Welcome to the Quest Diagnostics Fourth Quarter and Full-Year 2024 Conference Call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and the question-and-answer session that will follow, are the copyrighted property of Quest Diagnostics, with all rights reserved. Any redistribution, retransmission or rebroadcast of this call in any form without the written consent of Quest Diagnostics, is strictly prohibited. I’d now like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Sir, please go ahead.

Thank you and good morning. I’m joined by Jim Davis, our Chairman, Chief Executive Officer and President, and Sam Samad, our Chief Financial Officer. During this call, we may make forward-looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties that may affect Quest Diagnostics’ future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K. For this call, references to reported EPS refer to reported diluted EPS, and references to adjusted EPS refer to adjusted diluted EPS. Growth rates associated with our long-term outlook projections, including consolidated revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth, are compound annual growth rates. Now, here is Jim Davis.

Thanks, Shawn, and good morning, everyone. In the fourth quarter, we delivered impressive revenue growth of nearly 15%, including approximately 5% organic growth, while also improving our profitability. For the full year, we drove revenue growth of close to 7%, including approximately 3% organic growth. In 2024, our team completed eight acquisitions, including LifeLabs in Canada and four hospital outreach lab businesses in the US. We also expanded our Advanced Diagnostics menu and drove sustained double-digit growth in several clinical areas during the year. In addition, we attracted new business across the physician, hospital, and consumer channels, while also forming new relationships with health plans to extend our geographic reach. Our investments in automation in AI delivered improvements in quality, customer experience, and productivity during the quarter and throughout all of 2024, which helped us deliver on our annual 3% Invigorate savings and productivity targets. We also meaningfully improved employee retention as we strengthened our position as employer of choice. This morning, we provided guidance for 2025 that reflects our confidence in the core strength of our business, continuing robust utilization, and the momentum from acquisitions we completed in 2024. These dynamics position us favorably to accelerate revenue and earnings growth in 2025. Now, I'll recap our strategy and discuss highlights from the fourth quarter. Then Sam will provide more detail on our financial results and talk about our financial guidance for 2025. Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core customers, physicians, hospitals, and consumers. We enable growth across our customer channels through Advanced Diagnostics, with an intense focus on faster-growing clinical areas, including brain health, advanced cardiometabolic, and molecular genomics and oncology. In addition, acquisitions are a key growth driver, with an emphasis on accretive outreach purchases, as well as other independent labs. Our strategy also includes driving operational improvements across the business, with the strategic deployment of automation and AI to improve quality, service, efficiency, and the workforce experience. Here are a few key updates on the progress we have made in these areas in the fourth quarter of 2024. Please note that my following comments are focused primarily on our US operations. In physician lab services, we delivered high single-digit revenue growth, driven primarily by strong organic growth and contributions from acquisitions in the US. As a reminder, volumes from both hospital outreach and independent lab acquisitions originate in the physician offices. Last month, we closed our acquisition of the outreach lab business of University Hospitals in Ohio, and completed the transition of the business in January. We expect to moderate our pace of acquisitions in 2025 as we focus on driving growth from productivity from transactions completed last year. In addition to acquisitions, other growth drivers in the quarter included new customer wins, as well as growth among large physician groups and community health centers. We also saw a step-up in functional medicine testing as more people take an interest in prevention and wellness. In the fourth quarter and full year, we benefited from robust utilization compared to historical rates. We also continue to see strong volume and revenue growth from Medicare Advantage plans, which value our high-quality, low-cost testing for their narrow networks. We are well positioned to benefit from these dynamics as we expand access through our health plan partnerships with Elevance Health and Sentara Health Plans, both of which took effect on January 1st. Today, we have access to more than 90% of the in-network lives in the US. In hospital lab services, we grew revenues nearly 3% in the fourth quarter, primarily due to solid continued demand for reference testing, complemented by growth in professional lab services. Hospitals continue to order a greater range of reference tests from our expanding Advanced Diagnostics menu rather than performing these tests in their own labs. By referring testing to us, hospitals are freed from the pressures that come from performing specialized tests in-house, such as hiring skilled lab personnel and investing in expensive lab testing equipment. In professional lab services, we completed three collaborations with health systems in Connecticut, New Jersey, and Pennsylvania. We expect to see modest contribution from these relationships in early 2025. Looking at 2025, we expect hospitals to continue to struggle with high wage and supply inflation, constrained access to capital, and keeping up to date with laboratory innovation. At the same time, patients and payers want greater value from lab services. Hospitals increasingly recognize that Quest can improve access to innovative and cost-efficient lab services through reference testing, lab management, and outreach lab acquisitions. In consumer-initiated testing, our consumer-facing platform, questhealth.com grew total revenues nearly 50% in the fourth quarter, and approximately 40% for the full year to just over $60 million. Together with revenue from our channel partners, consumer-initiated testing revenues grew to nearly $100 million in 2024. During the year, we also greatly expanded our Questhealth.com offering to include 135 different tests to provide a comprehensive platform for serving today's increasingly health-minded consumers. In Advanced Diagnostics, we experienced double-digit growth across several clinical areas in the fourth quarter, including in brain health, advanced cardiometabolic, autoimmune, and women's health. We generated strong growth in brain health, largely due to impressive demand for AD-detect blood tests for assessing Alzheimer's disease risk. We will continue to explore opportunities to extend our portfolio with new biomarkers that can help providers better assess Alzheimer's and other forms of dementia. We also generated strong growth in areas of advanced cardiometabolic and autoimmune testing, and we expect these patterns to continue in 2025. Our growth in women's health was driven largely by prenatal and hereditary genetic testing. We were also pleased to see strong adoption of our self-collection option for testing of genital tract infections during the quarter. In molecular genomics and oncology, we spent much of last year developing and validating our Haystack MRD blood test to aid in the early detection of minimal residual disease from solid tumor cancers. We also engaged with approximately 75 leading academic health systems and community oncology centers in our Haystack MRD Early Experience program, and are pleased with the favorable feedback we received. We are now transitioning these organizations to a commercial program and are focused on expanding utilization among medical oncologists. Turning to operational excellence, our Invigorate program delivered our targeted 3% annual cost savings and productivity improvements. Here are some examples of how we're improving operations. We pilot many of our automation and AI solutions at our laboratory in Clifton, New Jersey. During the fourth quarter, we developed and implemented a proprietary system in Clifton that automates labeling and test tube preparation for tuberculosis testing, eliminating manual intervention and improving quality. In addition, we began testing an automated accessioning solution that speeds requisition processing. Also, in Clifton, we deployed a third-party AI solution that enhances parasitology screening by flagging likely positive specimens requiring closer human examination. We plan to roll out these solutions to our other labs later in 2025. Improving workforce engagement remains a major priority, and I'm pleased that our retention rates significantly improved across multiple job categories in 2024. Now, before I turn it over to Sam, I want to thank our more than 55,000 Quest and LifeLabs colleagues for delivering on our business imperatives last year. This amazing group of people is the engine behind our growth and the reason we entered 2025 strong, energized, and ready to deliver on our purpose, working together to create a healthier world, one life at a time. And now, Sam will provide more details on our performance and 2025 guidance.

