Q4 2024 Quest Diagnostics Inc Earnings Call

January 30, 2025

Any redistribution retransmission or rebroadcast of this call in any form without the written consent of quest diagnostics is strictly prohibited.

Sean Bezeq: I'd now like to introduce Sean Bezeq, Vice President of Investor Relations for Quest diagnostics. Sir. Please go ahead.

Speaker Change: Thank you and good morning, I'm joined by Jim Davis, Our Chairman and Chief Executive Officer, and President and Samsung <unk>, Our Chief Financial Officer.

Speaker Change: During this call we may make forward looking statements and will discuss non-GAAP measures.

Speaker Change: We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release.

Speaker Change: <unk> results may differ materially from those projected.

Speaker Change: 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.

Our Chief Financial Officer.

During this call we may make forward looking statements and will discuss non-GAAP measures.

Speaker Change: For this call references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS.

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.

Speaker Change: Growth rates associated with our long term outlook projections, including consolidated revenue growth revenue growth from acquisitions organic revenue growth and adjusted earnings growth are compound annual growth rates now.

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.

And subsequently filed quarterly reports on Form 10-Q, and current reports on form 8-K.

Jim Davis: Now here is Jim Davis.

Jim Davis: Thanks, Sean and good morning, everyone in the fourth quarter, we delivered impressive revenue growth of nearly 15%, including approximately 5% organic growth while also improving our profitability for the full year, we drove revenue growth of close to 7%, including approximately 3% organic growth.

For this call references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS.

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

Jim Davis: In 2024, our team completed eight acquisitions, including life Labs in Canada and for hospital outreach lab businesses in the U S.

Jim Davis: Now here is Jim Davis.

Jim Davis: Thanks, Sean and good morning, everyone in the fourth quarter, we delivered impressive revenue growth of nearly 15%.

Jim Davis: We also expanded our advanced diagnostics menu and drove sustained double digit growth in several clinical areas during the year.

Jim Davis: <unk> approximately 5% organic growth, while also improving our profitability for the full year, we drove revenue growth of close to 7%, including approximately 3% organic growth.

Jim Davis: In addition, we attracted new business across the physician hospital and consumer channels, while also forming new relationships with health plans to extend our geographic reach.

Jim Davis: In 2024, our team completed eight acquisitions, including like Labs in Canada and for hospital outreach lab businesses in the U S.

Jim Davis: Our investments in automation and AI delivered improvements in quality customer experience and productivity during the quarter and throughout all of 2024, which helped us deliver on our annual 3% invigorate savings and productivity targets.

Jim Davis: We also expanded our advanced diagnostics menu and drove sustained double digit growth in several clinical areas during the year.

Jim Davis: In addition, we attracted new business across the physician hospital and consumer channels, while also forming new relationships with health plans to extend our geographic reach.

Jim Davis: We also meaningfully improved employee retention as we strengthened our position as employer of choice.

Jim Davis: This morning, we provided guidance for 2025 that reflects our confidence in the core strength of our business continuing robust utilization and the momentum from acquisitions, we completed in 2024. These.

Jim Davis: Our investments in automation and AI delivered improvements in quality customer experience and productivity during the quarter and throughout all of 'twenty 'twenty, four which helped us deliver on our annual 3% invigorate savings and productivity targets.

Jim Davis: These dynamics position us favorably to accelerate revenue and earnings growth in 2025.

Jim Davis: We also meaningfully improved employee retention as we strengthened our position as employer of choice.

Jim Davis: Now I'll recap our strategy and discuss highlights from the fourth quarter, then Sam will provide more detail on our financial results and talk about our financial guidance for 2025.

Speaker Change: Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core customers physicians hospitals and consumers we enabled growth across our customer channels through advanced diagnostics with an intense focus on faster growing clinical areas, including brain health advanced car.

Jim Davis: These dynamics position us favorably to accelerate revenue and earnings growth in 2025.

Jim Davis: Now I'll recap our strategy and discuss highlights from the fourth quarter, then Sam will provide more detail on our financial results and talk about our financial guidance for 2025.

Speaker Change: <unk> metabolic and molecular genomics and oncology.

Speaker Change: In addition acquisitions are a key growth driver with an emphasis on accretive outreach purchases as well as other independent labs.

Jim Davis: Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core customers physicians hospitals and consumers we enabled growth across our customer channels through advanced diagnostics with an intense focus on faster growing clinical areas, including brain health advanced car.

Speaker Change: Our strategy also includes driving operational improvements across the business with the strategic deployment of automation and AI to improve quality service efficiency and the workforce experience.

Jim Davis: Metabolic and molecular genomics and oncology.

Speaker Change: Here are a few key updates on the progress we have made in these areas in the fourth quarter of 2024.

Jim Davis: In addition acquisitions are a key growth driver with an emphasis on accretive outreach purchases as well as other independent labs.

Speaker Change: Please note that my following comments are focused primarily on our U S operations.

Jim Davis: Our strategy also includes driving operational improvements across the business with the strategic deployment of automation and AI to improve quality service efficiency and the workforce experience.

Speaker Change: And physician lab services, we delivered high single digit revenue growth driven primarily by strong organic growth and contributions from acquisitions in the U S.

Speaker Change: As a reminder volumes from both hospital outreach and independent lab acquisitions originate in the physician offices.

Jim Davis: Here are a few key updates on the progress we have made in these areas in the fourth quarter of 2024.

Speaker Change: Last month, we closed our acquisition of the outreach lab business of University hospitals, and Ohio and completed the transition of the business in January.

Jim Davis: Know that my following comments are focused primarily on our U S operations.

Jim Davis: And physician lab services, we delivered high single digit revenue growth driven primarily by strong organic growth and contributions from acquisitions in the U S.

Speaker Change: We expect to moderate our pace of acquisitions in 2025, as we focus on driving growth from productivity from transactions completed last year.

Jim Davis: As a reminder volumes from both hospital outreach and independent lab acquisitions originate in the physician offices.

Speaker Change: In addition to acquisitions other growth drivers in the quarter included new customer wins as well as growth among large physician groups and community health centers. We also saw a step up in functional medicine testing as more people take an interest in prevention and wellness.

Jim Davis: Last month, we closed our acquisition of the outreach lab business of University hospitals in Ohio and completed the transition of the business in January we expect to moderate our pace of acquisitions in 2025, as we focus on driving growth from productivity from transactions completed last year.

Speaker Change: In the fourth quarter and full year, we benefited from robust utilization compared to historical rates. We also continued to see strong volume and revenue growth for Medicare advantage plans, which value our high quality low cost testing for their narrow networks.

Jim Davis: In addition to acquisitions and other growth drivers in the quarter included new customer wins as well as growth among large physician groups and community health centers. We also saw a step up in function of medicine testing as more people taken interest in prevention and wellness.

Speaker Change: We are well positioned to benefit from these dynamics as we expand access through our health plan partnerships with <unk> health and Sentara health plans, both of which took effect on January one.

Jim Davis: In the fourth quarter and full year, we benefited from robust utilization compared to historical rates. We also continued to see strong volume and revenue growth for Medicare advantage plans, which value our high quality low cost testing for their narrow networks.

Speaker Change: Today, we have access to more than 90% of the in network lives in the U S.

Speaker Change: Yeah.

Speaker Change: In Hospital Lab services, we grew revenues nearly 3% in the fourth quarter, primarily due to solid continued demand for reference testing complemented by growth in professional lab services.

Jim Davis: We are well positioned to benefit from these dynamics as we expand access to our health plan partnerships with L. A that's hell and Sentara health plans, both of which took effect on January one.

Speaker Change: <unk> continued to order a greater range of reference test from our expanding advanced diagnostics menu rather than performing these tests in their own labs.

Jim Davis: Today, we have access to more than 90% of the in network lives in the U S.

Speaker Change: By referring testing to us hospitals are freed from the pressures that come from performing specialized tests in house, such as hiring skilled lab personnel and investing inexpensive lab testing equipment.

Jim Davis: In Hospital Lab services, we grew revenues nearly 3% in the fourth quarter, primarily due to solid continued demand for reference testing complemented by growth in professional lab services.

Jim Davis: Hospitals continued to order a greater range of reference tasks from our expanding advanced diagnostics menu rather than performing these tests in their own labs.

Speaker Change: And professional lab services, we completed three collaborations with health systems in Connecticut, New Jersey, and Pennsylvania, We expect to see modest contribution from these relationships in early 2025.

Jim Davis: Referring testing to us hospitals are freed from the pressures that come from performing specialized tests in house, such as hiring skilled lab personnel and investing inexpensive lab testing equipment.

Speaker Change: Looking at 2025, we expect hospitals to continue to struggle with high wage and supply inflation constrained access to capital and keeping up to date with laboratory innovation.

Jim Davis: And professional lab services, we completed three collaborations with health systems in Connecticut, New Jersey, and Pennsylvania, We expect to see modest contribution from these relationships in early 2025.

Speaker Change: At the same time patients and payers want greater value from lab services.

Speaker Change: Hospitals increasingly recognize that quest can improve access to innovative and cost efficient lab services through reference testing lab management and outreach lab acquisitions.

Jim Davis: Looking at 2025, we expect hospitals to continue to struggle with high wage and supply inflation constrained access to capital and keeping up to date with laboratory innovation at the same time patients and payers want greater value from lab services.

Speaker Change: And consumer initiated testing our consumer facing platform Quest health Dot Com grew total revenues nearly 50% in the fourth quarter and approximately 40% for the full year to just over $60 million.

Jim Davis: Hospitals increasingly recognize that quest can improve access to innovative and cost efficient lab services their reference testing lab management and outreach lab acquisitions.

Speaker Change: Together with revenue from our channel partners consumer initiated testing revenues grew to nearly $100 million in 2024.

Speaker Change: During the year, we also greatly expanded our quest health Dot com offering to include 135 different tests to provide a comprehensive platform for serving today's increasingly health minded consumers.

Jim Davis: And consumer initiated testing our consumer facing platform Quest health Dot Com grew total revenues nearly 50% in the fourth quarter and approximately 40% for the full year to just over $60 million together with revenue from our channel partners consumer initiated testing.

Speaker Change: In advanced diagnostics, we experienced double digit growth across several clinical areas in the fourth quarter, including in brain health advanced cardio metabolic autoimmune and women's health.

