Q1 2025 Quest Diagnostics Inc Earnings Call

In the presentation and question and answer session that will follow are copyrighted property of quest diagnostics with all rights reserved any redistribution retransmission or rebroadcast of this call in any form.

Sam Samad: So we can have global suppliers like Siemens and Roche, but the manufacturing of that is in the U.S. So again, we believe our exposure is small. The other thing I'd say is most of our supplies are under multi-year contracts. Obviously, those contracts come up every four to five years. So, you know, 20 percent will come up this year. But, you know, we compete those things. So as we said in the prepared remarks, any tariff impact we think we can cover at this point, given the guidance that we've put out.

Thanks for turning on your TV, Shawn!

Written consent of quest diagnostics is strictly prohibited.

Speaker Change: Now I'd like to introduce Sean Belak, Vice President of Investor Relations for Quest Diagnostics. Please go ahead.

Speaker Change: Welcome to the Quest Diagnostics' first quarter 2025 conference call. At the request of the company, this call is being recorded

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

Speaker Change: The entire contents of the call including the presentation and question and answer session that will follow are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission, or rebroadcast of this call in any form?

Speaker Change: During this call we may make forward looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release.

Sam Samad: Yeah, and I would just add, Kevin, this is obviously based on under current law and current regulations, you know, so this is what we're assuming based on today, what we know today, it's the impact is not zero, but the impact is very manageable for us. And it's baked into our current guide.

Speaker Change: Without written consent of Quest Diagnostics is strictly prohibited. Now I'd like to introduce Shawn Bevec, Vice President and Investor Relations for Quest Diagnostics. Please go ahead.

Speaker Change: Actual 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.

Kevin Caliendo: That's super helpful.

Kevin Caliendo: I appreciate the color.

Kevin Caliendo: Can I ask a quick follow up? Just in the last week or so, we've read some stories about strikes up in LifeLabs. The stories don't give a ton of details. It sounds like it's somewhat organized, but non-union. Can you just maybe talk about what that is? And if it's impacting LifeLabs in any way or impacting the potential accretion from LifeLabs?

Speaker Change: Thank you and good morning. I'm joined by Jim Davis, our Chairman, Chief Executive Officer and President, and Sam Samad, our Chief Financial Officer Thank you and good morning.

Speaker Change: During this call, we may make forward-looking statements and will discuss non-GAAP measures . We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Any actual results may differ materially from those projected. Thank you.

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

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.

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

Jim Davis: Yeah, I'm sure Kevin.

Jim Davis: So first of all, the strike is just on the British Columbia side. Recall LifeLabs broadly participates in the Ontario marketplace and the British Columbia marketplace. British Columbia is actually the smaller of the two sides. There are about 1200 employees that are involved in the strike. Those 1200 employees are part of a much bigger union of roughly 70,000 employees called the BCGEU. It's largely a public service union.

Jim Davis: Now here's Jim Davis.

Jim Davis: Thanks, Sean and good morning in the first quarter, we delivered strong revenue growth of approximately 12%.

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

Jim Davis: Including nearly two 5% and organic growth as demand rebounded in March following weather impacts early in the quarter.

Jim Davis: Our growth was due to contributions from acquisitions and large enterprise accounts demand for our advanced diagnostics portfolio and expanded health plan access.

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

Jim Davis: Now, there's certain statutes about how strikes are conducted in British Columbia. And one of those is you can only we have 128 patient service centers in British Columbia, you can actually only strikes at 17 of those 128. So on any given day, actually, there's there's a small amount of people that are actually out on strike. And our management team in British Columbia has to backfill those open positions, which they've been doing.

Jim Davis: We also continued to expand our use of automation robotics, and AI with the goal of improving quality customer and employee experiences and productivity.

Now, here's Jim Davis.

Jim Davis: Thanks Shawn and good morning. In the first quarter we delivered strong revenue growth of approximately 12% including nearly two and a half percent in organic growth as demand rebounded in March following weather impacts early in the quarter.

Jim Davis: We are reaffirming our revenue and adjusted EPS guidance for the full year 2025.

Jim Davis: Now before turning to highlights from the quarter I'd like to briefly comment on the recent court case that vacated the FDA rule to regulate laboratory developed test as medical devices.

Jim Davis: Our growth was due to contributions from acquisitions and large enterprise accounts, demand for our advanced diagnostic portfolio, and expanded health plan access.

Jim Davis: We do have a mediator involved, we are making progress, and we hope to have things settled within the next 30 to 45 days.

Jim Davis: The court's decision will ensure patients and providers can continue to access innovative laboratory testing services regulated under CLIA without additional regulatory cost to comply with the FDA LDP rule.

Jim Davis: We also continue to expand our use of automation, robotics and AI with the goal of improving quality, customer and employee experiences and productivity.

Kevin Caliendo: Great, thank you guys so much. Thanks, Kevin.

Patrick Donnelly: Your next question comes from Patrick Donnelly with Citi. Your line is open. You may ask your. Hey, guys, thank you for taking the questions. Sam, maybe just a quick one just on pacing on margins. Can you talk a little bit about 2Q? I know, typically seasonally, you know, that that's the strongest quarter. So just want to talk through margins and earnings there. Any impact again, from some of the tariff noise, you know, freight surcharges, things like that.

Jim Davis: We are reaffirming our revenue and adjusted EPS guidance for the full year 2025.

Jim Davis: We also recognize had several growing areas of our business already operate under the Fda's existing quality management system regulations, including companion diagnostics and lab services for clinical trials.

Jim Davis: Now, before turning to highlights from the quarter, I'd like to briefly comment on the recent court case that vacated the FDA rule to regulate laboratory develop tests as medical devices. [inaudible]

Jim Davis: In addition, our business is increasingly global as we expand in Canada through life labs, and provide reference testing for many countries.

Sam Samad: And then just quickly LifeLab Sure, and good morning, Patrick. Listen, let's let's talk first about margins in Q1. And then I'll talk about the pacing and address your question about LifeLabs. You know, Q1 margins came in operating margins at 15.3%. So the 50 basis point expansion from prior year, that was driven by volume, impacted somewhat negatively by the weather impacts that we talked about, which were more severe than what we saw last year. But in general, strong margins, 15.3 operating margins, you know, as we think about the full year, Patrick, the pacing is really very consistent with what we expect to see, in terms of traditional or historic seasonality, you know, even going back pre COVID seasonality, because COVID impacted a little bit the seasonality.

Jim Davis: We continue to invest in quality management processes and technologies to navigate the complexity of the global regulatory environment.

Jim Davis: We also recognize that several growing areas of our business already operate under the FDA's existing quality management system regulations, including companion diagnostics and lab services for clinical trials.

Sam: Now I'll recap our strategy and discuss highlights from the first quarter, then Sam will provide more detail in our results.

Sam: Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core clinical customers physicians and hospitals as well as customers in the higher growth areas of consumer initiated testing life Sciences and data analytics.

Jim Davis: In addition, our business is increasingly global as we expand in Canada through life labs and provide reference testing for many countries. We continue to invest in quality management processes and technologies to navigate the complexity of the global regulatory environment.

Sam: We enabled growth across our customer channels through faster growing advanced diagnostics and five key clinical areas, which are advanced cardio metabolic autoimmune brain health oncology and women's and reproductive health.

Sam Samad: Now we'll recap our strategy and discuss highlights from the first quarter. Then Sam will provide more detail in our results.

Sam Samad: So, you know, traditionally, what we've seen, and I'm talking really here, EPS pacing, not necessarily operating margin pacing, but EPS pacing, you know, usually what we see is roughly, you know, 49%. In the first half of the year, you know, about 51% in the second half of the year. And so, you know, you see Q2 being the best quarter, Q3, slightly lower than that, Q4, lower than Q3. And then usually Q1 is actually the lowest quarter of the year in terms of EPS contribution. So, you know, that's, that's what we expect in terms of pacing in terms of expectation for full year 2025.

Sam Samad: Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core clinical customers, physicians and hospitals, as well as customers in the higher growth areas of consumer initiated testing, life sciences and data analytics.

Sam: In addition acquisitions are a key growth driver in our strategy emphasizes accretive outreach purchases and independent labs.

Sam: Finally, we are focused on driving operational improvements across the business with the deployment of automation robotics, and AI for improved quality customer and employee experiences and productivity.

Sam Samad: We enable growth across our customer channels through faster growing advanced diagnostics in five key clinical areas, which are advanced cardio metabolic, autoimmune, brain health, oncology, and women's and reproductive health. [inaudible]

Sam: Here are some of the updates on the progress we have made in these areas in the first quarter of 2025.

Sam: And the physician channel, we delivered revenue growth in the high teens, driven largely by acquisitions organic revenue growth in the physician channel was mid single digits.

Sam Samad: In addition, acquisitions are a key growth driver and our strategy emphasizes a creative outreach purchases and independent labs.

Sam Samad: Finally, we are focused on driving operational improvements across the business with the deployment of automation, robotics and AI for improved quality, customer and employee experiences and productivity.

Sam: Our expanding portfolio of advanced diagnostics continued to deliver solid growth. We also generated volume and revenue growth through access to new geographies. As a result of new health plan partnerships that took effect on January one.

Sam Samad: Yeah, let me just give you a little color on life plans in the quarter. First of all, I think, as you all know, most of the revenue is capitated. So there's generally not surprises on the revenue side, there's a small amount of patient, it's physician, patient physician revenue where you're selling tests directly to physicians outside of the capitated agreement, but the revenue was really basically in line with our expectations.

Sam Samad: Beer are some of the updates on the progress we have made in these areas in the first quarter of 2025 .

Sam: In addition, we also grew from large enterprise accounts, including functional medicine providers, which are often early adopters of advanced diagnostics test that over time move to broader adoption.

Sam Samad: In the Physician Channel, we delivered revenue growth in the high teams, driven largely by acquisitions, organic revenue growth in the Physician Channel was mid single digits.

Sam: For example, we saw impressive uptake of our novel P fast forever chemicals test, which we launched a little over one year ago.

Sam Samad: Our expanding portfolio of advanced diagnostics continued to deliver solid growth. We also generated volume and revenue growth through access to new geographies as a result of new health plan partnerships that took effect on January 1st.

Sam: Our ability to scale diagnostic innovation is attractive to large enterprise organizations seeking to improve access quality and affordability.

Sam Samad: In addition, we also grew from large enterprise accounts, including functional medicine providers, which are often early adopters of advanced diagnostics tests that, over time, move to broader adoption.

Sam: During the quarter Quest was named as the first independent National lab to be selected to the Optum health preferred lab network.

Unknown Executive: Operator, next question.

Sam: The Optum health <unk> requires labs to meet rigorous quality and economic criteria to improve patient affordability and access.

Elizabeth Anderson: Your next question comes from Elizabeth Anderson with Evercore ISI. Your line is open. You may ask your question. Hi, guys. Good morning. Thanks so much for the question.

Sam Samad: For example, we saw impressive uptake of our novel PFAS for ever chemicals test which we launched a little over one year ago.

Elizabeth Anderson: Are carrots or any of the potential hospital reimbursement challenges, creating an opportunity in the hospital lab management space or outreach space? Or would you say sort of Transcripts provided by Transcription Outsourcing, LLC. Yeah, I think it's a bit too soon. It's not to say we won't contemplate price increases if tariffs start to hit us in a meaningful way. As you know, you know, the health plan contracts, you know, probably don't give us a chance to go back and open those up. Having said that, you know, 25, 20 to 25% of the contracts come up every year.

Sam: The Optum health network represents more than 85000, optum employed contracted and affiliated physicians or.

Sam Samad: Our ability to scale diagnostic innovation is attractive to large enterprise organizations seeking to improve access, quality, and affordability.

Sam: Our addition to this <unk> is an example of our attractiveness as a partner to enterprise providers seeking to improve quality and economic value.

Sam Samad: During the quarter, Quest was named as the first independent national lab to be selected to the OptumHealth Preferred Lab Network.

Sam: We also announced an agreement to provide comprehensive lab testing for Fresenius Medical Care's dialysis center, serving more than 200000 kidney dialysis patients in the U S.

Sam Samad: The Optum Health PLN requires labs to meet rigorous quality and economic criteria to improve patient affordability and access.

Sam Samad: The Optum Health Network represents more than 85,000 Optum-employed, contracted, and affiliated physicians.

Sam: Under a separate agreement we also plan to acquire select lab assets from Fresenius medical care in the U S.

Sam Samad: Our addition to this PLN is an example of our attractiveness as a partner to enterprise providers seeking to improve quality and economic value.

