DGX - Earnings call transcript Q3 2020 | Quest Diagnostics Incorporated

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Operator

Welcome to the Quest Diagnostics third 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 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, Investor Relations for Quest Diagnostics. please. ahead, Go

Shawn Bevec

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

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

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

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

Steve is here Rusckowski. Now

Stephen Rusckowski

testing as everyone healthcare very benefiting recovery rapid continued well a COVID-XX from thanks strong us as today. utilization. for from and demand Shawn, quarter, third from the Thanks joining Quest had

our to to XX,XXX date, want also remainder of introduced employees work the ability enabling We for update million have that Quest pandemic, classroom, hard our dedication. contributing third to performed the the and COVID-XX outlook then has on any I’m We’ve and and athletic XX several work, all non-COVID discuss over than pandemic and and that and will extremely field. more business, on and I’ll detail serology our proud to you accomplished updated quarter, provide new thank are and results on more innovations This for base role the their I country’s performance Diagnostics year. other tests return to Mark the provider. COVID-XX of for financial the the morning through in the molecular our COVID-XX our the developed quarter

Our performance quarter the financial in third was very strong.

consumer for the demand base especially total offered of offices; across share points, and the to to care orders testing patients an in Direct. more ordered $X.XX. first and our in nearly life, non by use return testing a We’ve the quarter, the single Earnings direct and and of innovation retail granted their non-urgent sports; to and continued or an testing workplace to grew standard access and versus areas: by in systems we for providers by more drive-through declined due testing basis to receive nation. quarter sought and and country single elective several agility than XX% the adjusted as campus testing July self-collection. digits by from demonstrated Quest the prisons; for offered virus as pandemic clinical throughout such revenue testing to network homes an like were the nursing declines unobserved job For XXX% the on We XXX% our country, students COVID-XX also much sites the testing CVS high improved and employees September mid resume volumes university These and to employers high our to EUA quarter, prior COVID-XX base were results of testing in testing bringing increased in facilitate recovery people testing pre-surgical in surgeries. Organic to spread return in as digit high risk including billion. or authorization, by EUA In reported healthcare $X.XX testing volumes COVID-XX Wal-Mart; continued Demand came to to emergency populations COVID-XX healthcare year. as the on our to than offer basis reflect our to $X.XX [indiscernible]. per provider the

existing people estimated total and announced more up and contactless health in the Finally, drones. Foundation than populations locations underserved a our an color, focus Quest centers throughout Diagnostics the of testing with services for along $XXX and program specialty a and This million. healthcare underserved to on those delivery fund using we work reduce range plans to of pilot by will with donate to States. teamed communities, we impacted disparities Also in elderly with Wal-Mart builds initiative address DroneUp [indiscernible] kits commitment to COVID-XX. in United and value-based initiatives our on quarter, of Quest including serving

and awareness Our goal health. and of drive is innovations value testing improve managing diagnostic to of to access

decision the testing In what do currently to removes we’ve with the impact COVID-XX overhang CMS on Before funding to throughput laboratory I’d Last reimbursement. new government. testing reviewing and patients association, Medicare business, recent COVID-XX to week’s Act updating our comment on for been molecular conjunction high our reimbursement from on is for CMS change CARES will you like serve. base trade return uncertainty the our an to payment policy was our we that and testing COVID-XX announcement

our last from time Act country. spring funding the at which Finally, for CARES provided great we’re an important uncertainty us grateful for of

pandemic, was to thing as longer funding these and do. no the into returning this require several result, right the we Now will the we a government. be funds to months That

with and strategy making provider to health accretive on accelerate population then relationships in a data year systems; support elements the strategically to the services; reminder, be plan and expand and friendly to diagnostic X% strategy aligned, so as diagnostic the base through to We’re business, health grow five care per our innovation; growth the recognized consumer information with are more finally, of services. progress broadest health analytics extended our access hospital offer acquisitions; accelerate as of than

our highlights a I’ll few accelerate Now share from growth. strategy to

strong. we Mid of America MACL, as couple referred Laboratories, quarter, our small close remains pipeline M&A which second is we the acquisition tuck-in and Clinical Our a Since acquisitions. two did to Indiana,

during growth testing been performing Hermann acquisition from base We’ve in of the our announced pandemic; COVID-XX Genetics. for have advanced MACL outreach business. Our acquisition acquisition example, Blueprint this both seen year, earlier have recent Memorial our this recent acquisitions and as driven diagnostics as well also well in our growth

The with health and driver, hospital second expanding delivering. growth health plan relationships also systems is

have Our year. hospital returned reference COVID-XX testing volumes to growth over year excluding

many year logged term the strategy, amount and services are Quest can have their open challenges agreements than Given how discussions we facing, so them we lab that a this be hospitals bookings, longer help of past. record achieve expect about in more professional represent to the in to lab larger

on progress make to continue our health also plan strategy. We

reduce helping laboratory through out-of-pocket spending network, zero UnitedHealthcare the previously we’re benefit. Within lab announced preferred United out-of-PLN the

new into In reduce in a enhancements to administrative August, addition, for Anthem that XX related entered Then burden added and preauthorization. United we those with states. in has strategic requiring the patients physicians tests relationship

efficiency through in our major Then enable their respiratory innovation. three bacterial quarter, growth the strategy We’re We broadest identifying services. reducing working from finally, retailers. relationships new COVID-XX time with with and with element and single payors major delivery infections testing COVID-XX and made quality national members access of progress nearly to to improve we’re patients physician the Quest’s on Anthem launched tests, of diagnose access working swab. viral additionally our to third to accelerate to and laboratory to combined offering a by for In by XX treat virus we

