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 has 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 Insight 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 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 Holdings Inc. for specialty testing, they tend to use Labcorp Holdings Inc. 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 and clinical trials continues to increase. 2025, we launched more than 130 new tests. The majority of those were in strategic and high growth areas including oncology, women’s health, neurology, and autoimmune disease.
We also successfully integrated Invitae expanding our leadership in genetic testing solutions, Recently, we added several new specialty tests. In January, we expanded access to MRD testing for stage 1 through 3 breast cancer, stage 1 through 3a non-small cell lung cancer, and stage 3 colon cancer to help detect recurrence earlier than traditional imaging. In oncology, we now offer comprehensive and advanced testing capabilities with over 450 tests for many types and stages of cancer. We also advanced our leadership in neurology and launched the first FDA-cleared blood test for Alzheimer’s disease assessment in the primary care setting. This will enable broader access and better and more timely patient care.
And in consumer health, we saw strong growth as consumers look to take more control of their health and wellness. Last year, Labcorp Holdings Inc. OnDemand continued to expand, and now offers tests for over 200 biomarkers in categories like men’s and women’s health, cancer screenings, sexual health, and longevity. In the quarter, OnDemand launched new tests for food allergies, micronutrients, and thyroid health. We also continue to make significant progress through technology and AI-powered solutions to accelerate innovation, to improve quality, to enhance customer experience, and to operate more efficiently. For example, we launched AI and automation in areas such as pathology, psychology, and microbiology.
Recently, we announced that Labcorp Holdings Inc. became the first U.S. commercial laboratory to enter in an agreement to implement Roche’s fully automated mass spectrometry solution. In addition, we improved the customer experience in several areas. AI-powered solutions simplified appointment scheduling and results reporting for consumers. Our AI test finder experience for physicians helps them find the right lab test in seconds, freeing up time for patient care. And Labcorp Holdings Inc.’s Global Trial Connect will help to accelerate clinical trials for investigator sites and for sponsors. Finally, we announced a strategic investment to build a new central laboratory facility to support growth and demand, which will enable us to deliver a more integrated, connected experience for customers.
Construction of the new state-of-the-art 500,000-plus square foot laboratory and kit production facility is expected to begin later this year. Our strategic focus and disciplined execution drove strong financial results in 2025. In the fourth quarter, enterprise revenue increased 6%. Margins improved 120 basis points and adjusted EPS grew 18%. Diagnostics revenue increased 6% with organic growth of over 4%. Central Laboratory revenue increased 11%, or 8% constant currency. And as expected, early development revenue declined. The 1.16 and the trailing twelve months was also strong at 1.09. Our central laboratory business saw strong demand, underscored by wins in oncology, neurology, and also in cardiometabolic studies. Free cash flows from continuing operations were $490 million.
Based upon the momentum of our business, going into 2026, we expect full-year enterprise revenue growth of 5.4% at the midpoint of our guidance, improved margins across both segments, and adjusted EPS growth of approximately 9%. This outlook reflects a delay of PAMA through 12/31/2026. While we are pleased by the delay, permanent reform is necessary, and we will continue to advocate for the passage of the RESULTS Act this year. Finally, Mark Schroeder, Executive Vice President and President of Diagnostics, and Chief Operations Officer, and Sandy Vanderwaart, Executive Vice President, Chief Legal Officer and Corporate Secretary, will be retiring April 1. It has been a privilege to work with Mark and Sandy.
They have made extraordinary contributions, shaped our strategy, developed strong talent, and strengthened our ability to deliver on our mission. Their successors have been appointed following a thoughtful succession plan, and we look forward to introducing them to you in the coming months and as we plan for an Investor Day later in the year. With that, I will turn the call over to Julia to discuss our financial results and 2026 outlook in greater detail.
Julia Wang: Thank you, Adam. My remarks today will focus on our adjusted financial results. Please see our earnings press release and the 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 lab. 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 twelve-month book-to-bill of 1.09, driven by Central Lab. 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 lab. 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 $419 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 important parts of our capital allocation strategy. The company currently has approximately $800 million of share repurchase authorization. At year-end, we had $532 million in cash, while total debt was $5.6 billion.
Our debt leverage as of year-end is 2.3 times gross debt to trailing twelve-month adjusted EBITDA, reflecting a disciplined leverage position. Now I will review our fourth quarter segment performance, beginning with Diagnostics and Laboratory. Revenue was $2.7 billion, an increase of 5.5% compared to last year, with strong organic growth of 4.1% and acquisitions contributing 1.5%. Total volume increased 2.2%, with organic volume and acquisitions each contributing 1.1%. Price/mix increased 3.3%, with organic price/mix contributing 3% primarily due to an increase in tests per accession. Acquisitions contributed 0.3%. Diagnostics adjusted operating income was $419 million, or 15.4% of revenue, compared to $316 million, or 13.9% of revenue last year.
