DGX - Earnings call transcript Q1 2018 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics fourth quarter 2018 conference call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and question-and-answer session that will follow are copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited.

Now, I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. please. ahead, Go

Shawn Bevec

good Chairman, and Guinan, here Steve with Chief Thank and morning. Chief our President Officer. Mark Executive Rusckowski, Financial you I'm Officer, our and

subsequently discuss make X-K. During limited we those to, quarterly are our current Diagnostics' projected. filed that in may forward-looking future non-GAAP uncertainties from measures annual and those Form affect on statements differ this reports described Form materially and may XX-K on report not and XX-Q may call, Risks results results actual but and we'll report on Quest include, and Form

For reported EPS diluted refer call, amortization refer adjusted EPS diluted adjusted to EPS excluding this reported references to to expense. to and references EPS

were with and As and of that net impact a January new reminder, expenses X, reduction in basis. uncollectible these patient diluted and administrative prior-year expense now a the of adjusted as adopted for within recognition company bad associated Under possibility compensation. revenue as selling, comparisons stock-based balances revenues expenses. associated selling, XXXX when revenues EPS reports classified the general excludes the rules, on administrative amounts been net benefits have rules restated historically now and Also, debt new reflect with the retrospective basis effective were general a to tax were excess

Now, here is Steve Rusckowski.

Stephen Rusckowski

driven reform. and review PAMA. of the and morning, weather you with growth as Mark on provide quarter I'll some then We provide on execution and negative Shawn, performance. This of the strategy. more Earnings by PAMA, lower joining severe everyone tax detail as thanks strong reimbursement quarter highlights benefits strong on well today. Thanks, will our And Medicare revenue on under us the for continued despite fourth perspective two-point progress delivered growth was impact

start. a also of our which completed good is off announced previously MedXM, We to acquisition

EPS was XXXX. nearly Now, from up XX% X.X%. here EPS were Adjusted the grew highlights Revenues XX%. Reported up are some from quarter.

Before and provide to we've what PAMA reform. savings using made, like I progress investments tax I'd is the our of do business describe on from portion to update in the an a

our rates under Turning under for XXXX, clinical accounted we X% reimbursement we of of last quarter first first our reduction XXXX. year. And this both XX% actual expected and be our XXXX. projected would to IP PAMA, PAMA impact Medicare November, Since a the of in revenues schedule, XX% approximately approximately XXXX the approximately quarter said was the for in our pharma impact which in the operating reaffirms

by reimbursement We our continue trade support market-based implement efforts to association laboratory a to schedule.

On the court initial to decision the those from process legal we CMS rates. complaint to at rates challenging ACLA's reiterate has front, the Medicare their the CMS themselves, midyear. to but and sides sued both followed We we could briefs have submitted believe not the that by is ACLA arrive still new want a and judge have rather

ensuring with that seek laboratory like the progresses, and continued other about have issue critical This NILA, As to ACLA to stakeholders. a AdvaMedDx trade services. Medicare to fix lawsuit associations closely PAMA, coordinating legislative is aligned beneficiaries access has

new close rates to the their forced doors. serving While may areas, providers, including be other remote and us, many underserved have impacted laboratory

all. So, is to an that's important why issue this us

million basis reform, shared approximately tax in on in XXXX. that tax to we realize adjusted you $XXX Turning last will quarter, savings we with an

people tax this and are the much into million our underway. and is business before $XX We roughly reinvesting of

our our delivered Turning to growth. all to the first accelerate quarter, strategy on elements five we of

services. this More acquisition quarter health We consecutive a of from We the our a provider national MedXM, few of related above year our results. home-based in had minutes. expect X% deliver of are this integrating guided The acquisition XXXX to the productive strategy for XXXX, which pleased by strategically through X% is first in earlier on were of to achieved for latter of element M&A growth to accretive the completed which leading XXXX. M&A. grow acquisitions, we in our of top risk assessments and is We the points we XXX end X% X% announced a growth basis the in objective. year acquisitions half We're to about fifth

delivering we a expand an our for remains integrated lab Our M&A second healthcare relationships strong services professional systems. continue relationship New to system us. is strategy, We with PAMA that pipeline March, of acknowledged element earlier the hospital headwind and a we England. entered is strategy into growth. growth our health with delivery in Under In

plans. operating bigger about of frequent PAMA Many reimbursement their strategy more impact aware major are are and However, more the how executives Hospital with health to conversations cuts outreach we asked the headwinds having about systems lab them help. of with have of access for starting we're your of and laboratories. can expanding you become hospital possibility

is of well determine excited their an Texas. of appropriate number center new were to the cancer strategy, progress and innovation. and upon non-invasive are medicine which XX% of The growth In to recent on excellence we've treated patients we're screening. prescription patients in acquired payers. advanced in Quest health cancer. White networks a like opportunities Texas panels. drug health delivering have of making most members' many creating the with strong it's The cancer in quality with about based community continue Texas. the their and treatment precision access, our to oncologists Oncology, access is community conversations, conversations practices growth is we're with tumor of centers that offer of cancer clear plan diagnostic and of our convenience, health that and broadest We're Oncology seen with Health, we make And Key growth agree. element unmatched community and as in center the prenatal helping of Med monitoring, productive Fusion, Since the oncology acceleration Med with progress drivers third We & Network plans the Scott by our US Baylor diagnostics, quarter value. Fusion system largest offers as leaders QuantiFERON