We next consumer sequencing through about Ancestry points diseases enables also genetic price testing solution to insights generation launched that Health. access our automated hereditary individuals at

double direct-to-consumer COVID-XX Also, at-home kit an our to quarter, In Quest up offerings million patients Direct the average the launched the more quarter, smartphone XX test service. In before resonate consumers. drive-through roughly of a receive My more of this continue services remarkable per getting the we active is than quarter. the infection sign-ups location. This experienced our to or signed Today, progress have through week their portal. test, their done grew collection the make patient using pandemic. we choice on a patients the third Finally, results Quest for or computer. offering or to we with in in specimen appointments surge a account their rate XXX,XXX Quest consumers at made we than My our

the year. per Now, pursue operational two-point of continuing reduce drive X% goals to part to strategy excellence by our second by cost is our base our to

to same and time customer see gains the also experience ahead enhancing more opportunities at We productivity further drive our overall while levels. service

of couple examples. a Here’s

The XX We XX reduction the regional in a more enabled immunoassay workflow of efficiencies platform have our our solution in than Siemens has equipment laboratories. and footprint. standardized on XX% drives

is our Then of new lab simplify, which most system, pleased the in with culmination converted flagship in far, regional represent network and laboratory final to stages state this our the early New the will we’re of facility multi-year go complete, the operations. be Jersey these laboratory be savings early in call [indiscernible]. prepared to mark art highly being automated to of standard a live and This XXXX. are standardize still laboratory realized our will Clifton, to We but our progress. so operational initiative we will this regional also, streamline the in When

the Now Mark over Mark? our you turn update results I’d outlook. to to you and through like it take on to

Mark Guinan

the Volume the billion, year of testing XX% requisitions were the for with Revenues offset decline by approximately the In Steve. XX% which roughly reflected modest up information demand X%. acquisitions third year. year, contributing versus grew to approximately base revenues prior diagnostic services volumes. increased a quarter, services for $X.XX measured compared the in consolidated by prior significant versus XX.X% prior COVID-XX testing Thanks number

single continued prior business in to in and performance business third our high year. base digits a single digit testing our July to the base improved to in compared organic high pre-pandemic September decline mid declined Orders experience in for improving versus the We to quarter.

prior entire testing recent Steve earlier. M&A the from X% PLS new third declined and benefited roughly the that base volumes [indiscernible] highlighted the For versus quarter, year and

This strong or in in third million a increased compared requisition relatively experienced approximately averaging prior last quarter quarter third serology $XXX $X.XX tests third driven in year. approximately XX% in same of on by margin to was by $X.XX On versus also income headwinds date includes Adjusted last XX.X% contribution relief performing the million from $XXX billion million significant XX,XXX largely impact during a XX.X% X.X the drop-through ongoing high last million period X.X our $XXX $X.XX prior operations $X.XX offset or price business. expectations. revenues of by operating COVID-XX the or Act. the the exited partially CARES million million last to provided the provider COVID-XX was Cash adjusted XX,XXX to compared compared tests third reflecting or Revenue year. quarter, and million $XXX compared our quarter, testing. year was Reported and approximately volume the September revenues quarter, We in approximately unit year included molecular XX.X% serology of in through PAMA. EPS by income year-over-year the with XX.X% basis, was per day. revenue in ago. increase of to versus quarter Cash The COVID-XX million in approximately to X.X% year. operations driven We per revenues the was the XX $XXX an of year, $X.XX was of operating testing the under tests. $XXX molecular third Reported This incremental of from operating revenues year. EPS was line growth

strong of are we result earlier. our a As received, entire Steve CARES Act financial funding planning to return position, we the which noted

redemption the maturing notes accelerating of April are senior we in our XXXX. Additionally, of

to May will notes. proceeds repay completed We we of use offering bond these that XXXX the in the

We expect to November. in redemption the complete debt early

$XXX billion raised and we guidance, by as range a billion, approximately to and an to are be prior to Turning expected increase to cash in XXXX a is to range operations to adjusted XX.X% provided of EPS $X.X $XX; be expected outlook capital $X.XX $X.XX EPS to full versus year; now revenues be at billion, least the year of reported expected XX.X% approximately be to between $X follows: in our $X.X million. be $X.XX expected expenditures and of to

under the operate by uncertainty caused We continue to the COVID-XX pandemic.

in the our testing well of challenging tests for of base generally forecast. to full modestly remain trends. last we molecular year are stable uncertainty testing molecular nearly base testing as below serology to swing that for factors Continued prior and day recovery QX; mind, significant the as demand duration XXXX; with year With the assumes XX,XXX in as for COVID-XX of per in the test levels tests averaging COVID-XX day volumes please business consider volumes reimbursement and XX,XXX per degree generally midpoint exit test the high COVID-XX remain that recent outlook following: molecular

above reflects slightly October uncertainty of but these current environment. again Our the is performance the our guidance through assumptions, mid

mentioned, of Foundation in launching Finally, recently initiatives early Quest as to the disparities in announced Steve stages currently the reduce underserved heath communities. we our with are

As exclude the results. initiative expect we in move adjusted multi-year we costs forward, with our to associated determining this

we share offer some to outlook a year. today, prepared considerations I’d like to While for for aren’t next XXXX detailed

QX. our to are have year, the an much in for easy base we compare of business in First, especially likely

come serology and play tracing need Second, demand in into vaccines market. and there for a the active molecular eventually therapies continue that as additional PCR persist will COVID-XX XXXX. testing COVID-XX a believe diagnosing, is to that to to likely and testing tracking role will be important very well infections for growing testing We

Steve. Third, working will recent reimbursement it Medicare as understand included be given reminder, I the reimbursement COVID-XX for turn we CMS XXXX XXXX, under regarding in one-year molecular now and details the will PAMA to a are the CARES the of delay announcement finally to back there Act. in no costs

Stephen Rusckowski

number signs very and country into over back work, third developed athletic introduced throughout to our Thanks Mark. innovations testing fields. to COVID-XX recovery healthcare quarter. volume classroom, and the to quarter million To to recover a in XX performed summarize, had strong tests a of have the further continued rapidly seen get we also new third and allowing onto the and We’ve the utilization serology molecular date. as base of We’ve

at thank Diagnostics Finally, work throughout all I’m and and that Quest XX,XXX the again very Diagnostics all proud accomplished for time, all extremely has I hard this people of difficult Quest their dedication.

happy be your questions. to Now any we’d Operator? of take

Operator

from Ann Hynes [Operator Mizuho with instructions] is The first Securities. question

Your is now line open.

