Earnings call transcript Q2 2023

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the Quest Diagnostics Second Quarter 2023 Conference Call. At the request of the company, this call is being recorded. [Operator Instructions].

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

Shawn Bevec

morning. good and you, Thank I'm joined Officer; Financial and Executive our Jim President; and Davis, and Chief Chairman Sam Chief by Samad, Officer. our

will press provide our projected. call, to, forward-looking most measures future Diagnostics' annual measures and Form from in this uncertainties may those current to discuss Risks those results GAAP include, and are XX-K described non-GAAP our not affect reports may in tables quarterly Form Form earnings materially that on During to comparable measures. results Actual limited reconciliation a we filed reports We the of release. non-GAAP statements make recent but report Quest on subsequently XX-Q may and X-K. on differ and

EPS references EPS reported performance adjusted to reported For of business, refer to to refer business references refer to testing. EPS. EPS revenues excluding this and Any references testing, the our diluted base to diluted adjusted volumes to or call, COVID-XX

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

rates growth base measured against acquisitions revenue Finally, will business. from be our

here Jim Now is Davis.

James Davis

are hospitals revenue our physicians the regions good Thanks, business year-over-year. in had to nearly and environment the everyone. collaborations second returning by people boosted services care. with for growth double-digit plans, quarter amid formed strong morning, performance Demand health remains strong with all base We Shawn, and across where have we an

progress profitability and despite base our of health customers. second to high system prior are compared made quarter, the particularly the our quarter improving employee from persistently first of We nearly Also XX% in the by turnover. year business growth substantial business encouraged base the revenue in our we

approximately more improved million compared XXX $XX a margin in of decline to the operating points revenue. COVID first quarter despite adjusted basis Total than

provide our Sam on This financial guidance the results quarter, more XXXX. about talk discuss for updated will morning, highlights from and then second financial detail I'll our

highlights the from of some to turn the let's Now quarter.

needs at core continuing As physicians, to landscape navigate and strategy care. growth hospitals shared of changing our Day, Investor our they is drive evolving customers, the as health in by we the meet to consumers

will intense genomics focus areas, an oncology. molecular clinical including and We growth this on enable with faster-growing

continue In our to of growth. will key acquisitions be drivers addition,

includes Finally, the automation quality, and deployment strategy driving operational our with efficiency strategic across to business service. improvements AI of and improve

the value-based gains largely shared one So leakage, Physician expanded we health faster areas. each and health involve arrangements with relationships. Lab have a and savings programs. more let's as partner redirection plans and generating base progress growing we partnerships these are which to growth with strong in traditional of strategic share work together delivered physicians, These as of position A review number In made than through arrangements we've plans, the us Services, market. volume growth these our access our from on

In addition, NewYork-Presbyterian's from assets recently new outreach physicians. the acquired brought volume us

relationships. Lab saw Services, base quarter in and from existing systems the solid The grew Hospital strong Lab growth both nearly PLS In Professional business as very health Services quarter. had a we revenue new from XX%

and progress Lee by partnerships with encouraged our particularly PLS Northern Light Health, are Tower We Health new with Health.

to testing continue reference hospital's or to services, purchasing hospitals professional through As lab assets. outreach financial are help challenges, we whether experience the here

momentum deals growing systems. We are health pipeline large now seeing with significant of potential with a

base strong had we Health, business on Consumer growth In questhealth.com.

marketing now balance expect our strategically the more testing efforts target to be of to and We continue profitable our consumer-initiated to customers through optimize XXXX.

colon risk from saliva-based on of and cystic quarter, dozen carrier questhealth.com. and consumer-initiated conditions genetics breast during we This genes health cancer launched Sequencing test expertise fibrosis our for Tay-Sachs. status Also Insights, ranging in Next-Generation our X leverages Genetic to test through first for the analyze inherited

health-minded for which encouraged adds for test demand consumers. initial by offering, new this our are We options to growing

offerings prenatal discussed in and March, growth assess sequencing. specialized risk genomics strategy germline testing somatic hereditary all diagnostics. Investor genetic to through such As is to These and tumor testing oncology as of a highly molecular Day customer for advanced our segments faster key across include pillar support and at tests

for including help and Diagnostics growth Alzheimer's Advanced encompasses in positions women's Alzheimer's our may health and this lead Like to neurology, outcomes. of AD-Detect, in continue disease. new amyloid neurology, evolving Quest era promote Emerging indications Alzheimer's innovative health. also blood early of landscape. In this Quest ApoE to reproductive strongly treatment represent cardiometabolic achieve testing other diseases, tests, intervention key AD-Detect areas, better we status. strong for rapidly beta and Alzheimer's from in portfolio which a many early therapies identify

at Our has the potential evaluation to of potentially early convenient monitoring it to stages is our now customers of U.S., believe AD-Detect in progression. and portfolio and and strong the also the enables AD-Detect demand. physician risk we Alzheimer's consumer available accessible generate

