Participants

Christin O’Donnell; Vice President of Investor Relations; Labcorp Holdings Inc

Adam Schechter; Chairman, President and Chief Executive Officer; Labcorp Holdings Inc

Julia Wang; Executive Vice President and Chief Financial Officer; Labcorp Holdings Inc

Michael Cherny; Analyst; Leerink Partners

Jack Meehan; Analyst; Nephron Research LLC

Lisa Gill; Analyst; J.P. Morgan Securities

Erin Wright; Analyst; Morgan Stanley

Andrew Brackmann; Analyst; William Blair & Co.

Pito Chickering; Analyst; Deutsche Bank

Patrick Donnelly; Analyst; Citi

Kevin Caliendo; Analyst; UBS

David Westenberg; Analyst; Piper Sandler

Tycho Peterson; Analyst; Jefferies Financial Group Inc.

Presentation

Operator

Good day, and thank you for standing by. Welcome to Labcorp's fourth quarter 2024 conference call. (Operator Instructions). Please be advised that today's conference being recorded. I would now like to hand the conference over to your speaker today, Christian O'Donnell. Please go ahead.

Christin O’Donnell

Thank you, operator. Good morning, and welcome to Labcorp's fourth quarter 2024 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 our business and operations, which include a reconciliation of the non-GAAP financial measures to the most comparable GAAP financial measures both of which are discussed during today's call. 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 2025 guidance and the related assumptions, the spin-off of Forteo Holdings, Inc, the projected impact of various factors on the company's businesses, operating and financial results, cash flows and/or financial conditions, including global economic and market conditions, future business strategies expected savings, benefits and synergies from the LaunchPad initiative and from acquisitions and from other strategic transactions and partnerships, the completed holding company reorganization 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.

Adam Schechter

Thank you, Christin. Good morning, everyone. We appreciate you joining us as we review our 2024 performance and share our outlook for 2025. Today, I'm also joined by Julia Wang. Julia joined us as Executive Vice President and CFO this past December. As you know, Julie has succeeded Glenn Eisenberg, following his retirement announcement. Julia and I have hit the ground running, and Julia's experience in both diagnostics and pharmaceuticals, combined with their strong financial expertise have already been very valuable to Labcorp.
In 2024, our market-leading diagnostics and biopharma laboratory services businesses made meaningful advances in our strategy through organic growth, transformative acquisitions and through continued commitment to science, innovation and technology. Looking back in 2024, we executed well on our strategic priorities.
We furthered our role as a trusted partner to hospitals and health systems into regional local laboratories by closing or signing 10 transactions. We advanced our position in key high-growth markets, including oncology, women's health, neurology, and autoimmune disease. And we introduced new important diagnostic tests to meet significant unmet medical needs.
We expanded our leadership in genetic testing solutions through our acquisition of select assets of Invitae. Our clients now have access to Invitae's cutting edge science and genetic testing solutions to guide personalized treatment recommendations for oncology and rare disease patients. We advanced the development of plasma detect, an assay that uses whole genome sequencing and a proprietary machine learning analysis to detect MRD. Plasma detect is in 12 global trials across several tumor types.
We expect to move into clinical use in 2025 in the US with an early experience program for academic medical centers, beginning with colorectal cancer. We launched Labcorp Global Trial Connect; a suite of central laboratory solutions aimed at increasing the speed of clinical trials at investigator sites.
Turning now to our fourth quarter financial results. We performed very well across diagnostic laboratories and biopharma laboratory services, driven by strong underlying demand and advancements in science and technology solutions to better serve the needs of our customers.
Revenue in the quarter was $3.3 billion, an increase of 10% compared to the fourth quarter of 2023. Diagnostics and biopharma revenue each grew by approximately 10% in the quarter. Enterprise margins were down 40 basis points due to the expected impact of Invitae, which we referenced in our previous earnings call.
