Quest Diagnostics Incorporated

Good morning. Welcome to the Quest Diagnostics fourth quarter, first quarter 2021 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 Derrick, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Thank you, and good morning. I'm here 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 will 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 10Q and current reports on Form 8K. 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 severity and duration, healthcare insurer, government, and clientele reimbursement rates for COVID-19 molecular tests, 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 government 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, and references to adjusted EPS refer to adjusted diluted EPS. References to base testing volumes or base business refer to testing volumes excluding COVID-19 testing. 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 compound annual growth rates. Finally, revenue growth rates from acquisitions will be measured against our base business. Now, here is Steve Ruskowski.

Thanks, Sean, and thanks, everyone, for joining us today. McQuest had a strong first quarter with our base business continuing to recover to near pre-pandemic levels. Contributions from acquisitions and PLS relationships accelerated growth in the base business and helped offset the reduction in demand for COVID-19 testing, which was in line with industry trends. In March, for the first time since the pandemic began, monthly organic revenue in the base business grew versus our 2019 baseline. As we noted in our recent investor day, Quest is well positioned to grow as the U.S. exits the pandemic and people return to normal activities and address the routine care issues that have been neglected over the past year. Also, as you saw in our press release this morning, Our board of directors increased the company's share repurchase authorization by $1 billion for the second time this year. And we expect to launch an accelerated share repurchase, or ASR, in the amount of $1.5 billion in the coming days. This morning, I'll discuss our performance for the first quarter of 2021, provide perspective on industry dynamics, and update you on our base business. And then Mark will provide more detail on our financial results. But before we get into the details of the quarter, we wanted to share our perspective on the ongoing role of COVID-19 testing more than a year into the pandemic, as well as provide our thoughts on recent news regarding PAMA. COVID-19 testing remains critical as supplies of vaccine continue to be available to all Americans. Testing will help control the spread of the virus. In addition to reducing hospitalization and saving lives, continued testing will be key to helping segments of the economy reopen as more Americans become vaccinated. You know, vaccination is front and center in the minds of most people now, and testing remains a critical element of safely returning to life. I'd also like to share our perspective on some of the most recent developments regarding PAMA. So we're encouraged that MedPAC recently reported that it is exploring alternative data collection methods under PAMA that are less burdensome for laboratories. One of the alternatives mentioned is surveying a representative sample of independent hospital and physician office laboratories instead of reporting all laboratories to submit data. You know, we've been saying for years that CMS got the data collection process wrong and didn't follow the intent of Congress. MedPath found that hospital outreach in physician office labs reported higher payer rates than independent labs and that independent labs were overrepresented in the first round of PAMDA data reporting. We agree on both counts. The independent analysis by MedPAC also provides evidence that the Medicare clinical FD schedule would have been 10% to 15% higher if CMS had used a more representative sample that included more data from hospitals and physician office labs. Departments refute the claim that CMS collecting more hospital outpatient and physician office lab data would not have impacted the rates calculated by CMS. We believe that access to accurate and reliable testing remains critical, not just as part of our nation's ongoing response to the pandemic, but also for the millions of seniors who have delayed routine screening and care over the past year. We need to fix PAMA to avoid the next round of caught on the horizon in 2022 and to help ensure seniors have continued access to critical lab services they need and rely on. Additionally, we were disappointed by the recent dismissal by a U.S. District Court of ACLA's challenge to PAMA. We are working with ACLA to determine next steps with respect to this litigation We continue to work with policymakers to establish a clinical laboratory fee schedule that is truly representative of the full market and supports continued innovation and access to vital laboratory services as Congress originally intended. Now turning to our results for the first quarter. Total revenues grew by more than 49% to $2.7 billion. Earnings per share increased by more than 375% on a reported basis to $3.46, and nearly 300% on an adjusted basis to $3.76. Cash provided by operations nearly tripled to $731 million. As I mentioned earlier, in the first quarter, our base business performed at its highest level since the start of the pandemic and continue to recover throughout the quarter. Demand for COVID-19 testing slowed in the quarter, reflecting an industry-wide trend. We performed an average of 101,000 COVID-19 molecular tests a day in the first quarter, which is well below our current capacity of approximately 300,000 tests per day. We are engaged on several fronts to bring needed testing to schools, businesses, and industries like travel and entertainment, which rely on bringing people back together safely and in large numbers. With a current focus on schools, Quest is well-positioned to help with our extensive logistics network as well as our ability to offer high-quality, cost-effective classroom PCR testing using pooling. We want to help get the kids back in school, and we're working with a range of partners to get it done quickly and efficiently. We continue to make progress on our two-point strategy to accelerate growth and drive operational excellence. We discussed our strategy in detail a few weeks ago at our investor day, so we thought today would feature a few highlights of the plan. We are excited about our agreement to acquire the Outreach Laboratory Services business of Mercy, one of the nation's most highly-administrated, multi-state healthcare systems. And as we indicated yesterday, we're having more discussion with leaders of larger health systems like Mercy. The Mercy Outreach Laboratory Services business currently operates from 31 hospitals and clinical laboratories serving providers, and patients in Arkansas, Kansas, Missouri, and Oklahoma. And we're on track to complete this acquisition by mid-year. Our professional laboratory services relationship with Hackensack Viridian Health began in January and is also a good start contributing revenue for the quarter. We recently announced the sale of our 40% minority share in QSquared Solutions, to IQVIA for $760 million. IQVIA has a strategic vision and ability to lead Q-Split solutions on the next phase of its journey as a global leader in central lab services, and Quest will support it as a strategic lab partner. We made good progress taking advantage of health plan access in the first quarter. UnitedHealthcare implemented an initiative removing out-of-the-network benefits for insured groups in selective states. We also brought in leakage and redirection efforts with Anthem in eight more states from the quarter, and we're seeing benefits from these initiatives. And then finally, we renewed our long-standing strategic relationship with Emblem Health, provided comprehensive clinical laboratory services for more than 3 million members of Emblem Health, and it's affiliated with Medicare. Turning to our strategy to drive operational excellence, we are on track to once again deliver 3% savings across the business. In the process, we're also improving the customer experience and quality. And in the quarter, we achieved year-over-year improvement in 14 of 19 top-tier quality metrics which we track to gauge our operational performance. Now I'll turn it over to Mark to provide more details on the financial performance. Mark.