Sam: In the hospital channel revenue growth in the quarter was largely driven by contributions from our collaborative lab solutions, formerly known as professional lab services running.

Jim Davis: And if we're seeing a meaningful impact on our business, we're certainly going to try to pass that through. The health, you know, health system pricing landscape, I would still say is the most challenging of all that we deal with. But again, if we are hit in a meaningful way, we're certainly going to try to pass that along to both health systems, client bill, consumer bill, and anything outside of health plan.

Sam Samad: We also announced an agreement to provide comprehensive lab testing for fersenius medical cares dialysis center serving more than 200,000 kidney dialysis patients in the US.

Sam: Running a lab and developing lab test requires investing in equipment hiring specialized talent and keeping pace with innovation and lab technology.

Sam: Health systems continue to face supplies inflation workforce challenges and reduced access to capital.

Sam Samad: Under a separate agreement, we also plan to acquire select lab assets from Fersenius Medical Care in the US.

Sam: Through our reference testing co lab solutions and outreach lab acquisitions Quest provides hospitals with strategic options for accessing best in class diagnostic innovation without having to maintain a lab.

Sam Samad: In the hospital channel, revenue growth in the quarter was largely driven by contributions from our collaborative lab solutions formerly known as professional lab services. [inaudible]

Jim Davis: Sorry, sorry, Jim, I meant more like our hospitals like increasingly seeking relations like in your acquisition strategy. Sorry, that's my question. Okay, you know, the the funnel of opportunities on what we now call the our co lab collaborative lab services agreement continues to be very robust. We're in the process of negotiating with several institutions on this. So if anything, you're right, it can accelerate those opportunities if, if suppliers start to pass those tariffs in the form of price increases to our to our health systems. Got Thank you.

Sam Samad: Running a lab and developing lab tasks requires investing in equipment, hiring specialized talent, and keeping pace with innovation in lab technology.

Sam: At our recent Investor day, we shared our plans to expand in three high growth areas consumer initiated testing life Sciences and data analytics, we recently enhanced the online shopping experience of our consumer initiated test platform Quest helped dot com streamed.

Sam Samad: Health systems continue to face supplies inflation, workforce challenges and reduced access to capital.

Sam Samad: Through our reference testing, co-lab solutions and outreach lab acquisitions, Quest provides hospitals with strategic options for accessing best in class diagnostic innovation without having to maintain a lab. Thank you very much.

Sam: Aligning the order process, which contributed to a sharp uptick in first time orders during the quarter.

Sam: We also introduced 10, new tests on the platform.

Michael Cherny: Our next question comes from Michael Cherny with Lyric Partners. Your line is open. You may ask your question.

Sam: <unk> Dot com features fast access physician consults and for Stis and several other conditions access to prescriptions for treatment.

Sam Samad: At our recent investor day, we shared our plans to expand in three high growth areas, consumer initiated testing, life sciences, and data analytics.

Michael Cherny: Morning, and thanks for taking the time to join us. in a little different fashion. I appreciate the call you gave on the tariff impact. That's certainly helpful.

Sam: We recently shared our long term outlook for double digit growth in advanced diagnostics across the five key clinical areas.

Sam Samad: We recently enhanced the online shopping experience of our Consumer Initiated Test Platform, questhelp.com. Streamlining the order process which contributed to a sharp uptick in first time orders during the quarter.

Michael Cherny: I would assume that other entities in the market, smaller than you and your largest peer, are going to be in a slightly more challenging position in trying to get to managing any offsets on costs, similar to potentially what happened with the slave sharing environment on the wage side for a couple years back. How do you think about the strategic discussions you're having with payers on potentially driving more share about opportunities you have to service a wider swath of their membership bases, given your reach, your scale, and your ability to absorb and or offset any of these cost dynamics?

Sam: Advanced cardio metabolic and autoimmune testing both grew at double digit rates similar to trends seen last year. These.

We also introduced 10 new tests on the platform.

Sam: These areas helped provider support preventative care for patients by identifying early health risks conventional lab tests can miss.

And brain health, we generated double digit growth from our innovative <unk> detect blood tests for all timers disease.

Sam Samad: We recently shared our long-term outlook for double-digit growth in advanced diagnostics across the five key clinical areas.

Sam: We are particularly excited about our latest <unk> detect blood test panel, which we launched this month.

Sam Samad: Advanced cardiometabolic and autoimmune testing both grew at double-digit rates similar to trends seen last year.

Jim Davis: Curious, I know it's early, but if you're seeing any changes in terms of strategic payer dynamic, and I'm looking to you more closely, given you're on much more stable financial footing. Yeah, so Mike, I would tell you that our discussions and collaborations with the health plans are ongoing, continuous. As you know, we have all sorts of programs in place on the redirection of work to try to redirect work from expensive out of network labs, from expensive health system labs, several of our large payers, we have, you know, collaborative relationships, they provide us with information of physicians that are using these very expensive labs, and our teams go and work those lists really hard and try to convert that over.

Sam: This new panel combined results of amyloid beta in P. Tau $2 17 to well established all timers biomarkers to give physicians, even greater confidence to confirm all timers brain pathology and symptomatic patients.

Sam: In women's in reproductive health prenatal and hereditary genetic testing grew double digits in March we launched a solution that enables a patient to self collect a specimen for HPV cervical cancer screening at a doctor's office.

Sam Samad: In brain health, we generated double-digit growth from our innovative AD detect blood tests for Alzheimer's disease. We are particularly excited about our latest AD detect blood test panel which we launched this month.

Sam Samad: This new panel combines results of amyloid beta and P-tau-217, two well-established Alzheimer's biomarkers, to give physicians even greater confidence to confirm Alzheimer's brain pathology in symptomatic patients.

Sam: We plan to roll out this self collect option at our 2000 patient service centers in the U S. Early next month complementing our STI related self collect option, which is already seen high rates of adoption since its launch last year.

Sam Samad: In women's and reproductive health, prenatal and hereditary genetic testing grew double digits.

Jim Davis: As we also mentioned in the prepared remarks, we are now a preferred lab network provider for Optum health services. And that went into place during the quarter. And in a similar way, we work with the roughly 85,000 physicians that are in the Optum network, we work with the management team at Optum health to try to redirect as much of that work into, you know, labs, to Quest Diagnostics, where you're going to get really great quality at a great value. So if anything, yeah, I agree, these tariffs may push probe and help do that and move that work even quicker.

Sam: During the quarter, we started to receive commercial orders for our Haystack MRC test for assessing early risk of cancer recurrence.

Sam Samad: In March, we launched a solution that enables a patient to self-collect a specimen for HPV cervical cancer screening at a doctor's office.

Sam: We are investing in our connectivity with electronic medical records preferred by oncologists to improve ease of account setup and ordering for.

Sam Samad: We plan to roll out this self-collect option at our 2000 patient service centers in the US early next month, complementing our STI-related self-collect option which has already seen high rates of adoption since its launch last year. [inaudible]

Sam: For instance, we plan to deploy haystack Mark D via Epic's Aura specialty EMR module later this year.

Sam: Finally quest continues to be at the forefront of serving public health needs. We saw an uptick in our measles offerings, including testing that can be used for diagnosis or to assess vaccination status or prior infection.

Sam Samad: During the quarter, we started to receive commercial orders for our Haystack MRD test for assessing early risk of cancer recurrence.

Sam Samad: We are investing in our connectivity with electronic medical records preferred by oncologists to improve ease of accounts set up in ordering. [inaudible]

Sam: Turning to operational excellence, we continue to target, 3% annual cost savings and productivity improvements through invigorate.

Unknown Executive: Operator, next question, please.

Peto Chickering: Thank you. And this question comes from Peto Chickering with Deutsche Bank. Your line is open. You may ask your question. Hey, good morning, guys. A follow up to Kevin's question on the tariffs, and I think I missed one of the numbers that you gave out.

Sam Samad: For instance, we plan to deploy Haystack MRD via Epic's Aura specialty EMR module later this year.

Sam: We are automating several areas of our laboratories from tuberculosis testing to cervical cancer screening to improve quality customer and employee experiences and productivity.

Sam Samad: Finally, Quest continues to be at the forefront of serving public health needs. We saw an uptick in our measles offerings including testing that can be used for diagnosis or to assess vaccination status or prior infection.

Sam Samad: Of the $2 billion spend, what does spend on supplies on the sort of low end that could be sourced in China, like syringes, gloves, and gowns? Well, what we did, what I didn't give that exact number, the number I gave is of the two billion, less than 1% is sourced directly from suppliers in China by Quest Diagnostics. So, and within that less than 1% are. mostly pre-analytical supplies, so gowns, gloves. Now, that's not to say that the entirety of our pre-analytical low-tech supplies comes out of China. They come across, you know, in all parts of the world.

Sam: We also recently shared goals for project, Nova, which we expect will modernize and simplify our entire order to cash process.

Sam: While this initiative will take several years to fully implement we expect to realize the benefits sooner, including lower it spend and improved productivity.

Sam Samad: Turning to operational excellence, we continue to target 3% annual cost savings and productivity improvements through Invigorate.

Sam Samad: We are automating several areas of our laboratories from tuberculosis testing to cervical cancer screening to improve quality customer and employee experiences and productivity. Thank you very much.

Sam: Project, Nova will also support our ability to optimize data insights and Jen AI.

Sam: During the quarter, we announced a collaboration with Google cloud to streamline data management and employee Gen AI to personalized customer and employee experiences.

Sam Samad: We also recently shared goals for Project Nova, which we expect will modernize and simplify our entire order to cash process.

Sam Samad: Now, what I said is to minimize our exposure on that spend in China, we've actively been moving from suppliers, you know, in China to outside of China, including suppliers in the U.S., including suppliers around, you know, the rest of the globe, where tariffs are significantly lower. Yeah, a couple of percentages, though, Peto, just to keep in mind is, you know, we also said roughly 80% is basically manufactured or sourced in the US. So at least based on the law today, not impacted by tariffs. And, you know, also 70 to 80% of the total supplies that we have are under contract.

Sam: Finally, I want to thank our more than 55000 quest and <unk> colleagues for their dedication to living the quest purpose.

Sam Samad: While this initiative will take several years to fully implement, we expect to realize the benefits sooner, including lower IT spend and improved productivity.

Sam: Looking together to create a healthier world one life at a time.

Sam Samad: Project Nova will also support our ability to optimize data insights in Gen AI. During the quarter we announced a collaboration with Google Cloud to streamline data management and employ Gen AI to personalize customer and employee experiences.

Sam: And now Sam will provide more details on our performance in 2025 guidance Sam.

Sam: Thanks, Jim.

Sam: In the first quarter consolidated revenues were $2 $65 billion.

Sam: Up 12, 1% versus the prior year.

Sam Samad: Finally, I want to thank our more than 55,000 Quest and Lifelabs colleagues for their dedication to living the Quest purpose, working together to create a healthier world, one life at a time.

Sam: <unk> organic revenues grew by two 4%.

Sam: Revenues for diagnostic information services were up 12, 7% compared to the prior year, reflecting recent acquisitions as well as growth in our key physician and hospital channels.

Sam Samad: So you know, they have fixed pricing. And we think we can manage the exposure, the exposure is not zero, but we think it's manageable.

Sam Samad: And now, Sam will provide more details on a performance in 2025 guidance. Sam?

Sam Samad: Yeah, just to clarify, the 80% that is manufactured in the US are really the reagents, the expensive reagents for running the lab test. Right, so so the two billions or 20% price was out of the US economy probably split between, you know, Malaysia, China, or, you know, a series of other sources. That's sort of to think about that, right? That's about right. Okay, fair enough.

Sam: Total volume measured by the number of requisitions increased 12, 4% versus the first quarter of 2024.

Thanks Jim.

Sam Samad: In the first quarter, Consolidated Revenues were $2.65 billion, up 12.1% versus the prior year. Consolidated Organic Revenues grew by 2.4% Consolidated Organic Revenues were $2.5 billion.

Sam: With organic volume down by 9%.

Sam: During the quarter weather and one less day versus the prior year reduced volume growth by approximately 160 basis points.

Sam Samad: Revenues for Diagnostic Information Services were up 12.7% compared to the prior year, reflecting recent acquisitions, as well as growth in our key physician and hospital channels. [inaudible]

Sam: Total revenue per requisition was up 3% versus the prior year.

Jim Davis: And then for your M&A pipeline, just, you know, just can you sort of, you know, I talked about how the pipeline looks, it's just been a while since we haven't seen the deal close in a quarter, you know, going back to the cash flow statement. Yeah, the funnel is still healthy. And it's a mix of hospital outreach types of endeavors plus small regional labs that are still left out there. So I think it's healthy. We did, as we mentioned in the prepared remarks, enter into a collaboration with Fresenius Medical Services, where we are now going to start doing the lab testing associated with dialysis treatment in our regional labs.