Adjusted EPS of $3.45 was up 5% year-over-year. Free cash flow from continuing operations was $665 million. As we look ahead to 2025, we expect enterprise revenue growth of 6.7% to 8% and improving margins across both Diagnostics and biopharma. We -- we also expect an adjusted EPS range of $15.60 to $16.40 which represents an implied midpoint growth rate of 10%. Additionally, we expect free cash flow to grow in line with our earnings. In just a moment, Julia will provide more details on our results and our 2025 guidance.
Turning to highlights of our enterprise strategy in the quarter. First, we advanced our leadership position as a partner of choice for hospitals and health systems and regional local laboratories. In November, we completed the acquisition of the select assets and molecular testing location of lab works, enabling broader access to comprehensive testing and laboratory services in Alabama.
In December, we completed the acquisition of Select Outreach Laboratory services for valid health in the Appalachian region. In January, subsequent to quarter end, we announced a strategic collaboration with New Jersey-based Inspira Health to manage the operations of the health systems hospital laboratories and to serve as the primary lab for spares physician network.
As we look ahead to 2025, our pipeline remains strong, and we look forward to supporting more health systems and to expanding access to Labcorp's world-class diagnostic solutions. We also made several advancements in science, innovation, and technology in the quarter. As part of our focus on autoimmune disease, we launched a multiple sclerosis monitoring profile used to monitor neurofilament light chain serum and GFAP values in multiple sclerosis patients.
Working with the CDC, we announced the commercial availability of an H5 birth flu molecular test. And we announced the availability of the first companion diagnostic assay to identify gastric cancer patients eligible for targeted treatment for people with advanced cancer of the stomach. In addition, we continue to help consumers manage their health and well-being through Labcorp on demand. We launched several consumer-initiated tests in the quarter, including homocysteine for heart health, vitamin A, vitamin C and vitamin E.
We announced several enhancements to Global Trial Connect, including sample tracking with earlier visibility into samples chain of custody and electronic requisition, a fully digital solution that improves workflows, efficiency, and document management. We also experienced continued adoption of Labcorp Diagnostics assistant by health system clients and their physicians. Labcorp Diagnostic Assistant brings together lab result data, clinical guidelines and EHR data to inform clinical decisions at the point of care.
New capabilities like Smart trends combine information from the client's EHR with all of the patient's lab results available through Labcorp regardless of ordering provider, and it brings it into a single integrated view. Labcorp Diagnostic Assistant and Global Trial Connect, are just two examples of how we're harnessing our innovative testing capabilities, our vast data assets and technology to support clinical trials and patient care.
In closing, 2024 was a strong year for Labcorp as we continue to execute against our enterprise strategy, and we are well positioned for continued growth in 2025. I want to thank our 70,000 employees for their hard work and dedication as we pursue our mission to improve health and improve lives. In fact, we are just made to Fortune Magazine's World's most Admired Companies list for 2025, a testament to the efforts of our team and their dedication to our mission.
Finally, I want to personally thank Glenn for his contributions to the company during his 10-year successful run as CFO. Glenn and I have worked side-by-side since I joined as CEO, and I truly enjoyed having him serve as a key member of our Executive Committee.
Glenn is a remarkable CFO and a remarkable executive. He remains as a special adviser to me through the end of April to ensure a smooth, collaborative transition that positions Lab book to further accelerate our strategy in 2025. Please join me in wishing Glenn and his family, all of the best in his retirement. With that, I'll turn the call over to Julia.