the to continue progress strategy, of to of be consumers. make is executing the fourth our provider We which growth choice strong of element

this strategy continue customer Walmart on year. progress perform locations and outstanding We're well many feedback partnership expanding this the into the excited to health help in gaps them experience. within it's in Customers when care of well. where and their MedXM more element we population about fifth The of the services. board is integration traffic excited reach an markets that with with mobile our close we the using professionals patient can increase open to with The and for going them. locations to Walmart. future to of across throughout Our expect is growth care We're important pleased different and and extended healthcare support convenient analytics patients are

closing scores. This out include health to at of It eye assessment identify risk give on So, of care. tests, call this capability, people then key is is you members. those Medicaid and at-risk centers MedXM's or a retinal patients to enables a patient gaps schedule which the Diabetic of risk managed diabetes. Medicare improve quality care. helps image. identify reach one example part program perform a to Plan plans screening diabetes to their Health Advantage customers MedXM of capturing health let me National series visit

to project, for pilot system. we two The drive use healthcare operational second this data to the continuing the our to point the providers UnitedHealthcare launched which this quality with Optum, and and we technology lower Humana within is excellence. strategy element cost healthcare use We Earlier to to month, of program Blockchain improve administrative data and of our improve costs. reduce expertise can look believe forward efficiency MultiPlan,

wage reimbursement cost pressure. to We cover efficiency and continuing Quest drive to inflation effectiveness are within and the of

give few updates. me a let So, you

Our perform well. collaboration to with Optum XXX continues

As collection last price come in of healthcare, of line from a associated payers of responsibility cost And challenges. We're which bring keeping with transparency succeeding with pressure uncollectible the consumers year. pre-share there, increased to collaborating in from patient despite we're in revenues their poses patient balances patients, the more responsibility, our tool with our for plan a pay This enable test. plan customer improve continuing our that our a out-of-pocket to to estimation business cost through center drawn will before member what if health know is and health healthcare the at enables to specimen We're test is patient a to experience. real-time member service the tool. covered share

more used process XX patient in has than been e-check-in million Our encounters.

patients information the and like helps most they flow. Our patient needed are this convenience us the providers based where place on

service of patient with all We our to end XXXX. the deploy have centers of X,XXX and by sites e-check-in expect in

Now, let performance. financial take will me who Mark you through turn our to over

Mark Guinan

Services, The year with by X.X% with comparison. revenue requisition the approximately headwind prior Starting Revenues versus holidays consolidated last X.X% acquisitions, the a of Steve. year. Thanks, revenues, with revenues X.X% a bad basis organic up of the in XX uncollectible weather year, recognition balances on report weather of in Information instead impact driven as essentially patient $X.XX reduction weighed per was Volume versus of number associated versus by compared the X.X% timing major created to flat. points. increased responsibility of grew we improved net or first short, of first timing and DIS quarter. debt. of the Please Diagnostic and acquisitions. billion versus a quarter year negatively prior by now this by to holidays the prior for year prior The volumes were to requisitions, the revenues the during Passover note as year-over-year the a for accounting, volume Volume, and growth impacted of that year. quarter attributed measured due Easter with points requisition basis XXX tougher presented change Revenue

number we XXX we test XXXX quarters. XX reminder, for Medicare is price. many quarter indicated variation, and were as previously. points mix headwinds includes all PAMA req. This is business PAMA, variables outlook a a in other basis less consistent proxy observed as from during factors. we've trends than increase per It a revenue mix, the with price approximately provided changes line for test and the not unit per February in such Unit As req and have will from pressure the price to basis several is After reimbursement with points in of

of year. the a mix in was acquisitions, and of basis, weather caused more compared which the of decreased XX.X% headwinds. by $XXX decline compared and $X million or other using from prior-year we're operating a of million of offset in revenues in to not Reporter last strong or of of Beyond XX.X% or integration the remained quarter adjusted therefore, or compared are unit elements contribution. million million by revenues million operating reinvest business $XXX to our the for result XX.X% ago. $XXX On Almost, $XXX was year as than income price, yet revenues reform early PAMA, was operating as income XX.X% to Operating mentioned, weather. mix a income of revenues into quarter to an and, margin our The and full-margin a portion savings stages delivering Steve people. tax the reimbursement

from performance that last underlying of XX% into roughly help adjusted which in to to continue was provide We $X.XX operational accelerate the was to our stock-based Reporter related up to a benefits quarter. expect now ago. $X.XX, us these excess compared EPS business. growth, EPS $X.XX greater operating Note excludes this year. clarity comp our to impacted EPS margin quarter tax investments $X.XX also year Adjusted the in