Jim Davis: Revenues grew to nearly $100 million in 2024.

Jim Davis: During the year, we also greatly expanded our quest health Dot com offering to include 135 different tests to provide a comprehensive platform for serving today's increasingly health minded consumers.

Speaker Change: We generated strong growth in brain health largely due to impressive demand for <unk> detect blood tests for assessing all timers disease risk.

Speaker Change: We will continue to explore opportunities to extend our portfolio with new biomarkers that can help providers better assess all timers and other forms of dementia.

Jim Davis: In advanced diagnostics, we experienced double digit growth across several clinical areas in the fourth quarter, including in brain health advanced cardio metabolic autoimmune and women's health we.

Speaker Change: We also generated strong growth in areas of advanced cardio metabolic and autoimmune testing and we expect these patterns to continue in 2025.

Jim Davis: We generated strong growth in brain health largely due to impressive demand for E. D detect blood tests for assessing all timers disease risk.

Speaker Change: Our growth in women's health was driven largely by prenatal and hereditary genetic testing. We were also pleased to see strong adoption of our self collection option for testing of genital tract infections during the quarter.

Jim Davis: We will continue to explore opportunities to extend our portfolio with new biomarkers that can help providers better assess all timers and other forms of dementia.

Jim Davis: We also generated strong growth in areas of advanced cardio metabolic and autoimmune testing and we expect these patterns to continue in 2025.

Speaker Change: In molecular genomics in oncology, we spent much of last year, developing and validating our haystack <unk> blood test to aid in the early detection of minimal residual disease from solid tumor cancers.

Jim Davis: Our growth in women's health was driven largely by prenatal and hereditary genetic testing. We were also pleased to see strong adoption of our self collection option for testing of genital tract infections during the quarter.

Speaker Change: We also engage with approximately 75, leading academic health systems and community oncology centers and are a haystack Mardi early experience program and are pleased with the favorable feedback we received.

Jim Davis: In molecular genomic send oncology, we spent much of last year, developing and validating our haystack M. R. D blood test to aid in the early detection of minimal residual disease from solid tumor cancers.

Speaker Change: We are now transitioning these organizations to a commercial program and are focused on expanding utilization among medical oncologists.

Speaker Change: Turning to operational excellence, our invigorate program delivered our targeted 3% annual cost savings and productivity improvements here.

Jim Davis: We also engaged with approximately 75, leading academic health systems and community oncology centers and are a haystack M. D. Early experience program and are pleased with the favorable feedback we received.

Speaker Change: Here are some examples of how we're improving operations with.

Speaker Change: We pilot many of our automation and AI solutions at our laboratory in Clifton New Jersey during.

Jim Davis: We are now transitioning these organizations to a commercial program and are focused on expanding utilization among medical oncologists.

Speaker Change: During the fourth quarter, we developed and implemented a proprietary system in Clifton that automates labeling and test to preparation for tuberculosis testing, eliminating manual intervention and improving quality.

Jim Davis: Turning to operational excellence, our invigorate program delivered our targeted 3% annual cost savings and productivity improvements here are some.

Speaker Change: In addition, we began testing and automated a session in solution that speeds requisition processing.

Jim Davis: Apples of how we're improving operations.

Jim Davis: We pilot many of our automation and AI solutions at our laboratory in Clifton New Jersey.

Speaker Change: Also in Clifton, we deployed a third party AI solution that enhances parasitology screening by flagging likely positive specimens requiring closer human examination.

Jim Davis: During the fourth quarter, we developed and implemented a proprietary system in Clifton that automates labeling and test to preparation for tuberculosis testing, eliminating manual intervention and improving quality.

Speaker Change: We plan to roll out these solutions to our other labs later in 2025.

Speaker Change: Improving workforce engagement remains a major priority and I'm pleased that our retention rates significantly improved across multiple job categories in 2024.

Jim Davis: In addition, we began testing an automated a session in solution that speeds requisition processing.

Jim Davis: Also in Clifton, we deployed a third party AI solution that enhances parasitology screening by flagging likely positive specimens requiring closer human examination.

Speaker Change: Now before I turn it over to Sam I want to thank our more than 55000 quest and life labs colleagues for delivering on our business imperatives last year. This amazing group of people is the engine behind our growth and the reason, we entered 2025 strong energized and ready to deliver on our purpose.

Jim Davis: We plan to roll out these solutions to our other labs later in 2025.

Jim Davis: Improving workforce engagement remains a major priority and I'm pleased that our retention rates significantly improved across multiple job categories in 2024.

Speaker Change: Working together to create a healthier world.

Speaker Change: <unk> life at a time.

Speaker Change: And now Sam will provide more details on our performance and 2025 guidance Sam.

Speaker Change: Now before I turn it over to Sam I want to thank our more than 55000 class and life labs colleagues for delivering on our business imperatives last year. This amazing group of people is the engine behind our growth and the reason, we entered 2025 strong energized and ready to deliver on our purpose.

Speaker Change: Thanks, Jim and.

Sam: In the fourth quarter consolidated revenues were $2 62 billion up.

Speaker Change: Up 14, 5% versus the prior year.

Sam: Consolidated organic revenues grew by four 8%.

Speaker Change: Working together to create a healthier world one life at a time.

Sam: Revenues for diagnostic information services were up 15, 1% compared to the prior year, reflecting the contributions from recent acquisitions, including life labs as well as growth in our key physician and hospital channels.

Speaker Change: And now Sam will provide more details on our performance and 2025 guidance Sam.

Sam: Thanks, Jim in.

Sam: In the fourth quarter consolidated revenues were $2 six $2 billion up 14, 5% versus the prior year.

Sam: Total volume measured by the number of requisitions increased 13, 9% versus the fourth quarter of 2023 with organic volume growing by 6%.

Sam: Consolidated organic revenues grew by four 8% revenues.

Sam: During the quarter weather negatively impacted volume by approximately 50 basis points.

Sam: Total revenue per requisition was up 2% versus the prior year, driven primarily by an increase in the number of tests per req and favorable test mix, mostly offset by the impact of the life labs acquisition, which carries a lower revenue per requisition.

Sam: Total volume measured by the number of requisitions increased 13, 9% versus the fourth quarter of 2023 with organic volume growing by 6% during.

Sam: On an organic basis revenue per req was up three 3% in the quarter versus last year.

Sam: During the quarter weather negatively impacted volume by approximately 50 basis points.

Sam: Unit price reimbursements was relatively flat consistent with our expectations.

Sam: Reported operating income in the fourth quarter was $361 million or 13, 8% of revenues.

Sam: <unk> to $267 million or 11, 7% of revenues last year.

Sam: On an organic basis revenue per req was up three 3% in the quarter versus last year.

On an adjusted basis operating income was $409 million.

Sam: Unit price reimbursement was relatively flat consistent with our expectations.

Sam: Or 15, 6% of revenues compared to $338 million or 14, 8% of revenues last year.

Sam: Reported operating income in the fourth quarter was $361 million or 13, 8% of revenues.

Sam: The increase in adjusted operating income was due to strong organic revenue growth and the impact of recent acquisitions partially.

Sam: Impaired to $267 million or 11, 7% of revenues last year.

Sam: The offset by the impact of weather wage increases and higher performance based compensation.

Sam: On an adjusted basis operating income was $409 million or 15, 6% of revenues compared to $338 million or 14, 8% of revenues last year.

Sam: We estimate the impact of weather on an operating margin to be approximately 30 basis points.

Sam: Reported EPS was $1 95 in the quarter compared to $1 70, a year ago.

Sam: The increase in adjusted operating income was due to strong organic revenue growth and the impact of recent acquisitions, partially offset by the impact of weather wage increases and higher performance based compensation.

Sam: Adjusted EPS was $2 23 versus $2 15, the prior year.

Adjusted EPS in the fourth quarter was impacted by higher interest expense and a higher tax rate versus the prior year.

Sam: We estimate the impact of weather on the operating margin to be approximately 30 basis points.

Sam: We estimate the EPS impact of weather to be approximately <unk> <unk> in the quarter.

Sam: Reported EPS was $1 95 in the quarter compared to $1.70 a year ago.

Sam: Cash from operations was $1 $33 billion and the full year 2024 versus $1 7 billion in the prior year.

Sam: Adjusted EPS was $2 23 versus $2 15 since the prior year.

Sam: Turning now to our full year 2025 guidance.

Sam: Adjusted EPS in the fourth quarter was impacted by higher interest expense and a higher tax rate versus the prior year.

Sam: Revenues are expected to be between $10 7 billion.

Sam: And $10 85 billion.

Sam: We estimate the EPS impact of weather to be approximately six cents in the quarter.

Sam: Reported EPS is expected to be in a range of $8 34 to.

Sam: Cash from operations was $1 $33 billion and the full year 2024 versus $1 $7 billion in the prior year.

Sam: The $8 59 and.

Sam: And adjusted EPS to be in a range of $9 55.

Sam: The $9 80.

Cash from operations is expected to be approximately $1 $45 billion.

Sam: Turning now to our full year 2025 guidance.

Sam: And capital expenditures are expected to be approximately $500 million.

Sam: Revenues are expected to be between $10 $7 billion and $10 $85 billion.

Sam: We have posted a presentation on the Investor Relations page of our website that includes an adjusted EPS Bridge.

Sam: Reported EPS is expected to be in a range of $8 34 to.

Sam: The $8 59 and.

Sam: Which shows some of the key elements to bridge from our 2024 adjusted EPS for the 2025 adjusted EPS guidance, we shared today.

Sam: And adjusted EPS to be in a range of $9 55.

Sam: The $9 80.

Sam: Cash from operations is expected to be approximately $145 billion.

Sam: Our 2025 guidance reflects the following considerations.

Sam: And capital expenditures are expected to be approximately $500 million.

Sam: Our revenue guidance assumes approximately 3% organic revenue growth with the remainder coming from the acquisitions closed in 2024.

Sam: We have posted a presentation on the Investor Relations page of our website that includes an adjusted EPS Bridge.

Sam: It does not assume any contribution from prospective M&A that could be completed in 2025.

Sam: It shows some of the key elements to bridge from our 2024 adjusted EPS for the 2025 adjusted EPS guidance, we shared today.