MRD services. endocrinology, screening In genetic developed residual or detection area a cancer June, completed growth cancer. the with outcomes recurring high-growth positions sensitive strong and acquisition and infectious for technique to has residual minimal or addition, testing. prenatal disease we of to potential patients Oncology, disease for Haystack treated early carrier the highly being our of of improve to enter Haystack for cardiometabolic, continue in we In our which see us

introduce we test XXXX. is track, our early Texas, expanded Haystack solid in where also expect therapy to and introduced Oncology to and tumor in MRD Lewisville, intend our continue Excellence for from of tumor to panel We sequencing first Center test launch The integration recently our on we of this monitoring.

a said, strategy. will earnings per we've dilutive be for more little as initially to it share. about capabilities like M&A I'd say is our Haystack And acquisition. a

tuck-in first continues be purchases deals hospital earnings to on traditional outreach in However, in lab primary are our to and year. that accretive focus M&A the

M&A to inpatient continued To faced a due challenges robust is pressures pipeline care. underscore what to our and hospital shift as I earlier, margin said labor systems from outpatient

on well Invigorate is its operational to way delivering productivity target. and annual Turning X% program to our our productivity savings improvement,

to includes AI and In and Invigorate Kansas. efficiency automated quarter, service. Investor microbiology at Lenexa, improve automation in implemented deploying the we solution discussed our quality, we As Day,

automated of artificial negative X intelligence productivity. leading Lewisville, major and microbiology Next Texas. cases and use embedded quality will our laboratories complete, to positive identifying improved with up When lines is

just bioinformatics AI many our we're and In use of are showed AI also solution collection and of and all results major operations. labs AI of speed Clifton in pilot by variant continuously speed the regional and this lab across AI improve year. genomics, are a examples couple improve These of prioritization. excited specimen in of utilizing to data our our this that processing to classification in automation a We expect implement to our later

AI our insights deliver and not innovations content believe to operations. In generative great also has help standardize only serve addition, but to potential that lab create we customers, to and target better

We of that analysis and and generative operations quality marketing are to our sentiment targeting. pilots control our results preliminary encouraged and service customer market use their customer call research AI in center and improve automate by to

Now be nation's before I challenging turn away that close we a year it return saying always over and transitioned XXXX I'll to would by to from as we knew the supported care. testing Sam, COVID-XX

to bringing to time. done who lines and to the a working create world, leading employees proud a together purpose this a job I'm at supports have them, else life our on healthier one dedicated Diagnostics' really front team. be magnificent life, of everyone Our Quest

performance Sam guidance. details on and over our it turn provide I'll now more updated XXXX Sam? to our to And

Sam Samad

partially revenues second In to revenues quarter, were billion the Jim. grew testing COVID-XX the down prior to billion, year. X.X% XX% revenues Diagnostic reflecting Revenues prior $X.X business. of the Thanks, XXXX, declined year, Services $X.XX declined Information Base $XX in versus consolidated the compared X.X% to business from revenue growth for X.X% while million. our approximately by versus offset strong COVID-XX testing second quarter base lower

versus quarter. prior Revenue we basis return of points X.X% recognized grew per to the in year, lower req year with by req, requisitions, Base total up with grew continue to requisition versus Total the the a acquisitions X.X% Total prior to molecular XX the test base volume. more tests certain business see mix prior volume, care COVID-XX driven was X.X% as testing X.X% measured number to throughout changes volume. arrangements. broad-based volumes declined due benefits revenue and year, by value-based versus the per per contributing

expectations. flat XX.X% revenues million operating second or of an year. quarter quarter, XX.X% adjusted to XX.X% or $XXX our $XXX $XXX to year. XX.X% was compared revenues revenues of million of basis, income compared income reimbursement last or million operating revenues in million $XXX in was the the price consistent On or with Unit was Reported last of