Ann Hynes

because I just Mark, good morning. your turnaround Hi, touch what How’s expect to to assume and January, reimbursement it’s everything? to, deploy I time cash the modeling next need testing. talk test? lot about to you’re able - should for but by Thanks. would What do that to wanted cash about very that back do timing you that comments, make you investments year. about you any question is on elevated your just can we be be since expect--how flow once you molecular maybe more unknown, obviously expect time, still in $XXX all about able very that for and of reimbursement maybe purposes, elevated? capacity to deployment the a My it’s current further for know molecular is to get the second your just

Stephen Rusckowski

Let me that, Ann. piece start operational the with of

right we’re you and from detail even then secondly result guidance In I specificity to actual When testing times, more running heard have reimbursement introductory turnaround we two of less us said it for COVID-XX. for we’re be it my we trying COVID-XX around looking be looking now done remarks, turnaround by all, of at know, fall share prepared that than less understand We’ve tests capacity is sure in than terms collection more day, clarity we’re that demand about be reasons. from for What to so with exact XXX,XXX will what there this per will of One day, a for where for that though from further will helps days two capacity is is First averaging our me, I’m from recovery--excuse be less, testing, happy time, I’ll the anticipating I’m and when on that. and guidelines, specimen more the calendar changes. to as CMS at there say, and we’re that’s to more today also but--you of early there we’re in terms CMS also results, we’re and results.

there. think, I we’re So and demand, performing not versus capacity well we’re stopping with, our

actually we We’re as our speak. capacity increasing

of we us keep place, versus meet today, pooling the year indicated. of so systems of We’re looking our some at applying and to should secondly we’re platforms, XXX,XXX we the this to the so times out working should some out in eventually level that capacity get demand we get at of IBB already at put XXX,XXX last coming can new and turnaround to the our some the out per able be day I’ve of Mark?

Mark Guinan

means. the in clarification them. understand and to we two days to committing and obviously or how pronouncement commercial the much add details. At what still assume clock the we too as going payors time. it’s to Yes, less, to of expect we need of to for shape around it and the where we’re We the those through good end get turned to to on cautious some criteria. certainty with with have point, of just the we half and in need to than exactly around by tests meeting Ann, That’s need why should also terms that, in when up, think that’s work more well devil’s to turnaround obviously we that, Medicare, CMS very issues this in work around this be Based on so understand starts

the as you do, of at should is lot repaying said we’re our On early much April it shows confidence, debt fact which deducted our we’re this look cash flow strong to so flow, at May a million optimistic we when as we’re of returning cash but that least a be very expecting course about meet better our billion, to a we’re issued see, have as in obviously that that requirement. feeling from at certainly $X.XX projection I that able pre-issuance we work $XXX we cash from The point. year. We

time when pipeline, many better highly and very strict M&A Steve mentioned that’s but for M&A we’re to do it, we to do criteria. we because confident strong know, that very You do said have prefer would have investors shareholders, I’ve I our return a a we

have find for our we throughout that that you next to deals will can some as deploy strategy criteria, we optimistic or to normal We M&A meet at move forward year, calendar the a us of so those to then and capital chunk return I’m that year. point expect early

Ann Hynes

thanks. Great,

Operator

The Baxter Wolfe next Stephen question Research. from is with

open. Your line is now

Stephen Baxter

I I question. believe the have for single that you on I the volumes do wanted so, you. what’s from for digits, and actually put consistent Then to were said a the see just exit quarter. mid core you slowed then to a release assume further? you ask final that guidance does September down progression with it’s normal today’s If think continuation to high the bit. the to improvement and volumes thanks the September or has at it, that see not, basically singles. little Hi, high needs you Thank to about rate exit core a of level? a continuing missing? August same improve that suggest happen the point I’m level, it guys nuance experienced, to the if singles what to has rate seem down think Is about baseline what mid volume you it in return at to also This would

Mark Guinan

question, the for Thanks Stephen.

given September August improved in stagnation in uptick volume so mentioned, is yes, baseline, we so from the completely As COVID really was surprising July, in fairly the again. flat, recent there versus improvement little a not

year. range improvement, but in QX, any we this that’s have very range why there’s when business, terms expect recovery. we So a middle expect calendar not a variables, complete we’re it within $XXX on and continue broad not the million, of did the its worse time a us, full - that about in multi we I it hasn’t in talked but gotten Obviously counting for don’t what recovery so of base that

to end well, last the kind get go it from on move range, upper not depending that they been of as of that it’s where materially end lower would but you along, of course, We’re COVID expecting that couple away where months, with from and the midpoint. to that testing

that a improvement towards and So but on certainly it toward not the could end our lead counting us of little could bit, guidance. it if us end, upper eroded anything, lead lower

Stephen Rusckowski

watching that carefully. we’re and Yes,

at September, hear as there October. digits, mid so what we the indicated it we If improvement watching I off we’re started high as was quarter July said, as you also and and but enter we slight go back single and it in quarter the to in high, then fourth fourth in I here sit

Operator

question with Ricky is from Goldwasser next Morgan The Stanley.

Your now line is open.

