 4% of our revenue in the year, which is higher than prior years. And as we shared in the past, as you look at the priority areas in terms of the CapEx investment, it's primarily around refreshing our lab infrastructure as well as our technology investment to ensure that we create a set of experiences for our customers, our patients and our employees that are compelling and differentiated. Now this year, in addition to those areas of investments, we are also starting to plan to invest in an expansion of a new strategic site for the central lab business in order to support the long-term growth. And that investment in addition to all the ongoing investment is contributing to the overall planning for CapEx. With that, Adam, do you want to comment a bit about the business considerations?

So if you look at the business, we are a leader in this business. It is a strong business. I believe it will continue to be a strong business. The majority of our trials are with large pharma or large biotech companies. They're in Phase II, Phase III areas, and there are areas that will continue to get investment from pharma over time in order to launch new products into the marketplace. As we look at the book-to-bill, it remains strong across the segment as well as within the central laboratory. And if you look at the book that we have, it remains very strong and the growth is strong as well. When I think about the business, we have a truly global footprint. We have the ability to get samples from over 100 different countries around the world. It is a competitive advantage, and our laboratories consistently are able to give results that are using the same types of machinery, the same type of reagents around the world, which I think is a competitive advantage for us. As I think about the growth, it's going to continue to grow. And therefore, we need to continue to invest both in capital for building the kit facility as well as the laboratory we've talked about. We're also going to continue to invest in areas that improve the customer experience. So for example, our Global Trial Connect is a new digital way to help our pharmaceutical clients track their samples, track their studies, be able to submit data and other things faster than before. So because of the importance of the business, we'll continue to invest in it as appropriate.

And our next question comes from Pito Chickering of Deutsche Bank.

I guess just to start off with just looking at the ED market, can you sort of talk about overall market growth there? How does pricing volume look for '26? And then your thoughts around your market share for the upcoming year?

Yes. So if you look at our early development business, it remains a very small part of our business. In fact, it's now less than 6% of our revenue. And as we think about what we're going to do there is continue to be a market leader, which we are, but we're also going to streamline the business to areas where we can win in the marketplace that are strategically focused on where we want to win. And then at the same time, we will either divest areas like we mentioned before and/or consolidate sites. Historically, I said that we were going to keep the excess capacity for the growth to come back. But it's been too long, frankly. The growth has not come back to the level that we would have anticipated. So we've moved down the path to appropriately consolidate so that our utilization is at a better level and therefore, the margins and the profitability will improve. So as I think about that business, it's a strong business. We are a market leader. I expect it to be relatively flat throughout the year in '26, but it will improve as we go through the year. And I think it will be based somewhat on the timing of the $50 million of revenue that we've decided to consolidate or divest.

Okay. Great. And then a follow-up here. Can you talk about sort of the new test you're launching in oncology? You've had some interesting studies in peer-reviewed journals recently. How do you think about those tests launching and the revenues associated with those tests in the next sort of 12 to 24 months?

Yes. No, thanks for the question. If you think about precision oncology testing, I think about liquid biopsies, but I also think about solid tumors, and we're very well positioned in that market. We acquired OmniSeq in 2021. We acquired PGDx in 2022, and we acquired Invitae in 2024. Those are all intended to help accelerate our capabilities in this area. Earlier this year, we announced our MRD testing being expanded to Stage I through III breast cancer, I through IIIa non-small cell lung cancer and Stage III colon cancer. And that actually leverages both the Plasma Detect genome, but also the Plasma Detect ID that we put into the marketplace. So I feel very good about our position there. I think the growth over time will be strong for the test individually. But as importantly, we offer now over 450 different tests for oncology patients across different stages and types of cancer. And when you have a cancer patient that's tested for either an MRD test or a solid tumor test, they tend to get a lot of other tests alongside of that. So it not only is encouraging that we have these specialty tests available, but it actually helps us provide one place for the oncologist to go for all the testing needs or the majority of the testing needs of their patients. I think that's another growth opportunity for us.

And our next question comes from Lisa Gill of JPMorgan.

