DGX - Earnings call transcript Q2 2020 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics Second Quarter 2020 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 the 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 Rusckowski, and and on line the Guinan, Thank Chairman, morning. Chief Steve Officer. our Chief President; Executive with our you, Financial I'm Officer, Mark and

Diagnostics' current the statements, condition projected. The this Annual Actual differ believe X-K. driven and be pandemic XX-Q, and governmental duration, local economy, provide During company's control. operating company and effectiveness results and the pandemic Form reconciliation results, measures uncertainties, described the impact the may the state, beyond are may measures limited non-GAAP include subsequently pandemic's future materially impact financial comparable are Risks on the by that Form of pandemic, may of federal, pandemic's drivers scope, cash earnings U.S. tables Quest healthcare we not the make to a and of the will on non-GAAP our measures. call, discuss We GAAP which but in on those and to timing, reports and its that will to results, in affect or COVID-XX quarterly our and the and COVID-XX to future and of the U.S. impact responses from severity Report including primarily forward-looking the press to, XX-K, knowledge the reports system filed on and, those continues flows, most on recent Form release.

adjusted from operations. testing base testing call, EPS COVID-XX to refer reported business references volumes, base adjusted diluted from EPS volumes and references continuing testing refer continuing to and this refer to serology to volumes. to to molecular or base For operations, EPS excluding References EPS reported diluted

compounded revenue growth earnings are growth, Finally, outlook growth acquisitions, including growth, revenue adjusted associated long-term from growth, growth revenue and rates. annual organic with total projections, our rates

Now, here's Steve Rusckowski.

Steve Rusckowski

periods of one Well, than delivered quarter. stepped Diagnostics stronger our testing and up challenging expected the joining history, COVID-XX us and and second of everyone, in most for Thanks, country, today. expanded Quest performance thanks, in Shawn, the for the

Second have healthcare, quarter of and who the the results volume. our of been frontlines employees were driven COVID-XX rapid the I'm the COVID-XX on recovery very call, Quest and of base testing answering proud pandemic. fighting testing by

So, this the role financial quarter, business. Mark performance you on pandemic, position. the non-COVID update discuss more second detail I'll morning, and results on base our for quarter our our the and in will And our COVID-XX then provide

which Mark year by our We broad have about few range, underlying the uncertainty in our just the an a in of a subject reinstated reflects the caused [ph] minutes. financial remainder with outlook pandemic. for will talk outlook

anticipated, in performance second was lower XXXX. than the of stronger also period the same financial quarter Our than

Earnings approximately spread perform We to helped sooner million performed and interest We molecular play than finally, came tests. than testing from XXX,XXX to the the as since to had or capacity for $X.XX non-COVID-XX now X% tests, high-risk testing on COVID-XX adjusted test molecular the billion. employer X.X our antibody capacity declined the total to XX% For and capacity double $X.XX; tests in patients, strong has COVID-XX revenues the basis, approximately a the share These quarter, a in Heavy mid-May. to throughout testing of April, pivotal decline care base prisons, before $X.XX. Quest COVID-XX by the we began reported X.X for more they were back in and nation. today, a million on bounce sites, driven approximately basis, of molecular healthcare the an most results people homes elective so a surgeries by XX% Demand number diagnostic like nursing of so March testing non-urgent well. pent-up return partially decreased the volumes per with in and the proliferation volume retail anticipated. need resume as testing system areas demand and to to base pre-surgical virus continuing offset bringing Diagnostics employees country, to role up populations and have serology in work. the roughly of diagnostic continued

have and testing this Quest national we couple retailers Working Over the perform like across has the access HHS pandemic the of together CVS, and country. made testing. of day. with country. to we state Cumulatively, began. tests delivered up initiatives we've next progress very the for XXX,XXX approximately consumers to also nearly testing scaling since I'm weeks, have of per included model in to We're expect in the built supporting the diagnostic molecular capacity XX% drive-through large Walmart rapidly capacity all new a proud

average has recent results patients, However, testing least turnaround non-priority at is the for are two providing in for demand And for seven we testing the highest priority soared in time days. weeks. patients days and about

we're can So, to test patients COVID-XX delivery testing and more results. everything molecular of to the bring speed we doing

we we customers Through with to this ways authorization testing equipment, protective capacity, our referral exploring We're a equipment. technique, to We help and access use pandemic. other available program, over granted have suppliers with current range quality with of we're blood low magnitude recognition help have This of expand many reagents, fight populations FDA among the COVID-XX for our partnering the And nation's in colleagues to platforms and so like molecular in is ensure work laboratories week, technology test the asked last especially the use Quest stepped time. used COVID-XX Quest personal for which up first prioritize the months continue specimen to with few testing. for COVID-XX at capacity. lab commonly add expand patients will of us last new the banking, emergency estimates. to to to options, testing our demand pooling testing,

to expand the March, as five a grow respond enable provider health information we've finally, X% and growth fighting and expenses to offer we our actions are communities June, plans relationships April, been furloughs, customers, supervisors per and our of I patients, of a encourage health In are employees. of a the the earlier response, elements day. been pay today, very systems, in access services, actions growth to strategy diagnostics business. to reminder, to as COVID-XX, about services. us the to month offered hours, of reduced frontlines assistance pandemic. to been to [indiscernible] took our through report to frontline health then also to during financial but these support central on for In accelerating And temporary and to their hospital colleagues base diagnostic every to analytics then of has And our than pleased year of manage costs. a company recognized the proud accretive consumer-friendly were to increased and increased who majority am innovation, continue salaried the broadest data care employees These we included I'm Since serving testing. and cuts workforce in to and XX,XXX on a crisis with demand acquisitions, us population we've reversed for be Our more customers' vast accelerate that our series focused extended

able the slowed. accelerate me Through growth. of April, strategy complete But M&A outreach let a few early the we Hermann understandably a were that, pleased you the progress. Now, and highlights environment pandemic, despite to Memorial through business take are from to in acquisition the our with

centers in founding Vincent we MACL. to professional under Mid Community Once will XX also America We hospitals, complete hospital Ascension this and operated Indianapolis, Laboratories, Clinical all St. Indiana. lab recently acquire MACL's and or service Health announced patient laboratory quarter, agreement Quest own we'll this about Network. MACL Also, XX our of across transaction provide expected plan for a by and owned labs services long-term wholly

remains pipeline M&A Our strong.