Ricky Goldwasser

Hi, morning. margins. the a gross question have I on good

point, than also higher hearing core the can if about bit help lot volumes. more saw in with we’re COVID assuming testing? from understand return quarter, we us price talk return just reimbursement, quantify, little I’m on core gross meaningfully but versus comes a seeing we of the coming - benefits direct-to-consumer us of a the clearly that margin the what the get the maybe price higher in you We off realized came clarity is But more a of we’re you You can for which that. so testing,

Mark Guinan

into I have and dollar, revenues about if about - so patient there numbers, but first come a can because it’s there’s Ricky, the point I overall gross that COVID payors you testing that expenses our responsibility, our feel of we XXX of consumer margin on, offerings, the perspective, COVID does business business. will any a higher higher there on is the come everything a are go enterprise. between responsibility, when and a is gross X% we’ve that part is awareness that by having invested direct-to-consumer. benefit Then that really test about shared, just not collect, don’t patient don’t to let’s marketing price from XX% because COVID, the as we’re gross higher having good with Recall to to get reimbursed margin. our small it than about precise $X.XX of overall to it in actually from you imagine but some specific the business, We’ve out no say Certainly patients, is with drive think instead enterprise, unrelated on incrementally so so Sure, there on direct-to-consumer policies particular margin so even But one our margin in point. has that to very but other and coverage the is I’ll still money core with it’s some that on and do price collect inability base, the benefit due. and though we all really obviously that confirm we

Ricky Goldwasser

Great, and just one follow-up, I if may.

takes early some puts for us XXXX. gave You and

starting hear serology in with to hiring vaccines, for we to When preparation in assume think hiring next are a year. first increasing accelerating step-up increased associated COVID costs We’re related about in preparation you that? for etc., some should companies that

Stephen Rusckowski

over to Yes, Ricky managed carefully nine last we the workforce so our months. six

with Mark our business in done. and we our had over base the work and we reduced cut then workforce, board, recovery myself trim the recall, coupled and our you’ll down the so COVID we X,XXX salaries second furloughed people, steady As to schedules, including testing we’ve that we saw quarter we

the particularly where specimen we’ve So need weeks to work like of salaries, processing. so we’ve hired vast have furloughed back back we’ve we people hired areas reinstated people, brought majority brought we and and the people, actually hire we’ve in full employees,

can lot with go lab. person. volumes sort tell into the before to to very, the it add You to we seeing, you, another careful specimens still have we’re a these they being out But very you receive before have see I’ll we’re people of all

our we’re exactly laboratory expenses, with very with been in overhead we’ve can is quarter, what’s through we reason operations limited we overhead, demand for in make we that in hiring to go general. you have right but leverage for now. will third as want good our being ourselves. our believe very be our we in a Mark don’t’ continue in getting got we feel [indiscernible] very We’re place get ahead our The We and to our the and in of manage expense see, operations and in categories sure workforce hiring to and careful the

We’re make constantly quarter’s get think We ourselves. want will what future to don’t we the to we at think demand what the ahead indicated we going we looking be. sure of fourth be, but

are We done. building get capacity to more COVID-XX testing

don’t assess so and make back we’ve done we them. we’re to modest and beginning We serology jobs we to of we add But some quarter lot hiring, year, get of we’ll into without capacity to want based of watching fourth of add some we next some have need exception we’re it, frankly, mentioned, the workforce, adding volume a need available plenty of the and as for if the we before I the daily with far, people into staff, so as we then get people. full sure and deeper

Mark Guinan

any don’t add so Yes, we have resources, to Ricky. proactive plans

can have continue point. to short monitor move this anything to to to volumes fairly going ramp and I demand our in We’re confirm as other. the base direction generally the business, at of plan in in anticipation one window year expense we in no next the in or flexibility to QX a add

Stephen Rusckowski

particularly people There off other spigot things for options our of we some keep last with employment we’re hedge in point down, where we this, enough, so and non-exempt this in are turn because natural therefore our as if still attrition places do have draws, have trying carefully our And a are the could despite is on is this still to we interestingly up. some some economy, with well. of turn we jobs,

Shawn Bevec

Operator, next question?

Operator

question Next from Giacobbe from Citi. is Ralph

is Your now line open.

Ralph Giacobbe

want Great, to correct, the interpreting am not? will commercial then that I baseline? an times. now, the thanks. then to on period, and assuming you it the go be the rate period, $XXX reimbursement Good piece CMS we And is contracted of remarks or it your Thanks. think COVID on off place. Is just post of second there’s rate a expectation or comments, related clear the right tweak morning. in what sustain takes rate your reimbursement that meet should turnaround specifically default is be sort that I how is to level, overhang. just guess my those and commercial prepared rate, the PHE want removing $XXX negotiation I I back the that that to understanding for post PHE and Does the

Stephen Rusckowski

Yes, we and where uncertainty the start therefore me let word overhang. we used, saw so some with

for the order First that’s October. was third some extended as in place, all, had year emergency of you that quarter uncertainty, to in about the we this and know,

the it it $XXX for was $XX that reimbursement to that we’re do We want continue with Mark, changes incentive this, bump of it the at [indiscernible] are year. you spoken $XXX, the of, some was where to remember But if that we from the for XXXX uncertainty we heard days, and turnaround expectation get you $XX, before some the that would given rate our XXXX. there up assuming of on to you’re the reimbursement removes hopeful time two secondly, rate uncertainty and on got outlined therefore the the the $XXX, $XXX. Then new in that’s reverting remainder it’s $XXX, $XX original so again take of was commercial went the it’s about at January, being back at and rate until that this so to side? if up therefore don’t, you it new so we of

Mark Guinan

go. provisions test and to we to Ralph. renegotiation, There’s those, answer and of in payors in you. to default is the talk what as our set negotiate. to new and and negotiate any to molecular go tests, so for to commercial it was forward have COVID-XX high no sort had to commercial successful CMS getting throughput a is had to it at certainly this match that, certainly provision or where have it’s might our generally to one to going CMS’ no contracts point Yes, relationship rate, we’re there I We reimbursement automatically We of continue for