essentially were revenues, related Adjusted to versus the XXX primarily The adjusted testing the COVID-XX in operating offset we sequentially lower total Compared improving while operating basis the the expanded to base year-over-year profitability by points progress QX. partially made of strong business. first growth income revenues quarter, decline business. margin is in flat

of quarter, which related the second absorbed the adjusted also an supplemental increase no costs This the EPS. impact in value obligations We our in comp has deferred to XX higher SG&A by on plan market margin basis in points. operating lowered

closely have costs, than year. series support we more functions. to which this taken to a actions continue of fall, save cost manage corporate We last our and Since the $XXX reduce support of will million

quarter. track savings expectations, estimates it of Those in well improvement the year, historical this our and turnover with improved we're levels. in has our Frontline and on but QX, earlier not the marginally remains met began above largely pace employee

and wages. which the to continue an of tight We market, has feel the had productivity labor on impact effects

to $XXX year primarily EPS $X.XX quarter continues in base income. to decline lower operations The on million compared business prior $X.XX to drag Reported $X.XX in operating compared growth. from year period. the be $XXX flow strong ago. was last year. productivity operating million was a $X.XX year-to-date related the to cash a Cash was the versus was Turnover despite in EPS Adjusted

and of year business is to full COVID-XX capital be are between to EPS $X.XX. billion, million. billion between now to are Turning approximately $XXX expected $X.XX to expected billion. and to be expected be expected revenues range our in revenues in EPS Cash approximately to to Revenues be billion. $X.XX $X.XX $X.X $X.XX Reported operations be to $X.XX Base updated $X.XX guidance. billion are from of $XXX are expected testing is to range XXXX be million. expected at a $X.XX and a be adjusted and expenditures least to

to the could of lap be nearly half season, of be a in XXX last begin are for to panels we and strong flu not which year's becomes saw as of our demand to half. half raised revenue difficult second the year-over-year We've the more base year. consider the that guidance through comparison for are business the Note of things the remainder There the for our the our expectations some the remainder in to for wins year. base respiratory XXXX basis we later first reflect revenue the back performance in business points strong to we as some as PLS Also, headwind expecting year. in

revenue We to the Unit in be which price expect even and due reimbursement is factors: third expected departure a EPS and improve our typical the quarters, earnings from fourth is more to adjusted to half. back slight the in seasonality following

CIT move overall profitability throughout accretive we turned revenue the Our the of is throughout will business. profitable and taken the QX cost XXXX. first second business to year in continue and And half to to actions both be as the of of the more earnings expected half improve

but first wages. as to margin I XX comp productivity half tight costs basis EPS. lowered impact the turnover experience operating no plan also XXXX, related higher a points in noted deferred Finally, which supplemental our continue we on has Higher market, of by had and labor impact earlier, to an and the had frontline on SG&A

margin for our the approximately a guidance full As operating an of updated year. adjusted reflects result, XX.X%

will I turn it Jim. to that, now With back

James Davis

as plans, second health collaborations with base the summarize, in To us our amid performance double-digit we to had hospitals from Sam. return growth nearly revenue to strong quarter and demand a enabled broad physicians with care. Thanks, strong business benefit

business quarter guidance revenue progress on profitability which for and compared slightly finally, and persistently reflects of the first prior business. This weighs base improved was our expectations and high We the profitability made year. substantial base increases turnover, our updated productivity employee in our offset by the improving growth And to cost.

your take to Operator? Now we'd happy questions. be

Operator

question from with comes [Operator our Instructions]. Jack And Nephron Research. first Meehan

Jack Meehan

payment active somewhat seeing negative was gain about start the just commentary. integrity. share and at and that about of we tease of national heard ask versus possible it demand this being Quest? a related much payers discussion I that kind more plan I be be underlying positive Is growth if could to out strong curious wanted how to all, around health have related, you're or for just more could

James Davis

Yes. Thanks, Jack.

it. on that. of discern perfect things So like both. what always this is We it's our return data care and versus to to hard it's share in some But industry get don't is gain demand sense

we side, commercial of of those our those programs, is to that gains around On closely And It's there's at on that share which each the them, of are strong and above the the work are we conclude we the programs Certainly, leakage. growth using beyond through those focusing see benefits average payers. been and its some around see we care. gain. labs, out-of-network when programs, physicians benefits share gain we and the with look value-based that return see therefore,

that tests the support On appropriate Diagnostics through our back diagnostic to I to can the are policies it's we payer side, base here ordering understand effort they're physician then in that a look, tests. Payment make are that the you that, to sure sure policies, tell Quest that work denials, the continuously and what Integrity work those make never-ending

some we the understand base So payers But work work collaboratively referring errors. you're our those then to. any discernible of with them seen correct to to back physician policies to impact with try haven't we with and any

Jack Meehan

Super. Sam, one margins. question on

Sorry pace about you're what What if I the improvement? assuming of productivity missed in year? of the for is margins the for now just And assume you can guide talk terms this.

