Quest Diagnostics Incorporated

Hello and thank you all for standing by. Welcome to the Quest Diagnostic first quarter 2023 conference call. At the request of the company, this call is being recorded. All lines have been placed on a listen-only mode until the question and answer portion. The entire contents of the call, including the presentation and question and answer session that will follow, are the copyrighted property of Quest Diagnostic with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form without written consent of Quest Diagnostic is strictly prohibited. I would now like to introduce Sean Bevick, Vice President of Investor Relations for Quest Diagnostic. Go ahead, please.

Thank you, and good morning. I'm joined by Jim Davis, our Chairman, Chief Executive Officer, and President, and Sam Samad, 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 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. 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 Jim Davis. Thanks, Sean, and good morning, everyone. We're off to a strong start in 2023. Our base business grew double digits compared to prior year, driven by strong performance across physician and health system lab services. This morning, we announced the acquisition of Haystack Oncology. Later in my remarks, I'll describe how this transaction is aligned to the molecular genomics and oncology strategy we shared last month at Investor Day and how it positions us well in the fast-growing category of minimal residual disease testing. Now, turning to the first quarter, total revenues were $2.3 billion. Total base business revenue grew 10% supported by base business volume growth of nearly 8%. And earnings per share were $1.78 on a reported basis and $2.04 on an adjusted basis. Now let's look at some of the highlights from the quarter. The strong volume growth we experienced in our base business across all customer types points to a continued return to care in the quarter. We saw a faster growth in a number of tests per requisition across a broad range of clinical test categories. This suggests more people are returning to the healthcare system for routine care after delaying care during the pandemic. Health plan volumes also continue to grow faster than the overall business. This trend is directly related to our ongoing efforts to partner with health plans to actively steer patients to high quality, lower cost providers like Quest, thereby saving money for the health plan, employers, and plan members. During the first quarter, base revenues from health systems grew approximately 7%. At Investor Day, we said this book of business would grow at about 5% to 6% CAGR, and we're having success across the board with new wins in our reference and professional lab services offerings. Some of these highlights include, in February, we announced that we're helping Tower Health in Pennsylvania manage its laboratory supply chain in addition to performing reference testing. Our Northern Light Health PLS relationship began to ramp up in the quarter. Northern Light is a large integrated health system in Maine where we are providing services for all nine of its hospital labs and its cancer center. We also closed our acquisition of Northern Light's outreach lab assets. Finally, we completed our strategic laboratory services acquisition with New York Presbyterian with new test volumes starting to flow into our Clifton, New Jersey laboratory earlier this month. This is the third outreach acquisition we've completed in the last six months. As we enter the second quarter, our pipeline of new health system business remains strong, including many additional PLS opportunities. Now I'd like to say a few words about our announcement this morning regarding our planned acquisition of Haystack Oncology. Haystack is an early stage oncology company focused on minimal residual disease or MRD testing. Haystack has developed a highly sensitive liquid biopsy technology that can detect circulating DNA from residual or recurring tumor cells. The technology was licensed from Johns Hopkins where it was developed by genomics and cancer pioneers. Most patients treated for cancer must be monitored for years following surgery and initial treatment. This is because there's always the potential that some cancer was missed or may recur. At Investor Day, we talked about Quest's strong position in the mature cancer areas of screening and diagnosis, and that we will also play a leading role in therapy selection with our TSO500 assay. Haystack's liquid biopsy technology, combined with our strengths in screening, pathology, and sequencing, will now position us to play a leading role in the fast-growing MRD category. We expect to focus initially on colorectal, breast, and lung cancers and to start generating revenue next year. We are also encouraged by other recent developments in advanced diagnostics. In the area of brain health, we saw strong growth, which we attribute largely to our quest AD-detect Alzheimer's blood test. This proprietary test launched last year helps us assess the risk of Alzheimer's disease. We are now introducing additional tests to help us assess the inherited risk of Alzheimer's and provide personalized recommendations to lower risk. We also saw strong growth in our advanced cardiometabolic portfolio, prenatal genetics, our blood-based tuberculosis screening, and hepatitis B and C testing. We are encouraged by the CDC's recent decision to recommend one-time screening for hepatitis B. In consumer health, we continue to add to our test menu with new services, including long COVID and menopause testing. We also generated strong year-over-year volume growth in allergy and general health testing as consumers utilize our offerings as a complement to the care provided by their physician. In the coming months, we plan to launch a new consumer genetics panel as well. Turning to Invigorate, we are well on our way toward achieving our 3% annual productivity savings target. Here are some recent examples among the many contributors. We are improving the efficiency of our patient services network. In some cases, we're closing smaller draw sites and adding staff to larger, higher volume locations. At the same time, we're making it easier for walk-ins to register and be seen through our schedule at check-in service. We are adding new features to the pre-registration process, which improves both collections and patient convenience. During the pandemic, we relied heavily on third-party logistics to supplement our own team's collections of COVID-19 tests and other specimens. COVID-19 volumes have declined and the labor market eases, We are reducing our dependence on these vendors, which will generate savings for our logistics operations. Finally, we're continuing to enhance our labor staffing models across our lab network to reflect post-pandemic total volumes and drive productivity. As we have said before, we continue to closely manage the cost of our corporate and support functions. The actions we've taken will start to help margins beginning in the second quarter. Finally, I'd like to give you an update on where we are with Medicare clinical lab fee schedule cuts. As you know, PAMA cuts were suspended for 2023. We strongly support the recent bipartisan reintroduction of the legislation in Congress to fix PAMA through the Saving Access to Laboratory Services Act, or SALSA. We are working with our trade association on driving advocacy for SALSA through a campaign to stop lab cuts. aimed at congressional outreach on the importance of lab services. Now I'll turn it over to Sam to provide more details on our performance and our updated 2023 guidance. Sam?