Shawn Bevec

question? next Operator,

Operator

is question Jack next with The Meehan Research. Nephron from

is open. line now Your

Jack Meehan

core a Hey, in good dig around volumes. the little morning. on commentary Wanted bit to

clarification just digits. some that the Then return the to - you single do might reason a bridge was think to struggle back commentary? why include can you baseline as said pre-COVID look to core down mid the it M&A, XXXX, versus is think there routine to get think demand Just or I monthly Does XXX%? you to first you out

Mark Guinan

M&A quarter to I then were mid POS The for then digits to want we’re core so where apples a an deals. core the just and place apples July from of that’s didn’t be understand those August, apples, digits to high that confound down analysis, the clear, But business. some almost volumes the flat new quarter. also want base and you apples to the full mid comparison, to into higher with we reporting one an the same We slightly was for the utilization puts and September, single by fairly improvement volumes, wanted better to to and in single in store

terms to we’re else, of extent. like what might recover next things quickly how year, In and out to figure everybody trying

We’re at you are. the reports looking same all

couldn’t Given the it any to the time on point for it happen. doesn’t the to this and expecting but base not back soon get we’re economy have with potential uncertainties, [indiscernible] at the pre-pandemic utilization levels, given to volume said, the mean that impact continued utilization other

some it, this those assuming we a are, thinking. guidance assumptions for initial around come give that and what We’re specifics just when just not our while at we obviously you we’ll guidance, haven’t to out lot with and give given XXXX, point at have information. we’re But going to point of wanted we more

Stephen Rusckowski

we’re Then pre-pandemic back that change to city If by state, around--you affected color the the of of consequence Some but laggers. York variation we York New got business city. by so the overall not and around at have watching can know, look that has understand we City fully New recovered got New that’s carefully franchises clinical by of way and secondly, recovering. still that some things that. still so watching levels not other around country we’ve franchises, and are we’ve recovered, are we’re by have a clinical we it in the so fair There’s York, or you parts if percentage example, geography

areas business it We back levels, it, get it in a were to if get couple the back saw winter to before have so we where some normal we why at which different look XXXX to pre-pandemic our months, pandemic is of from prescription get these what levels in potentially then above drug understand the monitoring will below still to can you you March. it we takes hit going that pre-pandemic, dimensions, we’re and require below into and

Mark Guinan

complexity. Steve’s lot is we have some To growing year, some geographies actually then over are have and of [indiscernible]. really that do point, it’s year like--and a We there

much commuters has look than think they’re with fewer whether that If and We information point. of outside Jersey Westchester physician the But anything going done into during you specific they’re work any city, look of on. New it might at Long aren’t elsewhere certainly at the on while better Island, at work have their sure they’re office you is, you look Manhattan, shape instead at this Manhattan County, we in at do that right don’t we and be so to day. getting

Operator

Wright The Erin next Suisse. Credit is from question with

open. Your line is

Erin Wright

initiatives are question. and consumer the offerings, testing sort environment? it financial meaningful about in thinking the expedite to from years? to direct-to-consumer Direct this for your Great, should other a question those comes here efforts, your affect the testing Quest too, here, as you you a or or in be it testing of Thanks. this more it world? coming thinking testing this diagnostic perspective thanks dramatically when initiatives, Will capabilities get between as for competitive be COVID rapid the how of Overall, about broader in I dynamics behavior are thinking how guess we in Then a about point-of-care you or any such change will post-COVID some does of and inherently consumer

Stephen Rusckowski

the Yes, thanks. solutions. first point-of-care part take I’ll around

there’s solutions. you As know, point-of-care two

there for antigen some months gold a to and testing. the are to standard. solutions a lot testing, of why there Then of there monitoring a the antigen all continue is particularly understand point-of-care going of recently, return provided model to for out and do surveillance I a role be and for a diagnostic the PCR provided referring that most were number role. the We by manufacturers, be population. of they and they with to One intents believe lab for believe the what’s time and for purposes you happening IBD will But do for reasons we were

around testing, One physicians we upon there that, means well. will be PCR, that that applied, and flu of and negatives, get also season PCR and of respiratory depending are panel both positives for to it for we’re offered, the demand to prefer some for the are quality PCR testing when reflex might COVID believe reasons be the testing it that a and that we going requirements the think antigen out we coming flu do tests with as and

clarity testing. interest think of Then will on doing. necessary a the services PCR for be do there offerings that finally our believe testing expect antigen offer, we some part portfolio believe be what do we Hopefully out is to for that as solution of direct-to-consumer our but of the bringing the and part role it piece, we’re be testing we be. testing in that complementary antigen a we So provides we basic that will consumer will currently the our to increased

to [indiscernible] As lipid gone the their diseases. as their there of they their not patients AXc, make are is know, cholesterol, panel number properly checked have sexually them for for transmitted - working glucose an you to believe doctors should. all have We a statins know, do sure opportunity you

and serology very to do as telehealth physician through we testing. As direct business telehealth there couple as getting for with We in brought convenient approach interest this testing and Quest and part role and COVID-XX in recently provider through getting of demand up either our and our believe to service its testing, that forward, to consumer most is testing we’ve mentioned, both a consult of Direct going there is a believe we a overall, going well. that or getting be is then telehealth in secondly indirectly terms increased we’ve

very our regard also We’re with in but telehealth companies Quest positioned with relationships with well Direct. that

us have of a we we that from platform and that’s pandemic, off, the have demand, kicked building the going a to more in interest the feel circumstances, lot we and to be this there’s Before opportunities of as consumers. nice been so program given front up continues volume

Shawn Bevec

Operator, next question?