Julia Wang

Thank you, Adam. Hello, everyone. I want to start by sharing that I'm really excited to be with you all today. My experience across broader health care, including diagnostics and drug development has been very helpful as I jump started in my new role. I have been truly inspired by the strength of our business fundamentals, our passionate employees and the tremendous impact that Labcorp has on the patients that we serve each and every day.
Now I'm going to focus my comments on our financials, starting with a review of our fourth quarter results, followed by a discussion of our performance in each segment and conclude with an update on our full year guidance. For reference, we have also included additional business information that can be found in our supplemental deck on our Investor Relations website.
Revenue for the quarter was $3.3 billion, an increase of 9.8% compared to last year, driven by organic growth of 5.4%, the impact from net appreciation of 4% and foreign currency translation of 0.3%. Operating income for the quarter was $217 million, or 6.5% of revenue, which is 12.7% on an adjusted basis. During the quarter, we had $120 million of restructuring charges and special items, primarily related to acquisitions and large (technical difficulty) initiatives.
In addition, we have $16 million of expense for the transition service agreements related to the spin of Fortrea, with the corresponding income recorded in other income. Excluding fixed items and amortization of $17 million. Adjusted operating income in the quarter was $423 million or 12.7% of revenue compared to $395 million or 13% of revenue last year.
The increase in adjusted operating income was primarily due to organic demand and LaunchPad savings, partially offset by higher personnel costs. The 40-basis point decline in adjusted operating margin was due to invent. Our LaunchPad initiative delivered savings for the full year, in line with our long-term target of $100 million to $125 million per year.
The adjusted tax rate for the quarter was 22.4% compared to 19.5% last year. The higher adjusted tax rate was primarily due to the geographic mix of earnings. We expect our adjusted tax rate for 2025 to be approximately 23%. Net earnings from continuing operations for the quarter were $144 million or $1.70 per diluted share. Adjusted EPS was $3.45 in the quarter, up 5% from last year.
Operating cash flow from continuing operations was $777 million in the quarter compared to $580 million a year ago. The increase in cash flow was primarily due to higher cash earnings. Capital expenditures totaled $112 million in the quarter. For the full year, capital expenditures were 3.8% of revenue in line with prior year, and we expect this to be consistent in 2025.
Free cash flow from continuing operations for the quarter was $665 million. During the quarter, the company invested $88 million in acquisitions, paid out $16 million in dividends, and repurchased $75 million of stock. For the full year, free cash flow from continuing operations was $1.1 billion. The company invested $839 million in acquisitions, paid out $243 million in dividends, and repurchased $250 million of stock.
We continue to have a robust pipeline of potential application opportunities that meet our financial criteria and will supplement our organic growth. In addition, we continue to believe that our share repurchase program is an important part of our capital allocation strategy. The company currently has approximately $1.3 billion of share repurchase authorization.
At year-end 2024, we had $1.5 million in cash while total debt was $6.3 billion. This higher balances are due to the prefunding of maturing debt. The company paid down $1 billion of debt that matures on February 1, 2025. Our debt leverage as of year-end is 2.2 times net debt to trailing 12 months adjusted EBITDA.
Now I will review our segment performance, beginning with diagnostics laboratories. Revenue for the quarter was $2.6 billion, an increase of 10.2% compared to last year, with organic growth of 5.1% and net acquisitions of 5.2%. The base business was up 11.4% compared to the business last year, driven primarily by organic growth of 6.2%.
Total volume increased 6.8% compared to last year. Base business volume grew 7.5% and compared to the Base business last year as organic volume increased 4.7%, while acquisitions contributed 2.9%. Price/mix increased 3.4% versus last year due to organic business growth and acquisitions, partially offset by lower coating. Base business organic price mix was up 1.5% compared to the Base business last year due to mix, as we benefited from an increase in tax proposition and lab management agreements.
Diagnostics adjusted operating income for the quarter was $360 million or 13.9% of revenue. compared to $354 million or 15.1% of revenue last year. Adjusted operating margin was down 120 basis points due to making and the unfavorable impact of days and weather. Excluding these items, adjusted operating margin would have been up approximately 50 basis points. As the benefit of organic demand and launch pad savings was partially offset by higher personnel.
As we look to 2025, we anticipate Invitae will perform in line with our expectations. That is, we expect at revenue growth to be approximately 10% annually and to be slightly accretive for full year 2025. Now I will review the segment performance of Biopharma laboratory services.
Revenue for the quarter was $767 million, an increase of 10.4% compared to last year due to an increase in organic revenue of 8.9% and foreign currency translation of 1.5%. Central Lab continued its strong performance with revenue growth of 10%. Early development also demonstrated strong year-over-year revenue growth in the quarter, up 12%, (technical difficulty) the prior year with a soft comparison.
While farmer adjusted operating income for the quarter was $131 million or 17% of revenue compared to $109 million or 15.7% of revenue last year. Adjusted operating income and margins increased due to organic demand and large [base] savings, partially offset by higher personnel costs. We ended the quarter with a backlog of $8 billion. We expect approximately $2.5 billion of this backlog to convert into revenue over the next 12 months. Book-to-bill for the quarter was 1.17%, with a trailing 12-month book-to-bill of 1.00.
Now I will discuss our 2025 full year guidance, which assumes foreign exchange rates effective as of December 31, 2024, 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. We expect Enterprise revenue to grow 6.7% to 8% compared to 2024.
This includes a headwind from foreign currency translation of approximately 50 basis points. We expect Diagnostics revenue to be up 6.5% to 7.7% compared to 2024. This guidance assumes roughly half of the revenue growth, comes from organic growth and half comes from the annualization of acquisitions completed in 2024.
We expect biopharma revenue to grow 3% to 5% compared to 2024. This guidance includes a headwind from foreign currency translation of 140 basis points. We expect both central labs and early development to grow at a mid-single-digit constant currency growth rate for the year. We expect enterprise margins to be up, with margins improving in both Diagnostics and biopharma in 2025 versus 2024, driven by top line growth and LaunchPad savings.
Our guidance range for adjusted EPS is $15.60 to $16.40 with an implied growth rate at the midpoint of 10%. Our free cash flow guidance range is $1.1 billion to $1.25 billion. And due to normal seasonality, we expect it to be weighted towards second half of the year.
In summary, we are encouraged by the underlying strength of our business. As we move into 2021, we expect to drive continued profitable growth and strong free cash flow generation that will be used for acquisitions that support our strategy and supplement our organic growth, while also returning cash flow to shareholders through our share repurchase program and dividends.
Lastly, I want to thank Glenn as he has been a tremendous resource during this transition. I have been really impressed by the passion and the quality of our team, and I look forward to advancing the market-leading position of the company in an extremely impactful industry. Operator, we will now take questions.