Adjusted operating margin was up 150 basis points primarily driven by organic growth, which includes Invitae. Now I will review the fourth quarter segment performance for Biopharma Laboratory Services or BLS. Revenue was $793 million, an increase of 3.4% compared to last year due to an increase in organic revenue of 0.6% and foreign currency translation of 2.8%. In the quarter, Central Labs performed well, and revenue grew 11.1%, or 7.7% constant currency. Early development revenue was down 13.5%, or 15.1% constant currency. And we continue to focus on streamlining our business, which will reduce annual revenue by $50 million and increase operating income.
The actions began in the fourth quarter 2025, and we expect to be largely completed by the end of the second quarter. BLS adjusted operating income was $136 million, or 17.2% of revenue, compared to $131 million, or 17% of revenue last year. Adjusted operating income and operating margin was slightly up due to Central Labs revenue growth. We ended the quarter with a backlog of $8.7 billion, and we expect approximately $2.7 billion of this backlog to convert into revenue over the next twelve months. Our segment quarterly book-to-bill and the trailing twelve-month book-to-bill was strong at 1.16 and 1.09, respectively.
Now I will discuss our 2026 full-year guidance, which assumes foreign exchange rates effective as of 12/31/2025 for the full year. The enterprise guidance also includes the impact from currently anticipated capital allocation utilizing free cash flow for acquisitions, share repurchases, and dividends. Beginning with the enterprise, we expect revenue to grow 4.7% to 6% compared to prior year. This includes the tailwind from foreign currency translation of approximately 40 basis points. We expect Diagnostics revenue to be up 5% to 6% compared to 2025. This guidance assumes the majority of revenue growth comes from organic growth. We expect BLS revenue to grow 3% to 5% versus prior year.
This guidance incorporates the actions taken in early development and the tailwind from foreign currency translation of 170 basis points. For the full year, we expect Central Lab to grow mid-single digits organic constant currency, with early development relatively flat, improving throughout the year. We expect enterprise margins to increase with margins improving in both Diagnostics and BLS in 2026 versus 2025. BLS margins are expected to expand more than Diagnostics, reflecting continued strong top line growth in Central Lab, and operating efficiencies in early development as we streamline the business.
As an enterprise, we anticipate our LaunchPad initiative to deliver savings for the full year 2025 in line with our long-term target of $100 million to $125 million per year. We expect our adjusted tax rate for 2025 to be approximately 23%, and we expect net interest expense of approximately $213 million. Our guidance range for adjusted EPS is $17.55 to $18.25, with an implied growth rate at the midpoint of approximately 9%, and includes an impact from adverse weather year to date. Our free cash flow guidance range is $1.24 billion to $1.36 billion, and due to normal seasonality, we expect it to be weighted towards the second half of the year.
We expect the 2026 capital expenditures to be approximately 4% of revenue, higher relative to prior year, as we begin investing in the new strategic facility to support long-term growth in our Central Lab service operations. In summary, we are encouraged by the underlying strength of our businesses. As we move into 2026, we expect to drive continued profitable growth and strong free cash flow generation that will be utilized for acquisitions that support our strategy and supplement our organic growth, while also returning capital to shareholders through our share repurchase program and dividends. As we look ahead, we are confident in our ability to deliver sustainable growth and long-term value for our shareholders.
Now I will turn the call back over to Adam to provide closing remarks.
Adam Schechter: Thank you, Julia. I would like to thank our Labcorp Holdings Inc. team members for their contribution to a very successful year. It is because of their commitment to our mission that Labcorp Holdings Inc. 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 will now take questions.
Operator: Thank you. Press 11 on your telephone and wait for your name to be announced. Our first question comes from Michael Aaron Cherny of Leerink Partners. Your line is open. 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 volume, excuse me, kind of at the high and low end of the range at this point? Thank you.
Adam Schechter: Yep. 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 are probably referring to the volume in the Diagnostics segment. If you look at Diagnostics, we are 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.
Julia A. Wang: Hey, Dan. To add to that, I would 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 translate 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 Diagnostic 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 Diagnostic segment as we continue to drive strong top line growth in Central Lab while streamlining the ED business. So all in all, we are pleased with the margin progression. We believe it positions us for continued success in 2026.
Michael Aaron Cherny: Great. Thanks. Just a quick follow-up. How should we think about contributions from Invitae this year, given that you have, you know, did a pretty good job integrating it thus far? Thank you.