Thanks, Jim. In the fourth quarter, consolidated revenues were $2.62 billion, up 14.5% versus the prior year. Consolidated organic revenues grew by 4.8%. Revenues for diagnostic information services were up 15.1% compared to the prior year, reflecting the contributions from recent acquisitions, including LifeLabs, as well as growth in our key physician and hospital channels. Total volume measured by the number of requisitions increased 13.9% versus the fourth quarter of 2023, with organic volume growing by 0.6%. During the quarter, weather negatively impacted volume by approximately 50 basis points. Total revenue per requisition was up 0.2% versus the prior year, driven primarily by an increase in the number of tests per requisition and favorable test mix, mostly offset by the impact of the LifeLabs acquisition, which carries a lower revenue per requisition. On an organic basis, revenue per requisition was up 3.3% in the quarter versus last year. Unit price reimbursement was relatively flat, consistent with our expectations. Reported operating income in the fourth quarter was $361 million or 13.8% of revenues compared to $267 million or 11.7% of revenues last year. On an adjusted basis, operating income was $409 million or 15.6% of revenues compared to $338 million or 14.8% of revenues last year. The increase in adjusted operating income was due to strong organic revenue growth and the impact of recent acquisitions, partially offset by the impacts of weather, wage increases, and higher performance-based compensation. We estimate the impact of weather on operating margin to be approximately 30 basis points. Reported EPS was $1.95 in the quarter compared to $1.70 a year ago. Adjusted EPS was $2.23 versus $2.15 the prior year. Adjusted EPS in the fourth quarter was impacted by higher interest expense and the higher tax rate compared to the prior year. We estimate the EPS impact of weather to be approximately $0.06 in the quarter. Cash from operations was $1.33 billion in the full year 2024 versus $1.27 billion in the prior year. Turning now to our full-year 2025 guidance. Revenues are expected to be between $10.7 billion and $10.85 billion. Reported EPS expected to be in a range of $8.34 to $8.59, and adjusted EPS to be in a range of $9.55 to $9.80. Cash from operations is expected to be approximately $1.45 billion, and capital expenditures are expected to be approximately $500 million. We have posted a presentation on the investor relations page of our website that includes an adjusted EPS bridge, which shows some of the key elements to bridge from our 2024 adjusted EPS to the 2025 adjusted EPS guidance we shared today. Our 2025 guidance reflects the following considerations. Our revenue guidance assumes approximately 3% organic revenue growth, with the remainder coming from the acquisitions closed in 2024. It does not assume any contribution from prospective M&A that could be completed in 2025. As you know, we absorbed the headwind last year related to the CrowdStrike IT outage, which we do not assume repeats in 2025. We expect to begin generating revenue from the launch of our Haystack MRD test in 2025, and continue to anticipate that Haystack oncology will be slightly less dilutive compared to the prior year. We are making investments in 2025 to modernize our IT infrastructure, as well as to comply with FDA regulations of laboratory-developed tests that are scheduled to begin later this year. Operating margin is expected to expand versus the prior year. We anticipate net interest expense to be approximately $275 million. Adjusted tax rate is expected to be approximately 25%, and our average share count for the full year is expected to be approximately 114 million diluted shares outstanding. With that, I will now turn it back to Jim.