XX% rate Our in the last approximately effective compared to quarter year. tax was XX% first

was Cash $XX year-over-year. line The CapEx $XXX in Optum our the balances are million uncollectible the are million first is due accounts. our in $XX movements with million operations As which higher expenditures periodic patient $XXX first said, a quarter XXXX. year. year longer selling, with difference administrative in provide to I continue balances the reported last uncollectible expense. to our largely That planned updates associated in ago, make intend working million during earlier, and by compared quarter spend patient capital the XXX. the for cycle we to progress revenue was versus provided we with mentioned year-over-year associated were general no Capital partner, In responsibility responsibility our quarter, management flat on with to

turning guidance. Now, to

$X.X adjusted between half X% outlook Our diluted billion, be between to year. be to and and increase $X.XX X% an remains of XXXX EPS unchanged and the as $X.XX $X.XX to and Reported prior between be for and $X.XX. EPS $X.XX follows. billion Revenues of several to only versus we billion $X.X million closed and provided between back Cash to the by million. expenditures and to approximately to be be $XXX operations XXXX. Recall in acquisitions and the that our that that we've guidance capital acquisitions closed $XXX date includes

I'll earnings to XXXX and from XXXX. Steve. continue ramp now it We expect throughout accretion up into the deals to turn these back to

Stephen Rusckowski

And a strong we'd summarize, Thanks, that, growth Mark. driving quarter. accelerating like and take progress we We Operator? made To your delivered first excellence. questions. with operational solid to

Operator

Thank Instructions]. you. [Operator

comes question Leonard with Deutsche first Dan The from Bank.

ahead. go may You

Dan Leonard

Thank morning. you. Good

So, quick how a weather, some PAMA, quarter to there's your you on like your it the sounds parts on comment EBIT people. a compared margins, internal margins investment just between clarification the number EBIT Can in plan? in acquisitions, arrived moving and

Mark Guinan

we that, increase And with net mentioned, part obviously, had that would I'll of the handle margin, falls weather. that still when you we offset income Dan. tax impact. $X by in can was plan. to operating has planned happened, impact EBIT again, you revenue. about PAMA, you're see on obviously, We exactly one Sure, We going obviously, percent that as was despite was might if thing results, some reinvestment which, know never the margins, but impact to there know impact Yeah. I net Certainly, worst a how being of Kind tax despite this EBIT the predict, tax, reinvestment. holidays. reform the be. actually as in reinvest certainly, hadn't an margins million though, The have a that. of to not to that the grown The PAMA our negative way is the what the calendar see, quite – of self-evident,

that I those together be of at up would to rate of We going So, to part can we past, as put I when was planned of it and then, And case our to pieces, those what probably look a kind know, we we at last business acquisitions. synergies. all That them shared we've XX months take say. to the the think that's is piece XX in certainly as plan profitability. their a get

plans So, that well. was as our certainly in

Dan Leonard

might follow-up, profiling color. NCD FDA-approved Helpful Medicare tests? just Can your tumor strategy prepared remarks. you And now there a that evolve, in Okay. on an from comment profiling then, on how tumor the is profiling commented for you tumor

Stephen Rusckowski

evolving. continue say, has to So, will I evolved here. Steve is This and, it evolve. would It

as they're looking by areas interest this, regulatory how of will the think I on and think FDA around tests. oversight And there's I to more would developed more and the continue controls about describe, they one laboratory that at.

actually guidance that's tick support believe diagnostic tumor to So, value control through patient. a that, able forum to about that with that legitimizes panels process pleased have with the we're because then cancer workup we capabilities that we new a the that. to did the second that the out CMS the is, do be And the add of capabilities it and

care. you So, a it next center the brings just getting importance front when expensive of workup in full make choice cancer and that

Watson, Sloan our strong space. I Fusion, work and the think given and growing presence relationship about our Memorial my working IBM with strong Med in acquisition with earlier whole comments have we of relationship US Oncology, with a our

actually we positioned is very pleased well some because, that important energy ourselves quite lot guidance and the and go legitimate of that of certain to think, around controls operating And well. then value of and general the I that. like marketplace there very companies some in the the it's forward controls we a it that the we're about So, have that that bring verification of value do that, delivery around of tight value as

of approval around that, some that therefore, a we and so, is good think, And for kind controls thing.

Dan Leonard

Thank color. you. the Appreciate

Stephen Rusckowski

you. Thank

Operator

Instructions]. [Operator you. Thank

Goldwasser with question comes Stanley. next Ricky Morgan Our from

ahead. You go may

Ricky Goldwasser

Good on in morning. quarter. congrats And performance good the Hi. Yeah. a

quick and So, I have a follow-up. question then one

and give for RFP. the Aetna Just timing you the United can update on Lab an us contract an if

Stephen Rusckowski

Yeah, sure.

competitor's the in on So, United. said the obviously, industry be nearest one. our right number under two Number like, contract would is knows, we've expires XXXX, contract as that, we with to terms,

hopefully We we'll that. time when have about something, in to and right that we dialogue have we are also the nothing at shared we that have And dialogue. share will share

there. So, progress we're making

make health others We progress of hundreds of with plans. also

in they're in Care we our strategic. in work to Extended of around mentioned price with and relationships, the more becoming relationships. Some and doing nice contractual be And a yes, Services they're terms And shape our being small. portfolio we're feel, and network, some big really we'll enter related we as doing XXXX, more our I the and Population but we're estimation Health, work transparency tool. these

part So, what information this diagnostic really we definitely service and resonating. We're bringing business. But as well we're experience, That doing with centers. We're we're the last in said, And application and as is our are our the ourselves our we strategy big consumer the nice our consumer we're capabilities showing a resonates is laboratory. with of capabilities. whole information services it e-checking small. e-enabling extremely plans with health patient upgrading this MyQuest is

we'll progress. we quickly. And you it good sure all making have So, that make when something, hear