Question and Answer Session

Operator

Thank you ladies and gentlemen. (Operator Instructions)
Michael Cherny, Leerink Partners

Michael Cherny

And Julia, welcome to the call. Maybe if I can just ask a simple one straightforward. You talked about margins stepping up over the -- year-over-year. Obviously, we still have Invitae ramping over the course of the year. Can you give us a sense of what underlying margins are in terms of embedded into guidance? And how are you thinking about the push and pull on what would lead you to either the upside or the downside of the guidance range, the EPS guidance range?

Adam Schechter

Sure, Michael, I'll start. And I'll start by focusing on Diagnostics, right? If you look at the Diagnostics business, it was very strong. The revenue grew 10.2% and it was really driven by strong organic growth of 5% and acquisitions of 5%. If you look at the margins, the margins were about 39% of revenue when you look at AOI as a percent of revenue. That's compared to 15.1% last year.
The margin was down due to three things. It was down to invite weather and dates. The impact of Invitae was more than double each of the other two and as we look at this year, the reason we feel confident about margin expansion in both businesses, not just diagnostics, but also in biopharma is because -- number one, we expect Invitae to be slightly accretive. It will be dilutive to margins in the first half of the year, but then when we overlap the acquisition, it will be slightly accretive for the full year, meaning it will be accretive in the second half.
The second thing is we've built in $0.10 due to weather in the first quarter, and that's built into the guidance that we provided. But if there's no additional other weather things that could help us potentially with margin. And then the last thing is the number of days. So, we have some real tailwinds that will help us with the margins as we come into 2025, making us feel confident.

Michael Cherny

Got it. And then just one other question, I guess, on the implication of guidance, ending the year on a strong mix of both organic volumes and price mix on the Diagnostics side. What do you see as the environment going forward? Is there anything kind of -- I'll call it one-time in nature, but elevated versus what you would have expected on a run rate and how that factors into how you think about the 25% growth in Diagnostics?

Adam Schechter

Yes. So, if you look at the 2025 growth that we put for Diagnostics, the range is 6.5% to 7.7%, so it's a midpoint of 7.1% growth. Now if you look at 2024 in the fourth quarter, the 10% growth, volume was up 6.8% and price mix was up 3.4%. And of our volume growth, organic was up 4% and acquisitions were about 2.8%. At the end of the day, the volume continues to be higher than what we've seen historically.
Historically, you see volume growing at 1% to 2%, you would add a little bit on to that because I do think we're gaining some market share. So over time, I would expect that the volume would come back to more in line with what we've seen historically.

Julia Wang

Mike, yes. The only thing I would add is when you look at the growth of our Diagnostics business in 2025, our guidance is assuming half of the growth, about 3.5% will be coming from our organic business, and the other half will be coming from acquisitions that we've already completed in 2024. So, it's a fairly balanced profile in terms of the sources of growth for 2025.

Operator

Jack Meehan, Nephron Research.

Jack Meehan

Adam, just wanted to start, a big story of the last year has been M&A in the lab industry. Your cash flow here is pretty strong. Leverage is just over 2 times. Can you give us an update on how your pipeline deals look and just how active you expect to be even as you integrate everything you consummated last year?

Adam Schechter

Yes, sure, Jack. What [ I first of saying,] if you look at this year, we had 10 acquisitions. And was very strong from acquisition here, particularly with the hospital, regional local laboratories, but we also had the acquisition of Invitae, which was kind of one of those opportunistic acquisitions that became available to us.
As I look at the pipeline, it's strong. And it's impossible to know the exact number because sometimes they take 3 months, sometimes they take 2 years. But overall, as I look at the potential before us, I feel very good about the acquisition pipeline. But more broadly speaking, the way I think about our capital allocation is we, first and foremost, are committed to the dividend.
We then look for as many of these hospital local, regional laboratory deals as we can do, assuming that they meet our financial criteria of being accretive in the first year, return our cost of capital in 2 to 3 years and that they're good partners that we can integrate the business well. And then we'll look into the specialty areas to see if there's anything strategic there?
Or if there's any strategic in the biopharma area. Then we have the authority to do additional buybacks, and we have the wherewithal to add buybacks where we think appropriate. So, I think we have a very balanced mix. I think we have a good pipeline of deals.
And when you look at our longer-term guidance, we've actually increased the amount of revenue that we expect to come from deals. Historically, I would have said 1% to 2% of revenue, now it's 1.5% to 2.5%, and I feel good about that.

Julia Wang

The only other comment I would add is our 2025 guidance does include the impact from currently anticipated capital allocation essentially utilizing our free cash flow generation for acquisitions, share repurchases and dividends. The other point is, as you already commented, we did end last year with a leverage ratio of about 2.2% in terms of 2.2 times in terms of our net debt to trailing 12-month EBITDA, which clearly demonstrates that we have additional balance sheet flexibility to pursue share repurchase all M&A opportunities should attractive opportunities to emerge throughout the year.