Operator

The Donald next Keybanc. question from Hooker from is

open. now is line Your

Donald Hooker

I’d remarks of record morning. that or topics, good if scope thing going on know the in jumped environment that of as to there, well. what speaks suspect lot but might is I maybe it about bookings Great, but it’s a lot POS. talked prepared that. maybe me love one a was your being I why be There’s for I perspective your in if here, hear wondering the health the the to size possible think hospital case, also was out you on to

Stephen Rusckowski

Yes, encouraged. we’re well

is expect from testing our business. over up and portfolio testing that’s that’s up the we’ve nice of lab so program that’s seeing five business. remarks, traditionally been the we this, referenceable a in again year, marketplace. encouraging addition what my new you without This just accounts called Then professional trend. versus in COVID-XX, well. the and built an that that this hospitals would doing we a reference mentioned on and we’re isn’t serving prepared last a well or working years, in actually encouraging, and built As six have us business for services This to and years back hospital we’ve I we’re over and business growing hospitals, in see - is that’s those We where

we growth their growing and year can how from provide We will for continued on are term, with them us help contracts penning that number long for ’XX strategy. we see lab systems multi-year certain, a in delivery this interest of integrated

more with difficult As efficient, get variety a systems many the conversation at I of are hospital these and more the they’re with and had to of a get options you time know, speaking now of a through Tuesday CEOs, many one, effective. looking having pandemic, actually

of in they send that having does talked and through outreach reference do can with some they that’s years, and acute help their sell the for MACL, testing, did of around and cases how keep with seeing out, what strategy, it’s and it money going which this a is with and includes year, Then business, question they lab prospects. care think to beg we conversation what laboratory. more it in and to we’re about us, One momentum, Hermann the sophisticate areas building their the more their walking we’ve testing the save the I Memorial that

anything really to banner continues year growth to the and in in this ’XX. see that for was a that? and you’d bookings, receive Mark, it we’ll strong like interest, add year So to

Mark Guinan

some of evidence of Steve XXXX. bookings what very so just certainly results Yes growth and starting contract, moving into and POS Don, of that as to the we about quarterly what don’t and you’re the we report the we’re you know, accelerate but see from, implement prospectively we size forward see contribution, deals our our growth and we a talk about large going our that will where in generally will to as talked it’s announce these just coming

Shawn Bevec

Operator, next question?

Operator

question is with Kevin Caliendo from UBS. next The

now line open. Your is

Kevin Caliendo

levels I are, guess the that have given at falling, margin your you going to seeing do even didn’t year outbreaks suggest to guys. XX XXX it’s lower. say current given - for if meaningfully to like - they would any this or XQ. here. increase just ago, sequentially I we’re two-part you’re for still a is the guidance? about quarter additional assumption is costs the but that a now, the there fourth was maybe that earlier, is But from Ricky don’t the we’re in the that margin your understand bonuses do asking likely anything XQ Maybe why you expect be I Hey question already COVID pace volumes COVID versus down

Mark Guinan

actually I Actually wanted ahead PCR not is, reduced Yes, shared, guidance. midpoint slightly couple are and of we as I imply October will it assumes midpoint to first weeks of guidance to did now, QX. through the it that. in where we’re so clarify where be of the that the intend stays right I volumes of of the

catch-up did of QX in nothing We bonus. a In our significance. terms significant expense of on really margin, have

that As in so reversed our to sure we we’re year us we miss significantly have, got the of we and early proportion targets, QX assuming in our deliver, that. a were you QX I’m and to the exceed really would projecting point then expected targets, imagine, to QX could where just

QX, on So be in we that so the significant some in so those were catch they up Steve QX. normalcy, that bonuses QX that fully actually, did salaries there reductions have fully in are be July late will and to and was in some of referenced pre-pandemic, match reinstated will XXXK we that in not the then our cost reinstated QX to there’s other in a QX, expense actions did be incremental than where and of will repeated to we reinstate huge nothing significance there have

nothing a given are but normally pressures, other note. we are and of in really just we us that just but some manage then of have holidays returning couple and things other headwinds, I’d margin to QX pre-pandemic the call those there some what through, levels, So

business. that to be that it’s a amount increasingly up into consumer invest, Finally, and on business there I incremental there’s build a around our given investment business of things that’s we been our so little of doing step a small investment. so in our the the where referenced and We opportunity think important, from want do it’s have to performance is consumer commercial QX. we’re bit to business. We to continue supporting going

Operator

The Chickering Pito from from Bank. next Deutsche is question

open. is line Your now

Pito Chickering

Good quick Thank morning questions. for taking ones Two you you. my guys. for

the driver Now zero broad-based Pantox more core Thanks recovered that geographic do the City. is with referral experience changing a business, admin quick across seeing lower networks, primary so New it behavior? organic on that is book geographic the consumer - you’re with Is haven’t yet? seeing mentioned Also leverage think that much. of what York or pressure the preferred the a your you sources? in weakness the volumes Is plays lab a you follow-up more specialties like for bigger consumer it it burden you’ve from impact co-pays or

Stephen Rusckowski

our We with relationship on to UnitedHealthcare. continue work

and fall March. really hit actually pocket progression good in of As and we some related good pandemic and a in things our then work, lot out made did to to nice ’XX the XXXX the the had of see about volumes January really we zero to we progress up We felt preauthorization a and We employers, picking PLN. February. we said, in of of share do related

of our you if and by those some and this in opportunity lab spending to everything work Georgia to We programs of that We of believe to we Verizon about United matter can with be continue in in and we and we received work with time to to market, we systems time PLN, sure there fact, was that. by it go we Anthem on and us. $X believe be that to we will employers integrated of a XX% should able believe back United delivery access to we get Remember able state improvement and and front that last geography, by day, other of deliver. working specifically them XXXX and understand opportunity the programs that billion move there’s about their as and in with week us more that us, obviously to afforded investor patients the the of do this started, the value we what purchases where continue in more of I to be on and we’re make of

we continue help some can will work our to continue share accelerate growth. we what do is with in share you expect up it to in So that I pick XXXX and us ’XX