Adam Schechter: Yeah. So, you know, the Invitae integration went extraordinarily well. And in fact, it is so integrated, it is 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 Salesforce, they are now completely combined. So we expect strong revenue growth as one of our specialty areas. We expect that to grow two to three times faster than the overall market. But we will not be breaking out Invitae any longer specifically.
Operator: Thank you. And our next question comes from Kevin Caliendo of UBS. Your line is open.
Adam Schechter: Good morning, Kevin.
Kevin Caliendo: Good morning, guys. Thank you so much for taking my question. 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, like, what you imply in 2026, it seems an outlier, but I just want to understand it a little bit better.
Adam Schechter: Yeah. Let me give you some specifics on that, Kevin. So first of all, if you start with the Diagnostic 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 are 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 adjust it 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. If you look at the organic growth, about half will come from volume, half from price/mix, about the same as this year.
Kevin Caliendo: So that one customer, that was just a fourth quarter. It sounds like that is really the issue here, and that was a fourth quarter thing that is not going to continue or no longer. That is correct.
Adam Schechter: That is correct.
Kevin Caliendo: Got it. Okay. Thank you so much.
Adam Schechter: Yep. Thank you for the question.
Julia A. Wang: Thank you.
Operator: And our next question comes from Ann Kathleen Hynes of Mizuho. Your line is open.
Adam Schechter: Hey, good morning, Ann.
Ann Kathleen Hynes: Good morning. Thank you for the question. So when you look at your 2026 guidance, where do you think maybe you would be the most conservative and, alternatively, where do you think the biggest risks are? Thanks.
Adam Schechter: Yep. Thanks, Ann. So as I look at the enterprise guidance for 2026, I feel really good about it. And if you look at the, you know, it is really 4.7%–6% revenue guidance, and the EPS guidance implies about a 9% growth at the midpoint. You know, if you look at the pushes and pulls, we will focus on Diagnostic first. We expect the utilization environment to be healthy. We are seeing these industry trends that I have talked about before, aging population, 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 is 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 are going to continue to see how quickly we can turn that pipeline into revenue. If you look at biopharma side, you know, if you look at the Central Labs, we expect to see solid organic mid-single digit growth. And you can see the strong trailing twelve-month book-to-bill that will support that. And that is 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 have already sold the $50 million of impacted revenue. We expect that to impact us starting in the fourth quarter, but the majority will be done by the end of the second quarter. And it is just the timing of that can impact us a bit one way or the other. Those would be the big pushes and pulls.
Ann Kathleen Hynes: Thanks. And just as a follow-up, do you think there is any change to the competitive landscape in the Diagnostic business? You know? And when you look at, like, the break of test, you know, I know there is, a lot of these consumer tests happening. How do you view your market share in those type of consumer tests versus peers?
Adam Schechter: Yeah. 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. I think strategically of where we are focused, first and foremost, we have 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 are 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 four areas of women’s health, oncology, neurology, and autoimmune disease. We see those areas growing two to three times faster than the overall Diagnostic market, so that is 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 patient’s needs there. So it has a really good return for us. Then when I think about consumer business, if you look at our Labcorp Holdings Inc. OnDemand, we have 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 a woman throughout the stages of her life, and that is 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 do not break out the dollar amount yet. It is not yet at that level where I believe it is 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 have not necessarily been focused is on the other areas of consumerism and some of the wearables and so forth. In 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 we have, you know, just tremendous opportunity before us with the focuses that we have in the areas.
Julia A. Wang: Great. Thank you.
Ann Kathleen Hynes: Thank you.
Julia A. Wang: And our next question comes from Jack Meehan of Nephron Research. Your line is open.
Adam Schechter: Good morning, Jack.
Jack Meehan: Good morning, Adam and Julia. 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 is going to take place in a few months? And what do you think happens once the data read out time of fall?
Adam Schechter: Yeah. And thanks for the question, Jack. The first thing I would 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 is not enough. I mean, we are 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 are going to continue to work with our ACLA 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, we will be prepared to submit the data. It is hard to understand exactly what would happen because we do not 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 in place in the beginning of what they were trying to achieve for PAMA. So to me, that is the right answer.
Jack Meehan: And one unrelated follow-up. You mentioned investing in the Central Lab business within CapEx this year. I was wondering if you could give us an update as to what is going on there and how that is changing your footprint or just where those investments are getting directed? Thanks.