Sam: As you know we absorbed a headwind last year related to the crowd strike outage, which we do not assume repeats in 2025.

Sam: Our 2025 guidance reflects the following considerations.

Sam: Our revenue guidance assumes approximately 3% organic revenue growth with the remainder coming from the acquisitions closed in 2024.

Sam: We expect to begin generating revenue from the launch of our Haystack MRV test in 2025.

Sam: And continue to anticipate that haystack oncology will be slightly less dilutive versus the prior year.

Sam: It does not assume any contribution from prospective M&A that could be completed in 2025.

Sam: We are making investments in 2025 to modernize our it infrastructure as well as to comply with FDA regulations of laboratory developed tests that are scheduled to begin later this year.

Sam: As you know we absorbed a headwind last year related to the crowd strike <unk> outage, which we do not assume repeats in 2025.

Sam: We expect to begin generating revenue from the launch of our Haystack M D test in 2025.

Sam: Operating margin is expected to expand versus the prior year.

Sam: And continue to anticipate that haystack oncology will be slightly less dilutive versus the prior year.

Sam: We anticipate net interest expense to be approximately $275 million.

Adjusted tax rate is expected to be approximately 25% and.

Sam: We are making investments in 2025 to modernize our it infrastructure as well as to comply with FDA regulations of laboratory developed tests that are scheduled to begin later this year.

Sam: And our average share count for the full year is expected to be approximately 114 million diluted shares outstanding.

Jim Davis: With that I will now turn it back to Jim.

Sam: Operating margin is expected to expand versus the prior year.

Jim Davis: Thanks Sam.

Jim Davis: To summarize we delivered strong consolidated and organic revenue growth in the fourth quarter and the full year.

Sam: We anticipate net interest expense to be approximately $275 million.

Jim Davis: We expanded our presence in important new geographies, including Canada through eight acquisitions and new health plan relationships are.

Sam: Adjusted tax rate is expected to be approximately 25% and.

Sam: And our average share count for the full year is expected to be approximately 114 million diluted shares outstanding.

Jim Davis: Our innovations in advanced diagnostics drove meaningful growth and haystack Mardi strengthens our position in molecular genomics and oncology.

Jim Davis: With that I will now turn it back to Jim.

Speaker Change: Thanks, Sam to.

Speaker Change: To summarize we delivered strong consolidated and organic revenue growth in the fourth quarter and the full year.

Jim Davis: Given these business strengths and robust utilization, we expect to accelerate revenue and earnings growth this year.

Speaker Change: We expanded our presence in important new geographies, including Canada through eight acquisitions and new health plan relationships.

Jim Davis: And now we'd be happy to take your questions operator.

Jim Davis: Thank you we will now open it up to questions.

Speaker Change: Our innovations in advanced diagnostics drove meaningful growth and haystack Mardi strengthens our position in molecular genomics and oncology.

Jim Davis: Request of the company, we ask that you. Please limit yourself to one question. If you have additional questions. We ask that you please call back into the queue to.

Jim Davis: To be placed in the queue. Please press star one from your phone to withdraw press star two.

Speaker Change: Given these business strengths and robust utilization, we expect to accelerate revenue and earnings growth this year.

Jim Davis: Again to ask a question please press star one.

Speaker Change: And now we'd be happy to take your questions operator.

Kevin Caliendo: Our first question will come from Kevin Caliendo with UBS.

Speaker Change: Thank you we will now open it up to questions at the request of the company. We ask that you. Please limit yourself to one question. If you have additional questions. We ask that you please call back into the queue to.

Speaker Change: Your line is open Sir.

Speaker Change: Thank you and thanks for getting me in so early I appreciate it.

Speaker Change: Just a question on guidance and some of the assumptions that are in there I appreciate the earnings bridge.

Speaker Change: To be placed in the queue. Please press star one from your phone to withdraw press star two.

Speaker Change: I guess.

Speaker Change: Im trying to understand a little bit is there is $20 million of additional investment spend for <unk>.

Speaker Change: Again to ask a question please press star one.

Speaker Change: Our first question will come from Kevin Caliendo with UBS. Your line is open Sir.

Speaker Change: Are there any other one timers in there and specifically.

Speaker Change: Is do you expect core margins not sort of comping out some of the other things that have happened, but you said margin you expect to expands so does the guidance assume that just that core margins will expand ex all of the sort of one timers that we had from last year or the accretion from deals and things happening.

Kevin Caliendo: Thank you and thanks for getting me in so early I appreciate it.

Kevin Caliendo: Just a question on guidance and some of the assumptions that are in there I appreciate the earnings bridge.

Kevin Caliendo: I guess.

Kevin Caliendo: What I am trying to understand a little bit is there's $20 million of additional investment spending for <unk> T and what else what are there any other one timers in there and specifically.

Speaker Change: Want to understand that and whether there's any weather built in from <unk>, whether it's the fires or the frozen tundra that we had to deal with very long one question, but thanks.

Kevin Caliendo: Is do you expect core margins not sort of comping out some of the other things that have happened, but you said margins you expect to expands so does the guidance assume that just that core margins will expand ex all of the sort of one timers that we had from last year or the accretion from deals and things happening.

Speaker Change: Yeah. Thanks, Kevin This is Sam and good morning.

Sam: Let me just give some comments on guidance due to address your question first of all the one timers.

Sam: That youre asking about they're all laid out in the bridge that we've included there are no additional one.

Kevin Caliendo: I understand that and whether if there's any weather built in from <unk>, whether it's the fires or the frozen tundra that we had to deal with very long one question, but thanks.

Sam: One timers that you should be adding in or taking out the key things I think from.

Sam: A positive standpoint that we talked about in addition to the organic revenue growth in the M&A contribution.

Sam: Yeah. Thanks, Kevin This is Sam and good morning.

The benefit related to crowd strike, which obviously, we don't expect to repeat in 'twenty five.

Speaker Change: Let me just give some comments on guidance due to address your question first of all the one timers.

We've got some benefit in terms of.

Speaker Change: Youre asking about they're all laid out in the bridge that we've included there are no additional.

Sam: The haystack reduced dilution so some benefits year over year, but then fell.

Speaker Change: One timers that you should be adding in or taking out the key things I think from.

Sam: An offset in terms of headwinds we talked about the investments and then we can share some more comments on that.

A positive standpoint that we talked about in addition to the organic revenue growth in the M&A contribution is a benefit related to the crowd strike, which obviously, we don't expect to repeat in 'twenty five.

Sam: And it really relates to the FDA ODT compliance investments to get us in compliance with that and to build up our regulatory capabilities. In addition to some investments in terms of modernizing our systems and our it systems and the lab information systems and we can talk some more about that.

Speaker Change: You know we've got some benefits in terms of.

Speaker Change: The haystack reduced dilution so some benefits year over year, but then from.

Sam: Interest expense, we've talked about the fact that we at the fund the acquisitions that we took on especially life labs that represents a 50% headwind.

Speaker Change: An offset in terms of headwinds we talked about the investments and then we can share some more comments on that.

Speaker Change: And it really relates to the FDA L. D T compliance investments to get us in compliance with that and to build up our regulatory capabilities. In addition to some investments in terms of modernizing our systems and our it systems and the lab information systems and we can talk some more about that.

Sam: And then there are some other.

Sam: Headwinds that are laid out there in terms of.

Sam: Or whether.

Sam: We have not built any specific explicit assumption related to worse, whether as a result of.

Speaker Change: Interest expense, we've talked about the fact that we at the fund the acquisitions that we took on especially life labs that represents a 50 cent headwind.

Sam: What we're seeing but obviously, we're monitoring Q1.

Sam: And January closely because there have been some higher than expected weather disruptions, specifically the wildfires in California, specifically.

Speaker Change: And then there are some other.

Sam: <unk> in the south and some of the snow that we've seen also some lower temperatures in the northeast.

Speaker Change: Our headwinds that are laid out there you know in terms of in terms of weather.

Speaker Change: Yeah, we have not built any specific explicit assumption related to worse, whether as a result of what we're seeing but obviously we're monitoring Q1.

Sam: And snow as well so there are some of these in terms of operating margin. We are expecting operating margin expansion in terms of what we report. There is you don't have to normalize or make adjustments to get through expanded operating margins. We are expecting that our operating margin percentage, which finished at 15, 6% in 2020.

Speaker Change: And January closely because there have been some higher than expected weather disruptions, specifically the wildfires in California, specifically the freeze in the south and some of the snow that we've seen also some lower temperatures in the northeast.

Sam: <unk> will expand in 2026 or in 2025 I should say.

Speaker Change: In snow as well. So you know there are some of these in terms of operating margin. We are expecting operating margin expansion you know in terms of what we report. There is you don't have to normalize or make adjustments to get to expanded operating margins. We are expecting that our operating margin percentage, which finished at 15, 6% in 2020.

Sam: Yeah, Hey, Kevin Let me just provide a little more color on the investment so as Sam said Theres two parts to it one is in preparation for the FDA requirements now the first set of requirements go into effect on May six this year and notably we have to stand up a.

Speaker Change: Four will expand in 2026 or 2025 I should say.

Sam: St handling unit and enable ourselves to report any what.

Speaker Change: Yeah, Hey, Kevin Let me just provide a little more color on the investment so as Sam said Theres two parts to it one is in preparation for the FDA requirements now the first set of requirements go into effect on May six this year and notably we have to stand up a.

Sam: What we call medical device reporting to the FDA. So that does require some investment it requires some additional resources to do that so in part.

Sam: That is what some of those investments are used for the second and more substantial pieces look as you all know.

Sam: This is a digital enterprise that we operate today from order intake to our logistics systems to how we operate the labs to how we provide results through our my class application and our entire billing system.

Speaker Change: Claims handling unit and enable ourselves to report any.

Speaker Change: What we called medical device reporting to the FDA. So that does require some investment it requires some additional resources to do that so in part that is what is some of those investments are used for the second and more substantial pieces look as you all know.

Sam: We think about that as our entire order to cash spectrum of systems.

Sam: And while we have been making investments from time to time, we need to make some more substantial investments this year and next year and the benefits from those investments are certainly going to help us improve operations and improve the entire customer experience.

Speaker Change: This is a digital enterprise that we operate today from order intake to our logistics systems to how we operate the labs to how we provide results through our my class application and our entire billing system.