I just want to follow up on a few things from a guidance perspective. First, when we last spoke, you had talked about a potential headwind around the exchanges and perhaps Medicaid. So I just want to understand, one, what's in your guidance? Two, we had pretty severe weather in the Northeast in January. So just curious if you had any impact as it pertains to weather here in the first quarter. And that really leads to how do we think about the cadence of numbers? Should we think about that having some kind of impact in the first quarter? Or can you make it up within the quarter? And then just lastly, Julia, you mentioned that the enterprise margins had expanded by 50 basis points, and you expect it to be meaningful again in '26. Should I take that as it should be another roughly 50 basis point expansion?

Yes. Lisa, let me take the first cut of your question. Your first one relates to the impact from the expiration of the ACA tax credits. We have estimated that impact to be about a 30 basis point reduction to our diagnostic volume in 2026. This estimate is incorporated into our revenue guidance for this year. It is also worth noting that the reported enrollment this year has been slightly better than anticipated. Of course, we continue to monitor the utilization of this insured group as the year progresses. I think your second question, Lisa, is as it relates to the weather impact. Yes, we indeed experienced weather in January of this year, which was worse than this time of last year. But when you look at the guidance that we have provided here, we have already reflected that weather impact year-to-date. Now from a cadence perspective, while we don't really guide to the quarters, but what I can share from a directional perspective, for this year, you can expect potentially be very much similar to last year. So essentially, you look at 2025, I believe we generated approximately half of our earnings in the first half and in the second half, respectively, as well. So that is probably a good proxy for you to consider as you model things out. So all in all, I would say that -- from a margin perspective, I think that's your last question -- yes, so I shared a bit earlier that as a company, we're just highly focused and it's been a priority, but we've been extremely diligent with respect to prioritizing investments where it's really driving top line growth in an accelerated fashion. And then we are also diligently utilizing technology, among other things to help us become ever increasingly efficient in the way that we operate and in the way that we deliver value end-to-end to our customers and our patients. So while we do not guide margin specifically in the guidance, but what I would say is if you look at our guidance for 2026, in terms of the top line growth at the midpoint of 5.4% for the enterprise and then the midpoint of our adjusted EPS growth at 9%, you can perhaps triangulate into a margin expansion that is going to be supportive of that adjusted EPS guidance. So all in all, I would say that once again, we're really pleased with the strength of margin expansion in 2025, and we expect that strength to continue into 2026.

And our next question comes from Elizabeth Anderson of Evercore ISI.

Maybe one modeling question and one longer-term question. I think originally, when PAMA, we were still trying to decide whether PAMA was going to get delayed or not for 2026, you guys had previously said something about maybe $25 million to $30 million of additional savings if that came through. I know Julia just sort of put it -- talked about it in the traditional range. Is that -- like are those potential savings that you guys were talking about if PAMA came through, do you still view that as a potential source of upside like as you move through this year? Or is it just kind of -- we should think about it as, no, those are sort of investments needed at the higher revenue rate to think about? And then secondarily, just on the early development business, I think there's been some concern that there might be increased behavior changes, particularly from pharma and biotech in terms of some of the new AI applications. Just curious, are you actually seeing any of that like in terms of client requests currently? Has that been part of discussions? Or should we think of something that's something maybe that's potentially further out, but not something you're currently seeing?

Yes. Let me start with the second question first. So as we start to think about new models, we have a significant number of people within our organization that are actually working on the new models. In fact, we're working with several governments in Europe to try to develop those models. So we've not seen a utilization of them instead of the regular testing at the moment. But over time, I think in certain areas, you would see people move more towards NAMs. And I think those NAMs will be something that we want to be part of that there'll be ways to monetize the work that we do there in different ways than the work that we do today. And we're actually encouraged by the progress that we're making in those areas. But I would say, at the moment, it's not having a significant impact. In fact, if I look at our business, I look at like the dollar amount of our RFPs and I look at our win rate, they still remain relatively consistent to the historical levels.