that time, challenges open face, to laboratories could same help hospitals all the know will additional how we tuck-in them industry lab help discussions Given be their their have anything, regional had more to to the strategies. an produce If be we At can many expect for catalyst This Quest also about achieve consolidation. the own that challenges. acquisitions. pandemic more opportunities our could many drive

pandemic pipeline system the is new paused healthcare that the time. this the revisited, at in the being experiencing based that realities were on transactions because of Some are

to continue of member on a progress our UnitedHealthcare's results Lab being to your strategy. of year also second health and make We our we plans date. Network, We with Preferred the entered pleased are

the in appointment business as patient the year. UHC continued rates. cost We've patients money of with We labs, forward ordering have of secured Lab than XXX Preferred key We progress for met making look center service quality out metrics, overall the or and lowering care. also resulting, exceeded and such Network electronic for network to more saving and second

and computer. MyQuest the of sign-ups patient account quarter. late remarkable last that second three-fold receive We of through appointments surge patients a believe the which than April, we've ease than their seen Since few the in to weekly convenience their end the months, MyQuest experience. increase more and appreciate we've and accelerated in at our a portal. more our a our Today, registrations, million results XX the Over see consumer make or seen smartphone patients have of

it through results. to you Now, Mark, over I'd who turn take like Mark? to will the

Mark Guinan

X.X% Revenues consolidated X.X% Steve. revenues billion, year. prior the Thanks, services were year. information second compared quarter, the declined $X.X prior down to the In versus diagnostic for

the acquisitions compared down excess our Testing year-over-year, base in to declined procedures, reopened. June, results approximately that offices than as quarter for physician stay home limit were expected trends XX% home the business measures services. to than than volumes, last year, versus the across observed recovery prior company's XX.X% second physician Throughout many U.S., base gained back improve strongest continued at recoveries XX%, well were for the COVID-XX and year. the in approximately June, more others, quickly of less as as were stay momentum. declined stronger measured reintroduced contributing as states testing The May and offices opened by with in closed testing recovery prior the communicated in April, procedures, down XX the quarter, at requisitions, Texas and [Technical points. volumes Although reflecting demand base measures in such base than In XX%, in Florida. revenue as as versus in declined than decreased business. temporarily stronger the some hospitals we May, volume year, XX% volume elective implemented Difficulty], elective the Base Volumes, began to in trends of hospitals were number more growing many basis began volumes the

declines As we exited had June, high base approximately moderated single to volume digits.

cases recent a we base plans, of to reopening spike due in state several early of July. country across the our have rollback in COVID-XX softening the the However, seen and slight business

year-over-year, COVID-XX second and offset in down remain We quarter molecular approximately quarter. volumes averaging second testing was exited While the each tests day. COVID-XX a and testing serology base meaningful the XXX,XXX respectively XX,XXX

CARES operating expect next testing. Unit Reported PAMA. headwinds was CARES $XXX was includes versus revenues the diagnostic million in day. operating than requisition from operating molecular revenues, EPS revenues primarily adjusted testing the to was XX% couple base million XX.X% June of we reimbursement of with decline slightly our in second year. $X.XX associated last due the CARES a The million year. to of COVID-XX quarter margin actions. the to $XXX was in was revenue testing $X.XX operating provider in volumes, our I last or of was the through under year. same included income increased prior income COVID-XX capacity Reported prior year, have significant year-over-year XXX,XXX Reported last the does year from cost Act. molecular proceeds just the operations include Cash to Over XX, perform in to or from the million million proceeds the $XXX the million partially Revenue weeks, Adjusted income to reduction for million Adjusted by XX.X% operating to last basis, with compared quarter the year. line by XX.X% offset second tests compared $XXX our not per disbursements million $XX decline quarter, or the of ago. in of second and less income compared Cash includes compared provided $X.XX, revenues, driven $XX expectations. an X% $XXX year-to-date or EPS ongoing XX.X% of per in price mentioned. period Act were the quarter, $XXX versus This operations On $X.XX impact Act. by

Our very financial position remains strong.

to used offering due amended may million During debt in facility, second revolving allowing in the or We be a $XXX financial completed we quarter, senior us our notes redeem credit which May, XXXX. our greater flexibility. repay

results, only balance ratio debt We QX. to than above EBITDA quarter the billion was nearly ended in we better with our ended sheet. $X slightly quarter where cash the the Given second on expected

expected expected to Directors range to a million $X.XX the EPS be are $X.XX, be and Finally, the we $X.X provided This $X.XX reissued to company's of prior of at to $X.XX in time. approximately our our at increase as and follows. morning, be capital adjusted be between and share. to and least quarterly Board by and $X.XX of XXX outlook the is in per be expected range year. XXXX expected remains is operations full-year committed is X to million. dividend billion, and Cash expenditures $XXX versus between an to billion, EPS $X XX.X% billion of Reported Revenue this X.X%

uncertain the we outlook our to shared pandemic, today. which operate evident in extremely release wider to COVID-XX due ranges quarterly is in continue than the under usual We press conditions