Sam Samad

Jack. Thanks, Yes.

we XX.X%. assuming margins the operating year, to approximately at for are So be

for In benefits year terms of expect anything, those we if of from productivity, Invigorate in QX. the our and QX And continue you've accelerate and seen even the to, good rest program.

of seeing a beginning seeing of of are SG&A impact for the our materialize we've as We're and programs. seeing $XXX We're rest on about. good $XXX that we the for year million continue year they the those QX, will of momentum talked So well as the savings of Invigorate total million.

the seeing, a as On environment. also tough the heard prepared you are in other side, and we labor macro turnover remarks, and

XX.X% continues pressure we to the and terms than year that's be are for we But driving to So approximately of on OM. persist higher margins. expected, also in turnover expecting

James Davis

see see Yes. improvement Jack, base comes the I can QX. clear. the you from would just QX -- add, obviously, That you to pretty can through margin

from in year drop-down the numbers You year, COVID you've the math improvements margin revenue, to QX can make do of on assumptions -- you the base the past. when used range the you've this of you're which on the QX the in of the last with

So pleased of with of this the base year improvement we're this year improvement QX to from QX margin really year. year and from very of QX pleased this the of with last QX to

Operator

with next ISI. Evercore is question Our Elizabeth Anderson from

Elizabeth Anderson

just can have that into whether happens appreciate price. on or year of forecast or what to I year? on out. is, the what the good guidance quarter. it going question year's embedded of this -- that the future there ton I noise understand back of what's But Congrats could trajectory what for XQ different half in I it's one and -- realized be stock the to you? continuing sort a want nets in comp forward a deferred of of is My on assumption terms last was How this based how your the quarter your

how about labor and you the think productivity do the you turnover. of sort still then secondarily, elevated mentioned And

analysis perhaps like investing do receive how you the you more about sort So versus cost of think wages the that productivity that of something of potentially gains or like you in that? from could -- would benefit

Sam Samad

congrats. Liz, Okay. and appreciate Thanks, the I

some for that me of referring I'll to let there. compensation, you're to and the turn and DCP talk Jim So productivity about deferred trade-offs

just is let impact. and DCP, in So it terms the me of clarify what

plan. value the EPS So is nonoperating all, in with is income have our increase the saw, supplemental impact -- impacts to because offset of deferred the a an obligations expense line it benefit. in on does of not we on the first which comp That related that the market SG&A

net So it's but neutral impact does operating margin. EPS, it a on

materially Sometimes we don't it It's see movements. market impact us. related to

points This quarter, impact to margin materially tune operating impacted us percent. the basis it XX on of

So be margin if would operating you that, it XX%. our would exclude been percent have

value the it and terms deferred But had is more change. a gets benefit year, of you -- this actually If last year, because value to plan we fair compare to last where a market bit on expenses -- maybe year, compensation, last market related it in complicated.

And to impact QX, X%. year so compared it's an of last

have OM XXXX if quarter-over-quarter terms even in despite QX $XXX drop flat you OM, relatively compare in QX in last drop that a year-over-year saw of year been the So significant actually, of we percent would revenues. operating to XXXX versus COVID margin we the tune approximately of revenues, million COVID terms

plan. impact, both of rest EPS forecast and that's margin. something Now operating we a don't look year, not neutral P&L, deferred net as the mean towards that on on assume on forecast. compensation you we the We the I it's Liz,

the So I or about year. in XX the should points XX is first basis saw basis impact roughly of margin that carried the is of say, rest through operating the half, which we for points,

is half. that year XX.X% DCP And in by so operating the impacted full first margin the

that's it. characterize can So the best way I

James Davis

a we on we Liz, Investor is what roles, total which call labor And the the obviously, to our chart in range, said our pre-COVID Yes. phlebotomy, was come call at frontline the hasn't modestly levels, first that in our showed but the the processing, come down logistics, of front, XX%. our would or where still chart pre-COVID, like It's to XX% showed of it that turnover turnover. in said a Day, upwards down fourth them. We specimen we quarter, of year, centers, the part was