Ricky Goldwasser

Great, thank you. X.X% XXXX. for Obviously, M&A. the you're And just a looking quick growth follow-up for on

is in So, quarter? in missed of in the said the And that contribution it, you not I included new case M&A what M&A guidance.

place, is that seen now So, in PAMA any valuation. mean, on impact have I you

Stephen Rusckowski

was question was to for to make it the and M&A how for said M&A QX. turn let's X% in Mr. in I'll X% what more around is excluded. And The we what around the much is then, the what Mark. clarity guidance quarter in

then the want So, Mark, guidance? that QX to you take about and

Mark Guinan

deals because stronger or that that So, year. X% first first core committing the guidance. some our also upside or we annualized through XXX in deals points potential contemplate there's guidance but X.X% the do year, anything not our new our to we contributed in And included because be will half in of the you the work obviously, without for the M&A X.X% in quarter, X.X% the for And had we business. X% total of that, X.X% basis

year, in we because by in it contemplated which January. closed the was the early shared MedXM, had our guidance time we was completed late Now,

Ricky Goldwasser

you. Thank

Operator

question you. from Thank next Kevin The with Craig-Hallum. comes Ellich

ahead. go You may

Kevin Ellich

You how I Good to this growth expect can guess, the that first off, it growth more the have you're little actually bet. retail is to locations just Thanks on impact bit what you're morning, open Steve. business? contribution real on making then, a to tax that more a talk much up the and question. you from savings, strategy. the your for about How the And hearing you investments year? update planning quick many

Stephen Rusckowski

Yeah.

Okay.

reform, on take is this quarter So, first investment the million of the around those tax would and of you our of kind all, going the growth. say is broad categories, categories, would, $XX broad accelerating and majority in about we in around our fourth growth we're up to with we've results as what said are shared business some of What and strategies. outlines the of I

also the people. our Quest in So, strategy, Diagnostics, consumer but investing

So, don't will announced vast we going for that the majority equity provide of payable that fourth quarter. our have also a we're in to and employees the bonus that be

of So, with continue accelerate five strategies. the all has growth see and us throughout to you those what And believe started that that, year. around will will help starting this feather in we into QX

can second feedback And They're the well. of big The the Walmart. part really those to returns. services stores. and other continues that started customer is The going really venture Florida. with provide joint in your for good. Texas look question – with pleased health prospects we at is We the around basic We're early states

the draws Health bend blood as what and our basic This what you to formed business. at services around it's we, Population Quest was JV. But Extended and and healthcare around do venture the curve. importantly, all we we Diagnostics providing so, and do joint Services And laboratory Care more know, cost about

We're you excited as those that, of out how give will about number more. working many we're but around the Walmart kind And well. stores. still We be so, today with a details prospects there about won't

more We early have be good. the and initial making stores quite and because is progress returns there will the we're

Kevin Ellich

That was good. Thank you.

Stephen Rusckowski

you. Thank

Operator

with Suisse. AJ The comes you. next question Thank from Rice Credit

You may ahead. go

Stephen Rusckowski

AJ. morning, Good

AJ Rice

Thanks. you are guys? how Hey,

parts questions. So, to ask two quick here I'll just

you of react to – then, the years that people when when and mean at discussions will of having impact Express. appreciating then hospitals where where last we're of next And covered just the the further don't or some understanding in opened thinking reimbursement But are I Walmart the hospitals of wonder what a them. Just I wonder has lab step changed expand discussions where well. about whether referenced asking uptick know they their wonder, question. their discussions a it remarks, CVS, they about retail I you if has might in many and meaningful to I – You And I the that sort wondered times changing business tend as your I any – your their on up. think that potential an that's of to Reports changes for coming PAMA about way prior maybe with they activity of partners because business. Cigna, in in the it just Steve. lot either coming. up see to always hospitals to in come, With all you've that? collaboration? it's And an consolidation urgency curious And your there's with and discussion. new seen lab take year maybe at that, implications till your haven't

Stephen Rusckowski

Okay.

other would of the that PAMA. have is of take have And hospital pace of the you pressure part, is greatly all hospitals. the are of they – executives aware is which What number a say, hospitals. I aware find in awareness second So, first that is let that this me we accelerating. is they're

if there's lot So, PAMA. a not with just executives hospital and you to talk pressure, today, of

so, become And understand anxious they improvement ways have Many to more cost are could many efficient. goals.