XXXX I'd assumptions. As you considerations like to the consider our new outlook, following share and

regarding we First, volumes, volumes testing expect remain the base for below the of year remainder prior to year. levels testing base

While fluctuate through remainder as of assumes in in to phases, geographically and the volume likely the the magnitude year-over-year of outlook does the our not an the decline contemplate end base average year. low reopening outlook is throttle observed decline May, volumes current of XX% the magnitude declines and base testing April the of states

next testing such somewhat couple and Regarding at in operate tests maintenance planned Keep capacity peak molecular optimal molecular peak capacity, Due demand the conditions. this day mind downtime, testing continue per represents factors, weeks. routine under towards over we COVID-XX to of to operating capacity. under XXX,XXX various we of capacity, COVID-XX generally drive and as

testing step third expect quarter the end third testing low least the quarter. at trends the demand fourth quarter. similar We Please level assumes molecular a outlook for COVID-XX and in continue to our recent note, then COVID-XX the at volume that through remain of high, molecular throughout down

reimbursement an reimbursement the molecular the emergency tied is they Medicare additional declared HHS. COVID-XX expiration existing Medicare public extend HHS the health from have recently testing for Regarding public plan XX. beyond testing XX officials current the indicated COVID-XX $XXX to the molecular for health of emergency July by to days

Our Health end. HHS level of we while reimbursement are the outlook to for clear, through October. we crisis believe continues assumes plans continue the late Public and aware this any of To to Emergency be continues it not

serology testing, continues COVID-XX also offset COVID-XX base testing serology to help Regarding in testing declines volumes.

testing of We continue front to rising believe there is in meaningful potential remains customer within but us. serology demand

July. Regarding the we've in as actions cost took end we mentioned, Steve remaining of with back actions undertaken, we most have rolled these cost April expected of actions many

of Finally, The range this the as assumes XXXX. contemplated develop the of half just potential we second uncertainty described. outcomes variability a outlook end low I and in we

to are currently quarter far stronger I results be degree fourth the will Therefore, Steve. greater now third and there quarter. in the fourth have we We to of visibility the quarter back it quarter. more turn expect third in unknowns than

Steve Rusckowski

Mark. Thanks,

in performance. expanded for and Quest stronger the step With sunrise rapidly than delivered country COVID-XX Diagnostics second quarter, testing and expected the up the

uncertainty with the financial year, to Looking the the rest will our year drive to while We pandemic. the full which needs we forward accelerate of testing continued of the range, healthcare XXXX continue serving caused expand to the capacity the outlook strategy reinstated COVID-XX community unmet also reflects our growth. for and of broad by

been of proud happy the Now, and the questions. Operator? take Quest who fighting Finally, we'd frontlines answering COVID-XX employees pandemic be of of to your health care, the any I'm very our have on call

Operator

Our Ann Securities. Mizuho question first Thank from Hynes is you. Instructions] from [Operator

line is open. Your

Ann Hynes

of meaningful everyone you serology want XXXX they're questions a Does testing. I you have thank used I contribution you two it's to what made Great, the thank not I you. Should do Could you when in that second comments faster XXX capacity pooling so across you ultimately assumptions XXXX it's Thanks. the think turn around in it's the more of out? about question to guidance? just ability the as have testing, us. front Monday. doing. vaccine for you XXXX you in think the just announced comes around be that clarify the or for molecular contribution do that Then to to per words, over the would think we going testing on the increase and regarding testing, do day? if think Again, serology my mean a

Steve Rusckowski

brought serology on we So up as serology sounds that speak. are in we April. good. it We Well, doing

serology. the antibodies will of We the in outlook if you fact, some clear re-infection. growing the the volume. weigh not people it suggest has that, of is that for have have evidence is to is evidence fact, antibodies been I do our there provides year serology time. value that would debate There in those the ability for of provide will some that, What period in starting of confidence It a in are a that there be say

that builds to fall believe the as As who in the and should and we get particularly year, vaccine be the serology as we not about there vaccine. next pickup think into I and into do confidence a should who get start will get

front some of outlook. think of is I have our we that So us, in do some but that of in

per molecular I far the pooling opportunities by see the as driven particularly be to provided that of a in will portion numbers of testing we day couple As pooling. XXX,XXX weeks, and that with in getting some

and opportunities driven is new us stopping of capacity. that of beyond XXX,XXX. increase There's new not portion resources our systems that there. is by front say to Some in we're also adding I'll What

Mark Guinan

shared possibly done different million. than we the and our Steve's testing tests day earlier certainly We level. meaningful. an certainly, had shared where in like we've could I that exceeding capacity expectation just is molecular That's serology we capacity. that meaningful remarks had just would demand at XXX,XXX of that X.X to with a in be add It's serology is prepared demand

reasons, business testing it's decline near right meaningful Quest nowhere we're the that. and base to now. various For the offsets one of of is the serology But doing is amount certainly, very to

Ann Hynes

All right, thanks.

Operator

we have Next, from Baxter Stephen Wolfe Research.