Sam: We're modernizing this infrastructure and we're going to migrate some of our current systems into cloud based systems.

Speaker Change: We think about that as our entire order to cash spectrum of systems.

Sam: And over time, that's going to dramatically reduce the complexity, it's going to create more efficiencies between our labs, and it's really really going to improve the overall customer experience ultimately, it's going to lower our cost and and there is going to be a good ROI on these investments we're going to lay this out more at our Investor day on March nine.

Speaker Change: And while we have been making investments from time to time, we need to make some more substantial investments this year and next year and the benefits from those investments are certainly going to help us improve operations and improve the entire customer experience.

Speaker Change: We're modernizing this infrastructure, we're going to migrate some of our current systems into cloud based systems.

Sam: Teens, but thats really what <unk> is.

Sam: <unk> is being used for.

Speaker Change: And over time, that's going to do.

Speaker Change: Dramatically reduce the complexity, it's going to create more efficiencies between our labs, and it's really really going to improve the overall customer experience ultimately, it's going to lower our cost and and theres going to be a good ROI on these investments we're going to lay this out more at our Investor day on March 19th but.

Patrick: The next question your next question Patrick.

Speaker Change: The next question will come from Patrick Donnelly of Citi. Your line is open.

Hey, guys. Thank you for taking the questions.

Speaker Change: Sam maybe one for you to start just helpful to hear you talk about the margin expansion. This year. Overall can you just talk about the cadence anything to call out as the year progresses, I know life labs, starting lower margin, it's heading to corporate average at some point, maybe just talk to that would be helpful. And then Jim just quickly on utilization obviously been elevated.

Speaker Change: That's really what that 'twenty is.

Speaker Change: Is being used for.

Patrick: The next question your next question Patrick.

Speaker Change: The next question will come from Patrick Donnelly of Citi. Your line is open.

Speaker Change: Here, what have you seen as you exited <unk> into this year and just the assumptions on utilization as we work our way through 'twenty five thank you guys.

Patrick Donnelly: Hey, guys. Thank you for taking the questions.

And maybe one for you to start just helpful to hear you talk about the margin expansion. This year. Overall can you just talk about the cadence anything to call out as the year progresses, I know life labs, starting lower margin, it's heading to corporate average at some point, maybe just talk through that would be helpful. And then Jim just quickly on utilization obviously been elevated here.

Speaker Change: Yes, Thanks, Patrick so.

Speaker Change: So yeah. So again, let me reiterate we are expecting margin expansion this year versus 2024.

Speaker Change: I think the components that you see in the bridge that we laid out in the guidance organic revenue growth approximately 3%.

Patrick Donnelly: Or what have you seen as you exited <unk> into this year and just the assumptions on utilization as we work our way through 25. Thank you guys.

Speaker Change: At the midpoint, that's basically assumed at a contribution margin that comes in at roughly about 40%. Then you have the acquired revenue growth, which is roughly let's call. It 70 cents at the midpoint.

Patrick Donnelly: Yeah. Thanks, Patrick so on margin. So yeah. So again, let me reiterate we are expecting margin expansion this year versus 2024.

Speaker Change: It's basically a combination of life labs, which is the more significant piece.

Patrick Donnelly: I think the components that you see in the bridge that we laid out in the guidance you know organic revenue growth approximately 3%.

Speaker Change: Because of the fact that we have three quarters in 2025 that we didn't have in 2020 for at least the better part of three quarters and that will come in at a margin rate, which is in the lower double digits or in the low double digits I should say so below our corporate average I think you mentioned it and Youre right.

Patrick Donnelly: At the midpoint.

Patrick Donnelly: <unk> basically assumed at a contribution margin that comes in at roughly about 40%. Then you have the acquired revenue growth, which as you know roughly let's call. It 70 cents at the midpoint.

Speaker Change: <unk> will start at a margin rate, which is low double digits will ramp up over two to three years to get to our corporate average.

Patrick Donnelly: It's basically a combination of life's labs, which is the more significant piece.

Patrick Donnelly: Because of the fact that we have three quarters in 2025 that we didn't have in 2020 for at least a better part of three quarters and that will come in at a margin rate, which is in the lower double digits or in the low double digits I should say so below our corporate average I think you mentioned it and Youre right life labs will start at a margin rates, which.

Speaker Change: But this year it will be lower and it's a bit of a drag on the margin rate.

Speaker Change: But in terms of the other acquisitions they come in at somewhere in the 35% to 40% contribution margin. So all in that acquired revenue growth is probably coming in at the high teens in terms of contribution margin.

Speaker Change: Now you asked about the cadence and I won't talk about margin rates. Although it is it is a bit of a proxy.

Patrick Donnelly: Is low double digits will ramp up over two to three years to get to our corporate average.

Speaker Change: In terms of how EPS will come in but I think the best way to talk about cycling is really go back to our pre COVID-19 averages in terms of what the cycling was by quarter and Al Just mentioned these just as a comparative point it doesn't necessarily mean that our cycling is going to be exactly that in 2025.

Patrick Donnelly: But this year it will be lower and it's a bit of a drag on the margin rate.

Patrick Donnelly: But in terms of the other acquisitions you know they come in at somewhere in the 35% to 40% contribution margin. So all in that acquired revenue growth its probably coming in at the high teens in terms of contribution margins.

Patrick Donnelly: Now you know are you asked about the cadence and I won't talk about margin rates. Although it is it is a bit of a proxy.

Speaker Change: But it is a good proxy.

Speaker Change: It's a good proxy for how margin rate also will will be across the quarters, but in terms of contribution from EPS.

Patrick Donnelly: Of how EPS will come in but I think the best way to talk about cycling is really go back to our pre COVID-19 averages in terms of what the cycling was by quarter.

Speaker Change: Roughly 22, 5% is what we used to see pre COVID-19 in the first quarter of 26, 5% in the second 26% in the third and are approximately 25% in the fourth now again I'm not telling you. This is what our cycling as in 2025, but it's directional and it's a good proxy for what you.

Patrick Donnelly: You know I'll just mentioned he is just as a comparative point it doesn't necessarily mean that our cycling is gonna be exactly that in 2025, but its a good proxy and it's a it's a good proxy for how margin rate also will will be across the quarters, but in terms of contribution from EPS I would say roughly 22 five.

Speaker Change: Would expect.

Speaker Change: Most of the cycling to be in 2025, so thats, what we used to see for <unk>.

Pre COVID-19.

Patrick Donnelly: Percent is what we used to see pre COVID-19 in the first quarter of 2006, 5% in the second 26% in the third and are approximately 25% in the fourth now again I'm not telling you. This is what our cycling as in 2025, but it's directional and it's a good proxy for what you would expect.

Speaker Change: Yes, and then your question on utilization look we're pleased with the utilization coming out of the fourth quarter, we look at it in many ways and across many segments in terms of overall rack volume.

Speaker Change: We did have a slight weather impact in the quarter because of the hurricane early in Q4, so that cost is probably 50 basis points.

Patrick Donnelly: Close to cycling to be in 2025, so that's what we used to see for <unk>.

Speaker Change: And then we've been getting out of certain capital needed business arrangements in California that were.

Patrick Donnelly: Pre COVID-19.

Patrick Donnelly: Yeah and then your question on utilization look we're pleased with the utilization coming out of the fourth quarter, we look at it in many ways and across many segments in terms of overall rack volume.

Speaker Change: Impacting this.

Speaker Change: Business, we weren't making money on so we walked away from that and that cost us a little volume.

Patrick Donnelly: We did have a slight weather impact in the quarter because of the hurricane early in Q4, so that cost is probably 50 basis points.

Speaker Change: But when we look at the volume in our core physician and hospital segment. The req volume from those segments was very very strong in the quarter now as Sam also mentioned our rep per rack organically ex life labs was up three 3% in the quarter and as you know theres a lot of things that go.

Patrick Donnelly: And then we've been getting out of certain capital needed business arrangements in California that were.

Patrick Donnelly: Impacting this.

Patrick Donnelly: Business, we werent, making money and so we walked away from that and that that cost us a little volume.

Speaker Change: Into that Rev per req calculation. The first thing we looked at is price per test that was relatively flat in the quarter.

Patrick Donnelly: But when we look at the volume in our core physician and hospital segment. The Rep volume from those segments was very very strong in the quarter now as Sam also mentioned our rep per rack organically ex life labs was up three 3% in the quarter and as you know theres a lot of things that go.

Speaker Change: But the second biggest driver of that Rep. Correct increase is test per rack and that was probably two thirds of the increase in the overall organic Rev per req in the quarter and so that's utilization as well and what's driving it is some of the new tests that we've rolled out the brain health.

Patrick Donnelly: And to that Rev per req calculation. The first thing that we looked at is price per test that was relatively flat in the quarter.

42, <unk> 40 to 40 in the towel markers are advanced cardio metabolic testing, we're seeing big increases in things like LP little a and <unk>.

Patrick Donnelly: But the second biggest driver of that Rep. Correct increase is test per rack and that was probably two thirds of the increase in the overall organic Rev per req in the quarter and so that's utilization as well and what's driving it is some of the new tests that we've rolled out the brain health.

Speaker Change: Our autoimmune testing.

Speaker Change: It's been really propelling some of the test per req growth and then finally I'd mentioned, we're seeing a nice uptick in volume from what we call functional health types of physicians and as you probably know.

Patrick Donnelly:

Patrick Donnelly: 42 <unk>.

Patrick Donnelly: $42 40 in the towel markers are advanced cardio metabolic testing, we're seeing big increases in things like LP little a and a b.

Speaker Change: They look at a lot of things and a lot of hormone testing and things like that so the trends on test correct that trends on volume in our core physician and hospital segment remained very very strong.

Patrick Donnelly: Our autoimmune testing is been really propelling some of the tests per req growth and then finally I had mentioned.

Speaker Change: Operator next question.

The next question comes from Michael Cherny of Leerink Partners. Your line is open Sir.

Patrick Donnelly: Seeing a nice uptick in volume from what we call functional health types of physicians and as you probably know.

Michael Cherny: Good morning, and congratulations on a great quarter, maybe if I can just pull a little bit that thread there in Rev per req.

Patrick Donnelly: They look at a lot of things and a lot of hormone testing and things like that so the trends on test correct that trends on volume in our core physician and hospital segment.