Mark Guinan

Pito, to is in out will good employers everyone, zero to plans. are then and trying that’s going who has benefits this through news activity, how that expanded they paying of we’re with to demonstrate employers Obviously remind the encourage in ordering and collaborating those to of the lower and stop movement most fully bills, but of the the that the how runway lot things on PLN save has still terms using with out-of-network is show of and to of started a providers, us To sponsored marketed and to whole having of to to pocket really The just moving money. the of done that member, a them that lab physicians front go other them that their United point, lot plans might want that go go, the then to new so thing. the and ways insured still us just us small benefit. it, I a burden has out it’s in been a

putting requirements they and higher an more pretty members two is in of testing, responsible around realize to have We’re clinical that PLN or really that - can the the cost approach some things significant some testing. one panels

approach the in specifically some to so prices is this of value. to toxicology as thing better outside obviously payors, Medicaid in good compared second we’ve The have we and past United, some drive mentioned providers, used other the the that of have of managed

exempted You very last pre-auth. tend that and with have know, the tight labs us responsibly they do better in couple utilization, on toxicology over they some exploding prices, national restrictions years, seeing this and put a from the to

where steer on come same the does that not administrative make it and burden to to they’re is benefit because cost but more of lower. United the us physicians tends areas is easier high control So yet. to trying some but it sees in patients, only the to growth work that in it testing, to us

Operator

Larew from Next question is Matt Blair. with William

open. now is line Your

Matt Larew

morning. Good

questions. early a had traditional couple flu We’re the of in the weeks season, so I

or versus First, What versus asymptomatic, vaccine flu-RSV-COVID flu with respect those you what the individual you in to rates COVID, with analytes? approaches higher then reimbursement hearing to symptomatic and about going what physicians distancing? in about are social combos are expectations your offerings potentially potentially on or respect hearing from flu Thanks. are combo to with versus

Stephen Rusckowski

it and believe COVID, Matt, somebody the to PCR that testing believe will when option. they rule with we’re carefully. we that be symptoms, presents We want out themselves watching

solution the swab, quickly for is for very new a influenza, and for - about be feel you can patients to brought and test can we diagnose we with good and we viral you to bacterial really treat test single physicians just also going issues, a that convenient As effectively. other then mentioned, which out

for not what us in up, we’re session, us all it better Now back watching of job all this of hygiene we’re some watching do that, the entirely might carefully talk about to Mark, of rate we’re and want being lower it of certain you you with schools and distant and bring a of reimbursement being not actually infection doing because year, the-- socially so but that.

Mark Guinan

commercial Yes, still to code multiplex be you XXXXX, and is five respiratory Basically determined. targets, six to reference, XXXXX, today; is of this. reasonable. the $XXX $XXX, but CPT for for determined three have know, $XXX, XX to to could know, which XX targets then we XX panel XXXXX with where exactly it’s is the reflux with with some multiplex we Still panels, reference in the come be is reimbursement so negotiations is the out targets still these least at to on past with payors, you

Shawn Bevec

question? next Operator,

Operator

Brian from is question Next Tanquilut.

now Your line is open.

Brian Tanquilut

outlook. guys, on talked serology ramp a coverage XXXX for congrats are what you into you vaccine and my and about and potential coverage the thinking the guys, right that question plays that, likely out? with morning about How good on good conversations the now is payors I Hey, serology are the once quarter. you or guess how to of

Stephen Rusckowski

it’s per in running of of becomes an XX,XXX available. as increasingly plenty serology, we our We’ve believe around doing got of play capacity get front as XXXX, we’re share to role We going Yes, the important vaccine day. into us.

play we for role post engaged or the with We’re that vaccine a doing serology and vaccine where vaccine, trials understand are pharmaceutical might with role companies trying either there. [indiscernible] the a actively the and has those to

for wrong doing is happening give we’re so moving and for states believe if an good have more testing. and work early progression and we’re work also with continue to the warning work doing health disease in a we that population us signal done We’re will direction, We’ve some the on the handle CDC, that what to of serology come. some

and visibility believe be We’re that. in the growing where we it’s bringing as We understand how more we’re working we as go, are as on serology, science pandemic that pandemic. on marketplace understand particularly where see the utility the the towards and we progresses. progression do bigger a will opportunity of we vaccine that. pandemic the more more more will Then out to come the to and we provide we is, the new contribute be to But through that more believe we around of solutions to going there’s with working do XXXX can also, and and

Mark Guinan

In clarity a role is not point still while and of not around going in it’s with is exact payors, There is with that be terms we’re at early, discussions an the where going detailed play, the role, important to Brian. discussions there we it’s to payors the serology believe yet.

Operator

with Bruin de Bank America. of Derik from is question next The

Your now line is open.

Derik de Bruin

Hey, Thanks fitting great. for me in.

question, savings, business pooled, that it. are of and the much on Just pandemic can question think reimbursement pooled impact to the cost on much on what a a for you’ve do is samples guess ultimately fact economics and got how being that? to I you quick How have and the much your the areas is right the are be from the pooling. now, How do volumes realizing low the of

Just on the your thoughts that for business.

Stephen Rusckowski

XXX capacity. when IBD you Yes, what mentioned in we’ve is one the we improvements and looking productivity XXX,XXX capacity to populations up any low efficiency you where XX% third that doesn’t well, has do that resulted the of done that we’re It’s sure. locations, when capability. so moving way. earlier we’re for out helpful day XX% useful. rates because test you mask XXX,XXX our to get portion leveraging that’s XXX. in comments at was the LDTs, on our you pooling well and have been few pooling, will the It platform What our our in XX% Remember applying up, I mark it to and good in a particularly right lights primarily talked per where the applying prevalence have from in about as quarter it in tests [indiscernible] It’s our Roughly well, LDT we volume capacity, that day. to of and more, be for positivity call and XX, about per around

Mark Guinan

on we on a we from so a per testing and we capacity to everyone, economic our There huge real Steve pooling remind cost it’s more reagents, save rate, comes less Yes, said, and just an not the to positivity in difference. as increase, order that get individual do difference really highly ability the efficiency but is while dependent magnitude huge not The a and the not testing, the of is do expensive. benefit of on that pool. test margins benefit

Operator

is next JP from Morgan. Gill from The question Lisa

Your line is now open.