Your line open. is

Stephen Baxter

in front in the looks visibility of question. throughout sort meaningfully going and you referral QX, opportunity any close also you're discuss the have now to that is of I challenges little whether volume that it for hedge quarter thought if into hoping the currently COVID bit ask return-to-work? percentage one is a talk largely you, still of or a as return bit testing collection utilizing built another, how you about pretty testing. just work very and with and as quarter. even are capacity high My natural to little wanted coming potentially was molecular in there. Then was patterns molecular have Thanks. follow-up, looked there from process full testing. what I my side the during the way out a like that DSOs to seeing increased you you could about or Thanks delays you Can the the

Steve Rusckowski

Sure.

testing prioritizing we're that can with make in we're in demand, demand is our said far obviously share our sure in the demand bring need is elements have country up I'll First, and we're remarks, is of on Also, and remarks most as right it different the that urgent clients capacity now working those the about where our that we progress. prepared as doing and we with coming getting what to we customers you specimens the is we're took exceeding making and from. capacity. we to In prepared what

we weeks demand the as As have several we'll through August, next September, capacity into August manage believe into the and up and we get a get we our bring and we over past. of but level higher a demand be times and levels we've level get capacity, in in to we'll able the of the to that are acceptable turnaround higher also that had

several all front to us will in that it's We're next allow think hard there weeks. and getting elements you working through us. described be of So the successful I

We're As far come into it to programs. with about employers. as managing Steve, to demand, work our return you demand. starting talked It's

demand see August the in for of to required also return We testing around There'll colleges. a be the universities and of front us of that. lot month in

We actually offices and also up persons physicians are collected. us they've see sending physicians that more their bringing

to demand. and So that mentioned to at very has been the asymptomatic convenient there has with the testing access and broader we Then Then also testing Walmart people and we see availability demand. our where access CVS locations. adding that have broader the of stores now remarks I increased access with provided

the we We as say hope So, see are when September employees board, our there in into to the bringing though the are where going get employers a or areas. in I that it's months work is that number office we demand still all be do capacity funnels. growing would believe across in a will to place we that back the of to our meet we

Mark Guinan

pick last you question. ask your did I up concessions? about Stephen, quite pacing didn't

Stephen Baxter

or just sequentially It X COVID Yes. and I maybe the looks to talk whether things -- things. DSOs were these up to days guys want want testing me you [ph] maybe collection bit just something with with to about might a know other that like.

Mark Guinan

sheet. XX formulaic around to we That's assure do of collections expected. we're many are of we're in very our reserves have needed COVID and needed this approach. stronger that I that very, as and their can billing days collections so you everything were to in the We some did holding but payers our cash because point at with or some and balance on terms our really systems more where them testing update billing, delayed Cash comfortable

see $XX strong in you the benefited and was million CARES As flow operating the quarter. year-over-year volumes was can the pretty depressed earnings Act. cash second despite revenues the from

Stephen Baxter

you. thank Okay,

Operator

you. Thank

Nephron from Meehan Jack from Research. is question next Our

is open. line Your

Jack Meehan

Hey, good morning.

trajectory. durably reinvestment to assume you which And for I short-term can the the thoughts from are the the of half getting margins all, the you testing I've there get can the to guidance versus higher? to of how your try make second on and on incremental in the testing is then, of accelerate your get more and one trajectory convert things questions take congrats opportunity rate labs, was that your growth that. top on Mark, first longer Wanted So improve been what the to and does any term on curious business? long-term

Steve Rusckowski

going half our clearly, is Let versus XXXX. me second business down we're into and start to to going with continue base be

we'll in see hopeful year, continue back of of some start that to any outlook recovery but the to necessarily are We contemplating half XXXX. in the for not that our we're

As we the to and strategy get to are us those hard. goes share continue into actually working with actually we it growth appropriate strategies work we're they strategies pandemic more and remarks XXXX accelerated given you our for to were before. our the wanted back have prepared believe the do believe right that in I we than that we

give if and us that for think more through XXXX through the believe us us that that working those, up and year on two in through of half push we're some deals in the one the growth the there front. front for we on funnel recently going nicely through nice over back half in will acquisitions acquisitions those too keep acquisitions. could It to and we're as growth that XXXX. acquisitions So We in with we help growth back us is, will on announced be carry seeing sets the of prepare you for do us that

We're and lab plans. going with would in an we're up share that route is gain our pushing I far that approach strategy. our us share peers we the the or business, say many we've is organic concept preferred in to well. believe with as in United type opportunity Second for in pick with going same work of to said we our our as work contracts continue base network throughout our health as continue there them to growth to and relationships is with

lab with We Mako continue talked We systems, to professional also about services deal. the work hospitals.

have good for are to capabilities marketplace we organic about those Then us our the genetic bringing the think we're We sequencing finalized diagnostics offerings, those growth year. nice advanced some with year. as being about also we give as continued we speak next and gene we that number and consumer strategies us continued growth feel opportunities and will a will next give that believe

we're to on in have continuing as we'll same to push of recovers healthcare recovery our you'd in deliver So be that also through have a economy on X% we that we'll as natural base acquisitions. growth we business At XXXX like growth and think some anything platform. to base through time, add place acquisitions. the objective and good to into Mark, the as We get the business that?

Mark Guinan

Sure. margin dropdown, Jack. To EBIT answer question your about

are so variation, As business or the It's our we've highly any that in supplies a in a window we variable are costs. past fixed and XX% drop the to shared or good so will window, most in a so short from business, The labour the the around in has very minus cost through. on bad everything of it, their be infrastructure or is a base logistics fixed phlebotomy through. base reagents generally the plus really high largely business to even laboratory drop

it's good margin margins not our COVID of is variable have quite base a on but plus is attractive. on high or so we testing the in Although cost variable testing case, more sort our minus as still there very from any certainly COVID

Jack Meehan

Thank you.

Operator

Next, we Morgan have Ricky Goldwasser from Stanley.

line Your is open.

