LabCorp’s CEO: 5 Keys To Winning

Laboratory Corp

• #2 lab services company.

• $5.8 billion in 2013 revenue.• 4,000 tests including

blood analyses, genetics, and companion diagnostics

• 34,000 employees.• 220,000 customers.

• Physicians, hospitals, governments.

Growing alongside an aging America

First, let’s consider LabCorp’s revenue.•Q2 Sales of $1.52 billion, up 3.3% from last year.

• Total test volume up 5.3%.• Reform: increasing insurance

enrollment.• Demographics: 10,000 boomers

turn 65 daily.• Mix headwind of 2%.• First half 2014 sales up 1.3%.

Growing alongside an aging AmericaShare prices and revenue have grown in tandem over the past 5 years.

5 Keys to Winning in the future

“To be among the winners, we know that LabCorp must excel in five ways:1. Improve the quality and reduce the cost of care.2. Help manage the total cost of care.3. Serve as a performance management partner to our

customers.4. Serve a broad range of customers in multiple settings.5. Build scalable platforms with replicable processes that can

create value at many points along the continuum of care.”

-CEO David King

5 Keys to Winning in the future

1. Improve the quality and reduce the cost of care.• Build scale through

acquisitions.• $60 billion market.• 10% market share.

• Increase its managed care portfolio.

5 Keys to Winning in the future

2. Help manage the total cost of care.• IT infrastructure

investment.• Improve service and

workflow. • Expense reduction.

• Consolidation.

5 Keys to Winning in the future

3. Serve as a performance management partner to our customers.• Optimize operations.• Efficiency initiatives.

• Robotics.

5 Keys to Winning in the future

4. Build scalable platforms with replicable processes that can create value at many points along the continuum of care.

• Develop new tests.• Faster and more accurate.

• BRCA testing.• Personalized medicine.

• Hepatitis C test for Q80K polymorphism.• Required prior to Olysio.

5 Keys to Winning in the future

5. Serve a broad range of customers in multiple settings.

• Beacon LBS: right test at the right cost.

• Enlighten health: physician data and analytic tools.

Impact on earnings

•Gross margin of 37.5%, down from 39.3% last year.

• Product mix•SG&A is 19.6% of sales, up from 19.1%.

• Bad debt reserves, consultants, and merit increases.

•$1.64 EPS versus $1.62 a year ago.•Operating cash flow of $207 million, up from $138 million last year.

Forward guidance

•Guiding revenue growth of ~2.0% this year.•Guiding for adjusted EPS of $6.50 to $6.75 (versus prior guidance of $6.40 to $6.70), excluding share repurchase activity after June 30, 2014.•Guiding for free cash flow of $575 million to $635 million.

Fool-worthy thoughts

•International expansion opportunity in emerging markets.• $160 billion global diagnostics market.

•Opportunity to win U.S. market share.• 5,700 independent labs with a combined 20% market

share.

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