Julia A. Wang: Yes. Hi, Jack. Maybe we can start by sharing a bit of our thought around CapEx investment in 2026 in general. And then I would 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 is primarily around refreshing our lab infrastructure as well as our technology investment to ensure that we create a set of experiences for our customer, 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, you know, we are a leader in this business.
Adam Schechter: 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 are in phase 2, phase 3 areas, and they 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 is going to continue to grow. Therefore, we need to continue to invest both in capital for building the kit facility as well as the laboratory we have talked about. We are also going to continue to invest in areas that improve the customer experience.
So 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, other things faster than before. So because of the importance of the business, we will continue to invest in it as appropriate.
Jack Meehan: Thank you.
Operator: And our next question comes from Pito Chickering of Deutsche Bank. Your line is open.
Adam Schechter: Good morning, Pito.
Pito Chickering: Hey, good morning, guys. Thanks for taking my question. 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 2026? And then your thoughts around your market share in, you know, for the upcoming year.
Adam Schechter: Yeah. So if you look at our early development business, you know, it remains a very small part of our business. In fact, it is now less than 6% of our revenue. And as we think about what we are going to do there is continue to be a market leader, which we are. We are 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 has been too long, frankly. The growth has not come back to a level we would have anticipated, so we have 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 is a strong business. We are a market leader. I expect it to be relatively flat throughout the year in 2026. But it will improve as we go through the year.
And I think it will be based somewhat on the timing of $50 million of revenue that we have decided to consolidate or divest.
Pito Chickering: Okay. Great. And then a follow-up here. Can you talk about sort of the new tests you are launching in oncology? You have got some interesting studies in peer reviewed journals recently. How do we think about those tests launching and the revenues associated with those tests in the next twelve to twenty-four months?
Adam Schechter: Yeah. 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 are 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 1 through 3 breast cancer, 1 through 3a non-small cell lung cancer, and stage 3 colon cancer. And that actually leverages both the PlasmaDetect Genome, but also the PlasmaDetect 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 tests 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 is tested for either an MRD test or 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. So I think that is another growth opportunity for us.
Pito Chickering: Great. Thanks so much.
Operator: Thank you. And our next question comes from Lisa Christine Gill of J.P. Morgan. Your line is open.
Adam Schechter: Good morning, Lisa.
Julia A. Wang: Thanks very much. Good morning, Adam and Julia. 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. I just want to understand, one, what is 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 2026. Should I take that as it should be another roughly 50 basis point expansion?
Julia A. Wang: Yes. Lisa, let me take the first part of your question. Your first one really relates to the impact from the expiration of the ACA tax credit. 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 reporting 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, 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 do not really guide to the quarters, but what I can share from a directional perspective for this year, you can expect potentially to 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 is your last question. Yeah. I, yeah. So I shared a bit earlier that as a company, we are just highly focused, and it has been a priority. But we have been extremely diligent with respect to prioritizing investments where it is really driving top line growth in 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, 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 our margin expansion that is going to be supportive of that adjusted EPS guidance. So all in all, I would say that once again, we are really pleased with the strength of margin expansion in 2025, and we expect that strength to continue into 2026.
Lisa Christine Gill: Okay. Thank you for the comments. I appreciate it.
Elizabeth Anderson: Thank you.
Julia A. Wang: And our next question comes from Elizabeth Hammell Anderson of Evercore ISI. Your line is open.
Adam Schechter: Good morning.
Elizabeth Hammell Anderson: Good morning. Thanks so much for the question. Maybe one modeling question and one longer term. 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 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 source of upside, like, as you move through this year?
Or is it just kind of, I think 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, you know, I think there has been some concern that there might be increased behavior changes, particularly from pharma and biotech in terms of some of the new AI application. Just curious, are you actually seeing any of that in, like, in terms of client requests currently? Has that been part of discussions? Or should we think of something that is something maybe that is potentially further out, but not something you are currently seeing. Yeah.
Let me start with the second question first.
Adam Schechter: So, you know, as we start to think about new models, we have a significant number of people within our organization that are actually working on these new models. In fact, we are working with several governments in Europe to try to develop those models. So we have not seen a utilization of them instead of the regular testing at the moment. But over time, I think in certain areas, we would see people move more towards NAMs. And I think those NAMs will be something that we want to be part of, that there will be ways to monetize the work that we do there in different ways than the work that we do today.
And we are actually encouraged by the progress that we are making in those areas. But I would say at the moment, it is 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.
Julia A. Wang: Yes. Hi, 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 the timing of the implementing in 2026, we have plans to drive additional $25 million of savings above and beyond our LaunchPad initiatives 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. Super helpful. Thank you.
Elizabeth Anderson: Thank you.