Sam: Driven primarily by an increase in the number of tests per req, mostly offset by the impact of the Lifelock acquisition, which carries a lower revenue per requisition.

Sam Samad: Total volume, measured by the number of requisitions, increased 12.4% versus the first quarter of 2024, with organic volume down by 0.9% [inaudible]

Sam: On an organic basis revenue per req was up three 6% in the quarter versus last year.

Sam Samad: During the quarter, weather in one less day versus the prior year reduced volume growth by approximately 160 basis points. [inaudible]

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

Sam: Reported operating income in the first quarter was $346 million.

Sam Samad: Total Revenue for Requisition was up 0.3% versus the prior year. Driven primarily by an increase in the number of tests for rec, mostly offset by the impact of the Lifelapse acquisition, which carries a lower revenue for requisition.

Sam: Or 13% of revenues.

Sam: Compared to $300 million or 12, 7% of revenues last year.

Sam: On an adjusted basis operating income was $406 million or.

Sam: Or 15, 3% of revenues compared to $349 million.

Unit Price reimbursement was relatively flat, consistent with our expectations. Thank you.

Sam: Were 14, 8% of revenues last year.

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

Sam Samad: Reported operating income in the first quarter was $346 million or 13% of revenues, compared to $300 million or 12.7% of revenues last year.

Jim Davis: In addition, Fresenius also provided third-party laboratory testing services for other dialysis centers. And we purchased that small book of business, and that too will come into Quest Diagnostics. So that represents, as I mentioned, over 200,000 dialysis patients, patients getting tested at least once a month. And that represents a nice chunk of volume that will be coming our way when we officially close on this later in this year.

Sam: Partially offset by the impact of weather, one less day versus the prior year and wage increases.

Sam: Reported EPS was $1 94 in the quarter compared to $1 72, a year ago.

Sam Samad: On an adjusted basis, operating income was $406 million or 15.3% of revenues compared to $349 million or 14.8% of revenues last year.

Sam: Adjusted EPS was $2 21 versus $2 <unk> the prior year.

Sam: EPS in the first quarter was impacted by higher interest expense versus the prior year.

Sam Samad: The increase in adjusted operating income was due to the impact of recent acquisitions and organic revenue growth, partially offset by the impact of weather, one less day versus the prior year, and wage increases.

Sam: Cash from operations was $314 million in the first quarter versus $154 million in the prior year.

Peto Chickering: Great, thanks so much.

Unknown Executive: Thanks, operator.

Unknown Executive: Thank you.

Noah Kava: Our next question comes... Your next question comes from Tycho Peterson with Jeffrey. Your line is open. You may ask your question. Hey, this is Noah on for Tycho. Thanks for taking our question.

Sam Samad: Reported EPS was $1.94 in the quarter compared to $1.72 a year ago.

Sam: Turning now to full year 2025 guidance.

Sam: Despite the economic uncertainty and unstable macro backdrop.

Adjusted EPS with $2.21 versus $2.04 the prior year.

Noah Kava: I wanted to ask about Haystack, particularly in how you're receiving commercial orders, how you're thinking about reimbursement, submissions, and timelines, and then on the data side, anything you think needs to be done to generate more evidence. Yeah, so as we discussed in the remarks, we launched the Haystack assay commercially in the quarter. We are pleased with the progress that we've made. We had over 75 customers that were part of the early experience program, and many of those customers are continuing to do business with Quest Diagnostics. In terms of reimbursement, the test is being offered to Medicare and patients in commercial plans, and we offer it to any patient.

Sam: And given quests essential role in health care and comparative resilience.

Sam: We are reaffirming guidance for revenues and adjusted EPS.

Sam Samad: EPS in the first quarter was impacted by higher interest expense versus the prior year.

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

Sam Samad: Cash from Operations was $314 million in the first quarter versus $154 million in the prior year.

Sam: Reported EPS now expected to be in a range of $8 62 to $8 87.

Turning now to full year 2025 guidance.

Sam: And adjusted EPS to remain in the range of $9 55 to $9 80.

Sam Samad: Despite the economic uncertainty and unstable macro backdrop, and given Quest's essential role in healthcare and comparative resilience, we are reaffirming guidance for revenues and adjusted EPS.

Sam: Cash from operations is now expected to be approximately $1 5 billion.

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

Sam Samad: Therefore, revenues are expected to be between $10.7 billion and $10.85 billion.

Jim Davis: We've just started to submit for reimbursement. We're working with one of the big MACs on getting the coding and coverage policies in place, and, you know, that requires a bit of time, and it requires a bit of reimbursement experience, and that experience is well underway. You know, and in terms of evidence, stay tuned, we'll continue to work on potential evidence as we as we move forward here. Yeah, you'll publish you'll see more and more publications and the fruits of the ongoing clinical trials that Haystack had in place even before we purchased them. Well, well more than a year ago.

Sam: Our 2025 guidance reflects the following considerations.

Sam: Our revenue guidance continues to assume approximately 3% organic revenue growth.

Sam Samad: reported EPS now expected to be in a range of $8.62 to $8.87. [inaudible]

Sam: With the remainder coming from the acquisitions completed in 2024.

Sam Samad: and adjusted EPS to remain in a range of $9.55 to $9.80. [inaudible]

Sam: And announced to date.

Sam: It does not assume any contribution from prospective M&A.

Sam Samad: Cash from operations is now expected to be approximately $1.5 billion and capital expenditures are expected to be approximately $500 million.

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

Sam: We are making investments in 2025 related to project Nova.

R2025 guidance reflects the following considerations.

Sam: Which we expect will modernize our entire order to cash process.

Sam Samad: Our Revenue Guidance continues to assume approximately 3% organic revenue growth. Would the remainder are coming from the acquisitions completed in 2024?

Sam: Also despite the decision by a federal court to vacate the FDA rule on lab developed tests.

Jim Davis: Operator, next question please. Thank you and this question comes from David Westenberg with Piper Sandler. Your line is open. You may ask your question. Hi, um, thank you very much. Um, so I just wanted to on the collaboration with Google Cloud to streamline data management and use generate gen AI to personalize customer experience and employee experience, exploring experiences. How does that translate into some of the financial benefits? I was thinking about maybe the personalized customer retention, personalized customer one, maybe you you know, you get higher compliance rate and testing or something like that. And, you know, does the employee one lead to maybe some benefits from the cost side?

We still intend to make some investments this year to strengthen our regulatory capabilities to serve our growing global and life Sciences businesses.

and the announce to date.

It does not assume any contribution from prospective M&A.

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

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

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

Sam Samad: We are making investments in 2025 related to Project Nova which we expect will modernize our entire order to cash process.

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

Sam Samad: Also, despite the decision by a federal court to vacate the FDA rule on lab-developed tests, we still intend to make some investments this year to strengthen our regulatory capabilities to serve our growing global and life sciences businesses.

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

Sam: Finally, we raised our operating cash flow guidance by $50 million.

Jim Davis: What kind of specific KPIs should we be looking at to measure success in here? Thank you.

Sam: Which primarily reflects a pre tax gain to be taken in Q2 related to a payroll tax credit under the cares Act that we received in April.

Operating margin is expected to expand versus the prior year.

Jim Davis: So step one in the overall relationship with Google Cloud is simply the movement of what I call pockets of data that result that reside in a lot of various places across Quest Diagnostics, mostly on premise. So the benefits of moving that information to the cloud, I'll give you a couple. One, we have a data analytics business. And whenever we have to search the entire Quest database, you know, it's a complex task today to, you know, basically conduct searches across data that's sitting in pockets all across the country in various places. So it's really going to improve the efficiency and the effectiveness of our data analytics business.

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

Sam: With that I will now turn it back to June.

June: Thanks Sam.

Adjust the tax rate is expected to be approximately 25%

June: To summarize we delivered strong consolidated and organic revenue growth in the first quarter as demand rebounded in March following weather impacts early in the quarter.

Sam Samad: Our share count for the full year is expected to be approximately 114 million diluted shares outstanding.

June: In addition to acquisitions key drivers of growth included large enterprise partnerships advanced diagnostics and expanded health plan access.

Sam Samad: Finally, we raised our operating cash flow guidance by $50 million. $50 million.

Sam Samad: which primarily reflects the pre-tax gain to be taken in Q2 related to a payroll tax credit under the CARES Act that we received in April . [inaudible]

June: And we are reaffirming our revenue and adjusted EPS guidance for the full year 2025.

With that, I will now turn it back to Jim.

June: Now we'd be happy to take questions operator.

Jim Davis: Thanks, Sam. To summarize, we delivered strong, consolidated, and organic revenue growth in the first quarter, as demand rebounded in March following whether impacts early in the quarter.

Jim Davis: That business is primarily serving pharmaceutical companies, CROs, it serves the health plans. And it's really going to make that business more efficient, more effective, and will lead to greater growth. In terms of, you know, some of the, you know, benefits for employees, for customers, you know, our employees that are constantly searching databases to get information for patients to get information for physicians, it'll speed up those searches, you know, at some point, we're going to allow, you know, you know, AI based chat services for physicians and, and patients to get the information that they need. And honestly, at some point, look, patients and physicians, you know, we have a test menu of over 4500 tests, if you think every physician knows exactly what test to order at what specific time for what specific condition they're seeing, it's, it's just beyond the capability of many, many positions.

June: 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 fall back into the queue to.

Jim Davis: In addition to acquisitions, key drivers of growth included large enterprise partnerships, advanced diagnostics, and expanded health plan access.

June: To be placed into the queue. Please press star one from your phone to withdraw press star two.

June: To ask a question press star one.

Jim Davis: And we are reaffirming our Revenue and Adjusted EPS Guidance for the full year 2025.

Speaker Change: Our first question comes from Lukas <unk> with Barclays. Your line is open you may ask your question.

Now we'd be happy to take questions. Operator? Thank you.

Lukas: Great. Thanks, guys good morning.

Speaker Change: I wanted to touch on the organic.

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.

Speaker Change: The volumes that you guys had when you kind of break it down on a test per day, it's roughly flattish to what you guys had last year.

Speaker Change: If you have additional questions, react that you fall back into the queue.

Speaker Change: So as Youre thinking about as you roll out through the rest of the year is the patient going to be relatively similar to what we had last year.

Speaker Change: To be placed into the queue, please press star 1 from your phone. To withdraw, press star 2. Again, to ask a question, press star 1.

Speaker Change: And anything to call out there from days or what you guys have baked in from the downside from weather et cetera.

Speaker Change: Our first question comes from Luke Sergott, with Barclays, your line is open, you may ask your question.

Jim Davis: So having those types of gen AI interactive tools that allow patients and physicians to query our test menu and understand what is the best type of vitamin D test to order, what is the best type of testosterone test to order is really going to make their lives easier, faster, simpler, and actually get, you know, the best information into their hands. So those are some of the quick, easy things that we're anticipating with this. But it all starts with having our data in one location, easy to access, streamlined, efficient, and, and leading to higher quality. Thank you so much.

Speaker Change: Yes, so good morning, and thanks for your question. So just on the organic volume reported was down 90 basis points, but if we correct for the leap year impact and the weather impact year over year.

Luke Sergott: Great, thanks guys, good morning. I just wanted to touch on the organic, you know, the volumes that you guys had. When you kind of break it down on a test per day, it's roughly flatish to what you guys had last year.

Luke Sergott: And so as you're thinking about, as you roll out through the rest of the years, is the pacing going to be relatively similar to what we had last year? Anything to call out there from days or what you guys have baked in from the downside on, you know, from weather, et cetera? Yeah.

Speaker Change: It would have increased that by 160 basis points. So we would have been up.

Speaker Change: About close to 1%.

Speaker Change: Now that really does compare.

Speaker Change: With what we saw in the third quarter and fourth quarter last year. There was a progression through 2024, but only because the first and second quarter, we're really still impacted by Covid from 2023.

Luke Sergott: Yeah, so good morning, and thanks for your question. So just on the organic volume reported was down 90 basis points, but if we correct for the leap year impact and the weather impact year over year.

Michael Ryskin: Thank you. Our next question comes from Michael Ryskin with Bank of America. Your line is open. You may ask your question. Thanks for taking the question. I'm just wondering if you could give us your latest thoughts on... Other policy regulatory updates from D.C. that could happen. Specially. I'm a Sol, so just what your latest thoughts are on... and then sort of tying into that. How should we think about, um, how should we think about...

Speaker Change: The other thing I'd mention is.