It's a as to efficient on years. the somebody time in for X-plus in the day rates of each that lost $X,XXX upwards cost you takes or estimated between cost price that it right. simply for the who's turnover, us a $XX,XXX been and And the the the to We've wage turnover. and increasing you're productivity X pay Now each trade-off as role that's person this role from depending get -- can person role. to

about $X,XXX do So of if math $XX,XXX the to that, half in this could of year. on have million $XX upwards it's impact you the a which second

we're our on the rate to at of place that the said guidance that. X%. to high the markets, end. end ROI to adjustments We decisions. at certain adjustments, And make look that make Now wage obviously And with. high with need we're faced we're we get X% we to that we if turnover a will We're certainly those And we in gave. at comfortable

Operator

Our Suisse. next question Rice from A.J. Credit with is

A.J. Rice

about your and just you Maybe to Business. over pivot Health System ask

as quarter, quarter, press last coming I under And the it's And and is forth you're can think growing and back XX%. NewYork-Presbyterian might you When it think in this in maybe on impacting thoughts business opportunity? and you about side says that suspect there's targets well. just so release the any XX%. it in if shooting XX%. the about how updated said aggregate, what was your of I us on you And online the that the comment with growth half, be higher you're the margin for, that even than give fully seeing, pipeline margins

James Davis

Thanks, Yes. A.J.

business, Just because bucket, in not buy outreach payers our book actually business, when Physician physician System our is of bucket, that it's Health on build for third-party of NewYork-Presbyterian that. we the and it book we offices,

quarter the business Our the PLS side. was by Health in System helped really

Lights strong. the that Lee PLS strong book we script Health, newer the ones. but of of with business well, mentioned excited by X Health being Our in the very, reference growth and deals Northern some as our very was was Tower

that substantially So it generated growth more quarter. in -- was the

than got capital operating slightly to But like why has return it's the lower as continue okay? always on we of ROIC our do So we and said, normal strong office we've book that's Now on this. a physician margins that, PLS really business.

this as side have second our of more both PLS strong. hope of in the So in on the funnel well opportunities We year reference terms as new is half outlook, wins. closed the to of

the So that of Systems to we're will continue portion optimistic Health our business grow.

Sam Samad

one additional comment, And A.J. Yes.

ramped that last So half, some well In a on up are of to last wins second strong second said, the first that year. the in second we business. year-over-year the had big perspective, with half regards we from half growth the Jim year as in expectations seeing as of in in the half PLS,

do those that the some mutes So side the great seeing from really momentum some of revenue perspective, on lap wins a PLS to and growth But of our year-over-year we PLS extent. we're business.

Operator

Donnelly question next with Citi. from Our is Patrick

Patrick Donnelly

the that of moving pricing, parts, terms talked right again, XX.X%, is few maybe work little the now number would environment it. Sam, you Any you the a that guide? unit the in the a onetime these hitting know of about guys moment? to the wear about looking just of kind contracts off negotiate at on things then of the pricing, that annually. talk better, long-term labor And that you I Can off? X/X pricing of And

Sam Samad

term that XX guided to to if basis -- this it's XX.X% the the the end the right That's Patrick, so you're which we the point Investor Day, thinking is the -- No, XX.X% of point be the improvement. of launching the X-year be about would in Yes. still the number in off outlook, thinking longer year. and at XXX about point launching improvement

it. of couple recurring, items was in DCP, year, of for But forecast talked can things it and the first a onetime the about onetime. that we I QX think we you but of half although call you the significant don't maybe for terms that which is mentioned, more In

a benefit. it's Sometimes

an Sometimes year benefit. the it's half, the it of was a This negative. Last terms it's percent. margin actually operating first negative half, a in first year, in a in

we good. versus pricing we half. And plan is in first the improve that half good. seeing have. the environment contract pricing benefit the really the where It's Pricing environment to value-based We're half, the actually health second arrangements the with very expect in second good momentum

that still as uncertainty. we about we've about is Now think 'XX, talked before an PAMA

around SALSA passed, for certainty some there uncertainty that another whether gets still more PAMA until delay there's there's bill a or so And we have 'XX.