Michael Cherny: Obviously, a really strong year over the course of 2024 as you think about that dynamic heading into 'twenty five and beyond.

Speaker Change: How much of the continued technological advancements are the drivers of this versus payer arrangements and marketing and how should we think about this in terms of our long term trajectory.

Patrick Donnelly: We remain very very strong.

Speaker Change: Operator next question.

Speaker Change: The next question comes from Michael Cherny of Leerink Partners. Your line is open Sir.

Michael Cherny: Okay. So again.

Michael Cherny: Good morning, and congratulations on a great quarter.

Michael Cherny: Fast forward into 2025, we'll start with price price per test.

Speaker Change: If I can just pull a little bit that thread there in Rev per req, it's obviously, a really strong year over the course of 2024 as you think about that dynamic heading into 'twenty five and beyond.

Michael Cherny: At this point in the year it could probably swing.

Michael Cherny: Between plus or minus 30 basis points okay.

Speaker Change: Much of the continued technological advancements are the drivers of this versus payer arrangements and marketing and how should we think about this in terms of our long term trajectory.

Michael Cherny: There is still lots of contracts to negotiate.

Michael Cherny: As we go through the year and the one segment.

Michael Cherny: That has been experiencing some price pressure is the hospital segment in particular reference testing I think we've indicated on the past calls during the entire Covid period from 2020 through 2023 hospitals really then go out to RFP for reference testing providers right.

Speaker Change: Okay. So again, let's let's.

Speaker Change: Fast forward into 2025, we'll start with price price per test.

Speaker Change: At this point in the year it could probably swing.

Speaker Change: Between plus or minus 30 basis points okay.

Speaker Change: There is still lots of contracts to negotiate.

Michael Cherny: So busy with other things so we're seeing an uptick in rfps and there's still price pressure in that segment.

Speaker Change: As we go through the year and the one segment that has been experiencing some price pressure is the hospital segment in particular reference testing I think we've indicated on the past calls during the entire Covid period from 2020 through 2023 hospitals really then go out to <unk>.

Michael Cherny: <unk>.

Michael Cherny: On par, though look we think it's again within a range of plus or minus 25 to 30 basis points the test per rack.

Michael Cherny: We expect it to continue we are still at the very early stages. So when I talk about incredible test growth on things like <unk>, and <unk> and LP little a and the brain health portfolio.

Speaker Change: RFP for reference testing providers right. They were so busy with other things. So we're seeing an uptick in rfps and theres still price pressure in that segment. So.

Michael Cherny: The overall volume of these test is still relatively low so we still think there is significant.

Speaker Change: On par, though look we think it's again within a range of plus or minus 25 to 30 basis points.

Michael Cherny: A significant growth.

Michael Cherny: In these segments slipped autoimmune disorders is another one where just seen skyrocketing autoimmune disorders across across the country.

Speaker Change: <unk> per rack.

Speaker Change: We expect it to continue where were still at the very early stages. So when I talk about incredible test growth on things like <unk>, and <unk> and LP little a and the brain health portfolio.

Michael Cherny: So we expect those trends to continue.

The last thing that goes into it is payer mix.

Michael Cherny: And I didn't mention but in the fourth quarter and we saw all last year our mix.

Speaker Change: The overall volume of these test is still relatively low so we still think there is significant.

Michael Cherny: Medicare Medicare advantage that segment of our business has been growing.

Speaker Change: Significant growth in.

Speaker Change: In the segment slipped autoimmune disorders is another one where just seems skyrocketing autoimmune disorders across across the country. So we expect those trends to continue.

Michael Cherny: <unk> faster than the rest of the business and so that is actually good business mix, because theyre generally heavier racks theyre more frequent racks.

Michael Cherny: And as you know many Medicare beneficiaries have comorbidities that just lead to more testing. So all of that is pretty favorable maybe I can have just a couple of comments Mike.

Speaker Change: The last thing that goes into it is payer mix.

Speaker Change: And I didn't mention it but.

Speaker Change: In the fourth quarter and we saw it all last year, our mix of Medicare Medicare advantage that segment of our business has been growing.

Mike: Financial standpoint in terms of if you look at the Rep correct in Q4, it was up three 3% organically.

Speaker Change: Faster than the rest of the business and so that is actually good business mix, because theyre generally heavier racks theyre more frequent racks.

Michael Cherny: If you break that down between the components that Jim talked about.

Michael Cherny: Two thirds of that is really a benefit from test per req, which has been increasing continuously over the last number of quarters.

Speaker Change: And as you know many Medicare beneficiaries have comorbidities that just lead to more testing. So all of that is pretty favorable maybe I can have just a couple of comments Mike from.

Michael Cherny: And then the other third benefit is really a combination of payer mix and test mix test mix being some of the innovations that we have payer mix is just driven off of reimbursement and which payers, we're getting the contribution from the different payers.

Mike: Financial standpoint in terms of if you look at the Rep correct in Q4, it was up three 3% organically.

Mike: If you break that down between the components that Jim talked about two thirds of that is really a benefit from test per req, which has been increasing.

Michael Cherny: As we look towards 2025 of this year.

Michael Cherny: Test per req, we will continue to improve although our expectation is that it will slow in terms of the improvement so that improvement we don't expect it to be at the same pace that we've seen I mean, we have we have been increasing quite substantially over a number of quarters.

Mike: Over the last number of quarters.

Mike: And then the other third benefit is really a combination of payer mix and test makes test mix being some of the innovations that we have payer mix is just driven off of reimbursement and which payers, we're getting the contribution from the different payers.

Michael Cherny: And.

Michael Cherny: I wouldn't say, we've peaked but definitely that rate of improvement is not going to be at the same rate. So that's the only other comment that I would provide with regards to Rev. Rec expectation in 2025.

As we look towards 2025 of this year.

Mike: Tests per req, we will continue to improve although our expectation is that it will slow in terms of the improvement so that improvement we don't expect it to be at the same pace that we've seen I mean, we have we have been increasing quite substantially over a number of quarters and.

Speaker Change: Operator next question please.

Speaker Change: The next question comes from Elizabeth Anderson of Evercore ISI. Please go ahead.

Joanna: Alright. Thanks for the question this is Joanna.

Mike: I wouldn't say, we've we've peaked but definitely that rate of improvement is not going to be at the same rate. So that's the only other comment that I would provide with regards to Rev. Rec expectation in 2025.

Speaker Change: Maybe I'll go back to that 20%.

Joanna: 25.

Speaker Change: I think you guys said it is mostly related to the <unk> regulation is that is that due to the one time you guys, Matt Wuxi away.

Speaker Change: Operator next question please.

Joanna: We expect to repeat in 2006 and beyond.

Speaker Change: The next question comes from Elizabeth Anderson of Evercore ISI. Please go ahead.

Joanna: Yes, first we said on the 20 <unk> of the majority of it will be on modernizing our it infrastructure, but there is a portion in there that is for FDA readiness.

Joanna: Hi, Thanks for the question. This is Joanna fertilizers, maybe you go back to that 20%.

Speaker Change: 25.

Speaker Change: Sure.

Joanna: Now it's difficult to tell.

Speaker Change: I think you guys said it was mostly related to the L. D. G regulation is that expected to be a one time, you're asking that what should we kind of expect to repeat in 2006 and beyond thanks.

Joanna: What the future will be for that as you know there is a lawsuit in front of the courts right now that <unk> and other trade associations.

Speaker Change: Yeah first we said on the 20 <unk> of the majority of it will be on.

Joanna: Broad.

Joanna: And there'll be oral hearings on that on that lawsuit.

Speaker Change: Modernizing our it infrastructure, but there is a portion in there that is for FDA readiness now it's difficult to tell.

Joanna: On February 19th and we expect the case to likely be settled by the end of the first quarter or early second quarter.

Speaker Change: What the future will be for that as you know there is a lawsuit in front of the courts right now.

Joanna: Depending on the outcome of that.

Joanna: If the outcome supports the FDA position, then yes, there'll be some continued investments.

Speaker Change: Backlog and other trade associations.

Joanna: If the outcome favors our trade Association.

Speaker Change: Broad and there'll be oral hearings on that on that lawsuit.

Joanna: And those investments could certainly moderate now remember outside of what we're doing on the core clinical business to get ready, we do have segments and quest diagnostics that already operate under 21 CFR part <unk>. These are segments that serve our pharmaceutical industry customers.

Speaker Change: On February 19, and we expect the case.

Speaker Change: Likely be settled by the end of the first quarter or early second quarter, so depending on the outcome of that.

Speaker Change: If the outcome supports the FDA position, then yes, there'll be some continued investments.

Joanna: So they'll continue to be some investments to improve those systems and readiness, but look a lot of the future a lot of the future investments related to the FDA will depend on the court case and then the other part of that 20 that you referenced is the investments.

Speaker Change: If the outcome favors our trade Association then those investments could certainly moderate now remember outside of what we're doing on the core clinical business to get ready, we do have segments and quest diagnostics that already operate under 21 CFR part a 'twenty. These are segments that serve our <unk>.

Joanna: Investments that were going to make that Jim talked about earlier.

Joanna: Those investments will continue we have investments to modernize our system. So we don't expect that to be just this year. However, we talked on the Q3 call about our long term guide in terms of expecting high single digit EPS.

Pharmaceutical industry customers and so.

Speaker Change: They'll continue to be some investments to improve those systems and readiness, but look a lot of the future a lot of the future investments related to the FDA will depend on the court case and then the other part of that 20 that you referenced is the.

Joanna: Over the long term and that we still we reaffirm so those investments will continue but theyre part of our long term guide expectation.

Speaker Change: The investments that we're going to make that Jim talked about earlier.

Speaker Change: Operator next question please.

Speaker Change: Those investments will continue we have investments to modernize our system. So we don't expect that to be just this year. However, we talked on the Q3 call about our long term guide in terms of expecting high single digit EPS.

Speaker Change: The next question comes from Luke <unk> of Barclays. Your line is open.

Speaker Change: This is Sam on for Louise Thanks.

Speaker Change: Thanks for the questions.

Speaker Change: Just to start off could you guys provide a little more detail on what you expect the revenue contribution will be for the outreach lab services business acquisition, you guys had with University hospitals and then.