Speaker Change: While January and February were certainly soft because of the weather.

Speaker Change: We did see a nice bounce back in particular during the last three weeks of March and I would tell you our volume trends in the first 1920 days of April have also been consistent with our expectations and what we saw last year. So.

Luke Sergott: Now, that really does compare, you know, with what we saw both in the third quarter and fourth quarter last year. There was a progression through 2024, but only because the first and second quarter were really still impacted by COVID from 2023.

Speaker Change: I think we're pleased with the utilization levels that we're seeing out there right now.

Speaker Change: Okay.

Speaker Change: Great. Thanks.

Speaker Change: Youre welcome. Thank you.

Jim Davis: Yeah, so let's start with The cuts on Medicare, Medicaid at this point, if anything, the Medicare Advantage plans just got a nice rate increase, so we're pleased with that, and that should certainly help in our discussions with Medicare Advantage plans around the country. There's a lot being written around Medicaid, around Medicaid potential cuts. There's a lot being written around exchange, the APA exchange related. But at this point, those bills are moving through the House and Senate. There's a reconciliation process, so I think it's too early to tell. What I would tell you is Medicaid and managed Medicaid collectively, it's about 8% of our entire business, so it's certainly not the biggest portion of what we do, but we're watching it closely.

Speaker Change: Our next question comes from Kevin Kelly <unk> with UBS. Your line is open you may ask your question.

Luke Sergott: We did see a nice bounce back in particular during the last three weeks of March.

Kevin Kelly: Thank you good morning, Thanks for taking my question.

Speaker Change: I wanted to ask the tariff question.

Luke Sergott: And I would tell you, our volume trends in the first 19, 20 days of April have also been consistent with our expectations and what we saw last year. So I think we're pleased with the utilization levels that we're seeing out there right now.

Speaker Change: And just try to understand sort of what kind of exposures.

Speaker Change: Quest has to this.

Speaker Change: In the context of how much of your supply cost come.

Speaker Change: How much of it is fixed contracts.

Great, thanks.

Speaker Change: How should we think about the risks of this going forward have you adjusted your your model or your expectations for tariffs in any way.

Speaker Change: You're welcome. Thank you. Our next question comes from Kevin Caliendo with UBS. Your line is open. You may ask your question.

Kevin Caliendo: Thank you. Good morning. Thanks for taking my question. I want to ask the tariff question and just try to understand sort of what kind of exposures.

Speaker Change: Any details you can provide would be super helpful.

Speaker Change: Sure. Thanks, Kevin.

Speaker Change: Let me just start with look we buy.

Speaker Change: About $2 billion of.

Kevin Caliendo: Quest has to this, you know, in the context of how much of your supply cost

Jim Davis: If anything, I would say there appears to be support of the exchange plan, the ACA plan that's actually in place today, so we feel optimistic about that. In terms of other regulatory, you know, things going on in DC.

Speaker Change: Reagents supplies in that $2 billion as capital.

Kevin Caliendo: Come OUS, how much of it is fixed contracts? How should we think about the risks of this going forward? Have you adjusted your model or your expectations for tariffs in any way? Any details you can provide would be super helpful.

Speaker Change: Equipment costs and also service contract so about $2 billion of total spend.

Jim Davis: Again, first, we were pleased with the outcome of the lawsuit on LDT regulation. Very pleased with that outcome. As we said in the prepared remarks, we still have elements of our business that are FDA regulated, including our work around companion diagnostics, our clinical lab work that we do for pharmaceutical companies with patients that are in clinical trials, all of that still remains in a regulated type of environment. in terms of PAMA and PAMA reform. So now that we have the FDA LDT issue behind us, I would tell you the most important thing for our trade association ACLA and for ourselves to work from a regulatory standpoint is PAMA reform.

Speaker Change: Now first of all in less than 1% of that we source directly from China.

Speaker Change: Ourselves, okay and.

Speaker Change: Sure, thanks, Kevin. Let me just start with, look, we buy about $2 billion of...

Speaker Change: We have plans already activate where that less than 1% small number.

Speaker Change: We are moving.

Kevin Caliendo: You know, reagents, supplies, and that $2 billion is capital, you know, equipment cost.

Speaker Change: Some of those and by the way that less than 1% is pre analytical supplies gowns gloves masks tubes really simple types of things. So some of it we've already moved we're in the process of moving others. So we actually think our exposure there.

Kevin Caliendo: and also service contracts. So about $2 billion of total spend. [inaudible]

Kevin Caliendo: First of all, less than 1% of that we sourced directly from China.

Speaker Change: Is not that great.

Speaker Change: Now if you come back to that $2 billion.

Kevin Caliendo: ourselves, okay? And we have plans already activate where that less than 1% small number.

Speaker Change: <unk>, 75% to 80% of that.

Jim Davis: As you know, we have a new Congress, which means and you have a new majority position in the House. So we are working with you know, that our trade association is actively working with the three committees that really set health care policy, the House Ways and Means Committee, House Energy and Commerce, Senate Finance Committee. There I would tell you there's broad bipartisan support to actually get something done this year in terms of PAMA reform. So now if it looks like if we're moving into the back half of the year, and we don't see progress, we'll push for another delay, a sixth delay in the cuts that were anticipated six years ago.

Speaker Change: That spend is really reagents and supplies for the laboratory.

Kevin Caliendo: We are moving some of those, and by the way, that less than 1% is pre-analytical supplies, gowns, gloves, masks, tubes, really simple types of things.

Speaker Change: And.

Speaker Change: And that is actually manufactured here in the U S. So we can have global suppliers like Siemens and Roche, but the manufacturing of that is in the U S. So again, we believe our exposure is small the other thing I'd say is most of our supplies are under multi year contracts, obviously those contracts come up every four to five years.

Kevin Caliendo: So some of it we've already moved, we're in the process of moving others, so we actually think our exposure there is not that great [inaudible]

Kevin Caliendo: Now, if you come back to that $2 billion, about 75% to 80% of that spend is really reagents and supplies for the laboratory.

Speaker Change: So.

Speaker Change: 20% will come up this year, but we compete those things.

Speaker Change: So as we said in the prepared remarks.

Speaker Change: The tariff impact we think we can cover at this point given the guidance that we've put out there.

Kevin Kelly: Just add Kevin.

Unknown Executive: Great, thank you so much. You're welcome. Thank you for joining us.

Speaker Change: This is obviously based on under current law and regulations. So this is what we are assuming based on today, what we know today the impact is not zero, but the impact is very manageable for us and it's baked into our current guidance.

So again, we believe our exposure is small.

Andrew Brackmann: Question comes from Andrew Brackmann with William Blair. You may ask your question. Your line is open. Hi, guys. Good morning. Thanks for taking the question. Maybe another one just on the macro side of things. You know, there's been some discussion around the potentials for a recession later this year.

Kevin Caliendo: The other thing I'd say is most of our supplies are under multi-year contracts. Obviously, those contracts come up every four to five years, so, you know, 20% will come up this year, but, you know, we compete those things [inaudible]

Speaker Change: That's super helpful. I appreciate the color can I ask a quick follow up.

Jim Davis: So as you sort of think about the business, how it's set up today to sort of withstand any demand pressures from unemployment rates going higher, how does that sort of, how has it changed over the last handful of years? And how might a recessionary demand sort of shock be different today versus say, 08, 09? Yeah, so good question. And, you know, the first thing I asked you, you know, to keep in mind, look, it's important to remember patients access, you know, the healthcare system, and they need, you know, access to affordable lab testing in any environment, okay, whether the economy is booing or the economy is in a recession, we provide really essential services that are needed for both providers and for patients.

Kevin Caliendo: So as we said in the prepared remarks, any tariff impact we think we can cover at this point given the guidance that we've put out there.

Speaker Change: Just in the last week or so.

Speaker Change: Had some stories about strikes and life labs.

Speaker Change: The stories don't give a ton of details it sounds like it's somewhat organized but non union can you just maybe talk about what that is and if it's impacting life labs in any way or impacting the potential accretion from lifelock.

Speaker Change: Yeah, and I would just add, Kevin, this is obviously based on undercurrent law and current regulations. So this is what we're assuming based on today, what we know today, the impact is not zero, but the impact is very manageable for us, and it's baked into our current guidance. And I would just add, I would just add, I would just add, I would just add,

Speaker Change: Sure Kevin So first of all the strike is just on the British Columbia side recall life labs broadly participates in the Ontario marketplace and the British Columbia marketplace.

Speaker Change: That's, that's super helpful. I appreciate the color. Can I ask a quick follow-up?

Speaker Change: Just in the last week or so, we've read some stories about strikes up in lifelabs.

Speaker Change: Colombia is actually the smaller of the two sides. There are about 200 employees that are involved in the strike. Those 200 employees are part of a much bigger union of roughly 70000 employees called the BCG EU, it's largely a public service Union.

Speaker Change: The stories don't give a ton of details. It sounds like it's somewhat organized but non-union. Can you just maybe talk about what that is and if it's impacting LifeLabs in any way or impacting the potential accretion from LifeLabs?

Sam Samad: Now, it's not to say we're for most people that lose their jobs. So while we're not recession proof, we believe, you know, healthcare services, in particular, diagnostic lab testing, you know, are still really essential for all for the health and well being of all human beings.

Speaker Change: Yeah, I'm sure, Kevin. So, first of all, the strike is just on the British Columbia side. Recall Life Labs broadly participates in the Ontario marketplace and the British Columbia marketplace.

Speaker Change: Now.

Speaker Change: There is certain.

Speaker Change: The statues about how strikes are conducted in British Columbia and one of those is you can only we have a 128 patient service centers in British Columbia, you can actually only strikes at 17 of those 128. So on any given day actually there is there is a small amount of people that are actually.

British Columbia is actually the smaller of the two sides. [inaudible]

Speaker Change: There are about 1200 employees that are involved in this strike. Those 1200 employees are part of a much bigger union of roughly 70,000 employees called the BCG EU. It's largely a public service union.

Speaker Change: Out on strike and our management team in British Columbia has to backfill those open positions, which they've been doing we do have a mediator involved we are making progress and we hope to have things settled within the next 30 to 45 days.

Now...

Speaker Change: There's certain statues about how strikes are conducted in British Columbia and one of those is you can only we have 128 patient service centers in British Columbia you can actually only strikes at 17 of those 128.

Speaker Change: Great. Thank you guys so much.

Sam Samad: Yeah, and Andrew, I would add a couple of things as well to Jim's comments. You know, one, everything that Jim said, but there's also more safety nets today than there were back in 2009. You know, you've got the Affordable Care Act. So, you know, people have in general, some more coverage in terms of or backup coverage in terms of what's out there through the ACA. And, you know, even if we look back at the last Great Recession, you know, patient collection rates held fairly steady. So obviously, we'll monitor those, we'll make sure that we, you know, maintain our patient assistance programs and all that.

Kevin: Yes, thanks, Kevin.

Speaker Change: Thank you. Our next question comes from Patrick Donnelly with Citi. Your line is open you may ask your question.

Speaker Change: So, on any given day, actually, there's a small amount of people that are actually out on strike, and our management team in British Columbia has to backfill those open positions, which they've been doing.

Speaker Change: Hey, guys. Thank you for taking the questions Sam.

Speaker Change: And maybe just a quick one just on pacing on margins can you talk a little bit about <unk> in a typically seasonally the strongest quarter since we won't talk to margins and earnings there.

Speaker Change: We do have a mediator involved. We are making progress and we hope to have things settled within the next 30 to 45 days.

Speaker Change: The impact again from some of the tariff noise freight surcharges and things like that.

Speaker Change: Then just quickly life labs.

Great, thank you guys so much.

Speaker Change: Trying to strike just outperformed this year or in the quarter would be helpful.

Yep, you're welcome. Thanks, Kevin.

Sure and good morning, Patrick.

Speaker Change: Thank you. Our next question comes from Patrick Donnelly with City. Your line is open. You may ask your question.

Andrew Brackmann: But, you know, patient concession rates did not really spike up materially back in 2009. Great. Thanks, guys.

Speaker Change: Let's talk first about margins in Q1, and then I'll talk about the pacing and address your question about life labs.

Patrick Donnelly: Hey guys, thank you for taking the questions. Sam, maybe just a quick one. Just on pacing on margins, can you talk a little bit about 2Q? I know typically seasonally, you know, that's the strongest quarter, so I just want to talk through margins and earnings there.

Jack Meehan: Your next question comes from Jack Meehan with Neff Fund Research. Your line is open. You may ask your question.

Speaker Change: Q1 margins came in operating margins at 15, 3%. So a 50 basis point expansion from prior year that was driven by volume.