Operator

Jefferies. Tanquilut from is Brian question next The with

Brian Tanquilut

savings targets what Sam, of previously for margin, right? target as into the million And I this corporate of or that to XXXX? squeeze your that through of see run as kind related $XXX the next more question, you've guided the about maybe just going kind just follow there out to I think I guidance or on to that, quarter. and for on mean think push as up Patrick's you maybe of operating Congrats began to I'll the it rate sort it flow previous year does is in about comments had well? QX. P&L So we're outlined XXXX on is

Sam Samad

Yes.

regards with for thank of -- the So to question. first you, Brian, all,

regards Invigorate with on which, didn't next the $XXX productivity XX. next XX, the The execute savings So part continue to into long-term look run to, operating we some improvements, over around million and expect business. you apply that year what guide gave like the rate. referred our to to of We margin way, we be targets by X cost years will as our we

So we we're 'XX X expect to maybe an versus for -- 'XX see except year-over-year improvement because wouldn't quarter. in

will are the business the uncertainty the as cost launching expected PAMA, basis in I drive is X the inflation generating margins XX.X%, the mentioned say reductions with and XX range term. we've improvement Invigorate with and future. our to that offsetting of operating the is the improvements, expect becomes either points about which to do I the XXX There over But Patrick, expect long years. in what to drives improvement we continued do the that now would we continue point for And applied

James Davis

really you made off investments We've think turned obviously, profitable. But Yes. it's in going business. this of in continue out also Then wisely spend growth every script, And in dollar that. got paying strong the in to looking invest our as we're take can cost $XXX now heard nice of and we're always It's we most million. We've to can. we for Look, us. as CIT. as to terms the I efficient be out

stronger getting we've test build we're market and to to we're to to oncology invest and growth to because continue to Alzheimer's investment, And brought that that Haystack get requires possible the that continue to as quickly to genomics space. in to going going try invest molecular continue We're we're that and with The presence. market going in the invest to there a space. as acquisition, test in

to we're investing business balance So future. for this we're always But going X. the the in

Operator

with is question Deutsche Pito next The Bank. from Chickering

Philip Chickering

this, sustainability debate a among the corporates sorry been sort the utilization. Can you the we current big about about how back of versus seeing on XQ growth July what in talk the PLS the growth missed year? And and think There's half but organic continuing investors of of was in organic sort much how both trends transactions? if the of and of of you're organic the should I

James Davis

Yes.

north that. We've -- million that externally grew our $XXX core we're continue that business. reference generally here. with PLS PLS In consistent growth of the July less been our said is year, optimistic the said June. break our saw a business growth in half we is has second the franchise. grew about what of market We don't than So growth date apart that, to strong PLS PLS our the We health from system in will the grew at growth XX%,

our offering health So contributes helps you on systems. got their I we're we've and optimistic growth. of we for PLS think that the remain sense Health can help, But a that great need to think prospects systems our what a our opportunities get total needs. funnel strong. The meet with

Sam Samad

sort I I maybe driving give Pito, you're is can first comments a of couple And where half of additional at here. think, on half, second versus which

revenue But a to are think in second mind. So close had growth. keep to there of things about we've half, a as you couple first listen, XX% half, the great

in we of midst first business half First of XXXX. base by the some had compare COVID, in impacted were was Obviously, we versus easier the that. all,

repeat was the half. in some there easier expect So compare second in don't the that half we first to

X% in We is our negative compared effect prepared a half. on which a which the remarks, first the we in some talked the about the has second the flu to also On wins, definitely about talked on second muting lapping about panel, half, COVID PLS growth impact growth half.

factors half, that So you and when the it's the on it's these I you than can driven obviously, based gave just first all by guidance half you. in lower our combined, some these and factor well second at of of look implied growth

seeing of terms July, our higher utilization. still In traditional than are we

still in by encouraged utilization we're in we're July. of what seeing terms So

appropriately So in look the -- we're being half utilization of would but like. conservative the terms second in what

Operator

Andrea next UBS. Alfonso is from The question with

Kevin Caliendo

Caliendo. Kevin It's

So onetime I go all guess, margin the to went then XX% the XX.X% Haystack, just then if operating I back with just point to can -- we and this, bridge take with starting if it's the that also and down. and there and XX.X%, way we is we is churn? to the had took And out just DCP, should some to with delta then trend issues. forward? 'XX which of But we sort now Maybe calling impact the of quarter labor in are -- this labor you're quantify Like for was get all expectation continue expect playing around to of sort think 'XX of the of things these sort these that? out? a headwinds margin trying the that I'm expected cost the that bridge with about going expansion that originally how issue