Over the long term and that we still we reaffirmed so those investments will continue but theyre part of our long term guide expectation.

Speaker Change: Operator next question please.

Speaker Change: Assuming youll get some benefit from the value based contracts you have in place with payers first what's the typical rate you get on top of your average reimbursement at the onset of these contracts and how does that trend down in the next couple of years.

Speaker Change: The next question comes from Luke circa of Barclays. Your line is open.

Speaker Change: This is Dave I'm on for Lucerne.

Speaker Change: For the questions.

Speaker Change: Can we expect that kind of a typical rate for this transaction.

Speaker Change: Maybe I'll start with the University Hospital one.

Speaker Change: I mean, youll get some benefit from the value based contracts you have in place with payers first what's the typical rate you get on top of your average reimbursement at the onset of these contracts and how does that trend down in the next couple of years.

Speaker Change: Talk about value based compensation or incentives in general, but in terms of University Hospital. We made this acquisition we closed it at the end of the year. So right at the end of 2024.

Speaker Change: It's an acquisition of roughly $180 million.

Speaker Change: Can we expect that kind of a typical rate for this transaction.

Speaker Change: We don't usually provide.

Speaker Change: Revenue per each of these outreach acquisition. So we're not going to provide exactly what the revenue is but I'll give you a couple of.

Speaker Change: Maybe I'll start with the University hospital, one when I talk about value based compensation or incentives in general, but you know in terms of University Hospital. We made this acquisition we closed it at the end of the year. So right at the end of 2024.

Speaker Change: Points here to consider.

Speaker Change: Usually there is a certain valuation that we pay for those acquisitions, which is somewhere around three five X of of revenues that doesn't mean, that's what University hospital is but.

Speaker Change: It's an acquisition of roughly $180 million.

Speaker Change: There is a certain valuation we pay for these outreach acquisitions in.

Speaker Change: We don't usually provide.

Speaker Change: This is a ballpark kind of number on average.

Speaker Change: <unk>.

Speaker Change: Revenue per each of these outreach acquisitions. So we're not going to provide exactly what the revenue is but I'll give you a couple of.

Speaker Change: And then the other piece that you need to consider is that this contribution from University hospital is going to be in that acquired revenue growth.

Speaker Change: Points here to consider.

Speaker Change: Usually there's a certain valuation that we pay for those acquisitions, which is somewhere around three and a half ex of.

Or that you see in the bridge that we have include.

Speaker Change: Included on our website and so it's part of that 65 to 75.

Speaker Change: Revenues that doesn't mean, that's what University hospital is but.

Speaker Change: Contribution in terms of EPS from acquisitions now as I said before life labs.

Speaker Change: There's a certain valuation we pay for these outreach acquisitions in.

Speaker Change: This is a ballpark kind of number on average.

Speaker Change: A healthy portion of that Theres other carryover from outreach acquisitions that we made in 'twenty four beyond just university, but that is included in that in that piece.

Speaker Change: And then the other piece that you need to consider is that this contribution from University hospital is going to be in that acquired revenue growth bar that you see in the bridge that we have include.

Jim did you want to give any comments on value based incentives yet.

Speaker Change: From time to time.

Speaker Change: Included on our website and so it's part of that 65% to 75%.

Speaker Change: We didn't really see any in the fourth quarter, but from time to time, we get value based incentive payments that are tied to moving <unk>.

Speaker Change: Contribution in terms of EPS from acquisitions now as I said before life labs.

Speaker Change: A healthy portion of that Theres other carryover from outreach acquisitions that we made in 'twenty four beyond just university, but that is included in that in that piece.

Speaker Change: Next from expensive health systems into quest diagnostics that generally helps the payer obviously and as importantly, it helps the employer and it helps the patient.

Jim Davis: Jim did you want to give any comments on value based incentives yet.

Speaker Change: And so some of those incentives come at a six month period. Some come after a 12 month period look back.

Speaker Change: From time to time.

Speaker Change: We didn't really see any in the fourth quarter, but from time to time.

Speaker Change: So they're hard to predict and.

Speaker Change: Get value based incentive payments that are tied to moving <unk>.

Speaker Change: Again, we call them out generally in our quarterly results when they do occur now the other way we do collect some of these incentives is when we make these outreach acquisitions.

Next from expensive health systems into quest diagnostics that generally helps the payer obviously.

Speaker Change: And as importantly, it helps the employer and it helps the patient.

Speaker Change: And as you know some of these health systems are getting two to three X.

Speaker Change: And so some of those incentives come at a six month period. Some com after a 12 month period look back.

Speaker Change: The rates that we're getting over time, our rates don't just migrate exactly to class diagnostic rates they'll come down over a period of two to three years.

Speaker Change: So they're hard to predict and.

Speaker Change: Again, we call them out generally in our quarterly results when they do occur now the other way we do collect some of these incentives is when we make these outreach acquisitions and as you know some of these health systems are getting two to three X the rates that we're getting.

Speaker Change: And so there is.

Speaker Change: What I call incremental pricing as we move it from a health system.

Speaker Change: You're right to a quest diagnostics payor rate, sometimes those come.

Speaker Change: As bonus payments and sometimes it's just part of the overall pricing.

Speaker Change: Over time our rates.

Speaker Change: Operator next question.

Speaker Change: Not just migrate exactly to class diagnostic rates they'll come down over a period of two to three years.

Speaker Change: The next question comes from Peter Chickering of Deutsche Bank. Your line is open Sir.

Speaker Change: And so there is you know.

Peter Chickering: Hey, good morning, guys. Thanks for taking my question looking at the competitive environment.

Speaker Change: What I call incremental pricing so as we move it from a health system.

Speaker Change: You extended.

Speaker Change: You're right to a quest diagnostics payor rate sometimes.

Speaker Change: Access to start with states and 225 with two payers. The lost one state how do you see the landscape shaping up between 25 and do you see more rfps coming up this year that could result in more turnover next year is just been a couple of years it seems.

Speaker Change: As bonus payments and sometimes it's just part of the overall pricing.

Speaker Change: Operator next question.

Speaker Change: The next question comes from Peter Chickering of Deutsche Bank. Your line is open Sir.

Peter Chickering: Hey, good morning, guys. Thanks for taking my question looking at the competitive environment.

Speaker Change: As much volatility with with states turnover.

Speaker Change: Yes.

Speaker Change: Have you expanded.

Speaker Change: Yes, so first of all net net on all of the payer changes.

Speaker Change: Access to start with states and 225 with two payers. The lost one state how do you see the landscape shaping up in 2025 and do you see more rfps coming out this year that could result in more turnover next year. It's just been a couple of years it seems.

Speaker Change: It came about in 2024, we're better off so when we look at the lives that we picked up through <unk> in Colorado, Nevada, Virginia and.

Speaker Change: Were not in network with some of the plants in Georgia, when we look at the lives that we pick up from Sentara and then we subtract the lives we lost in Alabama, we're better off by well more than 1 million lives. So our access in total has significantly improved as we enter 2025.

Speaker Change: Sure.

Speaker Change: Volatility with with states turnover.

Speaker Change: Yes.

Speaker Change: Yeah. So first of all net net on all of the payer changes.

Speaker Change: It came about in 2024, we're better off so when we look at the lives that we picked up through <unk> in Colorado, Nevada, Virginia.

Speaker Change: In terms of agreements that we will negotiate here in 2025.

Speaker Change: And we were not in network with some of the plants in Georgia. When we look at the lives that we pick up from Sentara and then we subtract the lives we lost in Alabama, we're better off by well more than a million lives. So our access in total has significantly improved as we enter 2000.

As you know the typical health plan contract is somewhere between three and five years. So every year, we renew somewhere between 25% and 30% of health plan arrangements.

Speaker Change: And this year will be in that typical range. So.

Speaker Change: 25.

Speaker Change: In terms of agreements that we will negotiate here in 2025.

Speaker Change: So more to come on that but every year we are renewing.

Speaker Change: Agreements in that magnitude and we're going to.

Speaker Change: As you know the typical health plan.

Speaker Change: We're going to do it again this year.

Speaker Change: Contract is somewhere between three and five years. So every year, we renew somewhere between 25% and 30% of health plan arrangements and this year will be in that typical range. So.

Speaker Change: Okay.

Speaker Change: Operator next question please.

The next question will come from David Westenburg of Piper Sandler Your line is open hi.

Speaker Change: Hi, Thank you for taking the question. So just on the acquisition and integration I believe you completed my counted eight acquisitions in 2024, including big ones like life Lab had a lot of inorganic growth.

Speaker Change: So more to come on that but every year we are renewing.

Speaker Change: Agreements in that magnitude and where.

Speaker Change: No.

Speaker Change: We're going to do it again this year.

Speaker Change: Do you expect those acquisitions to enhance the revenue stream and how should we think about as they lap the organic revenue growth.

Speaker Change: Okay.

Speaker Change: Operator next question please.

Speaker Change: The next question will come from David Westenburg of Piper Sandler Your line is open hi.

Speaker Change: That actually accelerate and just.

Speaker Change: Thinking about puts and takes on integration speed what exactly do you have to do this year given the.

David Westenburg: Hi, Thank you for taking the question. So just on the on the acquisition and integration I believe you completed my counted eight acquisitions in 2024, including big ones like life Lab had a lot of inorganic growth.

Amount of acquisitions, you did in the last year end.

Speaker Change: What would make you go back to a little bit more aggressive act.

Speaker Change: Acquisitions.

Speaker Change: How do you expect.

Speaker Change: Just given the fact that there is a lot out out there available to you sorry that was long.

Speaker Change: Those acquisition to enhance the revenue stream and how should we think about as they lap the organic revenue growth would that actually accelerate and just.

Speaker Change: Yes, sure so as Sam indicated in his comments.

Speaker Change: Thinking about puts and takes on integration speed what exactly do you have to do this year given the amount.

Speaker Change: The 2025 revenue growth that is coming from acquisitions.

Speaker Change: The amount of acquisitions, you did in the last year and.

Speaker Change: Carryover acquisitions is about 6% and as you know, we only carry that growth through the date.

Speaker Change: What would make you go back to a little bit more aggressive acquisitions.

Speaker Change: Acquisitions.

Speaker Change: Through the 12 month anniversary, Okay. So we closed life labs.