Patrick Donnelly: Any impact again from some of the tariff noise, you know, freight surcharges, things like that, and then just quickly lifelabs outside the strike just how a performance you're in the quarter will be helpful. [inaudible]

Jack Meehan: Morning. I just had a couple of follow-ups. The first was... I don't think I heard it earlier. Just what was the final impact from weather when you take what you experienced in January and February and talk about the Analyst Day? That's question number one.

Speaker Change: Fact that somewhat negatively by the weather impacts that we talked about which were more severe than what we saw last year, but in general strong margins 15, three operating margins as we think about the full year Patrick the pacing is really very consistent with what we expect to see it.

Thor, and good morning, Patrick.

Patrick Donnelly: Listen, let's talk first about margins in Q1 and then I'll talk about the pacing and address your question about life labs.

Jack Meehan: And then question number two, just, Sam, last quarter you provided some helpful commentary around EPS cadence. Was just curious if you still think that's a good way to think about how the guidance is set up for the year. Thank you.

Speaker Change: In terms of traditional or historic seasonality, even going back pre COVID-19 seasonality, because COVID-19 impacted a little bit the seasonality. So traditionally what we've seen and I'm talking really here EPS facing not necessarily operating margin pacing, but EPS spacing, usually what we see is roughly.

Patrick Donnelly: You know, Q1 margins came in, operating margins at 15.3%, so a 50 basis point expansion from prior year

Patrick Donnelly: That was driven by volume, impact that somewhat negatively by the weather impacts that we talked about which were more severe than what we saw last year. But in general, strong margins, 15.3 operating margins.

Sam Samad: Sure. Yeah, I'll take the first one, Jack. So in terms of whether we set it on a year over year basis point a year over year basis, it was a 50 point impact. In terms of volume, we said the one last day the leap year was worth 110 basis points. So 160 altogether. Now, yes, in our investor day, we suggested our revenue would be lighter in the quarter. Remember, that was at the beginning of March, we prepare those things the first week of March, our actual volume, and it was some weather during that first week of March was actually light.

Speaker Change: 49% in the first half of the year about 51% in the second half of the year.

Patrick Donnelly: You know, as we think about the full year, Patrick, the pacing is really...

Speaker Change: And so you see Q2 being the best quarter Q3, slightly lower than that Q4 lower than Q3, and then usually Q1 is actually the lowest quarter of the year in terms of EPS contribution.

Very consistent with what we expect to see.

Patrick Donnelly: in terms of traditional or historic seasonality, even going back pre-COVID seasonality because COVID...

Speaker Change: So.

Speaker Change: That's what we expect in terms of pacing in terms of expectation for full year 2025 still the expectation is that we continue that we grow operating margins rates versus last year, both dollars and rate.

Roughly, you know, 49% in the first. [inaudible]

Sam Samad: But we saw a really strong recovery in the last three weeks of March, which we mentioned has continued into April, the first 1920 days of April, our volume trends have been in line with what we were seeing in Q3 and Q4 of last year. Yeah, and yes, yeah, for sure. And Jack, remember, the half a percent of weather is a year over year impact. So it's incremental to what we saw in last year, as an impact on growth. And from an EPS perspective, you know, the seasonality is, I think, consistent with what we've talked about in the past in terms of traditional seasonality.

half of the year.

Patrick Donnelly: You know, about 51 percent in the second half of the year. And so, you know, you see Q2 being the best quarter, Q3, slightly lower than that, Q4, lower than Q3, and then usually Q1 is actually the lowest quarter of the year in terms of EPS contribution.

Speaker Change: In terms of Lifelock, Yes, let me just give you a little color on <unk> in the quarter first of all I think as you all know most of the revenue is <unk>. So there is generally not surprised on the revenue side. There is a small amount of.

So...

Patient.

Patrick Donnelly: You know, that's, that's what we expect in terms of pacing, in terms of expectation for full year 2025.

Speaker Change: Its physician and patient physician revenue, where youre selling tests directly to physicians outside of the <unk> agreement, but the revenue was really basically in line with our expectations on the margin side.

Patrick Donnelly: Still the expectation is that we continue, that we grow operating margins rate versus last year, both dollars and rate.

Speaker Change: As we indicated.

Speaker Change: We expect to have life labs.

Patrick Donnelly: In terms of lifelabs? Yeah, let me just give you a little color on lifelabs in the quarter first fall. I think, as you all know, most of the revenue is capitated. So there's generally not surprises on the revenue side. There's a small amount of...

Speaker Change: The corporate average within two to three years and I would just tell you. We made again nice progress in the quarter, we've seen quarter over quarter improvements in margin rate and we expect to be if anything on the early side of our plans of having it at the.

Sam Samad: So EPS in Q2 being the highest quarter, Q3 is a slight step down, Q4 is a step down from that, but second lowest quarter of the year in terms of EPS cadence, and then Q1 is usually the lowest EPS that we get. So Q1 is the lowest quarter of the year. So you know, that type of seasonality, I think, is still realistic to assume. Thank you.

Patrick Donnelly: It's patient physician, patient physician revenue where you're selling tests directly to physicians outside of the capitated agreement. But the revenue was really basically in line with our expectations. [inaudible]

Speaker Change: Company corporate margin in two to three years.

Speaker Change: Operator next question.

on the margin side, you know, as we indicated.

Speaker Change: Thank you and next question comes from Elizabeth Anderson with Evercore ISI. Your line is open you may ask your question.

Erin Wright: Our last question comes from... Your last question comes from Erin Wright with Morgan Stanley. Your line is open. You may ask your question. Thanks.

Patrick Donnelly: We expect to have lifelabs at the corporate average within two to three years. And I would just tell you we made, again, nice progress in the quarter. We've seen quarter over quarter improvements in margin rate.

Elizabeth Anderson: Hi, guys. Good morning, Thanks, so much for that question.

Elizabeth Anderson: If there are any of the potential hospital reimbursement challenges, creating an opportunity in the hospital lab management outreach base are you would you say sort of too soon if you can just sort of talk about maybe the progression of some ourselves.

Jim Davis: So you mentioned continuing investments that you're making that I guess that would offset the app or what would have been kind of the LBT pool, I guess, what are those in terms of what you're making there? And what's incremental relative to what you were thinking previously?

Patrick Donnelly: and we expect to be, if anything, on the early side of our plans of having it at the company corporate margin in two to three years.

Sam Samad: You also mentioned labor expenses, like with anything as anything changed on that front, in terms of what you're seeing, or your expectations there, and then just more broadly speaking around kind of expenses, I guess, can you speak to some of the offsetting factors or you have from here in response to whether it's inflationary pressures, like labor costs, or any direct indirect impacts kind of from tariffs that you were mentioning before? All right, so let me comment first on the investments from an FDA perspective.

Elizabeth Anderson: Questions and debates that you've been hearing recently.

Operator, next question

Elizabeth Anderson: Yes, I think it's a bit too soon.

Speaker Change: Thank you and this question comes from Elizabeth Anderson with Evercore ISI, your mind is open, you may ask your question

Elizabeth Anderson: It's not to say, we won't contemplate price increases of tariffs start to hit us in a meaningful way.

Elizabeth Anderson: Hi guys, good morning. Thanks so much for the question. Are tariffs or any of the potential hospital reimbursement challenges, creating an opportunity in the hospital lab management space or outreach space, or would you say sort of too soon, if you could just sort of talk about the maybe the progression of some of those questions and debates that you've been hearing recently?

Elizabeth Anderson: As you know.

Elizabeth Anderson: The health plan contracts.

Elizabeth Anderson: Probably don't give us enhanced to go back in and open those up.

Elizabeth Anderson: Having said that 25, 20% to 25% of the contracts come up every year and if we're seeing a meaningful impact on our business, we're certainly going to try to pass that through.

Jim Davis: And then I'll have Sam make some comments on the labor outlook and inflation. So as we said at Investor Day, expected to spend about 10 million dollars of incremental cost investment to prepare for the FDA LDT rule. Now, that was really centered on two things that the FDA asked us to have in place for year one. One was the build out of a complaint handling unit, and two was enabling the output of that complaint handling unit, which is the analysis of complaints that potentially turn into MDRs, medical device reports, and to have that the ability to exchange information with the FDA and electronic means.

Elizabeth Anderson: Yeah, I think it's a bit too soon. It's not to say we won't contemplate price increases if tariffs start to hit us in a meaningful way. As you know,

Elizabeth Anderson: The health.

Elizabeth Anderson: Health system pricing landscape I would still say is the most challenging of all that we deal with.

Elizabeth Anderson: But again, if we are hit in a meaningful way, we're certainly going to try to pass that along too.

You know, the health plan contracts, you know, probably don't give us [inaudible]

Elizabeth Anderson: With health systems client Bill consumer Bill and anything outside of health plans.

and we'll see you next time.

Elizabeth Anderson: Sorry, Jim I meant more like our hospitals like increasingly seeking relationships like in your acquisition strategy sorry, If my question wasn't clear.

Elizabeth Anderson: Okay.

The help.

Speaker Change: The funnel of opportunities on what we now call our co lab collaborative lab services agreement continues to be very robust.

Jim Davis: Now, we're not going to spend zero dollars and we're likely not to spend 10 million dollars this year. However, as I mentioned, we have a growing companion diagnostics business. We have a life sciences business that does clinical trial work for both supporting CROs and supporting pharmaceutical companies. And we take in reference testing from close to 40 countries around the world, all which operate in various ISO frameworks that require some type of regulatory framework. So we still have some infrastructure needs to be put in place. We still actually do need to have a complaint handling unit.

Elizabeth Anderson: But again, if we are hit in a meaningful way, we're certainly going to try to pass that along to both health systems, client bill, consumer bill, and anything outside of health plans.

Speaker Change: In the process of negotiating with several institutions on this so if anything youre right. It can accelerate those opportunities if if suppliers start to pass those tariffs in the form of price increases to our to our health systems.

Jim Davis: Sorry, Jim. I meant more like our hospitals increasingly seeking relations in your acquisition strategy. Sorry if my question wasn't clear. [inaudible]

Speaker Change: Got it thank you.

Thank you. Our next question comes from Michael Cherny with Leerink Partners. Your line is open you may ask your question.

Michael Cherny: Good morning, and thanks for taking the question maybe to kind of get at the market dynamics are a little different fashion.

Michael Cherny: I appreciate the color you gave on the tariff impact Thats certainly helpful. I would assume that other entities in the market.

Jim Davis: It may not need 40 resources. It may need something much smaller than that to support the other elements of our business that again are growing and operate under FDA regulation.

Michael Cherny: Then you and your largest peer are going to be a slightly more challenging position and trying to get to.

Got it. Thank you.

Jim Davis: So, again, the answer is not zero, the answer is not ten, somewhere in between that, but we expect to continue to improve the regulatory and quality organization that we have in place here at Quest today.

Michael Cherny: Managing any offsets on costs similar to essentially what happened with the inflationary environment on the wage side from a couple of years back how do you think about the strategic decision discussions you are having with payers on potentially driving more share about opportunities you have.

Speaker Change: Thank you. Our next question comes from Michael Cherny with Larry Partners, your invite us open. You may ask your question.

Michael Czerny: Morning and thanks for taking the question. Maybe to kind of get up the market dynamics.

Sam Samad: Sam? Yeah, and just in general on expenses, so let me break it down into three things. So labor, first of all, which is, you know, a big piece. Our expectation is still somewhere in the three to four percent in terms of wage inflation this year. In terms of retention or turnover, turnover is now somewhere in the mid to high teens. So an improvement definitely versus where we ended 2024, which was, you know, around 19 percent or so, approximately 19. You know, I would say we're approaching pre-pandemic rates in terms of turnover, which was somewhere around 14, 14-ish percent.

Michael Czerny: in a little different fashion. I appreciate the color you gave on the tariff impact that's certainly helpful. I would assume that other entities in the market...

Michael Cherny: We service a wider swath of their membership basis, given you reach your scale and your ability to absorb it.

Mara Than You and your largest peer are going to be in slightly more challenging position in trying to get to...

Michael Cherny: Were offset any of these cost dynamics curious.

Michael Cherny: Early but if youre seeing any changes in terms of strategic payer dynamic and then looking to you more closely given you're in a much more stable financial footing.

Michael Czerny: Managing the offsets on cost similar to potentially what happened with the inflationary environment on the wage side from a couple years back. How do you think about strategic decisions, discussions you're having with payers on potentially driving more share about opportunities you have? [inaudible]

Speaker Change: Yeah, So Mike.

Speaker Change: I would tell you that our discussions and collaborations with the health plans are ongoing continuous.

