Quest Diagnostics Incorporated

Welcome to the Quest Diagnostics second quarter 2020 conference call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and question and answer session that will follow, are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited. Now I'd like to introduce Sean Bevick, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Thank you and good morning. I'm on the line with Steve Roszkowski, our chairman, chief executive officer and president, and Mark Guinan, our chief financial officer. During this call, we may make forward-looking statements and we'll discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties, including the impact of the COVID-19 pandemic, that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows, and or its financial condition will be primarily driven by the pandemic's severity and duration, the pandemic's impact on the U.S. healthcare system and the U.S. economy, and the timing, scope, and effectiveness of federal, state, and local governmental responses to the pandemic, which are drivers beyond the company's knowledge and control. For this call, references to reported EPS refer to reported diluted EPS from continuing operations, and references to adjusted EPS refer to adjusted diluted EPS from continuing operations. References to base testing volumes or base business refer to base testing volumes excluding COVID-19 molecular and serology testing volumes. Finally, growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth, are compounded annual growth rates. Now, here is Steve Roszkowski.

Thanks, John, and thanks, everyone, for joining us today. Well, in one of the most challenging periods of our history, Quest Diagnostics stepped up and expanded COVID-19 testing for the country and delivered stronger than expected performance in the second quarter. Second quarter results were driven by COVID-19 testing and a rapid recovery of our base testing volumes. I'm very proud of Quest employees who have been on the front lines of healthcare answering the call and fighting the COVID-19 pandemic. So this morning, I'll discuss our performance for the quarter, our role in the COVID-19 pandemic, and update you on our non-COVID-based business. And then Mark will provide more detail on the second quarter results and our financial position. We have reinstated our financial outlook for the remainder of the year with a broad range, which reflects uncertainty caused by the pandemic. Mark will talk about our outlook and underlying incentives just in a few minutes. Our financial performance in the second quarter was stronger than anticipated, also lower than the same period of 2019. For the quarter, total revenue declined approximately 6% to $1.83 billion. Earnings per share decreased by approximately 10% on a reported basis to $1.36 and approximately 18% on an adjusted basis to $1.42. These results were driven by a strong bounce back in our base testing volumes for March and April as the healthcare system began to resume non-urgent care and elective surgeries sooner than we had anticipated. Heavy demand for COVID-19 molecular testing helped partially offset the base volume decline as well. Demand came in from a number of areas. The continuing spread of the virus throughout much of the country. A pent-up need to test non-COVID-19 pre-surgical patients. People in high-risk populations like nursing homes and prisons. the proliferation of retail testing sites, and finally, employer interest in testing employees before they return to work. Quest Diagnostics has continued to play a pivotal role in bringing COVID-19 testing capacity to the nation. We've performed roughly 8.5 million COVID-19 molecular diagnostic tests, and more than 2.5 million antibody or serology tests. We now have the capacity to perform up to 130,000 molecular diagnostic tests a day, double the capacity since mid-May. Over the next couple weeks, we expect to have the capacity to perform approximately 150,000 molecular diagnostic tests per day. Intuitively, but has delivered nearly 20% of all the testing completed in this country. Working together with large national retailers like Walmart and CVS, we've built a new model for consumers to access testing. We're also supporting HHS and state drive-through testing initiatives across the country. I'm very proud of the progress we have made and rapidly scaling up capacity since the pandemic began. However, demand for testing has soared in recent weeks, and we are providing testing results in about two days for the highest priority patients, and the average turnaround time for non-priority patients is at least seven days. So we're doing everything we can to bring more COVID-19 molecular testing to patients, and speed the delivery of test results. We continue to add testing platforms and work with our suppliers to ensure access to testing equipment, reagents, and personal protective equipment. We're exploring a range of new technology options. Like last week, the FDA granted Quest, the nation's first emergency use for office emergency use authorization to use assessment pooling for COVID-19 molecular testing. This technique, which is commonly used with blood banking, will help expand capacity, especially among populations with low incidence. Through our lab referral program, we're partnering with other quality laboratories to expand our available capacity and in recognition of the magnitude of the current demand for testing, we have asked customers to help us prioritize patients we test for COVID-19 at this time. Quest Colleagues has stepped up in so many ways over the last few months to fight COVID-19 pandemic. Our company has been central to the crisis response, and I'm proud of our employees on the front lines who are serving patients, customers, and communities every day. In June, we offered financial assistance to about 23,000 of our frontline colleagues and their supervisors to encourage increased expenses during the pandemic. In April, we took a series of temporary workforce actions to manage our costs. These included furloughs, reduced hours, and pay cuts for salaried employees. And then today, I am very pleased to report the vast majority of these actions were reversed a month earlier to enable us to continue to respond to our customers' increased demand for testing. Since March, we've been fighting COVID-19, but we've also been focused on accelerating growth in the base systems. And as a reminder, the five elements of our strategy to accelerate growth are to grow more than 2% per year through accretive strategic line acquisitions, to expand relationships with health plans and hospital health systems, to offer the broadest access to diagnostic innovation, be recognized as a consumer-friendly provider of diagnostic information services, and then finally, support population health and data analytics and extended care services. Now let me take you through a few highlights from our strategy to accelerate growth. Through the pandemic, the M&A environment understandably slowed. But despite that, we were able to complete the acquisition of Memorial Hermann's outreach business in April and are pleased with early progress. We also recently announced our plan to acquire all of Mid-America Clinical Laboratories, or MACL, Once we complete this transaction, expected this quarter, Quest will wholly own Mackles Laboratory in Indianapolis and about 50 patient service centers across Indiana. Also, we'll provide professional lab services under a long-term agreement for 30 hospital labs owned and operated by Mackles founding hospitals, Ascension St. Vincent, and community health network. Our M&A pipeline remains strong. Given the many challenges that hospitals will face, we expect many more to be open to discussions about how Quest can help them achieve their lab strategy. At the same time, we know that smaller regional laboratories have had their own challenges. This could also produce more opportunity for tuck-in acquisitions. If anything, the pandemic could be an additional catalyst to help drive industry consolidation. Some transactions in the pipeline that were paused because of the pandemic are being revisited based on the new realities that the healthcare system is experiencing at this time. We also continue to make progress on our health plan strategy. We entered our second year of being a member of United Health Care's preferred lab network, and we're pleased with the results to date. We have met or exceeded key quality metrics, such as electronic ordering and resulting, and patient service center appointment rates. We've also secured business for more than 180 out-of-network UHC labs, saving money for patients, and lowering the overall cost of care. We look forward to making continued progress with the preferred lab network in the second year. Over the last few months, we've seen a remarkable surge in the sign-ups of our MyQuest patient portal. Today, more than 11 million patients have a MyQuest account to make appointments, and receive the results through their smartphone or computer. Since late April, we've seen a more than three-fold increase in weekly registrations, which accelerated at the end of the second quarter. We believe that our patients see and appreciate the ease and convenience of our consumer experience. Now I'd like to turn it over to Mark, who will take you through the results. Mark.