Ricky Goldwasser

Hi, all the thank morning and details. you good for

the end range. question low highlighted is Mark, guidance. my on the the of So the assumptions you on obviously

the what trying molecular testing. Just about to at we high understand assuming and you think end when especially better

step be the in that there you're think going quarter. end at expecting low fourth a to the is I down that

do to about of in the you high will in to market when it COVID-XX down end? any the relates step relation do molecular? conversations how environment vaccine trying at that. vaccine? administration see testing you for think the with the you just vaccine in the future What So think what manufacturers of molecular the are Then, in What to a and -- in addressable just of the do are as role to relation understand type be we're you going rationale you where to see we assuming think

Mark Guinan

question, been over predict I don't vaccine April the months in then assumptions. a think we of question. last Ricky, has other the several the expect and didn't Then thing the we fast that things our we let the is about had to I'll given you any side, of even recovery here first just when so appreciate If ability these us one I some that the there the in don't have demonstrated in what on the handle May I'll XX% June, saw happened envisioned talk business started. April. pandemic throughout is decline

and being any the Since cautious in two to expect in are, months those it's assumptions have we're QX, away of that the guidance. that that Therefore we in follow-up. to the these how last they take a don't future bit that and vision but falling we talk it we we to were and we to so some ranges month I might some months away recognize June several our people of assumptions shown and wondering in things our some and that, hopefully been had Quest. at explaining of little a uncertainty, appropriately we PCR happening, outcomes with didn't even the might living impact that a couple that's are So control it's just not what want results because that to hard a of be happened. volumes about large we what financial potential want happening where talk of make surge when predict off degree But will sense of molecular we've over out think we've or have about

rate non-clinical think to for for I we dampens follow-up that return-to-work it some might doing heavy employers work the should and some us we're are will of QX note and hoping students as the in down also the for that society of be infection of step in QX. work, all but expect

is the as spike. So, that one in the how to some people season, infection and that it's bit the might have driver going certainly when believe you and little get to might say that we would virus is even but we QX, another would dampen flu if proceed a know that we demand rate lead not

clear those very around but assumptions. we don't know So be to we wanted

Steve Rusckowski

question Ricky, specifically your and vaccine. year next on about the

all, testing So, first XXXX. next year COVID-XX we be will there of in believe

next a assume said in role vaccine, testing we a finally, the terms be we earlier serology if for our to of get developing those conversations in who about us. back role year with data is, in the of to we'll and are using of and or do XXXX Then actively working there will and of vaccine, productive should believe I go you recruit evaluating in patients. way sometime, what a have the Second we are vaccine prioritizing that

the also our but the around with for the donation is development help vaccine of of to country. using Some data this plasma

smart use good So, as is provider information the for of again strategy diagnostic of the which part a our help with the data, user pandemic. way data, -- growth our to services

Operator

Thank you.

is question from Ralph Our from next Giacobbe Citi.

open. is line Your

Ralph Giacobbe

good morning. Hey,

at up all Sorry you obviously updated to earnings harp two of key you on for to this, you implies slightly June. in ended breakeven first early back want but I to when June, the do That go quarter, in came guidance. the $X.XX. Because positive expected the essentially is

So if $X.XX already number first before up you earnings run even I six $X just [ph] at put months, that contemplate half. the rate I'm the in for over in I

moves understand still testing conservative again, offsets core guess COVID higher -- extremely but what struggling is I'm make and the the end, on a So range, headwinds some else. trajectory sure pretty little not bit recovers, at particularly want to appears missing I'm a my continued lower just the assuming and to anything or

Mark Guinan

in detailed pretty in you end. for out low laid we the Well, fashion

you own view, to very, So can you very of we at point why assumptions. your wanted that And,, those clear about and be can assumption. a take look that's have

business in of question And single XX the digits all at know. sustainable? base And June the step on. spot that the look half high much back down don't times So that One is, take We'll with were the in issue for six would is pretty your is multiplying our was earnings a We couple that we'll QX June. exiting back, month a notion average is worse. be things.

COVID. would So assumption or say to do business difference the just six but math, our XX% to certainly, months, were make before business. was if of that down, the whole would drop the quarter billion our can And you XX% versus a at some were down on XX% I $X as described, an hold it core about on floor, improve, material for that for

significant is a points pretty basis XXXX revenue know, you difference OM. on So and

in have because largely shared foreknowledge, because we're will be down dropped we to and we because us, PCR, the the On but any we volumes work behind said, return that to assuming QX, don't not as I school know. and back

moved level would about we want at QX and testing of that, and really point better through cautious a on be have so. get towards counts see this on the to be to need to careful. knowledge we we is things guidance QX given go putting that how PCR But, unpredictable. around, Obviously, want update a that we we do So

is, Emergency thing be because ease-of-testing could high as unpredictable, fully be if any will very tests. at I other of molecular we continue, said, want it levels assumptions our but [ph] the continue that's reimbursement on COVID we Federal to to expect, have revoked and actually time. The We about for that careful

point, this by extension, bottom significant well. we that's make hope at and so, reimbursement while in voiced high-end if into XX-day either But that since reimbursement or current building we're not of will QX, would that And a that And continues a very difference the that been HHS. that COVID as the through would guidance. in is continue expect only our

Operator

you. Thank

Our from Pito Bank. Chickering next from question is Deutsche

open. is line Your

Pito Chickering

assumed questions with geographic back for low pooling guys. you, for questions. testing would the a Two multiplier morning, option, my that larger areas I Thanks effect for rates. have Good taking to a posit

that if testing, discussions that being testing the effect? is is, hold large don't providing both a about As a XXXX, capabilities is a larger COVID have the we there quarter, of countries that multiplier there's into And any in as other question the impact? decline US, serology much for provide testing look and the why in infrastructure? and there it molecular scale can't And into reason to an you back what progress second would from third