Jack Meehan

Great. And then, Julia, one for you. Just it'd be great to hear your initial impressions since joining LabCorp. And on this topic of M&A and Invitae was a headliner last year, just how you feel like the integration is going with that?

Julia Wang

Yes. Of course, Jack, as Adam commented earlier, I joined last call in December of last year, so this is number three for me. Let me just say that I am so happy to be here. In terms of my early observations, first of all, I'm really excited about our growth profile. When you look at our long-term guidance, you're looking at the top line growth of mid- to high single digits.
I have to say that this growth rate is meaningfully higher than what I would have thought the last time I worked in the industry prior to COVID. Then if you take that strong top line growth, coupled with margin expansion, along with the expectation to drive adjusted EPS growth and free cash flow generation in the range of high single digits to low double digits. To me, this is truly compelling. I believe that we have a tremendous platform and opportunity to potentially create outsized returns for our shareholders.
I also like our people and our culture. What we do is grounded in science, innovation and technology and our people actually passionate, dedicated, and focused. From a personal perspective, it is the delight coming back to this part of the country, which was essentially where I started when first coming to the US years ago to study at State University.
So in many ways, life has come full super for me. So, I'm really excited to be here, working across both internal and extremely to continue to advance our leadership position in an industry that is extremely impactful to the patients that we serve.

Adam Schechter

And Jack, with regard to the Invitae integration, it's going very well. I actually had a chance to spend time with the team in California in January. And the science, the people, the technology, the patient experience that they have is really remarkable. I was excited about the deal when we first announced it. I'm actually even more excited about it as I sit here today.
We remain on track financially. We expect the revenue to grow by more than 10%, and we also expect it to be slightly accretive as we look at full year 2025, second half of the year being accretive first half still dilutive. So, as I look at that business, if I look at the integration, it's going as well as I would have expected.

Operator

Lisa Gill, JPMorgan.

Lisa Gill

Just really wanted to follow up on your thoughts around the organic growth rate for diagnostics. Adam, when we were together in January, you talked about esoteric testing being 3 times the typical growth rate. of what we see. And then you also talked, and you highlighted again today that you expect kind of normal utilization to go back to 1% to 2%.
So how do I think about the makeup of the 3.5% that Julia talked about as far as organic. How much of that is coming from esoteric? Is your underlying assumption that we go back to 1% to 2% historical utilization in that number? And then as we think about esoteric and your relationship with Managed Care, anything changing there as far as shifting more volume to you, et cetera, as we think about '25?

Adam Schechter

Yes. Thank you for the question, Lisa. And -- when I talk about esoteric business, I very kind of subset it a little bit to look at oncology, women's health, neurology, and autoimmune disease. It's in those four areas that I see the growth at 3 times the historical rate of diagnostics. So, it's not the entire set of esoteric test. It's that kind of subset, which is still a big portion of esoteric testing, and we continue to see those growth rates faster than others.
And then when I think about the underlying market historically at 1% to 2%, a big part of it is still that they're so -- the market is so big. And if you look at the CAGR, it's -- from 2019, the volume has been at a 1% to 2% range. And I think that's just like a historical rate. With that said, I do believe that we are gaining some market share.
And I think with these hospital deals, with the geographies surrounding the hospitals, I think it is enabling us to grow faster than the market. And therefore, I would expect us to continue to do that even if the market growth goes back to historical levels.
In terms of esoteric testing, we continue to work with our managed care payers. I think because we have such a broad pipeline, we have 6,500 different tests available to them. It actually gives us a good mix that we can talk to them about when we speak about reimbursement. So, I think having the breadth of the test profile that we have helps us.

Lisa Gill

And just one follow-up on the guidance. Lab directed test that there's supposed to be something obviously coming into play, your trade organization currently has a lawsuit. Is that cost meaningful? And could there be a meaningful shift if you're able to win the lawsuit in May?

Adam Schechter

Yes. So, with regard to lab developed tests, the vast majority of what's being required to do we actually were already doing because we submit our test to New York State for approval, and that's a lot of where the cost was. So, we were incurring that. There might be some other costs in terms of systems to track safety and other things, but those are kind of within the ranges that we provided, nothing that I would call out specifically. I still think it's the wrong thing for the industry.
I think it could slow down the ability to get new important tests to market for people that need them. I think it caused some health care disparities where if you live around an academic medical center, you might have access to an LDT before the rest of the population. For those reasons, I don't think it's the right answer. I think the trade organization needs to work to find a better way with the administration to move forward. At the same time, it's not a significant financial impact to us.

Operator

Erin Wright, Morgan Stanley.