put to key around part And particularly value board, so, point a which our our will, strategy nicely if launch they of being with you a in-patient laboratory hospital can plays the cost, some proposition. through that program us, into is

of us, accelerating. it's So, independent

it are Second is accelerating we well. as

not doors strategy. aware and the knocking to hospital executives already, aware, conversation sure specifically we're if lab this and a many that So, on around make they're around they have are

talk those have with about particularly large to we've businesses outreach that lab strategy. engaged their So, systems, many

to So, possibilities. options understand think and make our strategy it's well their that accelerate of be strategy they're sure a aware what could deliberate and about the

out So, helping we with well. information as there the are

The of do has retail strategy. your second part question our with to

we're overnight. happened Now, for strategy retail working this has years. on This

said, that. As departed we Walmart

in a Safeway MinuteClinic. part of that. have We We They've active strategy. the CVS their who evolved do is for work

could for mass to this commitment as about. doesn't we that don't Safeway communicate have so far like have relationship a We're the work number because what great Walmart, we do if we But leave could comments, We'll work with reality, retailers, of will of two earlier working CVS cover Aetna. as not and some And far, said that my going but as have also we're States. becomes topic. some this announced with them Aetna. the have working And on accelerate know, energy is partners as or on And is potential these with center well. reemphasizes any just And uncovered. We in United is see Number the merger hopeful of that health right making around sure one. number well. great population actually I and that they them help relationship Walmart, other necessarily of of their a geography the and a with speculation the do you whole and will the

and complement to off could around We're through table already have. as continue So, different this. we're how partnerships continue we early that fortunately, what running. the But, to fitting there understand we to might we this, retail be work

deals You reinforcement in see that this of the the of some are marketplace. the out with

strategy with more is try by and to right And being consolidation marketplace the it's resources importantly, supported the is bring our So, interesting. their this the But, together one. capabilities. is

services and And prepared what remarks capabilities in all which actually is what cost about to bend we're is data portion this with curve. Our the overall. of a the to my of doing middle MedXM about, was quite essential are that

AJ Rice

Okay, lot. great. Thanks a

Stephen Rusckowski

Thank you,

Operator

comes question Jack from next Meehan The you. with Thank Barclays.

may You ahead. go

Jack Meehan

this Lab with how to want lab the appetite an Shiel acquisitions of with are like In PLS performing? sale some you've is hospitals Medical conversation of consolidation. I having, recent versus How you're for there closed, of assets? much stick

Stephen Rusckowski

and Mark some start for turn I'll it I'll more to color.

what have is to we a executives the the related our there's track when going our sure are and one cost top to the a of question, and in sophisticated capabilities in laboratories, day, XXXX, advanced good right we conversation broad have variety the want initially, making diagnostics around what's could all to a setting, with we of this right simple it it we that had with their one. what if a their we a prepared the if just in of send described patient One tests the reference want not they of all C-suite, have partner there inpatient, about they or classing doing of of three this we you have Medicare right It's inpatient some testing three do a conversation, strategy us, to accounts going is the where as they're they if record and PAMA marketplace. to One that a a have rates conversation this XX and us in leader Surprisingly of terms a reference the matter is of consolidation walk hospital is happening money all, ways. given And of in have And we the that you conversation actually proposition be to we conversation them leadership do this a And what's strategy. the the outreach, time. fact, Diagnostics. commercial we because there. C is with outreach. a with do shared have to there's of hospital with around and that diagnostics pieces. call what as in then And around that at Quest we've the anymore, that First more our Part week our part market confidence, of around about saved important now pieces. around player XX in conversation you to group that their lab. a pressure have you. is sure their we that, center And that us do We're we're is around into on we the make with around strategic this, we many this with testing, we get we investor that volumes, value believe partner of inpatient they're a question, to and list. your lab and smarter for CEOs but that's strategy conversation, care When and is to they're getting have regard the suites suppliers their ask on and with happening referenceable reality in are we what's

we end so, a with strategy. comprehensive And

shared year example. good If We're one, testing. we've see you helping as you one. and inpatient We reference their laboratories see a bought with their PeaceHealth. well their helping outreach. But was with last with we're That them

in they And in the happens, integrated delivery marketplace. for services So, they all resonating and system. the the current the we're that well given dynamic when all in have that's pressures partner have their that laboratory the parties

to So, share that's around Mark, want specific going? consolidation, about how bit opportunities a to the you little

Mark Guinan

results. important. integrated. us Commercial From Shiel, We're Sure, is little which mean as operational specifically you're pleased billing, within I an largely including a consolidation, fully the and industry is critically standpoint, can initial is laboratory talking consolidator. about And, specifically with early. Steve. When the share a integrated, you yes, bit. Shiel

pleased a And and the of things that. retention We infrastructure, critically, completely good. think, I we're few most consolidated But, is on time. entire That draw like little takes haven't a centers certainly, and plan. bit then, after the months,

if model, we're to to So, over number at the relative us, look very customers of moved expectations from you that the and Shiel doing well.

So, point Shiel. share, what I that's can the around

like So, feel it And this very was at deal. it's on plan. a point, nice

Jack Meehan

up Great. follow-up took seasonality maybe on in it was of year, had you, I quarter, we one not know expected, just the beginning receivable. the I on at the which step debt. first Mark, a and that some there's bad but Thanks. comment than for accounts bigger

Mark Guinan

Sure.

the with a obviously, acquisitions. the at we're look you especially if business, So, dollars, larger

you we AR couple XX change, at days, relatively four typically ended different at look where the Last kind that's and level of are. we year, reasons. a a If of

may been QX, when is a QX. quarter. to ramp about think I QX year-end think have And you about that asking you down

if it's than then, look ramp obviously, So, at a QX, much quarter. larger And October is up December. you

is March much larger January. than So,

So, going dynamic QX you're to than QX. of is terms larger of dollar see end a receivables always where much the in

Shawn Bevec

add also Shawn. I'll is to Jack, that. This

obviously the With historical change of the around all to bad DSO. that's impact debt, going accounting

quarter. go relevant a to adjustment and have quarter after you'd the you those make to by So, back get comparison recalculate

Jack Meehan

you. Thank Great.