Sam Samad: So we're making good progress there. Turnover is definitely improving, which improves productivity, which improves our expenses as well, and, you know, impacts potentially wage inflation. SG&A, you know, we continue to drive leverage on SG&A, and you talked about, you know, some of the areas that we focus on in terms of managing expenses actively. SG&A is one of them. You know, our goal is to not grow SG&A more than half of the rate of growth of revenues at most, I would say. That's our target, and that's our focus.

Speaker Change: As you know we have all sorts of programs in place on the redirection of work to try to redirect work from expensive.

Speaker Change: Out of network labs from expensive health system labs.

Michael Czerny: Curious, I know it's early, but if you're seeing any changes in terms of strategic pay or dynamic, and I'm looking to you more closely given you're on much more stable financial footing.

Speaker Change: Several of our large payers we have.

Speaker Change: Collaborative relationships that provide us with information of physicians that are using these very expensive labs and our teams go.

Michael Czerny: Yeah, so I would tell you that our discussions and collaborations with the health plans are ongoing, continuous.

Speaker Change: And work those lists really hard and trying to convert that over.

Unknown Executive: And then finally, and really importantly, Invigorate as a whole, which is to offset the impacts of inflation, wage inflation, you know, any other major cost drivers in our business, is to offset them through Invigorate of approximately 3 percent productivity and cost improvement. And, you know, I would say we're on track, and we've got that target this year, and we're executing towards it. Operator, any more questions in the queue? I'm showing no further questions.

Speaker Change: As we also mentioned in the prepared remarks, we are now a preferred lab network provider for Optum health services and that went into place during the quarter and in a similar way we work with the roughly 85000 physicians that are in the Optum network, we worked with the management.

Out of Network Labs, from Expensive Health System Labs.

Speaker Change: <unk> team at Optum health to try to redirect as much of that work into <unk>.

Speaker Change: <unk> to quest diagnostics.

Speaker Change: Youre going to get really great quality.

Speaker Change: And a great value.

Michael Czerny: As we also mentioned in the prepared remarks, we are now a preferred lab network provider for Optum Health Services.

Unknown Executive: I'll turn the call back over to your. Okay, thanks again for joining our call today. And we certainly appreciate the support and have a great day. Thank you for participating in the Quest Diagnostics first quarter 2025 conference call. The transcript of prepared remarks on this call will be posted later today on Quest Diagnostics website at www.questdiagnostics.com. A replay of the call may be accessed online at www.questdiagnostics.com forward slash investor or by phone at 866-361-4757 for domestic callers or 203-369-0183 for international callers. Telephone replays will be available from approximately 1030 a.m. Eastern Time on April 22nd 2025 until midnight Eastern Time, July 1st of 2025.

Speaker Change: So if anything yes, I agree these tariffs may.

Speaker Change: Push probe and help do that and move that work even quicker.

and that went into place during the quarter. Hello.

Speaker Change: Yeah.

Michael Czerny: And in a similar way, we work with the roughly 85,000 physicians that are in the Optum Network. We work with the management team at Optum Health.

Speaker Change: Operator next question please.

Speaker Change: Thank you. Our next question comes from <unk> Chickering with Deutsche Bank. Your line is open you may ask your question.

Speaker Change: Hey, good morning, guys, a follow up to Kevin's question on the tariffs and I think I missed one of the numbers that you gave out the $2 billion spend what to spend on the supplies on the sort of low end.

Michael Czerny: You know, labs to Quest Diagnostics where you're going to get really great quality at a great value. So if anything, yeah, I agree. These tariffs may push probe and help do and move that work even quicker. Thank you.

Speaker Change: That can be sourced in China, like stringent gloves and gowns.

Speaker Change: Well, what we did what I didn't get that exact number the number I gave is of the $2 billion.

Operator, next question please.

Speaker Change: Less than 1% is sourced directly from suppliers in China by Quest diagnostics. So.

Speaker Change: Thank you. Our next question comes from Pito, Chickering with Doysha Bank. Your line is open. You may ask your question.

Peto Chickering: Hey, good morning guys. I follow up to Kevin's question on the terrorist and I think I missed one of the numbers that you gave out. The $2 billion spend. What does spend on supplies on this low end that could be sourced in China like stringes, gloves and gowns?

Speaker Change: Within that less than 1% or.

Speaker Change: Mostly in pre analytical supply so gallon slots now that's not to say that.

Speaker Change: The entirety of our pre analytical low tech supplies comes out of China, They come across and all those in all parts of the world.

Goodbye.

Peto Chickering: Well, what we did, what I didn't give that exact number, the number I gave is of the two billion less than one percent is sourced directly from suppliers in China by Quest Diagnostics.

Speaker Change: <unk>.

Speaker Change: What I said is to minimize our exposure on that spend in China. We've we've actively been moving from suppliers in China to outside of China, including suppliers in the U S, including suppliers around the rest of the globe, where tariffs are significantly lower.

So in within that less than 1% are

Peto Chickering: Mostly pre-analytical supplies, so gowns, gloves. Now, that's not to say that the entirety of our pre-analytical low-tech supplies comes out of China. They come across in all parts of the world.

Speaker Change: Yes, a couple of percentages, though Peter just to keep in mind as we also said roughly 80% is basically manufactured or sourced in the U S. So at least based on the law today not impacted by tariffs.

Bow.

Peto Chickering: What I said is to minimize our exposure on that spend in China, we've actively been moving from suppliers.

Speaker Change: And.

Speaker Change: So 70% to 80% of the total suppliers that we have are under contract. So they have fixed pricing.

Peto Chickering: You know, in China, to outside of China, including suppliers in the US, including suppliers around, you know, the rest of the globe, where tariffs are significantly lower. [inaudible]

Speaker Change: We think we can manage the exposure the exposure is about zero, but we think it's manageable, yes, just to clarify the 80% that is manufactured in the U S are really the reagents the expensive reagents for running our lab testing.

Speaker Change: Alright.

Speaker Change: So the $2 billion or 20% price versus outside the U S accommodation, probably split between Malaysia, China or Siri.

Peto Chickering: So at least based on the law today, not impacted by tariffs.

Speaker Change: A serious.

Speaker Change: However, the sources.

Speaker Change: Think about that right.

Peto Chickering: Under contract, so they have fixed pricing and we think we can manage the exposure. The exposure is not zero, but we think it's manageable. Just to clarify, the 80% that is manufactured in the US are really the reagents, the expensive reagents for running the lab test. Thank you.

Speaker Change: That's about right.

Speaker Change: Okay Fair enough and then.

Speaker Change: For your M&A pipeline just just.

Speaker Change: Can you sort of.

I'll talk about sort of how the pipeline looks it's just been a while since we haven't seen a deal closing quarter or are you going back to the casual savings since.

Speaker Change: Fourth quarter 'twenty three does does the pipeline for our we'd still look at is as robust as.

Peto Chickering: Right, so how did you billions or 20% of price-sourced outs out of the U.S., a commission I'll be split between Malaysia, China, or a series of other sources that I started to think about that, right?

Speaker Change: As it has been do you sort of see the pace continuing as expected.

Speaker Change: Or as hospitals continue to do well operationally, excluding the current political environment do you see that you've changed the pace of housing as you view outreach deals. Thanks, so much.

That's about right.

Okay, I'll get fair enough. And then...

for...

Speaker Change: Yes, the funnel is still healthy and it's a mix of <unk>.

Speaker Change: Hospital outreach types of endeavors, plus small regional labs that are still left out there. So I think it's healthy.

Peto Chickering: as it has been de-sourced to see the pace continually as expected, or as hospitals continue to do well operationally, excluding the current political environment, do you see that change the pace of as you average deals? Thanks so much.

Speaker Change: We did as we mentioned in the prepared remarks enter into a collaboration with Perseus Medical services, where we are now going to start doing the lab testing associated with dialysis treatment in our regional Labs. In addition, Fresenius also provided third.

Peto Chickering: Yeah, the funnel is still healthy and it's a mix of hospital outreach types of endeavors plus small regional labs that are still left out there, so I think it's healthy. [inaudible]

Speaker Change: Party Laboratory testing services for other dialysis centers, and we purchase that small book of business and that too will come into quest diagnostics. So that represents as I mentioned over 200000 dialysis patients.

Peto Chickering: We did, as we mentioned in the prepared remarks, enter into a collaboration with Vircinius Medical Services where we are now going to start doing the lab testing associated with dialysis treatment in our regional labs.

Speaker Change: <unk> is getting tested at least once a month and that represents a nice chunk of volume that will be coming our way when we officially closed on this later in this year.

Speaker Change: Okay.

Peto Chickering: In addition, for Sennius also provided third-party laboratory testing services for other dialysis centers

Speaker Change: Great. Thanks, so much.

Speaker Change: Thanks, Operator question Ken.

Speaker Change: Thank you. Our next question comes from Tycho Peterson with Jefferies. Your line is open you may ask your question.

Peto Chickering: and we purchased that small book of business and that too will come into Quest Diagnostics. So, that represents, as I mentioned, over 200,000 dialysis patients,

Speaker Change: Okay.

Speaker Change: On for Tycho. Thanks for taking our question I wanted to ask about Haystack procedurally.

Peto Chickering: Patients getting tested at least once a month, and that represents a nice chunk of volume that will be coming our way when we officially close on this later in this year.

Speaker Change: And commercial orders, how youre thinking about reimbursement submissions and timelines and then on the data side anything you think so.

Speaker Change: It has to be done to generate more evidence.

Speaker Change: Yeah. So.

Great, thanks so much.

Speaker Change: As we discussed in the remarks.

Thanks operator question come

Speaker Change: We launched the haystack.

Speaker Change: Thank you. On this question comes from Tykel Peterson with Jeffries. Your line is open. You may ask your question and I will answer your question.

Speaker Change: Commercially in the quarter.

Speaker Change: We are pleased with the progress that we've made we had over 75 customers that were part of the early experience program and many of those customers are continuing to do business with quest diagnostics in terms of reimbursement on the test is being offered to Medicare.

Speaker Change: Hey, this is Noah Onfer, Tyga, thanks for taking our question. I wanted to ask about Hey Stack, particularly in your receiving commercial orders, how you're thinking about reimbursement submissions and time lines, and then on the data side, anything you think possibly needs to be done to generate more evidence. Thanks.

Speaker Change: Patients in commercial plans and we offered to any patient.

Speaker Change: We've just started to submit for reimbursement, we're working with one of the big Macs on getting the coding and coverage policies in place and that requires a bit of time and it requires a bit of reimbursement experience and that experience is well underway.

Yeah, so um...

Speaker Change: As we discussed in the remarks, we launched the haystack assay commercially in the quarter. We are pleased with the progress that we've made. We had over 75 customers that were part of the early experience program and many of those customers are continuing to do business with Quest Diagnostics. In terms of reimbursement, the test is being offered to Medicare and patients in commercial plans and we offer to any patient. [inaudible]

And in terms of evidence stay tuned we'll continue to work on potential evidence as we as we move forward here, Yes, you will publish youll see more and more publications in the fruits of the ongoing clinical trials that haystack had in place even before we purchased them.

Speaker Change: Well more than a year ago.

Speaker Change: Yeah.

Speaker Change: Operator next question. Thank.

Speaker Change: And, you know, that requires a bit of time and requires a bit of reimbursement experience, and that experience is well underway.

Speaker Change: Thank you. Our next question comes from David Westenburg with Piper Sandler. Your line is open you May ask your question Hi.

David Westenburg: Thank you very much so I just wanted to on the collaboration with Google cloud to streamline data management.

Speaker Change: These generate.

Speaker Change: <unk> personalized cut.

Speaker Change: Customer experience and employee experience exploring experiences how does that translate into some of the financial benefit that we're thinking about maybe the personalized customer retained.

Speaker Change: Personalized customer one maybe you.

Speaker Change: Higher compliance rate in testing or something like that.

Speaker Change: Does the employee one need to maybe.

Speaker Change: So some benefits from from the cost side, what kind of specific kpis should we be looking at to measure success in here they get.

Speaker Change: Deny AI to personalized.

Speaker Change: So step one in the overall relationship with Google Cloud is simply the movement of what I call pockets that that reside in a lot of various places across class diagnostics, mostly on premise. So the benefits of moving that information to the cloud.

Speaker Change: Customer experience and employee experience alright, exploring experiences how does that translate into some of the financial benefits I was thinking about maybe the personalized customer retained.

Speaker Change: Personalized customer one maybe you do you get higher compliance rate in testing or something like that.

Speaker Change: Does the employee one need to maybe.