Yes. Elizabeth, we are pleased that PAMA is delayed for another year as we continue to work on the more permanent solution through the RESULTS Act. Now as you were saying previously, we did comment that should PAMA be implemented in 2026, we have plans to drive additional $25 million of savings above and beyond our LaunchPad initiative to help mitigate a portion of the PAMA impact. At this point, we continue to move forward with those efforts; however, given the PAMA delay, we plan to reinvest a portion of the additional savings into our businesses to position ourselves for continued long-term growth. So at the end of the day, I would say that in 2026, we expect enterprise margin once again to expand versus 2025 to support the adjusted EPS growth of 9% at the midpoint of our guidance.

And our next question comes from Michael Ryskin of Bank of America.

I'm wondering if you could add a little bit of color on esoteric testing, what you saw in the fourth quarter, just how that played out relative to expectations, just if there's been any changes in the market there? And a small follow-up to what you called out earlier in terms of the 4Q volume weakness that you called out sort of a consumer genomics business. Just clarify, is that a onetime hit? Or do you expect that to continue to be a little bit softer in 2026? And just sort of what was behind that? Was that just timing? Or just explain that a little bit more.

Yes. It was, in our opinion, a onetime hit, and we've actually seen good recovery, and we have additional business that we brought in into that area. So as I look at 2026 and we provide the guidance for 2026, you can see that we expect the volume to be strong.

Michael, as it relates to the question about the esoteric testing, we are pleased with the progress that we continue to make in this regard. Just for perspective, in the first quarter of 2023, esoteric testing accounted for 37.5% of our total testing in revenue. And then if you fast forward to Q4 of last year, that contribution went up to 41.5%. So clearly, if you just look at the growth of the esoteric testing, it's been outpacing the routine testing, as you would have expected, given our strategy around enhancing our investment execution in the specialty testing as well as our continued focus around enhancing our partnership with the hospitals and the health care systems. So we are encouraged by the progress, and we will continue to focus on that going forward.

And our next question comes from Erin Wright of Morgan Stanley.

You mentioned that the Diagnostics segment, it's largely organic in terms of the revenue guidance there. But can you talk a little bit about the deal pipeline on that front? I guess, how do you think about the nature of the deal pipeline now, how it compares to maybe this time last year? And when you think about hospitals and health systems, what are you thinking about in terms of the nature of some of those conversations and deals going forward?

Yes, sure. And as I look at our deal pipeline, it remains very robust. And I look at it not only from hospitals, but I also look at local, regional laboratories. And I think there's just a lot of pressure right now in the systems, particularly with the hospitals in terms of profitability. So they've been turning to us quite a bit to say, how can we partner with them? What can we do to work with them in order to help them with the issues that they're facing financially. So I've personally been involved in many of those discussions and the discussions continue to go well. I would say there's two things that I monitor. One is the number and the size of the partnerships that we're involved in discussions with and the pipeline there is strong. I look at the timing. We've seen the timing be a little bit slower perhaps because now for certain states, we also have to get approval in addition to the federal approvals that we need. But not been -- those have not been obstacles to approval. It just takes sometimes a little bit longer. And then I look at the future pipeline in terms of where I think the business can come from. And I would expect that we'll be talking about these types of acquisitions for quite some time because we still have a long, long tail to what I believe this business can do in those areas.

Okay. Great. And then the lower referrals from that one consumer client, I guess, in light of that one-off dynamic, I guess, how do you think about the durability of growth across the consumer-driven market? Can you talk about the long-term growth profile, margin profile, durability thereon? And what's your philosophy on how to participate or not in that market?