Operator

comes The you. Donnelly with Patrick next from Sachs. Goldman Thank question

go may You ahead.

Stephen Rusckowski

morning, Patrick. Good

Patrick Donnelly

felt have given your you see seeing think Can also, where bit hit are you is And that One the growth. guys wage of we're that Invigorate in an a opportunities up a environment targets? in about in you? just are that more context any through up the how you're XXXX. tick once of comes of topics the PAMA of from margins common beyond How heavier just impacts durability talk our the conversations you

Stephen Rusckowski

What we was question. the we for XXXX, two shared in talk continuously our have strategy. point it, about and Thanks

strategies We five great accelerating length talked our where great we of all progress. is at that around First made around growth.

at excellence. of is business The kind large, streamline an final way This our plenty operational of $X.X cost, in better. the have run complex more also example. of a we example systems. second of is goal still opportunities then, and we're highly opportunities to reduces harmonizing what of achieved in is This is – rate front we our savings. XXXX our we of get by us. we processes we it shared do workflow. have us happen it in But billion of allows And end we is And IT And shared that, what we to will and second is standardizing XXXX. push shared one that our is When the of our what

It's consolidation in see call region. presence is to have still our our New laboratory a a project for opportunities shared us. of building We've We You'll physical we big consolidate Jersey. completed, what laboratory network. us allow some new facility, we're a will in facility that it that XXXX. around in that our When new east

opportunity continuing calls, the So, into prior it about big simple some laboratories of out. to the cost allow can e-enablement. we In one. process, we When our see around to us regional a will we e-enable take talked consolidate We're things.

calls our call around we in instance, results. got a centers to of that came For lot

these educated what And so, can our is customers get you now we've done online. that results

eliminated of has And lot done our are it into what a call centers, is so, Customers cost. call volume coming to allows us reduce happy.

continuously opportunities. look we at So,

the you we XXXX I'll number. be that embedded a in that to in inflation it's you dialed color pressure and will in a haven't allows in we and have outlook. sights into that offset those opportunities, also of There's and beyond. the so, And and And our some year for opportunities. reimbursement But provided specific that around. we lot assure XXXX given us our XXXX, guidance wage Those this you numbers our clearly

Patrick Donnelly

Very helpful. Thank you.

Stephen Rusckowski

Thank you.

Operator

comes Blair. William Thank from The Amanda next Murphy you. question with

You may ahead. go

Amanda Murphy

had thank focus, kind follow-up a all the relationships Hi. outlined expand time. around for morning. AJ Good you just When your the had increased Jack's questions you of to and over you and to hospital first there. opportunities talked Actually, strategy about comments

of For safe example, relationships to early are was gotten there some know it's just able these in you've how course anecdotal I could that progressing work. terms any some been now? reference the getting where if of give comments of wondering on but of there I the over incremental or relationships the conversations of you've deals, you are examples expand kind

Stephen Rusckowski

how at them them I is help can their talked So, their about, looked three example. That's the help at hospital cost. great with hospital And They me, yeah, strategy. we one aspects looked -- I brought that's their laboratory a up PeaceHealth. inpatients, that excuse the

and more effective, into A example. of and west and example. our for is, is it Second And an acquired efficient region. we had finally, business. would rather, inpatients, outreach help business great share reference I then, can they ordering another testing become outreach diagnostics them we now integrating

Hospitals' the these We a this, is credibility. all dialogue we a them, their their build We efficient. in consolidate help we we of Amanda, around We way If of look bought existing at should build. or couple Hartford, build then back help there business. laboratories at more continue and look Hartford you purchases The testing. case outreach years and ago, we we manage recall are relationships. beachheads. We start We account. had them hospital we And can become some the how reference to

starts So, though year, build. a good where working it even example in could it one relationship,

Amanda Murphy

point? seen testing volume growth Is you example? at year, impacting organic then over actual Have in if for it growth back think last you actually this reference

Stephen Rusckowski

Yeah.

is interesting the marketplace. our there's One with is, So, find this. you the pieces what marketplace. the what's two of enough, what's share second then is of happening And happening hospital in

to hospital – we've what is in There admissions have as a is our and fire talked a best relatively seen admissions this efficient. them lot and been QX executives actually, perspective changes. volumes, flat of volumes in from more a pressure both patient of to become puts log in So, volume hospital given hospitals, we second on help reimbursement

that, And volumes portion then, strategy. leader so, more more relatively market we our strategy. business, get though are our testing When this deliberate in we into price picking some challenges. a even business, And plays some what and of share, for competition. we reference have second stable. that we in up And see our have we the see might stronger like do is a should is, be what There's

comprehensive So, having hospital are systems many strategy. suppliers, more looking a at consolidating

to more but So, marketplace two probably than continue to hope share, over time ago. challenging three of build to a we years more

Mark Guinan

the just add, POS the half many serve to we only country. comes. these question we certainly is how alone. without deal. The of a not as a much Amanda, of do we POS cases, reference No, would we just, the reference In deal do don't And business shared, hospitals in

these already say work. doing reference some if were not of probably all, cases, most I'd so, And we

opportunity an expand do cases, and more to footprint or, it. in all some there's that of So,

is competitive of And to that that a we RFPs to of part the being and So, we in as parcel five locked therefore periodic relationship. shared, instead and subject seven-year up contract situation.

relationship hospital. a longer-term us nice it's and So, between the

Amanda Murphy

Okay, thanks much. very

Operator

The Ross you. with from question next Muken comes Evercore Thank ISI.

go may You ahead.