Speaker Change: Just given the fact that there is a lot out out there available to you sorry that was long.

Speaker Change: In September of last year. It had five months of impact for months of impact last year and so we carry that through for the through the first seven to eight months of this year.

Speaker Change: Sure.

Speaker Change: Yeah sure so as Sam indicated in his comments.

Speaker Change: The 2025 revenue growth that is coming from acquisitions.

Speaker Change: So in total it's about six percentage points of our growth in 2025 and more than two thirds of that is light flats. Okay. So we feel good about that now yes. The team is hard at work at integrating these acquisitions and yet the funnel of opportunity.

Speaker Change: Carryover acquisitions is about 6% and as you know, we only carry that growth through the date.

Speaker Change: Through the 12 month anniversary, Okay. So we closed life labs.

Speaker Change: In September of last year. It had five months of impact for months of impact last year and so we carry that through for the through the first seven to eight months of this year. So in total it's about six percentage points of our growth in 2025 and more than two thirds of that is <unk>.

Speaker Change: <unk> remains.

Speaker Change: Strong so we will continue to assess the opportunities we're not backing away from any if it fits our criteria of.

Speaker Change: We have great payer access in that market.

Speaker Change: Okay.

Speaker Change: Our share is very small in that market then it becomes an attractive opportunity for us to look at so.

Speaker Change: So we feel good about that now yes. The team is hard at work at integrating these acquisitions and and yet the funnel of opportunities remains.

Speaker Change: While we have a lot of work to do to integrate what we've got on our plate, we're not going to be shy about picking things up and going after things that improve our market access.

Speaker Change: As strong so we will continue to assess the opportunities we're not backing away from any if it fits our criteria of.

Dave: Maybe I can add just a couple of quick comments Dave.

You talked about sort of difficulty of integration and complexity of integration and yes. There were a lot of acquisitions in 2024, now remember life labs is more of a standalone entity.

Speaker Change: We have great payer access in that market.

Speaker Change: If our share is very small in that market then it becomes an attractive opportunity for us to look at so.

Dave: Canada has been established.

Dave: Company. They have labs that are established there is a lot of things that they can learn from us, but we can learn from them as well so I would say that the integration is.

Dave: Later, there because.

Dave: They are already operating in we're not we're not looking to close labs or move them to our systems.

Speaker Change: You talked about sort of difficulty of integration and complexity of integration and yes. There were a lot of acquisitions in 2024 now remember life labs is more of a standalone entity. That's in Canada has been established.

Dave: At this point so.

Dave: Thats an easier integration and then you asked about sort of the cadence of M&A, what would it take to do more.

Speaker Change: Company. They have labs that are established theres a lot of things that they can learn from us, but we can learn from them as well so I would say that the integration is.

Dave: Just keep in mind I mean, we're not it's not that we're not doing any more M&A in 'twenty five we have not included in our guide any new M&A that has not been announced but we do have in our capital plan, we have allocated certain capital for potential what we call tuck in M&A, it's mostly focused on the hospital out.

Speaker Change: Lighter there because.

Speaker Change: They are already operating in we're not we're not looking to close labs or move them to our systems.

Speaker Change: At this point so you know that's.

Speaker Change: That's an easier integration and then you asked about sort of the cadence of M&A, what would it take to do more.

Dave: Reach lab acquisitions. So we will do more M&A because these are very attractive opportunities that scale very quickly.

Speaker Change: Just keep in mind I mean, we're not it's not that we're not doing any more M&A in 'twenty five we have not included in our guide any new M&A that has not been announced but we do have in our capital plan, we have allocated certain capital for potential what we call tuck in M&A, it's mostly focused on the hospital out.

And get to a healthy contribution margin. So I just want to make sure that people don't expect that we're not going to do any more M&A.

Speaker Change: Operator next question.

The next question comes from Andrew Brachman of William Blair. Please go ahead with your question Hi.

Andrew Brachman: Hi, guys. Good morning, Thanks for taking the question I wanted to ask on Haystack first can you, maybe just sort of set a little bit more light on any volume or reimbursement expectations for that asset and 25, but I guess also a bigger picture here and way more important than 'twenty five as Youre moving these customers to those commercial programs, how should we be thinking about any additional pool.

Speaker Change: Reach lab acquisitions. So we will do more M&A because these are very attractive opportunities that scale very quickly.

Speaker Change: And get to a healthy contribution margin. So I just want to make sure that people don't expect that we're not going to do any more M&A.

Speaker Change: Operator next question.

Speaker Change: The next question comes from Andrew Brachman of William Blair. Please go ahead with your question Hi.

Andrew Brachman: Through our Halo effect that having this asset now in the commercial phase should should allow on the oncology side of the business.

Andrew Brachman: Hi, guys. Good morning, Thanks for taking the question I wanted to ask on Haystack first can you, maybe just sort of set a little bit more light on any volume or reimbursement expectations for that asset and 25, but I guess also bigger picture here and way more important than 'twenty five as you're moving these customers to those commercial programs, how should we be thinking about any additional pool.

Andrew Brachman: Yes, so thanks, Andrew so.

Andrew Brachman: We're pleased with the progress that we've made with haystack as we mentioned in the comments we served over 70.

Andrew Brachman: Customers on a non revenue basis last year.

Andrew Brachman: Really nice mix of academic medical centers community oncology and so the emphasis right now is on moving those customers into full commercial.

Andrew Brachman: Through our Halo effect that having this asset now on the commercial phase should should allow on the oncology side of the business.

Andrew Brachman: Arrangements now.

Andrew Brachman: Yes, so thanks, Andrew so.

Andrew Brachman: As we start we're going to build we're going to bill Medicare we're going to Bill Medicare advantage, we expect denials.

Andrew Brachman: We're pleased with the progress that we've made with haystack as we mentioned in the comments we served over 70.

Andrew Brachman: To be high at the beginning but.

Andrew Brachman: Customers on a non revenue basis last year.

Andrew Brachman: You then quite those denials and then begin the conversations with the appropriate Mac or the appropriate Medicare advantage plan around.

Andrew Brachman: Really nice mix of academic medical centers community oncology and so the emphasis right now is on moving those customers into full commercial.

Andrew Brachman: The goodness of the test and why it is important for patients and so we do expect as Sam indicated to get modest revenue from that business. This year.

Andrew Brachman: Arrangements now.

As we start we're going to build we're going to bill Medicare we're going to Bill Medicare advantage, we expect denials.

Andrew Brachman: Now.

Andrew Brachman: You asked about other other opportunities first let.

Andrew Brachman: To be high at the beginning but.

Andrew Brachman: Let me remind everyone look oncology is a billion dollar business for quest diagnostics today that includes some of our screening assays that includes a very very strong anatomical pathology business and it includes a very very strong hematology business. So we actually expect to get pull through of our <unk>.

Andrew Brachman: You then fight those denials and then begin the conversations with the appropriate Mac or the appropriate Medicare advantage plan around.

Andrew Brachman: The goodness of the test and why it is important for patients and so we do expect as Sam indicated to get modest revenue from that business. This year.

Andrew Brachman: Say from the existing set of customers that we have.

Andrew Brachman: Now.

Andrew Brachman: You asked about other other opportunities first let.

And we're already seeing we're already seeing that pay off. We also have in addition to an mrna assay, we have a therapy planning assay, our DSO 500 assay and so we expect to get some benefits.

Andrew Brachman: Let me remind everyone oncology is a billion dollar business for quest diagnostics today that includes some of our screening assays that includes a very very strong anatomical pathology business and it includes a very very strong hematology business. So we actually expect to get pull through of our <unk>.

Andrew Brachman: That segment of our business as well.

Andrew Brachman: Opera.

Andrew Brachman: Later next question.

Speaker Change: Once again, if you would like to ask a question. Please press star one at this time. The next question comes from Tycho Peterson of Jefferies. Your line is open.

Andrew Brachman: Assay from the existing set of customers that we have.

Andrew Brachman: We're already seen we're already seeing that pay off.

Andrew Brachman: We also have in addition to an M. R. D assay, we have a therapy planning assay, our DSO 500 assay and so we expect to get some benefits in that segment of our business as well.

Speaker Change: Hey, this is Noah on for Tycho, Thanks for taking our call I wanted to ask about preventative screening, particularly with the <unk>. That's going on I was wondering how big your exposure is to preventative screening and if you have any assumptions on potential impact.

Speaker Change: Operator next question.

Speaker Change: Alrighty. Thanks.

Speaker Change: Once again, if he would like to ask a question. Please press star one at this time. The next question comes from Tycho Peterson of Jefferies. Your line is open.

Speaker Change: I'm, sorry, you mentioned that gray dwell kits.

Speaker Change: Case.

Speaker Change: So for yes.

Speaker Change: Hey, this is Noah on for Tycho, Thanks for taking our call.

Speaker Change: John.

Speaker Change: Great.

Speaker Change: Wanted to ask about preventative screening, particularly with the Broadwell case going on I was wondering how big your exposure is to preventative screening and if you have any assumptions on potential impact.

Speaker Change: Yes.

Speaker Change: Yes, you were cutting out a little bit there is some not.

Speaker Change: I'm not familiar with the case.

Speaker Change: Sam I think you are okay. So.

Speaker Change: Alrighty. Thanks.

Speaker Change: Look in general.

Speaker Change: Sure.

Speaker Change: I'm, sorry, I mean, you mentioned that grain dwell kits.

Speaker Change: There seems to be what I would call a shift in focus going on across the country and that shift in focus from.

Speaker Change: Case.

Speaker Change: So for yes.

Taking care of.

Great.

Speaker Change: Spending all our time and effort on sickness.

Speaker Change: Yes.

Speaker Change: Yes, you were cutting out a little bit there is some not.

Speaker Change: And carrying these to this shift towards what I would call prevention and wellness and.

Speaker Change: I'm not familiar with the case.

Speaker Change: Samad I think you are okay. So.

Speaker Change: And in general, we actually think Thats, a is a wonderful shift for the lab industry right.

Speaker Change: Look in general.

Speaker Change: Sure.

Speaker Change: There seems to be what I would call a shift in focus going on across the country and that shift in focus from <unk>.

Speaker Change: We strongly believe it's tied to our purpose that.

Lab testing should be used early early and often in order to.

Taking care of spending all our time and effort on sickness.

