Quest Diagnostics Incorporated

Welcome to the Quest Diagnostics third 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 registration, retransmission, or rebroadcast of this call in any form without the written consent of Quest Diagnostics is strictly prohibited. Now I would like to introduce Sean Bevick, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Thank you, and good morning. I'm joined by Steve Roszkowski, our Chairman, CEO, 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, healthcare insurer, government, and client payer reimbursement rates for COVID-19 molecular tests, the pandemic's impact on the US healthcare system and the US economy, and the timing, scope, and effectiveness of federal, state, and local governmental responses to the pandemic including the impact of vaccination efforts, 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. Any references to base business, testing, revenues, or volumes refer to the performance of our business 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. Well, we had a strong third quarter as COVID-19 molecular volumes increased throughout the summer. while our base business continued to deliver solid volume growth versus the prior year and 2019. In late summer, we experienced some softness in the base business across the country, but saw a rebound in September. Importantly, our base business continued to improve sequentially in the third quarter, which speaks to the ongoing recovery. We have raised our outlook for the remainder of the year based on higher than anticipated COVID-19 volumes, as well as continued progress we expect to see in our base business, despite rising labor costs and inflationary pressures. The momentum of our base business positions us to deliver the 2022 outlook we shared at our March Investor Day. So this morning, I'll discuss our performance for the third quarter of 2021 and update you on our base business. And then Mark will provide more detail on our financial results and talk about our updated outlook and underlying assumptions. But before turning to our results in the third quarter, I'd like to update you on our progress we've made in our Quest for Health Equity initiative. a more than $100 million initiative aimed at reducing healthcare disparities in underserved neighborhoods. Since we've established it just over a year ago, we have launched 18 programs across the United States and Puerto Rico, ranging from supporting COVID-19 testing and vaccination events to educating young students on healthy nutritional choices to providing funding support for a long-haul COVID-19 program clinic in Puerto Rico. Recently, we announced a collaboration with the American Heart Association that will expand research and mentorship opportunities for black and Hispanic scholars and drive hypertension management and COVID-19 relief. We're off to a good start and I look forward to updating you on our continued progress as quest for health equity enters its second year. Now turning to our results for the third quarter. Total revenue of $2.77 billion, down 40 basis points versus the prior year. Earnings per share were $4.02 on a reported basis, down approximately 3% versus the prior year, and $3.96 on an adjusted basis, down 8% versus the prior year. The revenue and earnings declines in the third quarter reflect lower COVID-19 testing in 2021 versus the prior year, partially offset by continued recovery in our base business. Cash provided by operations increased by nearly 20% year to date through September to approximately $1.75 billion. Now, starting with COVID-19 testing, our COVID-19 molecular volumes increased in the third quarter versus the second quarter due to the spread of the Delta variant over the course of the summer. Testing began to increase meaningfully in mid-July and peaked in early mid-September. Our observed positivity rate peaked in mid-August and has steadily been declining across much of the country in recent weeks. We performed an average of 83,000 COVID-19 molecular tests a day in the third quarter and maintained strong average turnaround times of approximately one day for most specimens throughout the surge. As clinical COVID-19 volumes declined, we are expanding our non-clinical COVID-19 testing to support the return to school, office, travel, and entertainment. We're making testing easy, fast, and affordable for school systems and other group settings across the country. We are currently performing K through 12 school testing in approximately 20 states with five additional states ready to come online. We're testing passengers on Cardinal Cruise Lines and Quest exclusively provided testing at the Boston Marathon earlier this month. In the base business, we continue to make progress on our two-point strategy to accelerate growth and drive operational excellence. Now here are some highlights from the third quarter. Our M&A pipeline remains strong. In the third quarter, we completed a small tuck-in acquisition of an independent lab in Florida. We continue to build on our exceptional health plan access of approximately 90% of all commercially insured lives in the United States. At our investor day, we discussed how we have fundamentally changed our relationship with health plans, and we continue to see the promise of value-based relationships come to life. So here's a couple examples. We are working with national health plans to help their self-insured employers to employer customers improve quality, outcomes and lower the cost of care for both the employers and their employees. Also, effective October 1st, we gained access to 1 million Bandage Medicaid members in Florida as their coverage transitions to Centene's Sunshine Health Plan. We're getting good feedback from the provider community and are growing tested volumes through this expanded access opportunity. Our hospital health system revenue continues to track well above 2019 levels, driven largely by the strength of our professional laboratory services contracts. As we highlighted previously, 2021 performance is benefiting from two of our largest PLS contracts to date, Hackensack Meridian Health and Memorian Hurman. Altogether, our PLS business is expected to exceed $500 million in annual revenue this year. Trends in our hospital reference business also remain steady, with third quarter base testing volumes above 2019 levels. We also generated record consumer-initiated testing revenue through Quest Direct in the third quarter. While COVID testing has been strong contributor to growth, we expect our base direct-to-consumer testing revenue to more than double this year. Recently, we soft-launched a comprehensive health profile on QuestDirect, similar to our Blueprint for Wellness offering for employers. This expanded health panel offers a deep dive into consumers' health profile with a battery of tests and biometric measurements to provide a personalized health quotient score that can be used to track health progress over time. And then finally, our MyQuest app and patient portal now has almost 20 million users. In advanced diagnostics, we continue to ramp investments and see strong momentum and key growth drivers. We're seeing strong growth in non-invasive prenatal testing, significantly above 2019 levels and saw solid contribution in our specialty genetics portfolio from Blueprint Genetics. We continue to work closely with the CDC to sequence positive COVID specimens in an ongoing effort to track emerging variants, expanding of the work that we performed in the quarter. And then finally, we plan to introduce a test service based on a new FDA-approved companion diagnostic for Magellan for a therapy from Eli Lilly for a certain type of high-risk early breast cancer. Quest will be the first laboratory to offer it to physicians nationally at the end of the month. Turning to our second strategy, driving operational excellence, we made progress or remain on track to deliver at our targeted 3% annual efficiencies across the business. Last week we announced that we completed the integration and consolidation of our Northeast Regional Operations into our new 250,000 square foot next generation lab in Clifton, New Jersey. This state-of-the-art, highly automated facility services more than 40 million people across seven states. In patient services, we are seeing all-time high numbers of patients making appointments to visit our patient service centers. Now more than 50% of patient service center visits are now by appointment versus walk-ins. And this enables patients to be very satisfied and also improves our ability to drive productivity for our phlebotomists. Similar to our immunoassay platform consolidation, We recently procured a highly automated urinalysis platform that is expected to generate millions in annual savings once these new systems are standardized across our laboratory network. And then finally, I'd like to recognize and thank all of our nearly 50,000 employees who have worked tirelessly to provide critical COVID-19 testing to our country throughout the pandemic and continue to serve the healthcare needs of patients who depend on Quest every day. As a demonstration of our gratitude, we're assisting our employees with a one-time payment of up to $500 designed to reimburse costs that they incurred during the pandemic. Additionally, another year of pandemic pressures and travel restrictions have made it very difficult for many employees to take their hard-earned time off. Therefore, we're providing a payout of most unused paid time off for our hourly employees to ensure they don't forfeit their earned unused time at year end. Now I'd like to turn it over to Mark to provide more details on the third quarter financial performance and updated outlook for the remainder of 2021. Mark.