Stephen Rusckowski

Good Ross. morning,

Operator

open. Please your mute Ross, your check is feature. line

Ross Muken

Hopefully, you me. Hi. can hear

you're core some or on – hold we're doing the touch was to like down make implies the trying just investments. on numbers, really you the the flat given which year-on-year And, a looks into of to would line. we what PAMA. obviously, flattish, touch And margins almost OpEx I'm that dig to with OpEx essentially down. part is restated – sort of know even sort down how So, a was of acquisitions considering I like are It the we sense able saw

the the what all sequentially had of considering because that you So, side. really sort rest and help the the year things then the on in kind deal good us with to of the and implied like just performance cadence quarter PAMA understand to is of seems weather of

Stephen Rusckowski

Yeah.

I and So, we'll tag team Mark this. again.

a of my First moving execute as pointed did lot the all, A quote, is I of mentioned parts. as parts think quarter. within moving out, I there we in lot of well. And we

mentioned, We And those in. in had all sure comments, to acquisitions levers. managed that so, we coming we make Mark's have we

an around improvements. And about you tax around what cost also, Invigorate investments reform. are for earlier our doing We was there have comment program

that QX, within going so, you've And on. all got

Okay? You've that all going on.

is we those marketplace need pull And team to to we that the to management the what that uncertainty get moving of We continue integrated plan we a – with the what's parts, as laid market. what sell we outlook to in progress. the so, do out with together happening sometimes in

winter predict cannot we you that had through instance, For the our manage we but to way saw, that. severe

summary, a the color of give So, you that pieces? as with more a high Mark, want do level to little

Mark Guinan

sure. Yeah,

believe margin. the are we over $X capability. Invigorate Ross, can on about billion. our about We X% on base past of As a got we've price talk and cost cost with we've said drive in and we productivity which you We some a know, headwinds discussed inflation year

shared end. have also amount can did of skewed was do a that you that. we on we that lot So, A Obviously, substantial the back the math towards M&A. of

which So, we new of us. will expect on growth. then, the business organic expansion throughout the margin piece finally, year, help that is important book And

drop-through we fully-loaded is doing, when grow So, on obviously, the than higher organically, margin. the the been incremental way the revenue we've

the of some inflation. headwinds price to and opportunity offset another that's in So,

than what in we together, of add out able which with as had is digits. But any We more to came anticipated. where in I said said is end despite earnings the end correlation XXXX, obviously, that, So, to X we're but also longer-term we although and still topline going PAMA more to the be that's single directionally outlook all being when well. our higher by PAMA stays lower of it you where has per share, earnings. significant reaffirming caution those XXXX if do earnings, topline our Not likely be the X, with mid-to-high growing did then us and

be at more that. likely the than to lower end probably So,

of fairly million, So, investments of some year, referenced, $XX in over the that the Steve smooth the the year. of terms the rest those are

Some of bonus them are mentioned. accounting, Steve like that the

that's and equally. bit some pretty but of expansion that such clearly as offset, ramp up the as And investment. we then, of our are that to move factors throughout acquired year, little have we're growth a revenue other them strong So, organic incremental we going those also been

Ross Muken

Helpful guys. color. Thank you,

Stephen Rusckowski

Thanks, Ross.

Operator

Thank you. [Operator Instructions].

Our comes Canaccord with Genuity. next question Mark from Massaro

may You ahead. go

Stephen Rusckowski

Good morning, Mark.

Mark Massaro

the touch Mark, indicated know flattish. are question. volumes wanted organic quarter. you I organic volumes Thanks good revenue to that on and morning. for in I Hey, the

called XX from out basis points weather. You

year, volumes last you actually organic grew at by X.X%. I Looking think

And so, think I guidance in to is embedded X.X% your for XXXX X.X%.

organic the of some will midpoint think get So, growth year? your us can the of revenue you X% drivers help key to of you that for

Mark Guinan

Yes, sure.

going you a And, buying bounce those POS in a were quarter-to-quarter. around POS POS not organic. anything. new. We're then, close number We late a year, of couple to When is factors. XXXX. deals obviously fairly is is amount had look our that didn't There volume last were of And remember, significant So, early up. ramping at we

look Wednesday, at and look you weekend on our mentioned, fall floating New quarter when of a and that you in terms of growth. Fourth July you the – I when of a the look in have so, versus if Certainly, volume. have those at at difference on – organic that the there's a as holidays Christmas, – significant Year's, dramatic impact holidays you is if timing the So, when

year, the out, a you when this year so, and started year Year's look way And this on at weekend didn't. we previous we the had New

spillover get after. those or So, holiday little a it's that had that just before you little day not that right a impact. Certainly, from right

much read wouldn't quarter much the too I make variation. slight So, into to too – quarter

the the amount And that in the to we what we'll commitments. of certainly or guidance of keeping with going share terms utilization drivers things the of that try are our of there's have forward. abilities was certainly and a implications first fair best to significant concerned noise. are other on I'd say, And there our that things real about. So, out be very might confident we you track put and quarter,