James Davis

the me turn to here. piece, let Yes, Kevin, labor I'll take Sam and then it over

slightly talked Day in better was range. at than frontline positions our rate a The So chart the Investor March, in it was our we In it's previous of December, XX%. on about showed pre-COVID, XX% question, attrition that. QX we

at point be $X,XXX to the impact it. want can We versus We've would said second to a year, we we be think have And year. in employee. about it the of this in it million of $XX,XXX half quantified it's where the per upwards $XX

up rate they're are at trying sits now. to labor today. So Fed again X.X% back right unemployment notch easy? interest rates has the market a get actually X.X%, The X.X%. now, to to is upwards of going rate that The signaled is Unemployment up take the

predict. think hard the markets going easing we going but it's So to be forward, to there's in

And think the guidance being second now, in right so half. conservative appropriately on the I we're

Sam Samad

Yes.

let Kevin, confidence give second that you have half some XX.X% year. half first around outlook commentary why so margins approximately for And you and gave, the the the me versus should margin we in

an COVID, just despite of in our million XXX first points to in in drop everybody, sequentially basis COVID. by QX, margins $XX expanded $XX roughly remind So all, and drop million

operating So we momentum of great terms in had some margin.

dynamics towards factor. half, that second should look we versus of you As half some are the here first

on margins second operating first dilutive in net half, half. Our accretive the CIT business, which becomes in was the

by and net -- becomes QX, business it's to net continue to of the a become be for -- the second half, is in in we're the accretive and a from will profitable Pricing second accretive to the momentum encouraged expect definitely half going and see step-up the we as half. it's that improve also year. So actually, first it it's very and

to $XXX those million achieve in started QX. we annualized savings SG&A,

want to remainder have benefit the didn't too And the COVID some fact approximately expecting per second have that in south of on that but the talked in right lower that we're million our guidance, is the now second is half $XX expect we it in in the the which QX, first QX that, the million much we QX we revenues first. half. $XXX headwind half, achieved of and Offsetting so We I second that definitely because to a the in well was expect year. focus we which this DCP, about we and don't in in achieve don't half,

to -- that this So yes, some of is ramp-up to $X.XX confident about and we these terms of look momentum you the the factors, of -- there plus you the in see outlook Invigorate of to as we which the as improvements but Haystack the to the are $X.XX of is achieve look But all gave year. all in dilution, at that second expect margins. operating we things, at these half about for of very tune ability

James Davis

Medicaid. this when price about think think is to Medicare I'd payers, you Kevin, add in and business, the tend last about always thing we commercial

You of employer businesses $X.X we $XXX million And where annual other solutions, billion our to price ExamOne testing insurance and Physicians. Systems, serves wellness business, have then we worth companies. business, to remember basis on have Health life which there's drug directly between an to our that business, another our

from we the we're price of the our lift business. So half price performance in as segments be portfolio. primarily those it the getting was that indicated, first of on in And will in our are half side getting Sam our second better than

Operator

And Gill JPMorgan. our with from next is question Lisa

Lisa Gill

go talked evolution time where the value-based about you how care over you to about value-based to comments back as to you But around and see see I opportunities. care maybe how pertains just it this of earlier just leakage want your talk can you out-of-network just One, that? size heard secondly, Systems. opportunity Health of I opportunity? think margin-enhancing And you like? any this to more looks that the talk Is just Is then what way I've or volume pipeline a lab. about a how pipeline about do of there current

James Davis

Yes.

incentives. on confusing make just here, terminology we're and to want not So I the value-based first question, value-based sure care

Medicare lives plans talk Medicare generally groups. into lives are value-based reach Advantage integrated arrangements directly ACO put has programs about where large these into when these for care, So delegate physician we

very we of Advantage Medicare these care and terms that because not physician And ensure driving become conditions programs these with price, lives we diseases they good of lab delegate in generally, ACO situations, helping are the both Now contracting REACH organizations and directly and physicians much those useful Medicare are believe and with at value-based that fact, for in a in are fixed progress. labs that directly do those groups. business large more

good feel we that. So about

talk what we we're about these the about plans value-based -- generally I things health incentives. talk and called when think we

system programs are with and help more help those them we these labs expensive and that Diagnostics. plans health flowing the health into redirect leakage are into us have flow to laboratories So structure to to requisitions out-of-network that Quest directly requisitions reduce

leakage of those So into value-based labs we Diagnostics. reducing help that Quest in when targets the labs achieve when independent can there are successful when be earn those higher-priced earn incentives moving hospital we we efforts, from them like work we and --

to and our programs these we with more ACO programs do with both payers. seek large incentive So value-based of REACH value-based of programs, those care

Operator

Coldwell from with And our Eric is Baird. question last

Eric Coldwell

have I two.

more First bit level, one, a higher strategic.