Steve Rusckowski

with me so pooling. start Yes, let

as So what you prevalence. [ph] mentioned will XXX getting our capacity, up in ramp couple We've is true, that of that to is, we're weeks. it's driven more which beneficial a capacity get mentioned, I our in nice in low for areas to for, some boost planning that that to started be have

to So laboratory we're areas the to our concepts low test and get going be to try steer those best it to able buck. in apply prevalence towards bang developed the locations for the

considerable We'll the is it. on have pushing we'll So capacity. that would our and push so prevalence, that when up very helpful on multiplier be keep to bringing you low

entirely the time geographies, on but testing US. of it, the in our right XXXX, for purposes non-US with sit dealing as are and it we pandemic haven't far all-intensive could We consider we now about in for thinking focused the we it's US. a not frankly, As here lot in as spent plans

Operator

you. Thank

Kevin Caliendo Next we have from UBS.

is line open. Your

Kevin Caliendo

Hi, thanks, to get call. I my how the thanks want around for vaccine and and the to taking think about to assumption this.

be vaccine quickly assume who this figure serology population. Are to we vaccine available to the if vaccine would with you there's people So testing entire suggesting anticipate you get administered to or? can the going out imagine distributed were to number a administered or vaccine need that would January that whatever be, might first is We doses along and billion testing? a becomes X, do the how the being

the vaccine take of expect me administration you through would So with to the out model testing. how along

Steve Rusckowski

it this beyond But should Yes, the it and it States. throughout is rationing and how Diagnostics what's you and like distribute prioritizing Quest or groups. are who the groups like for obviously, progression get with testing. first, that to well, priority the initially, United other list higher those we vaccines, tested on higher the And get COVID actually the higher-risk groups to risk you'd

and with respiratory pre-existing age of in with past. that And so, over obviously, the those illnesses have people been the were XX, conditions, compromised other

of groups be priority you there is those my everyone priority list on then the second then, So at in high would test be independent of be serology and were will antibody the And antibodies, And to for a that testing, part, in would you of be speculative list. positive the if, how And at-risk point my assumption fact, that else. be the would sense my the public that, evidence question to immunity period choice to for will this have on versus time. all have lot would or fact, a much you'll whether want independent suggest be policy determined. That's vaccine will not. of be,

First come get. where it. it's much all, as will how I'm And to be debated sure going to be States United when the this of we get going vaccine available, the the is from, US also, into will throughout

Operator

Thank you.

Lisa Next, Gill we have from JPMorgan.

Your line is open.

Lisa Gill

good to I back and wanted just on morning. much, Steve, follow up reimbursement. Thanks very

will the and you So, Medicare about just pricing Medicare. Can post-emergency emergency anticipation it's talk pricing, what's that talked through the the market about your anticipation commercial commercial you follow So, should What's one. back, back plans your market? heard experience it that market number in number health we've two, been on be some rolled so on multiple the of And tests are pushing the done far? individuals. the

Steve Rusckowski

Sure, sure.

just everyone So commercial outlook reimbursement? rates rates Mark, assumption in as all, have do you that first our of we have going Medicare far for forward assumptions what why with don't an as we remind the are aligned and,

Mark Guinan

use our so -- which XX book. full $XXX get know, view we obviously don't going $XXX; extend a not HHS expressed days, -- emergency Federal that So that we the into price that you we've -- they're priced our our the is $XXX built but much on XXth. that has Emergency expires July pretty to fully AWR,

so, the there. with for plans they previously, we part, line quite we the that shared And everybody, get rates as most Medicare Medicaid as from commercial couple didn't the expect Therefore, much that state are. continue. get of price to reimbursement regardless payers commercial that pretty a the who would fell of in But we additional

we the a at payers less keep expect still do some our and will federal up, post-emergency get obviously, rates take where Medicare Once and But there's it less it'd So, hard to Medicare in that so up, line rate we the that. it's we mean we'll for pressure. should best it commercial stays rate that's a than nonetheless, but obviously, with that's front will there end of position of transparent quite not the because the it very get and are It to be obviously be that, Medicare. and even emergency, through They than we costs as still test, as our And in if some something the doesn't us. a rate test cutting shouldn't wouldn't be be that argue. to would importance continued that stay that, the long -- be with stays, commercial will says what pressure, important.

Steve Rusckowski

positive. policy, as test could it far all, one as week is is payment of week, know, and negative first the share it'd next you policy, be that policies, reimbursement As all What frequency we evolving. I'll

important people exposed, have and been believe get early quite feel fact, they some therefore, should So symptoms. it's they tested might that they've if, in that that they if

take support as that to seen in positions think position the these So, we'll are you programs and taken I many and that people notion, but large have are return-to-work employees by continue cases, and that moving with, self-insured. employers on

in their pocket sort of healthcare employers, the it that a fully those insurers from. is not there for it's reimbursement of issue, what insured moot some comes But positions included So that's by policies.

if by school a debate going playing to and going or that. like or equally they're for whether -- included some universities paid the students it therefore, campus So And be in physical would on there's should back around colleges, sports then reimbursement is with employers. the testing -- free the be,

out XX the but reduce therefore, on value, There trying that you are the with second most some on have of So seeing trend a whether, tested been this who and should might of you've growing that characterize I not also say, help should demand understand great kind it negative right people get are of then, your to as this. we get question debating get now. is some and after maybe now, to evolve, would and test again, we a some we're tested. for system not operating as positive this. who some days people is retested protocol that there's right And that We're of views even verify tested of

being that's So as debated, well.

Mark, a like in COVID? reimbursement And So you'd general it's of evolving, on lot discussion. to anything add to

Mark Guinan

it had be add we or would frequency denials of have very would amount, a any few limitations. that not just I significant

are those. the issues into molecular risk Lisa, evolve, not for might and run the not for programs, things while taking point, to we've the So, and tests, payers with the back-to-school return-to-work this we on around frequency

the arranging contractually we a client to in we fall or So denial, cases where payer, bill coverage think where, the where customer, are then either from get do a we to some the we by right get directly. back directly have have bill we have paid they client if they a

we're think headwinds payers the [indiscernible]. far financial for we protecting have less into from ourselves the So, standpoint, we not on run frequency

Operator

you. Thank

from Larew William Matt Blair. from is question next Our

Your line is open.