Stephen Rusckowski

Yeah.

we that, part on what's look one side, question stable. you at add that if about to – hospital to got as of of just different to we which And in see So, the physician a are our X% very X%, PAMA revenue when testing, get QX of the on business, and when we majority we and you have you we for was our the the of earlier year, okay described admissions is you confidence through Mark reaffirming actually, the we described in our that we includes vast growth. actually price QX X% that through to the But think the physician kind we the portion hospital that with acquisition. reduction felt couple and we different we all basis volumes from pieces terms look were this from therefore, and X% about at at rest of pleased performance where of of points it, think the solid. when of our happening the are pieces, XXX offset organic pieces, And and we go what some the with for QX you which thought it some headwinds, look in and in business,

Mark Massaro

Thank you, helpful. very

Stephen Rusckowski

Thanks.

Operator

last you. Tanquilut Jefferies. And from our Brian question Thank with comes

ahead. You may go

Bryan Ross

had does my lab bigger of on data quick on value on that in how and question Quest see past, monetizing how contract the chip currently the in highlighted Ross I Brian discussions. there in becoming play guess, conversations, And negotiations Brian Quest we move negotiation. prop secondly, demonstrates a you've I a leveraging Tanquilut. more data further we one And payer is do as Quest move just conversations? exactly I is commercial the This see do what you as the much those that know, and opportunities you forward? then, that Hi. during for is overall value forward?

Stephen Rusckowski

particularly I it's mentioned increasingly more Brian, comments. becoming important, introductory in as my

payers Medicaid and XX% they're when the of to X% the the get taking are you population that Advantage, and obviously, of represents into If are, the cost. understand risk trying Managed really Medicare

where Extended with identify then have described The we specifically a the to the centers our our our care location data to convenient a home. our pinpoint someone's onsite what going we into then what and it MedXM. and So, patient professionals and with include and services, we're called out call us doing we have for programs capabilities which used Services specific Walmart, in they in Care to be of like use could but also ability could one

and interest curve. the active diagnostic opportunities the yes, company, largest using the services are of to around, manage what is and in bend information a cost So, identify lot we the the world's the but way we lab, data largest world's which care a more then includes are

Bryan Ross

Got it, thanks.

Mark Guinan

they real-time surprised things the the with would cost. patient one see about add estimation, that that value I because Steve is of of coverage, being patients like also surprised difficulties they the being And referenced, of that deal about our some

in is, is shared happier. of patient so, The The win-win-win one as happier. around. payers are all And happier. this the the past, we We're

It well. rolling just appreciate they So, us. actually not as us out a bit them quite for tool. It's that helps

instead make and after can ahead around decisions patients so finding cost So, out on. coverage and of

well So, bring data. value we that the beyond just goes really, the

our force. is sales one other The

you doc, to our we And labs data are and plan. deploy on work part The walk we we or deductible from some value. you've hey, physicians, how of when sales solution. at we struggling leakage are with look they them the are high cost help patients great call the can steerage, to high So, control say, national that costs, in fact payer, force the providers. And to it with got are setting

costing send You're money them when to this you them laboratory.

if That's Let company and really Yes, control for case, between the get aligned. these things it work but want to that in risk-bearing want to that, diagnostic retail powerful they patients got patients They difference the And it sites, patients utilizing. finally, me from to strategy. their get setting especially payers. testing. Medicare, those get know you're insurance up sending monitoring – the done, we're convenient the who actually, they condition, are want more And, that if in They will if show currently more like this likely fully we to done. putting Medicaid. entity. their it's obviously, their a a you're they're costs, critical that. you They They've Managed then,

Mark Guinan

we quality table, A is bring to secondary the remarks, value in mentioned around I scores. my

care, those close and in are those to So, scores quality help get they and higher we right score right, from reimbursement to gaps identify them the allows better driving the patients if payers. process care are which

all it our together. beyond well is fits So, The value testing. diagnostic

Bryan Ross

Appreciate color. Thanks, guys. the

Operator

no there questions. further are And

Stephen Rusckowski

day. And today. we We Well, Thanks appreciate you your great Okay. joining appreciate a for us have your time. support.

Operator

be the international XXX-XXX-XXXX available may at conference from www.questdiagnostics.com. participating quarter or of callers. will later will call. domestic for AM for Quest replay be you call Or on of transcript today Diagnostics Eastern Thank in phone replays Telephone online www.questdiagnostics.com/investor approximately accessed at at XXX-XXX-XXXX this remarks call A the Diagnostics Time. first by XXXX for XX:XX website posted prepared be callers. Quest on A

You may disconnect you. at this time. Thank

Quest Diagnostics (DGX) 19 Apr 182018 Q1 Earnings call transcript