I in Preferred were any that removed Healthcare changes Network relationship contract then was July. that notable your same roles? market opportunities topic, to narrow move Labs the today? discussed the what's more you opportunities in or and say, other National LabCorp networks MCO there Are being United Mayo, or updated the on saw other preferred like So in outlook but they that broadly into, there Lab there? And for

James Davis

Yes.

first your and changes part network, that's any to of part on still forward. respect plan going that preferred So the other did not our remain question, network. preferred plan we of notable lab We note the with

In to which it's in requisitions to perspective, always speak commercial from payers, all ability we good sure network and to going that terms we It's their labs the improves our the for of narrowing good patient. for their employer, that payer. price the think independent it's lower is good networks, when are environments, have cost, actually make for better, both to lower

narrow change access don't independent networks restrict any we trend so that laboratories. that see to to in And

labs labs Now said fringe laboratories that, environments. looking there's specialty specialty And do can expensive single-type that of could payers that on I the having be well. work that always some the at play versus independent think that test as are

Eric Coldwell

or if quantify investment spending portion seen second the you other also I action year-over-year captured quarter and the times, plus could million the actually answering in events did a that and cost got you the incremental you reduction XQ. in toggling of My in to apologize this Okay. a $XXX of you couple close this morning. question, think been few and I quantify But I've

what's So left a we for on year. of have rest sense the the

Sam Samad

Eric. Sure, Yes.

investment much haven't have quantify So no, last versus lower is. QX spend year, quantified the we spend. but of did investment how in reduction we in it QX We didn't

benefits to X/X that realized SG&A can you we and make that and occur the it's in of million, about expect QX and QX. is to the million $XXX think assumption the $XXX regards same With the QX was in I that

James Davis

for want business. this going Yes. I continue in we're remind, invest to growth to to just

As look again called really to investment. ad spend, we've it's invested see the in We and CIT, we on in return now that starting positive. the mentioned, we're metric fruits a script, at of

profitable So growth. and there it's it's to growth, driving we're going we invest continue to believe because now driving

tests. invest the ABXX, tests, and our blood-based that These area. we going up in to of Alzheimer's continue We're have test portfolio We talked about XX to running.

the useful and blood-based PET and environment. be more running. to the ApoE These going are are up scans have or less These CSF tests. to We than costly

industry these our We're of the going us oncology that's laboratory and to the to continue our molecular going the things going to to outlook. invest growth higher for invest in are going business. of And ensure continue the to of -- side position to in segments all We're long-term business.

Operator

We did have in. question one more come

Derik is America. with from Our of last Bruin De question Bank

Unidentified Analyst

This could and lots talked M&A on come quite the John certainly focus about traditionally pipeline have deals but before. done a bit, portfolio you've the that you investing in you And seems you this of your be product to about you your oncology is products whatnot. complement or have plenty portfolio the can Derik. of you talked it first of you quarters for course, potential launch your on about the in will to But current as you coming balance. XXXX, We and in -- And have Alzheimer's internal in don't pipeline? talk you're would look MRD current that deals see

James Davis

diagnosis. we of Well, own selection. minimally our you disease for as Haystack, we cancer internal the think with assay centered brought on testing post which, up therapy combination noted, And is residual

for positioned So very therapy future we from and well a therapy we're believe standpoint, selection monitoring growth.

genetics, continues continue area for family and side genetics receive business, is focus. prenatal purposes and offerings also We then that to planning hereditary genetic the to our invest on an the diagnostic genetics of

So side. we believe cancer we're well positioned on the

where positioned. genetic -- well make We think investments to that's the some and on continue we're side the we

right focus and small that our deals continue on focus hospital again, to Now outreach accretive now, tuck-ins are to business. we'll other our

Operator

question. last our was That

James Davis

everyone. thank We had outlook great about second feel Quest We've right. that, a All we I guidance, taken our Well, -- the again, The you quarter revenue you, thank up for Diagnostics. and a Have here. for half. believe strong day. supporting good

Operator

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

Quest Diagnostics (DGX) 26 Jul 232023 Q2 Earnings call transcript