Lisa Gill

unemployment potential the business, think about term, near what’s having the is your a few understand Good just any thoughts your playing we’ve for vaccine? the PCR we I serology, year, on think expectation around COVID back we volume? couple months, that that around testing do morning. about are we bit think just but testing? base do a of in about about PCR your and we think the think of when into think gave, comments and we understand a and secondly, trends, XXXX, PCR little Mark persisting think first or what think core unemployment part to about we we last kind to into your do when When XXXX, what just things about how a impact the the around that thoughts and about better. testing preliminary want as guidance I Then in go vaccine, seen

Stephen Rusckowski

to comments want with the start economy? and you Mark, ’XX

Mark Guinan

I spring, potentially office. Yes, more so were they what’s the of specifically know huge of large the Certainly with a population than to the engaging physician because fear into think utilization. have a whereas it’s the physician all hard Lisa, when up there part dampened around was the healthcare of were in a at system risk you opened catching things so a lot closed, in offices driving COVID went

so dramatically the we right certainly While for rate to before has I the around. that’s or know is a six there who certainly wouldn’t but how unemployment contributor next we left months, certainly - that in dramatically, long turn certain, suggest and expect eliminated, now there some don’t wouldn’t improved overhang that change knows probably might it is

their share next dampening utilization cautious going thinking next will for being would but we unemployment year. form we’re opinions, some So have expect that. into our and people we to to wanted year, around own Obviously on

rolled we guidance vaccines look had they ’XX, level In including once of we role, hoped be are, rolled testing maybe of out, see volumes, the we less, today little effective this COVID be something next a all how six part COVID like terms there this year. to haven’t us not how depends a whether but us and testing, the PCR out, get amount it’s COVID might meaningful year. on get three, we to calendar does and some months happen, we’re haven’t or it’s quickly even the of a of of testing so a expect given a Clearly, seeing for throughout but modeled going they reasonable ago that that behind

Stephen Rusckowski

just access, to remember will is access important economy, [indiscernible]. Great we back this with and the the Yes, and to us happens so and economy affect Recession, whatever saw to add that, to in the

of it, pocket, is and models they’re confidence, ’XX. to healthcare own utilizing think know thinking out we consumer for population of paying we think as therefore twice is going the large that about are Second about a we and about their in so portion

right look if in for Now with about said, at full you an the think that comparison, should said Mark base be where with it year, we are was of and as comments versus where if our you easy business math for the are that it just comparison. versus ’XX. look now, about year given ’XX the Even easy comparison where at we makes versus it’s the be for down full ’XX, what ’XX, to will his an

PCR. from As we out X test had have a PCR, on not ramping year and our full we we’ve rapidly, as remember been PCR far first March brought so

capacity stride, the more to we’re demand, see coming we’ll our then some because demand enter and all do vaccines. winter the anticipating start of as we’re is hopefully first anticipate winter, the clearly hitting in We’re we more and building quarter, we

of full going there’s did the and in with you XX won’t what and all PCR ’XX, for something of year we versus for pandemic deployed a It’s months about be ’XX half versus still XXXX, COVID-XX us to in a think you and think year virus have if portion you essentially volume for those be As do the will immediately to be models. large for a the of XXXX. so your the as about full know, lot broadly testing we

Mark Guinan

if it’s be to year. we compare so XXXX, based year see Steve’s for basis our and high full down even down point, hundred a couple easy Yes, an still it points on base in in teens, volume expectations, will this our the organically for guidance the

Operator

is with question last from Evercore Mike The ISI. Newshel

Your is line open. now

Mike Newshel

Thank you.

the are to reopening? just economies are Going [indiscernible] core it you into patient variation how spike business Is where just there differences correlated bouncing you’re on volatility far is geographic core is wondering more local there to that are along outbreaks. or local others? affecting faster level back some back than a the at to states or fluctuations rebound cases volume and just behavior Is there seeing if new mentioned, COVID tied the when specifically changing

Stephen Rusckowski

four some large LA. in first, levels, really it’s Well back not rebound, saw you steady they’re cities like know, shut big a states, still down to states. California particularly we pre-pandemic the the by of

actually we saw you a rebound in If Texas, Texas. go good into

have the in a into they summer, in summer, were saw continue it - still at Look Texas, the flare-ups where both issues spring pre-pandemic. and to there’s great the in Florida. the of be presence despite in Houston in some range in we Dallas, still the We of and went Florida we down

northeast, the spring, to our ignore of watching because negative States a so they those, We’re we’re there. still you to again, nice element franchise with saw we of, steady we’re have the Boston we of specific we’re to that a carefully. are have ways still pre-pandemic so and prescription Then actually But it exception so and Borough summer specific if the there’s of are we’ve some geography New those related related to it New have related the Then in drug to seen earlier, rates. But takes as and not watching these these months, York consequence recovery get business businesses, We interesting of to had the pre-pandemic. that to at what of were this particularly some and the to the levels not not Connecticut, indicated a go to go effects of City, like Texas in portion York where back some we’ve as there, to did but the in getting of you all. like buy-in issues enough, the other base it recover back far, monitoring, can’t Manhattan. to infection Florida where related flare-ups, clinical

Mark Guinan

and has most, York, down I of actually would the can’t downturn we last direction. several representation. say movement the be lowest the actually they’re opposite like seen in spikes precisely with It that positivity huge COVID so over in my between months a but utilization. parallel gone negatively a the kind New rates, correlated, in Areas actually are haven’t

Shawn Bevec

We all general, day. call wish you on we great for thank this in so questions. today appreciate your all and Okay, and a support your you

Operator

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

Quest Diagnostics (DGX) 22 Oct 202020 Q3 Earnings call transcript