Speaker Change: Give me a couple one we have a data analytics business and whenever we have to search.

Speaker Change: So some benefits from from the cost side, what kind of specific kpis should we be looking at to measure success in this.

Speaker Change: Entire request database, it's a complex task today.

Speaker Change: Thank you.

Sure. So step one in the overall relationship with Google Cloud is simply the movement of what I call pockets that that reside in a lot of various places across quest diagnostics, mostly on premise. So the benefits of moving that information to the cloud.

Speaker Change: Basically conduct searches across data that's sitting in pockets all across the country in various places so it's really going to improve the efficiency and the effectiveness of our data analytics business that business is primarily serving.

Speaker Change: Pharmaceutical companies Crows. It serves the health plans and it's really going to make that business more efficient more effective and will lead to greater growth in terms of.

Speaker Change: Give me a couple one we have a data analytics business and whenever we have to search.

Speaker Change: The entire quest database, it's a complex task today to basically conduct searches across data that's sitting in pockets all across the country in various places so it's really going to improve the efficiency and the effectiveness of our data analytics business that business is primarily serving.

Speaker Change: Some of the.

Speaker Change: Benefits for employees for our customers.

Our employees that are constantly searching databases to get information for patients to get information for physicians it'll speed up those searches.

Speaker Change: At some point, we're going to allow.

Speaker Change: AI based chat services for physicians and patients to get the information that they need and honestly at some point look to patients and physicians. We have a test menu of over 4500 test. If you think every physician knows exactly what tests to order at what specific time for what specific condition.

Speaker Change: Pharmaceutical companies Crows. It serves the health plans and it's really going to make that business more efficient more effective and will lead to greater growth in terms of.

Speaker Change: Some of the.

Speaker Change: Benefits for employees for our customers.

Speaker Change: Our employees that are constantly searching databases to get information for patients to get information for physicians it'll speed up those searches.

Speaker Change: <unk> seen.

Speaker Change: It's just beyond the capability of many many physicians so having those types of gen. AI interactive tools that allow patients and physicians to query our test menu and understand what is the best types of vitamin D tests to order what is the best type of testosterone test to order.

Speaker Change: At some point, we're going to allow.

Speaker Change: AI based chat services for physicians and patients to get the information that they need and honestly at some point what patients and physicians, we have a test menu of over 4500 test. If you think every physician knows exactly what tests to order at what specific time for what specific condition. They are seeing.

Speaker Change: It's really going to make their lives easier faster simpler and actually get the best information into their hands. So those are some of the quick easy things that we're anticipating with this but it all starts with having our data in one location easy to access streamlined efficient and and leading to higher quality answers.

Speaker Change: <unk>.

Speaker Change: It's just beyond the capability of many many physicians so having those types of gen. AI interactive tools that allow patients and physicians to query our test menu and understand what is the best types of vitamin D test to order what is the best type of testosterone test to order.

Speaker Change: Thank you so much.

Thank you. Our next question comes from Michael <unk> with Bank of America. Your line is open you may ask your question.

Speaker Change: It's really going to make their lives easier faster simpler and actually get the best information into their hands. So those are some of the quick easy things that we're anticipating with this but it all starts with having our data in one location easy to access streamlined efficient and and leading to higher quality answers.

Speaker Change: Great. Thanks for taking the question.

Speaker Change: Just one overall everything together just wondering if you could give us your latest thoughts on.

Speaker Change: Other policy regulatory updates from DC that could happen this year, especially anything on Pam I saw so just what are your latest thoughts are on that and then sort of tying into that some concern about potential cuts to Medicare and Medicaid just how should we think about.

Speaker Change: Thank you so much.

Speaker Change: Thank you. Our next question comes from Michael <unk> with Bank of America. Your line is open you may ask your question.

Speaker Change: How should we think about.

Speaker Change: Potential risk of the business.

Speaker Change: Yes, so let's start with.

Michael Czerny: Great. Thanks for taking the question.

Speaker Change: The cuts in Medicare Medicaid at this point, if anything to Medicare advantage plans, just got a nice rate increase.

Speaker Change: Just one on Rover them together I'm just wondering if you could give us your latest thoughts on.

Speaker Change: Other policy regulatory updates from D. C that could happen this year, especially anything on Pam I saw so just what are your latest thoughts are on that and then sort of tying into that some concern about potential cuts to Medicare and Medicaid just how should we think about.

Speaker Change: So we're pleased with that and that should certainly health and.

Speaker Change: In our discussions with Medicare advantage plans around the country.

Speaker Change: There's a lot been written around Medicaid around Medicaid potential cuts there is a lot being written around exchange to the FDA.

Speaker Change: How should we think about that.

Speaker Change: Exchange related but at this point those bills are moving through the house and Senate Theres a reconciliation process. So I think it's too early to tell what I would tell you is.

Speaker Change: Potential risk of the business.

Speaker Change: Yeah, So let's start with the.

Speaker Change: The cuts in Medicare Medicaid at this point if anything the Medicare advantage plans just got a nice rate increase so we're pleased with that and that should certainly help.

Speaker Change: Medicaid and managed made.

Speaker Change: Manage Medicaid collectively it's about 8% of our entire business. So it's certainly not the biggest portion of what we do but we're watching it watching it closely and if anything I would say there appears to be support of the exchange plan. The ACA plan Thats actually in place today, So we feel optimistic about that.

Speaker Change: In our discussions with Medicare advantage plans around the country.

Speaker Change: There's a lot been written around Medicaid around Medicaid potential cuts there is a lot being written around exchange the.

Speaker Change: Exchange related but at this point those bills are moving through the house and Senate Theres a reconciliation process. So I think it's too early to tell what I would tell you is.

Speaker Change: In terms of other regulatory.

Speaker Change: Things going on in DC again, Firstly, we're pleased with the outcome of the lawsuit.

Speaker Change: Medicaid and managed made.

Speaker Change: DT regulation.

Speaker Change: Manage Medicaid collectively it's about 8% of our entire business. So it's certainly not the biggest portion of what we do but we're watching it watching it closely if anything I would say there appears to be support of the exchange plan. The ACI plan Thats actually in place today, So we feel optimistic about that in.

Speaker Change: Very pleased with that outcome as we've said in the prepared remarks, we still have the elements of our business that are FDA regulated including our work around companion diagnostics, our clinical lab work that we do for pharmaceutical companies with patients that are in clinical trials all of that still remains in a regulated.

Speaker Change: In terms of other regulatory.

Speaker Change: This type of environment.

Speaker Change: Things going on in D. C. Again, firstly, we're pleased with the outcome of the lawsuit an LDC regulation.

Speaker Change: In terms of Panama and Hammer reform. So now that we have the FDA LDP issue behind US I would tell you that the most important thing for our trade Association <unk> and for ourselves to work from a regulatory standpoint is Panama reform.

Speaker Change: Very pleased with that outcome as we've said in the prepared remarks, we still have elements of our business that are FDA regulated including our work around companion diagnostics, our clinical lab work that we do for pharmaceutical companies with patients that are in clinical trials all of that still remains in a red.

Speaker Change: As you know we have a new Congress, which means and you have a.

Speaker Change: New majority position in the house. So we are working with.

Speaker Change: Our trade Association is actively working with the three committees that really set health care policy. The house ways and means Committee House Energy and Commerce Center Senate Finance Committee. There I would tell you there is broad bipartisan support to actually get something done this year in terms of patent reform.

Speaker Change: <unk> type of environment.

Speaker Change: In terms of Panama, and Panama reform. So now that we have the FDA LDP issue behind US I would tell you. The most important thing for our trade Association <unk> and for ourselves to work from a regulatory standpoint is Panama reform.

Speaker Change: Now if it looks like if we're moving into the back half of the year and we don't see progress will certainly push for another delay a six month delay in the in the cuts that were anticipated six years ago.

Speaker Change: As you know we have a new Congress, which means and you have a.

Speaker Change: New majority position in the house. So we are working with our trade Association is actively working with the three committees that really set healthcare policy. The house ways and means Committee House Energy and Commerce Center Senate Finance Committee. There I would tell you there is broad bipartisan support to actually get something done this year in terms of.

Great. Thank you so much thank you.

Speaker Change: Youre welcome. Thank you our next.

Speaker Change: Thank you. Our next question comes from Andrew Backman with William Blair You May ask your question. Your line is open.

Speaker Change: Hi, guys. Good morning, Thanks for taking the question maybe another one just on the macro side of things there's been some discussion around the potential for a recession. Later this year. So as you sort of think about the business. How it's set up today to sort of withstand any demand pressures from unemployment rates going higher how does that sort of how has it changed over the last handful of years and how.

Speaker Change: Pam a reform.

Speaker Change: So now if it looks like if we're moving into the back half of the year and we don't see progress will certainly push for another delay a six month delay in the in the cuts that were anticipated six years ago.

Speaker Change: Great. Thank you so much thank you.

Speaker Change: Recessionary demand sort of shocked be different today versus OE.

Speaker Change: Youre welcome. Thank you our next.

Speaker Change: Thank you. Our next question comes from Andrew Backman with William Blair You May ask your question. Your line is open.

Speaker Change: Thanks.

Speaker Change: Yeah. So good question.

Andrew Backman: Hi, guys. Good morning, Thanks for taking the question maybe another one just on the macro side of thing there's been some discussion around the potential for a recession. Later this year. So as you sort of think about the business. How it's set up today to sort of withstand any demand pressures from unemployment rates going higher how does that sort of how has it changed over the last handful of years and how.

Speaker Change: First thing I asked.

Speaker Change: Keep in mind.

Speaker Change: It's important to remember patients access the health care system.

Speaker Change: They need.

Speaker Change: Access to affordable lab testing.

Speaker Change: In any environment okay.

Speaker Change: The economy is booming or the economy is in a recession, we provide really essential services that are needed for both providers and for patients now it's not to say we're recession proof. If you go back to the great recession of 2009 2010, we did see a modest impact on our volumes in <unk>.

Andrew Backman: Minor recessionary demand sort of shocked be different today versus say, okay alright. Thanks.

Andrew Backman: Thanks.

Andrew Backman: Yeah. So good question.

Andrew Backman: The first thing I'd ask you.

Andrew Backman: Keep in mind.

Andrew Backman: It's important to remember patients access the health care system.

Speaker Change: 2009, it was about a 70 basis point reduction and in 2010, it was a little bit bigger.

Andrew Backman: And they need.

Andrew Backman: Access to affordable lab testing in.

Speaker Change: About 1%, but remember when people get laid off generally they have benefits that continue our cobra benefits that provide coverage. So there is a layer of insurance for some period of time for most people that lose their jobs.

Andrew Backman: Any environment Okay.

Andrew Backman: The economy is booming or the economy is in a recession, we provide really essential services that are needed for both providers and for patients now it's not to say we're recession proof. If you go back to the great recession of 2009 2010, we did see a modest impact on our volumes.

Speaker Change: So while we're not recession proof we believe.

Speaker Change: Healthcare services in particular diagnostic lab testing.

Andrew Backman: In 2009, it was about a 70 basis point reduction and in 2010, it was a little bit bigger.

Speaker Change: Are still really essential for all for the health and wellbeing of all human beings.

Andrew Backman: About 1%, but remember when people get laid off generally they have benefits that continue our cobra benefits that provide coverage. So there is a layer of insurance for some period of time for most people that lose their jobs. So while we're not recession proof we believe.

Speaker Change: Andrew I would add a couple of things as well to Jim's comments.

Speaker Change: One.

Speaker Change: Everything that Jim said, but there's also more safety nets today than there were back in 2009, <unk> got the Affordable Care Act.

Speaker Change: People have in general some more.

Speaker Change: Coverage in terms of where backup coverage in terms of what's out there through the ACA and even if we look back at the last great recession patient collection rates held fairly steady. So obviously, we will monitor those will make sure that we maintain our patient assistance programs and all that but.

Andrew Backman: Health care services in particular diagnostic lab testing.

Andrew Backman: We are still really are central for all for the health and wellbeing of all human beings.

Andrew Backman: Andrew I would add a couple of things as well to Jim's comments.

Andrew Backman: Won.

Speaker Change: Patient concession rates did not really spike up materially back in 2009.

Andrew Backman: Everything that Jim said, but there's also more safety nets today than there were back in 2009, <unk> got the Affordable Care Act.

Speaker Change: Great. Thanks, guys.

Speaker Change: Thank you. Our next question comes from Jack Meehan with Nephron Research. Your line is open you may ask your question.

Andrew Backman: So you know people have in general some more.