Erin Wright

Could you characterize, I guess, the backdrop right now across biopharma. What are your expectations in terms of the underlying market into 2025? And if you could provide an update on the NHP business as well. Just the supply, given some of the news on that front more recently. And just how we think about also from a margin perspective for that business in the quarterly progression, anything to think about into 2025?

Adam Schechter

Yes. Thanks, Erin. I'll tell you, it's nice to see the growth that we had anticipated in both of the biopharma segments. So, if you look at biopharma, we had 10% revenue growth for our central labs. And as expected, we did see growth in early development. Through development actually grew 12% year-over-year.
As I look at the guidance that we're providing for 2025, we're giving a range of 3% to 5% with a midpoint of 4%, realizing that there's a significant impact in that from foreign exchange levels. As I look at that business, it remains healthy. We are a leader in both of those segments. When I start with Central Labs, I mean, about 85% of the forecast comes from the backlog.
So I feel good about the forecast that we have, and I feel good about the backlog that we have. As I look at early development, I look at three things. I look at the number of RFPs in dollars as well as numbers. I look at our win rate and then I look at the cancellations.
If you look at the RFP, they remain strong, both in dollars and numbers. If you look at our win rate, it remains consistent. And if you look at cancellations, although it's not back to exactly normal levels, it's at the high end of normal now. So, it's come down much better than where it had been historically.
So I feel good coming into the year with both of those businesses. As I think about margins, we expect margins to expand in the biopharma laboratory services business as well as in Diagnostics. And I think the expansion comes from increased volume as well as increased utilization, particularly in early development. As far as NHPs, we have the supply that we need for the forecast that we've provided, I feel good about our supplies.

Julia Wang

Maybe I could add a little bit more color. As it relates to the margins for the BLS segment in 2025 versus 2024, so first of all, we did share in the opening remarks that we are anticipating this currency impact to the top line, which will translate to about 140 basis points of negative impact to the BLS revenue growth versus prior year. Therefore, when you look at the margin expansion drop-through in '25, the pace of that growth will not be as much as you saw in '24.
The other factor is the sources of our growth from a revenue standpoint from the two business lines within BLS it's not going to be as heavily weighted towards central lab as it did in 2024. The other point that is worth noting is Q1 PP play is the lowest margin quarter of the year. So, you might want to take that into consideration as you think about the quarterly phasing within the year.

Erin Wright

Okay. That's helpful. And just a quick one on regulatory. You mentioned LDTs. But -- what about PAMA (technical difficulty) and just the broader regulatory environment where we stand today with the new administration?

Adam Schechter

Yes. So, with PAMA, we continue to work with our trade organization to find ways to get better legislation in place that we think is more applicable to what they were trying to achieve and a better way to actually move it forward. We've been trying that for many, here's now, to be frank. And if that doesn't happen, we'll try for a delay as has happened in the last several years.
And then at the same time, we continue to just push it out a year. So, my base case, I assume PAMA is coming in 2026. We built a plan that looks good, assuming PAMA does happen. And then if it doesn't happen, it looks even better. But at this point in time, we continue to work to try to find a better legislative option.

Operator

Elizabeth Anderson, Evercore ISI.

Hi. This is (technical difficulty) Sorry. Yes, maybe go back to onetime items. I think you said you have $0.10 of weather impacting a '25 guide. So maybe what's the total weather impact for '24? And is (technical difficulty) day and Payroll day going to be tailwind or headwind for fiscal '25?

Adam Schechter

Yes, if you look at 2025, in January, we had about $0.10 impact from weather, and we built that into the guidance that we've already provided to you. And as we also look at 2025 payroll will actually be a tailwind for us. And let's see what happens with the rest of the quarter with weather before we comment any further. But at this point, we've built in $0.10.

Julia Wang

Joanna, the only thing I would add, I definitely agree with Adam. So clearly if you look at 2025 full year calendar is largely not a factor. However, it will be slightly unfavorable because we expect to have one less revenue day partially offset by one less payroll day. So, you might want to take that into consideration as we work through the quarters within the year.

Operator

Andrew Brackmann, William Blair.

Andrew Brackmann

Hi Julia. Looking forward to working with you. And Glenn, I'm glad if you're listening, congrats and best luck in retirement. Maybe just two on the macro front, I'll ask upfront. Sort of first here, can you maybe sort of talk about underlying inflation assumptions and how those might impact margins this year? Any sort of spending categories that should get either better or worse in 2025.
And then secondly, a lot of noise on the tariff front right now. How are you sort of thinking about any impact to your supply costs, if any, for this year?