Yes. So first, I'll respond to the consumer genetic company that we were referring to. We now have additional business in that area. So I don't think it's going to be a headwind as we move forward. As I think about the consumer market, I put it into perspective of strategically where we want to be. And first and foremost, your first question regarding hospitals and local regional laboratories, the pipeline there is strong. When you look at the average margin across those businesses, they're typically about the same as our average margin, and we continue to have that as a priority focus. I then look at our specialty testing areas. And we talked earlier about how the esoteric testing is shifting in terms of our mix, and I expect that's going to continue. The esoteric testing or specialty testing continues to be an area of focus in oncology, neurology, women's health and autoimmune disease. And a big part of why is because that's going to grow 2 to 3x faster than the underlying diagnostic market. And in general, those margins tend to be about the same margins as our other business. But equally important, when you do the specialty test for a patient, you tend to do all the other tests that a physician may request for that same patient. So there's even spillover into the routine testing for us that I think makes a lot of sense. Then when it comes to the consumer market, and we have a good consumer business. Our Labcorp OnDemand continues to show significant growth. We launched new tests in there almost every single quarter. We have over 200 different biomarkers that can be ordered from Labcorp OnDemand. Ovia Health continues to perform well and grow and help women through different stages of life and their testing needs. And then we also have the genetic testing that we do. And I think that, that will continue to be an area of growth. So if you look at those three areas together, the growth there is strong. We haven't broken out the revenue there to this point. But I think as it reaches critical mass with the growth rates I've seen at some point, we will, I expect, break it out. So I think that's how we approach the market. And it's really based upon strategically where we see the best growth opportunities, maintaining the margins that we want to maintain at the price points that we think makes sense. We also, of course, look at our ROIC on each and every one of those areas, which remains strong.

And our next question comes from Eric Coldwell of Baird.

A little late in the Q&A here, so I'm going to have to get pretty myopic. I want to go back to early development. I heard you say a few times on the call, you expected the business to be relatively flat year-over-year. I do think that was before taking out the $50 million of divestiture and cost impacts as well as FX. So if I do make some preliminary assumptions there on the FX, I mean, it looks like you're talking about an $800 million revenue year in early development. Is that really what you're saying?

No, I would say that including the $50 million impact that we've said, we expect it to be relatively flat with the second half performing better than the first half, Eric.

So you are expecting something in the [ $865 ] million, [ $866 ] million ZIP code?

Again, I don't want to give the exact number, but I would say, directionally, your second number is closer than the first, I think, but there's always a range that we look at within there.

So that would suggest to me that you're either being very aggressive with that formula or you had pretty good bookings or you have pretty good signs on your expectations for that business, given that you are eating into the $50 million -- you have to overwhelm that $50 million of divestiture and cost impacts, cost action impacts. So what are the signs in the market that give you that level of confidence?

Yes. I would say you saw the overall book-to-bill across the segment. It was strong. The trailing 12 months is strong, and we've seen improvement in both segments, frankly, of the book-to-bill.

Okay. And then on the margin front, prior to the divestiture and the cost actions, I believe this business was running at a low single-digit margin with the actions and your revenue outlook as well where there would be more leverage than I was expecting. Could you give us some sense on where you think margin could exit this year in early development? What kind of improvement is available near term? And then longer term, what kind of profile do you expect your business could have in that piece of BLS?

Yes. Eric, as you know, we don't really necessarily break out the business unit within the segment from a profitability perspective. But what I could share is the following to reiterate what I commented earlier. We head into 2026 with the momentum, including from a margin perspective. So we not only are expecting another year of margin expansion for the enterprise, we actually expect that improvement to be supported by expansion in both segments, inclusive of BLS. And then if you look at BLS margin expansion in '26 over '25, we actually expect that ratio improvement to be even greater than Diagnostics segment. And the key drivers for that are really two. One of them is what you already alluded to is all these actions we are taking with ED, which will be complete by the second quarter of this year is going to make that business meaningfully more profitable. And the other contributor to the BLS margin expansion in '26 versus '25 is really driven by the solid growth from a top line perspective. So all in all, we are pleased with the direction we are heading towards, and we look forward to providing you with more updates as the year progresses.

This concludes our question-and-answer session. I'd like to turn it back to Adam Schechter for closing remarks.

Thank you. So it was great to spend time with you this morning. As you can see, we entered 2026 with momentum, and we look forward to continuing to provide you with updates as the year progresses. Have a great day.

This concludes today's conference call. Thank you for participating, and you may now disconnect.