Operator: And our next question comes from Michael Leonidovich Ryskin of Bank of America. Your line is open.
Adam Schechter: Morning, Michael.
Michael Leonidovich Ryskin: Hey. Good morning, guys. I am 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 has been any changes in the market there? And 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 one-time 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 bit more. Thanks.
Adam Schechter: Yeah. It was, in our opinion, a one-time hit, and we have actually seen, you know, good recovery, and we have additional business that we brought in into that area. So I, you know, as I look at 2026 and we provide the guidance for 2026, you can see that we expect the volume to be strong.
Julia A. Wang: 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 2023, esoteric testing accounted for 37.5% of our total testing 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 has been outpacing the routine testing, as you would have expected given our strategy around enhancing our investment and 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.
Michael Leonidovich Ryskin: Great. Thanks.
Operator: Thank you. And our next question comes from Erin Wright of Morgan Stanley. Your line is open.
Adam Schechter: Good morning, Erin.
Erin Wright: Great. Thanks. Good morning. You mentioned that the Diagnostics segment, it is 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? Thanks. Yeah. 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 is just a lot of pressure right now in the systems, particularly with the hospitals, in terms of profitability. So they have 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 are facing financially? So I have personally been involved in many of those discussions, and the discussions continue to go well. I would say there are two things that I monitor. One is the number and the size of the partnerships that we are involved in discussions with, and the pipeline there is strong. I look at the timing.
We have 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 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 could come from. And I would expect that we will 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.
Erin Wright: 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 durability thereon? And what is your philosophy on how to participate or not in that market? Thanks.
Adam Schechter: Yeah. So first, I will respond to the consumer genetic company that we are referring to. We now have additional business in that area, so I do not think it is 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 here is strong. When you look at the average margin across those businesses, they are typically about the same as our average margin. And, you know, we continue to have that as a priority focus. I then look at our specialty testing areas.
And, you know, we talked earlier about how the esoteric testing is shifting in terms of our mix. And I expect that is 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 is going to grow two to three times 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 is 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 Holdings Inc. OnDemand continues to show significant growth. We launch new tests in there almost every single quarter. We have over 200 different biomarkers that can be ordered from Labcorp Holdings Inc. 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 will continue to be an area of growth.
So if you look at those three areas together, the growth there is strong. We have not broken out the revenue there to this point. But I think as it reaches critical mass with the growth rates I have seen, at some point, we will, I expect, break it out. So I think that is how we approach the market. And it is really based upon strategically where we see the best growth opportunity, maintaining the margins that we want to maintain at the price points that we think make sense. We also, of course, look at our ROIC on each and every one of those areas, which remain strong.
Operator: Thank you. And our next question comes from Eric Coldwell of Baird. Your line is open.
Adam Schechter: Eric, good morning.
Eric Coldwell: Hey. Good morning. A little late in the Q&A here, so I am 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 are talking about $800 million revenue year early development. Is that really what you are saying?
Adam Schechter: No. I would say that including the $50 million impact that we have said, we expect it to be relatively flat with the second half performing better than the first half, Eric.
Eric Coldwell: So you are expecting something in the $865–$866 million zip code?
Adam Schechter: Again, I do not want to give the exact number, but I would say, directionally, your second number is closer than the first, I think. You know? But there is always a range we look at within there.
Eric Coldwell: So that would suggest to me that you are 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, you know, you are eating into the $50 million. You have to overwhelm that $50 million of divestiture and, you know, cost impacts, cost action impacts. So what are the signs in the market that give you that level of confidence?
Adam Schechter: Yeah. I would say, you know, you saw the overall book-to-bill across the segment. It was strong. The trailing twelve months is strong. And we have seen improvement in both segments, frankly, of the book-to-bill.
Eric Coldwell: 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, you know, your revenue outlook as well, 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? You know, 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?
Julia A. Wang: Yeah. Hi, Eric. As you know, we do not really necessarily break out the business unit within the segment from a profitability perspective. But I could share the following to reiterate what I commented earlier. We head into 2026 with 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 the BLS margin progression in 2026 over 2025, we actually expect that year-over-year improvement to be even greater than the Diagnostic 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 2026 versus 2025 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.
Eric Coldwell: Okay. Thanks very much.
Operator: Thank you. This concludes our question-and-answer session. I would like to turn it back to Adam Schechter for closing remarks.
Adam Schechter: Thank you. It was great to spend time with you this morning. As you can see, we enter 2026 with momentum, and we look forward to continuing to provide you with updates as the year progresses. Have a great day.
Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.
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Labcorp (LH) Q4 2025 Earnings Call Transcript was originally published by The Motley Fool