Adam Schechter

Thank you, Andrew. So, two thoughts. First of all, underlying inflation, a big part of our inflation is cost of people, and we've assumed 3% to 3.5% inflation. As we look at our labor, it's actually gotten better in 2024 than it was prior, particularly at turnover rate. So, I feel like we're in a pretty good place with 3% to 3.5%.
In terms of tariffs, it's hard to know exactly what would happen, the timing of what would happen. But we've taken a look at a lot of different scenarios, and we think that it would be very manageable for us.

Julia Wang

Hi Adam, very nice to meet you. To just build on what Adam has already shared. As you know, we have this launch plan initiative that every year, we drive about $100 million to $125 million of savings through really process and technology improvement that really dropped through to the bottom line. So that actually helps us to really for the most part, the increase in labor cost.

Operator

Pito Chickering, Deutsche Bank.

Pito Chickering

So a quick follow-up question on ED. I think you said that would grow sort of mid-single digits. I guess what's the components there between pricing and volume for 2025?

Adam Schechter

Yes. Thank you, Pito. So, we didn't give specific guidance for ED. We just said that bio pharma services is expected to grow range 3% to 5%, 4%. Both segments will grow within that. ED does tend to grow slightly faster than what Central Laboratory business grows. Price is basically pretty flat. I mean there's a little bit of pressure, but nothing more significant than what we would expect. So, it comes from volume.

Pito Chickering

Okay. Got it. So, pricing flat for ED and growth coming from the volume side. Looking at the free cash flow conversion for '25, can you walk us through the delta between sort of EPS growth on '25 versus your free cash flow growth. That looks to be sort of some working capital or some pressure on your free cash flow growth versus your earnings growth?

Julia Wang

Yes, maybe I can start another question. So to purpose understand 2025, let me start with regrounding ourselves about how we landed in 2024, particularly in Q4, so as you may be aware already, in terms of the free cash flow generation, we typically generate the majority of our free cash flow in the second half of the year with the fourth quarter being the strongest, and that was exactly what we saw in the fourth quarter of last year.
Specifically, the Q4 free cash flow from continuing operations was $665 million, which was up over 60% versus the year before. And the increase was primarily driven by higher cash earnings, lower capital expenditures as well as favorable working capital due to timing.
Now when you transition to 2025, you might have already seen coming out of the strong cash flow in 2024 of $1.1 billion -- our guidance for 2025 for the free cash flow is between $1.1 billion to $1.25 billion with a midpoint of $1.175 billion -- and that growth once again, is really driven by the higher cash earnings and to a certain degree, some very (technical difficulty) it relates to working capital.
But what I would say is from a cash conversion perspective, we are targeting around mid -- as I higher, which was what you have seen historically, which is also what we built in the guidance for 2025. And overall, I would say we are really pleased with the strong cash flow that we have been generating, which has been serving and will continue to serve as a key funding force for our capital deployment strategy and execution.

Operator

Patrick Donnelly, Citi.

Patrick Donnelly

Maybe I'll just kind of package a couple together here. When you think about the lab business, the core Diagnostics business here, can you just talk about the pricing side, what those conversations have been with payers, the expectations for '25 on that front?
And then in a similar vein, just the utilization, obviously, it's been elevated. It feels like it's going to continue. How much conservatism did you guys put on the utilization side? And how are you seeing that play out as we work our way in '25?

Adam Schechter

Yes. Thank you, Patrick. So, as I look at 2024, I mean we ended the year in the quarter very strong, and it gives us momentum as we come to 2025. And if you look at the guidance that we provided for 2025 for our Diagnostics it's a midpoint of 7%. So once again, showing very strong underlying demand, which we believe 3.5% will come organically.
The other 3.5% will come from deals that we already completed in 2024. Our discussions with the payers go very well. We continue to show them the value that we add. They see the benefit of us acquiring some of the hospital business because that actually helps them as well as helps the patient, helps the hospital and help Labcorp.
So those deals are very helpful to, I think, the entire health care system. And I think the payers see that. They also see that we are a very high-quality lab. We now have so many specialty tests and almost every one of the specialty areas that they're focused on, and they see that we are a lower-cost providers. So, we get very high quality and because of our scale, we're able to give it at a lower cost, which works in our favor in those discussions. So, I feel good about the environment. I feel good about where we are in 2025 as we move forward.

Operator

Kevin Caliendo, UBS.

Kevin Caliendo

In the quarter -- in the fourth quarter, you mentioned ex weather, ex days, and ex in Invitae, core margins in Diagnostics that have grown 50 basis points. Is there any dynamic that's different when you think about 2025 such that core margins would continue to grow? And I guess that's -- you mentioned labor turnover is better versus LaunchPad.
I'm just wondering like when you think about the business ex the one-timers, weather and everything else, would you still expect core margins to expand by roughly what you saw in third quarter, fourth quarter, the 50 basis points or so?