Matt Larew

Hi, rising good opportunity back-to-work mix morning. have but unemployment, for with in back-to-school. how were commercial pair the obviously, I also, on the population to as restrictions wanted in patients relaxed, business, wanted the trending ask services quicker and may up base the about to I and is seek been suspect to I that follow

an testing versus strategies is perhaps but testing not the companies, opportunity Quest there schools? discussions or cities what employers, in then, role managing testing? to model only had lab-based rapid for play role for or you've curious play And what testing, a and Just might

Steve Rusckowski

was think question. Mark, payments? the you part that of around to take first want I the this

Mark Guinan

Yes, I'm question? you what specific your sorry, repeat it? Matt, Can is

Matt Larew

Sure.

business? the in mix; how quarter the base trended payer Just that through

Mark Guinan

not The was increase did an uninsured. see one Yes, payer materially. thing change mix did in we

see So this no beyond size, that, was -- I and material we don't given see and rarely think we changes our of there any rarely was -- payer exception. mix

people with uninsured. was utilization did did The in certain one drop others. we payers the that more certainly, more than So see not impact

Steve Rusckowski

gold testing, for like is devices and opportunity us -- coming include diagnostic to serology And are in and will, provide standard the you what employers then standard. those -- is that think secondly are the are gold there those and work our we offering role specificity devices, the return let's specifically. devices help at we the are surveillance. both a to all Yes, are programs Matt. services can that for is day, we us, to finding based to a workup the best. an marketplace and test around that where and of that that the if they university point blood are particularly of to few we're for universities, The or say of to for looking test devices few initial care are Still On this there both sensitivity and PCR

antigen lower be possibly those know time. of Some looking to the sensitivity helpful coming a you a form, to it at, tools of surveillance manage is and our of set screening with of just which we're around XX% biometric over and the for overall population us serology for the sensitivity some some combination and devices than marketplace but devices could in are

our are going their how and to universities we services have thinking surveillance So, include employers we'll for they those forward. also as populations in to about

Operator

you. Thank

question is Brian next Our from Tanquilut.

Your line is open.

Steve Rusckowski

Brian Hi,

Mark Guinan

Brian. Hi,

Brian Tanquilut

Difficulty]. [Technical

Steve Rusckowski

you're Brian, breaking up.

Brian Tanquilut

this? how's sorry. I'm Yes, Better?

Steve Rusckowski

Much better. Yes. better, much

Brian Tanquilut

Yes. Okay.

per day how that terms prevent of this what really you uncertainty strategy knowing beyond think the versus XXX you in tests So the of are XXX the increasing opportunity about from And how do big now capacity to not or that could balancing, a pushing limiting day? factors say be? up XXX,XXX right that

Steve Rusckowski

a do mentioned, Yes. we XXX. of push beyond excuse And Well, demand point my going forward, XXX. to capacity it as get earlier are that to going me we see we all, I where first And going to that's our do on beyond be will believe do capacity meet -- do we'll we remarks, see demand.

limiting beyond get combination machines. know, And the are, you And there. will factors go so We'll XXX. we the of

been get for not but particularly second know, and -- get our we're and to and can on working our consider. able the IVD you two capacity us equipment, setup, laboratory the the it's it know, more for need and in It's much to capacity, all up some our those test machine the as platforms, take you then is XXX. there's just getting actually more as other And you laboratory we platforms, pieces bring getting, the tests. and up beyond handling. extraction be systems but PCR constraints systems So It's to to to bring that suppliers liquid test bring developed with the

are we million Yes, this that The last is backwater from gone the microbiology of in our four has second months, the XXxX. tests trained time. those laboratory and need just And my I our adequate reagents. to controls department systems manpower. deliver that place. get, remarks, that then need on in teams to to training in And is working limits Remember, to And you front in just the you And know, you just, and people we third physically the over are fourth know these this. know, then the as have takes is, nonstop. we know, doing capacity is place, center. you the we're around adequately X.X running have And some mentioned and

juice get and we And with platform. getting rate to our all are by limited suppliers more. much working We we're our how different run

We not had shortages some ability that deliver results. our have the with has and of suppliers helped to some

to again. And give so to, reliable, them we're get of secondly working they delivering more first all, actively and to, be to what you then us commit know,

ideas get rate factors do the to be future it of beyond can to incredibly time. where will at August, need your the to hard get we want But into So to beyond where also task XXX. more to That's those manufacturers we with pushing the are will answer to more particularly September get be more we limiting I But we meet well late is now, capacity, everyone working XXX. get White early capacity. say the the together, we're and we to as we that around force, demand what see, working able working House IVD all question, get

Mark Guinan

clear, this to but be ask didn't not we conservative. know, you Brian, And are directly, being you

spend get operating moving get everything of to and equipment, people willingness all multiple are, do ability things our who and know, challenges know, to the you in it. or to to as trained are as are expense more They're The said, we to running. Steve and We for as operational we matter, capital operational get can. quickly pieces doing not them to up equipment get are and, financial, more possible. you And that

weeks. today another from As you over go said, several Steve the we're beyond from next increase we capacity said, expecting you to our we XX,XXX we're where day that. as then And going are per know, mid-May, doubled

hesitancy So to of we capacity you increase because everything and to doing no, uncertainty certainly know, add to demand. can We're times. and there's our turnaround reduce capacity