Andrew Backman: Coverage in terms of where backup coverage in terms of what's out there through the HCA and you know even if we look back at the last great recession patient collection rates held fairly steady. So obviously, we'll monitor those will make sure that we maintain our patient assistance programs and all that but.

Jack Meehan: Thank you good morning, guys.

Jack Meehan: Good morning, just had a couple of follow ups.

Jack Meehan: The first was.

Jack Meehan: I don't think I heard it earlier, just what was the final impact from weather.

Jack Meehan: Take what you experienced in January and February.

Speaker Change: Patient concession rates did not really spike up materially back in 2009.

Jack Meehan: You talked about at the Analyst day. That's question number one and then question number two just.

Andrew Backman: Great. Thanks, guys.

Speaker Change: Sam last quarter, you provided some helpful commentary around EPS cadence.

Speaker Change: Thank you. Our next question comes from Jack Meehan with Nephron Research. Your line is open you may ask your question.

Speaker Change: Just curious if you still think that's a good way to think about how the guidance is set up for the year. Thank you.

Thank you good morning, guys.

Speaker Change: Good morning, just had a couple of follow ups.

Speaker Change: <unk>.

Speaker Change: The first was.

Jack Meehan: Sure, Yes, I'll take the first one Jack so.

Speaker Change: I don't think I heard it earlier, just what was the final impact from weather.

Jack Meehan: In terms of whether we set it on a year over year basis points, a year over year basis. It was <unk>.

Speaker Change: Take what you experienced in January and February.

Jack Meehan: The impact in terms of volume we said.

Speaker Change: We talked about at the analyst day. So that is question number one and then question number two just.

Jack Meehan: The one less day, the leap year was worth 110 basis points to 160 altogether now, yes at our Investor day, we suggest that our revenue would be lighter in the quarter remember that was at the beginning of March we prepare those things. The first week of March our actual volume and it was somewhat they are during that first week of March.

Speaker Change: Sam last quarter, you provided some helpful commentary around EPS cadence.

Speaker Change: Just curious if you still think that's a good way to think about how the guidance is set up for the year. Thank you.

Speaker Change: Yeah.

Speaker Change: Sure, Yes, I'll take the first one track so.

Speaker Change: In terms of whether we set up on a year over year basis points, a year over year basis. It was assistant.

Jack Meehan: <unk> was actually light.

Jack Meehan: But we saw a really strong recovery in the last three weeks of March which we mentioned has continued into April the first 1920 days of April our.

Speaker Change: The impact in terms of volume we said.

Speaker Change: The one less day, the leap year was worth 110 basis points to 160 altogether now, yes at our Investor Day, We suggested our revenue would be lighter in the quarter remember that was at the beginning of March we prepare those things. The first week of March our actual volume and there was some weather during that first week of March.

Jack Meehan: Volume trends have been in line with what we were seeing in Q3 and Q4 of last year.

Speaker Change: Yes, yes for sure and Jack remember the half a percent of whether it's a year over year impact. So it is incremental to what we saw in last year has an impact on growth and.

Speaker Change: March was actually light.

Jack Meehan: From an EPS perspective.

Speaker Change: But we saw a really strong recovery in the last three weeks of March which we mentioned has continued into April. The first 1920 days of April our volume trends have been in line with what we were seeing in Q3 and Q4 of last year.

Speaker Change: The seasonality is I think.

Speaker Change: Systems with what we've talked about in the past in terms of traditional seasonality. So EPS in Q2 being the highest quarter Q3 is a slight step down in Q4, the step down from that but.

Speaker Change: Lowest quarter of the year in terms of EPS cadence and then Q1 is usually the lowest.

Speaker Change: Yeah for sure and Jack remember they have a percent of whether it's a year over year impact. So it is incremental to what we saw in last year has an impact on growth and from.

Speaker Change: Etfs that we get so Q1 is the lowest quarter of the year. So that type of seasonality I think is still realistic to assume.

Speaker Change: From an EPS perspective.

Speaker Change: The seasonality.

Speaker Change: Is I think consistent with what we've talked about in the past in terms of traditional seasonality. So EPS in Q2 being the highest quarter Q3 is a slight step down in Q4 as a step down from that but second lowest quarter of the year in terms of EPS cadence and then Q1 is usually the lowest.

Thank you. The next question comes from.

Speaker Change: Thank you our last question comes from Erin Wright with Morgan Stanley. Your line is open you may ask your question.

Erin Wright: Great. Thanks, So you mentioned continuing investment that you're making I guess that would offset what would have been kind of the LPT pool I guess what are those in terms of what youre, making there with incremental relative to what you were thinking previously you also mentioned labor expenses like with anything has anything changed on that front.

Speaker Change: Etfs that we get so Q1 is the lowest quarter of the year. So that type of seasonality I think is still realistic to assume.

Erin Wright: Terms of what Youre seeing or your expectations. There and then just more broadly speaking around kind of expenses I guess can you speak to some of the offsetting factors. There leverage you have from here in response to whether it's inflationary pressures like.

Speaker Change: Thank you. The next question comes from.

Speaker Change: Thank you our last question comes from Erin Wright with Morgan Stanley. Your line is open you may ask your question.

Erin Wright: Great. Thanks, So you mentioned continuing investment that you're making that I guess that would offset that or what would have been kind of the L. P. T pool I guess what are those in terms of what you're making there and what the incremental relative to what you were thinking previously you also mentioned labor expenses like with anything has anything changed on that front in terms of.

Erin Wright: Labor costs or any direct indirect impact kind of from Karen that you were mentioning before thanks.

Speaker Change: Alright, So let me comment first on the investments from an FDA perspective, and then I will have Sam can make some comments on the labor outlook.

Speaker Change: So as we said at Investor day, we expected to spend about $10 million of incremental cost investment to prepare for the FDA Ltte rule.

Erin Wright: What you are seeing or your expectations. There and then just more broadly speaking around kind of expenses I guess can you speak to some of the offsetting factors or levers you have from here in response to whether it's inflationary pressures like Les.

Speaker Change: And now that was really centered on two things that the FDA asked us to have in place for year. One one was the build out of a complaint handling unit and two was.

Erin Wright: Labor costs or any direct indirect impact kind of from parents that you were mentioning before.

Erin Wright: Alright, So let me comment first on the investments from an FDA perspective, and then I'll have some make some comments on the labor outlook in the region.

Speaker Change: Enabling the output of that complaint handling unit, which is the analysis of complaints that potentially turn into <unk> medical device reports and to have that.

Erin Wright: So as we said at Investor day expected to spend about $10 million of incremental cost investment to prepare for the FDA Ltte rule.

Speaker Change: The ability to exchange information with the FDA and alike and electronic means.

Speaker Change: Now.

Speaker Change: We're not going to spend $0 and we're likely not to spend $10 million. This year. However, as I mentioned, we have a growing companion diagnostics business. We have a life sciences business that does clinical trial work for pole supporting <unk> and supporting pharmaceutical companies.

Erin Wright: And now that was really centered on two things that the FDA asked us to have in place for year. One one was the build out of a <unk>.

Erin Wright: Plain handling unit and two was enabling the output of that complaint handling unit, which is the analysis of complaints that potentially turn into <unk> medical device reports and to have that.

Speaker Change: And we take in reference testing from close to 40 countries around the world all which operate in various.

Erin Wright: The ability to exchange information with the FDA and the like and electronic means.

Speaker Change: So frameworks that requires some type of regulatory.

Erin Wright: Now.

Erin Wright: We're not going to spend $0 and we're likely not to spend $10 million. This year. However, as I mentioned, we have a growing companion diagnostics business. We have a life sciences business that does clinical trial work for both supporting <unk> and supporting pharmaceutical companies and we taken referenced test.

Speaker Change: Our framework.

Speaker Change: So we still have some infrastructure needs to be put in place, we still actually do need to have a complaint handling unit. It may not need 40 resources that may need something much smaller than that to support the other elements of our business that again are growing and operate under FDA regulation today.

Erin Wright: Seen from close to 40 countries around the world all of which operate in various ISO frameworks that requires some type of regulatory.

Speaker Change: So again the answer <unk> zero the answers now 10 somewhere in between that but we expect to continue to improve the regulatory and quality.

Erin Wright: Framework.

Speaker Change: <unk> organization that we have in place here at quest today Sam.

Erin Wright: So we still have some infrastructure needs to be put in place, we still actually do need to have a complaint handling unit. It may not need 40 resources. It may need something much smaller than that to support the other elements of our business that again are growing and operate under FDA regulation today.

Speaker Change: In general on expenses, So let me break it down into into three things. So labor first of all which is a big piece.

Speaker Change: Our expectation is still somewhere in the 3% to 4% in terms of wage inflation. This year in terms of retention.

Erin Wright: So again the answer is not zero. The answers are 10 somewhere in between that but we expect to continue to improve the regulatory.

Speaker Change: Or turnover turnover is now somewhere in the mid to high teens, So an improvement definitely versus where we ended 2024, which was around 19% or so approximately <unk> 19.

And quality.

Speaker Change: Organization that we have in place here at quest today Sam.

Speaker Change: I would say, we're approaching pre pandemic rates in terms of turnover, which was somewhere around 14 14 ish percent so were.

Speaker Change: In general on expenses, So let me break it down into into three things. So labor first of all which is a big piece.

Speaker Change: We're making good progress there turnover is definitely improving which improved productivity, which improves our expenses as well.

Speaker Change: Our expectation is still somewhere in the 3% to 4% in terms of wage inflation. This year in terms of retention.

Speaker Change: <unk> potentially wage inflation.

Speaker Change: SG&A, we continue to drive leverage on SG&A and you talked about some of the areas that we focus on in terms of managing expenses actively SG&A is one of them. Our goal is to not grow SG&A more than half of the rate of growth of revenues.

Speaker Change: Or turnover turnover is now somewhere in the mid to high teens, So an improvement definitely versus where we ended 2024, which was around 19% or so approximately <unk> 19.

Speaker Change: I would say, we're approaching pre pandemic rates in terms of turnover, which was somewhere around 14 14 ish percent. So.

Speaker Change: At most I would say, that's our target and that's our focus and then finally and really importantly, invigorate as a whole which is to offset the impacts of inflation wage inflation.

Speaker Change: We're making good progress there turnover is definitely improving which improves productivity, which improves our expenses as well.

Speaker Change: <unk> potentially wage inflation.

Speaker Change: Any other major cost drivers in our business is to offset them through invigorate of approximately 3% productivity and cost improvement.

Speaker Change: G&A you know we continue to drive leverage on SG&A and you talked about some of the areas that we focus on in terms of managing expenses actively SG&A is one of them. You know our goal is to not grow SG&A more than half of the rate of growth of revenues at most I would say, that's our target and that's our focus.

Speaker Change: I would say we're on track and we've got we've got that target this year and were executing towards it.

Speaker Change: Okay.

Speaker Change: Operator, any more questions in the queue.

Speaker Change: At this time I'm showing no further questions I'll turn the call back over to your speakers.

Speaker Change: And then finally and really importantly, invigorate as a whole which is to offset the impacts of inflation wage inflation.

Speaker Change: Okay. Thanks, again for joining our call today and we certainly appreciate continued support.

Speaker Change: Any other major cost drivers in our business is to offset them through invigorate of approximately 3% productivity and cost improvement and I would say we're on track and we've got a we've got that target this year and were executing towards it.

Speaker Change: Have a great day everyone.

Speaker Change: Thank you for participating in the quest diagnostics first quarter 2025 conference call the <unk>.

Speaker Change: Transcript of prepared remarks on this call will be posted later today on quest diagnostics website at Www Dot quest diagnostics Dot com a replay of the call may be accessed online at www Questdiagnostics Dot com.

Speaker Change: Operator, any more questions in the queue.

Speaker Change: At this time I'm showing no further questions I'll turn the call back over to your speakers.

Speaker Change: Okay. Thanks, again for joining our call today and we certainly appreciate your continued support and have a great day everyone.

Speaker Change: Slash investor or by phone at 806, 6361, $475 seven for domestic callers or 2033690183 for international callers.

Speaker Change: Thank you for participating in the quest diagnostics first quarter 2025 conference call.

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.

Speaker Change: Telephone replays will be available from approximately 10 30, a M. Eastern time on April 22025 until midnight Eastern time July one of 2025.

Speaker Change: Play of the call may be accessed online at Www Questdiagnostics Dot com.

Speaker Change: Goodbye.

Speaker Change: Slash investor or by phone at 806, 63614757 for domestic callers or 2033690183 for international callers.

Speaker Change: Telephone replays will be available from approximately 10 30, a M. Eastern time on April 22025 until midnight Eastern time July 1st of 2025.

Speaker Change: Goodbye.