Adam Schechter

So as I think about 2025, we expect to see margin expansion, and we expect to see it in both businesses, in our Diagnostics business, but also in the biopharma laboratory businesses. Some of the things that you mentioned, in particular, Invitae works in our favor, and it's actually a tailwind it will be dilutive to the margins in the first half of the year, but it will be slightly accretive for the full year, saying that the second half of the year that will be accretive for Invitae.
So overall, I feel very good and confident that we've got some tailwinds on the margin improvement that will help us as we expect in 2025.

Julia Wang

If I would add maybe one more color. As you look at 2024 and Q4 in particular, from a diagnostic margin perspective, once you neutralize the impact from the strategic acquisition of inviting as well as some unusual operational items like weather based, the language for our Diagnostics business was actually in the mid to high 20s, which was in line with our plus performance.
And as we move into 2025, we expect to continue to build upon that foundation and continue to expand the margin, particularly as we also overlap the dilution to margin from Invitae in 2024.

Kevin Caliendo

Got it. Okay. That's helpful. And just one follow-up. You made some comments about 1Q and weather and the timing of Invitae. But just when we think about cadence -- is there any other color you can give us around cadence for the year as we think about EPS growth or however you would want to clarify that. As we think about 1Q versus 2Q versus 3Q versus 4Q because there's obviously some one-timers this year that might throw off normal seasonality.

Adam Schechter

Yes. So we're not going to give quarterly guidance. But as I did say, in the first quarter, we have a $0.10 impact through the month of January due to weather. We'll see if there's anything else that happens to weather. We haven't built in anything above the $0.10, but we're not going to give quarter-by-quarter guidance at the moment.

Julia Wang

And earlier, I shared right in the first quarter, there will be a day impact, but I think that's included in our supplemental information on the website as well.

Operator

David Westenberg, Piper Sandler.

David Westenberg

So I'll just have one question here on the Invitae acquisition integration plus some of the growth here. So, it did have an MRD assay that you talked about bringing Multi -- first biopharma and then eventually commercialization. Can you talk about reimbursement or expectations on timelines and reimbursement? I know Invitae had reimbursement, but it also had some IP fights. I'm not really sure where that actually end up shaking out. So, if you can give us an update there.
And then just in terms of the back half of the year, accretion on Invitae. How much of this is growth dependent versus maybe cost synergies that you've already identified and really already have them in place. And thank you. I'll just ask one upfront because that was a little longer.

Adam Schechter

Yes. So, two points. One is -- and they both come together. As I look at the accretion for Invitae, I mean, we are taking costs out, but we're doing it in a very thoughtful manner, and we're doing best of best. So, we have MRD assets. They have MRD assets. We were looking at the ones that were scientifically most advanced from a timeline, we're furthest along, and we're taking the best of best. So, we continue to have a significant number of assets as we look at liquid biopsy, including MRD.
With regard to the timing of accretion dilution, I would say part of it is just it's a year later. So, we've overlapped the year. And then the second part of it is that we've taken out significant costs where it makes sense.

Operator

Tycho Peterson, Jefferies.

Tycho Peterson

I wanted to ask on (technical difficulty) on the partnership there. I know there have been, I think, some developments, there was a hearing at the end of last month on the injunction. And just how are you thinking about resources you need to put behind that ahead of the launch later this year? And then anything thoughts on USPSTF and the Braidwood case and whether that may impact timing of the launch?

Adam Schechter

Yes. I think it's best to actually talk to them about the specifics of any type of cases and where they are with litigations and those types of things. With regard to us, we'll be prepared to launch. And when it's appropriate, we'll be ready.

Tycho Peterson

Okay. And then follow-up is just -- I know you had the question earlier on PAMA. Going back to your comments at JPMorgan on SALSA, you had commented it makes sense and it's logical, but there might be kind of pieces you can pull out of if you connected it all approved. Can you maybe just talk a little bit more about what you're implying there and what parts you might pull out of.

Adam Schechter

Yes. So, we're trying -- again, I didn't want to say we're pulling apart bills or legislation. Our trade group is working to figure out what's the best path forward to try to get approval of legislation that addresses the needs and with any legislation, you talked with Bureaucrats Republicans and Congress and the Senate, you try to find things that are appropriate for all involved.
So I feel like we've got a path forward that we continue to work on. We've had Democrats and Republicans very supportive that the current patent of the way it has been implemented doesn't make sense. Now we just have to find the most logical way to move forward where it does make sense.

Operator

Ladies and gentlemen, this does conclude the question and actual portion of today's call. I'd like to turn the call back to Adam for any closing remarks.

Adam Schechter

All right. Thank you, everybody, for joining us today. We appreciate your time, and we look forward to updating you on the first quarter of 2025 in April.

Operator

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.