Speaker Change: Ensure somebody.

Speaker Change: And carrying disease to this shift towards what I would call prevention and wellness.

Speaker Change: It is not moving from one morbidity to another morbidity and so we're excited by a lot of the work that's going on in functional medicine today, because that focus is really on prevention and wellness.

Speaker Change: And in General we actually think that's a is a wonderful shift for the lab industry right. We strongly believe it's tied to our purpose that.

Speaker Change: So we feel good about that and we think those trends are going to help the lab industry.

Speaker Change: Lab testing should be used early early and often in order to.

Speaker Change: Yes.

Speaker Change: Operator next question please.

Speaker Change: Ensure somebody.

Speaker Change: The next question will come from Jack Meehan of Nephron Research. Your line is open.

Speaker Change: It is not moving from one morbidity to another morbidity.

Speaker Change: And so we're excited by a lot of the work that's going on in functional medicine today, because that focus is really on prevention and wellness.

Jack Meehan: Thank you and good morning.

Speaker Change: Wanted to get.

Speaker Change: I'm not sure. If this was addressed I don't think it was but.

So we feel good about that and we think those trends are going to help the lab industry.

Speaker Change: Latest thoughts on Haystack, I know you talked about expecting to generate initial revenue here.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: But can you talk about.

Speaker Change: Operator next question please.

Speaker Change: Expectations for clinical data updates, we might be able to expect this year and.

Speaker Change: The next question will come from Jack Meehan of Nephron Research. Your line is open.

Speaker Change: Just progress in terms of getting Medicare payment for the test. Thank you.

Jack Meehan: Thank you and good morning.

Speaker Change:

Speaker Change: Wanted to get.

Speaker Change: Yeah. Thanks, Jack So I did give a few brief comments, but this is we went through this.

Speaker Change: I'm not sure. If this was addressed I don't think it was but.

Speaker Change: Latest thoughts on Haystack, I know you talked about expecting to generate initial revenue here.

Speaker Change: <unk> program.

Speaker Change: Four 6% to <unk>.

Speaker Change: Seven months during 2024.

Speaker Change: But can you talk about.

Speaker Change: Expectations for clinical data updates, we might be able to expect this year and just.

Speaker Change: And so we gathered a lot of insights on our new assay, we gathered a lot of experience with close to our customers that touched academical academic medical centers as well as community oncology centers. So we're now in the process of moving those customers to full commercial.

Speaker Change: Progress in terms of getting Medicare payment for the test. Thank you.

Speaker Change: Yeah. Thanks, Jack So I did give a few brief comments, but this is we went through this early experience program.

Speaker Change: <unk>, which will include billing of Medicare and Medicare advantage plans like any new test you start the billing process.

Speaker Change: Four 6% to seven months during 2024, and so we gathered a lot of insights on our new assay, we gathered a lot of experience with close to our customers.

Speaker Change: You expect some denials you respond to those denials in a very thoughtful way and you engage with the appropriate Mac as well as the Medicare advantage plans and so look we have a ton of experience with this as you know our broad reach into every Medicare advantage plan in the country, our health plan access.

Speaker Change: Customers that touched academical academic medical centers as well as the community oncology centers. So we're now in the process of moving those customers to full commercial arrangements, which will include billing of Medicare and Medicare advantage plans like any new test you start the billing prop.

Speaker Change: Our relationships are all very positive and so we will get revenue in this segment this year.

Speaker Change: <unk>.

Speaker Change: So in terms of new clinical studies.

Speaker Change: All I would say is stay tuned.

Speaker Change: Stack for many many years even prior to.

Speaker Change: Ownership by Quest diagnostics had funded many clinical trials some of which are coming near an end and we'll be able to publish I think some great results. This year.

Speaker Change: Our relationships are all very positive and so we will get revenue in this segment this year.

Speaker Change: Operator next question.

Speaker Change: The final question for today will come from Erin Wright of Morgan Stanley. Your line is open.

Speaker Change: So in terms of new clinical studies.

Speaker Change: All I would say is stay tuned.

Erin Wright: Great. Thanks, Jim.

Speaker Change: Stack for many many years even prior to.

Erin Wright: Bigger picture question as we head into 2025, and how you think about how it is progressing in terms of market share gain versus the underlying utilization what's embedded in your expectations on that front I know you talked a little bit about the underlying environment, but.

Speaker Change: Ownership by Quest diagnostics had funded many clinical trials some of which are coming near an end and we'll be able to publish I think some great results. This year.

Speaker Change: Operator next question.

Erin Wright: Particularly when I know you didn't ask.

Speaker Change: The final question for today will come from Erin Wright of Morgan Stanley. Your line is open.

Erin Wright: Decelerating in terms of the market underlying market share gains that youre seeing as well and then and then also.

Erin Wright: Great. Thanks, and just a bigger picture question as we head into 2025, and how you think about how it's progressing in terms of market share gains versus the underlying utilization what's embedded in your expectations on that front I know you talked a little bit about the underlying environment, but.

Erin Wright: Lastly, if I can sneak one in there on Pam I thought the regulatory environment, you spoke to ODT tough, but any any thoughts in terms of the changing kind of administration and how you're viewing your visibility into that.

Erin Wright: Yeah. So.

Erin Wright: I, particularly want to know because it is it accelerating in terms of the market underlying market share gains that youre seeing as well and then and then also just lastly, if I can sneak one in there on P&I SASSA, a regulatory environment, you spoke to ODT stuff, but anything any thoughts in terms of the changing kind of administration and how youre viewing.

Erin Wright: Let me start with the latter question on Panama, So as you know.

Erin Wright: The rate cuts.

Erin Wright: Do not go into place. So this was the fifth year that rates were less the same and we feel good about that I would actually say.

Erin Wright: And your visibility into that thanks.

Erin Wright: There's going to be renewed focus on Panama reform this year.

Erin Wright: Yeah. So.

Erin Wright: As you know there's three committees that we generally work with there is a Senate Finance Committee the house and means committee in the House Energy and Commerce Committee. Those three committees are really charged with.

Erin Wright: Let me start with the latter.

Erin Wright: Question on Panama, So as you know.

Erin Wright: The rate cuts.

Erin Wright: It did not go into place. So this was the fifth year that rates.

Erin Wright: All things healthcare in this country so.

Erin Wright: Or less the same and we feel good about that I would actually say.

Erin Wright: The committee.

Erin Wright: In two of the three Theres New Committee Chair people, we know who they are we've already had outreach to them and I would say look there is strong bipartisan support to actually solve it this year. So we're excited about.

Erin Wright: There is going to be renewed focus on Panama reform this year.

Erin Wright: About the opportunity to get a final solution to to Panama.

Erin Wright: As we worked throughout 2000 22020 I can tell you. It's the number one priority of our actual trade Association and we've been hard at work since January 2nd.

Erin Wright: All things healthcare in this country so.

Erin Wright: The committee.

Erin Wright: To get a solution in place.

Erin Wright: Conversation.

Erin Wright: Keith.

Speaker Change: Yes, so on the market share utilization question look I think in general for the independent labs that all independent labs are making progress from a market share standpoint.

Erin Wright: About the opportunity to get a final solution to <unk>.

Erin Wright: Uh huh.

Erin Wright: As we worked throughout 2000 22020 I can tell you is the number one priority of our Aqua Trade Association and we've been hard at work since January 2nd.

What you see the outreach acquisitions that we've done is a is.

Speaker Change: Assign that hospitals are less focused on gathering that work in the communities and more focused on deploying their capital their assets. The resources there knowhow to other parts of the health system operations.

Erin Wright: Yeah.

Erin Wright: Get a solution in place.

Erin Wright: Conversation.

Erin Wright: Okay.

Erin Wright: Yes, so on the market share utilization question look I think in general for the independent labs that all independent labs are making progress from a market share standpoint.

Speaker Change: So I feel good about our prospects it was a share gain year and again I just think we're seeing health systems pay less attention to that outreach book of business than they have in the past and I think thats, great signs for quest diagnostics as well as the independent lab industry.

Erin Wright: What you see the outreach acquisitions that we've done is a is a sign that hospitals are less focused on gathering that work in the communities and more focused on deploying their capital their assets their resources their knowhow to other parts of the health system operations.

Speaker Change: Okay.

Speaker Change: Any other questions operator.

Speaker Change: That was our final question for today Sir.

Erin Wright: So I feel good about our prospects it was a share gain year and again I just think we're seeing health systems pay less attention to that outreach book of business than they have in the past and I think thats, great signs for quest diagnostics as well as the independent lab industry.

Speaker Change: Thank you for participating diagnostics fourth quarter and full year of 224 conference call.

Speaker Change: Thanks, everyone. We appreciate you joining in and look forward to seeing you all on March 19th at our Investor Day in New York City.

Speaker Change: Okay.

Speaker Change: A transcript of prepared remarks on this call will be posted later today on quest diagnostics website at Www Dot quest diagnostics Dot com.

Erin Wright: Any other questions operator.

Speaker Change: That was our final question for today Sir.

Speaker Change: Thank you for participating diagnostics fourth quarter and full year of 224 conference call.

Speaker Change: A replay of the call may be accessed online at www Dot Questdiagnostics dot com forward slash investor or by phone at 806 63608701 for domestic callers or 2033690179 for.

Speaker Change: Thanks, everyone. We appreciate you joining in and look forward to seeing you all on March 19th at our Investor Day in New York City.

Speaker Change: A transcript of prepared remarks on this call will be posted later today on quest diagnostics website at Www Dot quest diagnostics Dot com AR.

Speaker Change: Callers telephone replays will be available from approximately 10 30 am eastern time on January 1st two.

Speaker Change: A replay of the call may be accessed online at Www Dot quest diagnostics dot com forward slash investor or by phone at 8663608701 for domestic callers or 2033690179 for.

Speaker Change: Excuse me 2025 until midnight Eastern time February 13, 2025, Thank you and goodbye.

Speaker Change: All callers telephone replays will be available from approximately 10 30, a M. Eastern time on January <unk> two.

Speaker Change: Gives me 2025 until midnight Eastern time February 13th of 2025, Thank you and goodbye.

Q4 2024 Quest Diagnostics Inc Earnings Call

Request a DemoDemo

DGX

Quest Diagnostics

Earnings