Operator

you. Thank

Our Eric next from Baird. Coldwell question is from

open. line is Your

Eric Coldwell

in assumption? I'm what give very couple PCR volumes first. XQ, your for PCR daily quick you just XQ Maybe housekeeping in volume on declined average just XQ how much versus in much. sense guidance said that's thank you a guidance you us curious I can expecting that Hey, of your know a implicit assumes in you're

Steve Rusckowski

know, to very, well. rate, PCR, mentioned, important. as very you outcome. point certainly is as we And so, to very, know, estimate, the know, know, know, Yes, you it's can know, the improvement you if And even XX-day is base the appreciate sure not we every multiple decline our you as Eric, relative material, within the you very know, finally, a you can things material, then volume, number because that, for is that you range high-end assumptions then we've I'm the factors forecasts, you got, material that or beyond very or reimbursement volume that range, move extension have

because, significant So, running you answer at you in would you really know, scenario know, we to but, get point, a directly, reduction so, know, we're guidance these numbers. planning, but I specific this have demand variable QX know, can't tell there's multi I you to number you that

going return volumes work that's volumes just uncertainty not of but and So by happen, will it's gone to school again, And to what's not small, that fairly know largely back the the QX. and to it's because given the the significant. be we knowledge

Operator

Thank you.

Bank have is Bruin de Derik Next your line of America, open. from we

Derik de Bruin

questions. Two Hi, good morning.

of rebounds And then one on some first different of color give can in bit noted softening The you've being, the you in some July. the a categories? little

to So how give a us sort pathology, you what hiccups? versus talk you're about versus clinchem of of you've on flavor sort oncology seeing just can seen

Steve Rusckowski

Yes.

have a put way; primary up So as rebound back of have they nice it cases patients. [ph] call well. and their bounce back extended back a some characterize let as hours; in seen on their piece of nice demand. physicians that We've our care, this OB/GYNs in In some offices I'll seen me that we've opened so

taking And that's that big to April when then, We're that this there. a should a run we some that's reasonable some of seen our pent-up period come the get forever talk life rate seeing insurance in then and recovery might And frankly, outlook, some not of is that we of make we'll demand we the it some because sustainable us see to some way. we're actually pathology system. in that for are our of to being in other that recovery summer. tissues rebounded have not expect some be as a rate is cautious about businesses; our to in summer. pent-up started in if we June we And you are been -- entirely rate June We the might we business, that back the that we good through why those lost will, our actually run those sure May to as haven't time slowdown the QX. have it's Secondly, might absorbed, procedures have of sure there reacted down see run into coming in the considerably, related and will and to we nice

business drug come back versus down Our start is is pre-employment to testing hire considerably starting as employers but to people XXXX.

do employer of employers Our programs been those events for we considerably, population where down wellness business have health cancelled. is many

best normal life say variation worst those the around hiring wide the general, are insurance would economy, it's to people. and wellness and I being the constraints with being and and tied programs a in that really care So, primary like

So like add that? to Mark, you'd anything

Mark Guinan

come most has add back business I that our of would base just Yes. proportionally.

but it's But pre-employment couple testing deferred pent-up of whole recently the just monitoring; demand. of category, was employer franchises has said, we'll drug in base that Steve see really last so up other As business. how oncology bit much that's area, the in not drug over business, picked the not a just one the little some the within prescription lagged of our weeks;

Operator

comes ISI. from question And Newshel you. last Mike from Evercore our Thank

line open. Your is

Mike Newshel

structure? follow-up you in sense and region? threshold does where particular your know mind single state specific specimen, pooling there And have big pooling. on each incremental makes a full but specimens? Is reimbursement cost a a testing Is Maybe pooling just rate Thanks. versus in get much change a positivity there you for difference I how margin

Steve Rusckowski

Yes.

that we the there have you starts all. if the obviously is four -- your get know, So, you then have well, within those is Where that positives obviously the and, it pool, you positives, that whole and could lowest you if game. best put to zero to well, a will, into know, eat test and you run, productivity about, know, and you quadruples, throughput think you in where we per specimens like you batch, know,

well. So, the a all doing sustained. that right do. up best of is to states range. high is need now is We in effectiveness it's retesting lower Northeast lose geographies Actually, that than hope actually because single then, as the to and to go quite you to And number have are digits, that X%. you of the start We starts it

to and beyond. not of and tests, than is it's it. -- also, and earlier. starts we capacity, systems we get believe the more is and our But to we about look get than to worth applied X% capacity, sweet spot, pooling capacity new developed plenty more less we're clearly, we get us marginally us adding our if at pooling we're laboratory in piece X% greater pooling; a But talked to have that again, to give XXX, people just to it's everything going doing processes So

of the So, it well. will doing us as capacity but other give things we're some there's

Mark Guinan

pooling reminder, currently on possible our a just And only is that LDT.

to can a And expander network, or know, low that certain we so or whole across extent not to it's LDT going you our if large extent. as it's prevalence to an a and prioritize be therefore, areas

the samples single get areas when biggest instead we rates. four on to capacity. once -- some point, positivity do despite so of currently can reagents savings really even do that And the costs it's we of low a Steve's going we're the at to target benefit some have while you But is retesting; the cost benefit one,

is cost more certainly with really So, and equipments although is a comes more same of the to being larger, the benefit, that sales serve a pooling. savings patients much with there able people

Operator

And you. we Thank questions. other have no

Steve Rusckowski

Well, Okay. and doing, your your And appreciate we time appreciative phone. hope we appreciate well. interest us, We are extent the as of our support Quest we're like everyone at the the what we of in on business. and appreciate you,

great have So a everybody. day

Operator

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

Quest Diagnostics (DGX) 23 Jul 202020 Q2 Earnings call transcript