Thanks, Sam. To summarize, we delivered strong consolidated and organic revenue growth in the fourth quarter and the full year. We expanded our presence in important new geographies, including Canada through eight acquisitions and new health plan relationships. Our innovations and Advanced Diagnostics drove meaningful growth, and Haystack MRD strengthens our position in molecular genomics and oncology. Given these business strengths and robust utilization, we expect to accelerate revenue and earnings growth this year. And now we'd be happy to take your questions.

Our first question will come from Kevin Caliendo with UBS. Your line is open, sir.

Oh, thank you, and thanks for getting me in so early. Appreciate it. Just a question on guidance and some of the assumptions that are in there. I appreciate the earnings bridge. I guess what I'm trying to understand a little bit is there's $20 million of additional investment spend for LDT and IT. Are there any other one-timers in there? And specifically, do you expect core margins, not sort of comping out some of the other things that have happened, but you said margins expect to expand, does the guidance assume that just - that core margins will expand ex all of the sort of one-timers that we had from last year, or the accretion from deals and things happening? I want to understand that in weather, if there's any weather built in from 1Q, whether it's the fires or the frozen tundra that we had to deal with. Very long one question, but thanks.

Yes, thanks, Kevin. This is Sam, and good morning. Let me just give some comments on guidance to address your question. First of all, the one-timers that you're asking about, they're all laid out in the bridge that we've included. There are no additional one-timers that you should be adding in or taking out. The key things I think from a positive standpoint that we talked about in addition to the organic revenue growth and the M&A contribution is a benefit related to CrowdStrike, which obviously we don't expect to repeat in 2025. We've got some benefits in terms of the Haystack reduced dilution, so some benefit year-over-year. But then from an offset in terms of headwinds, we talked about the investments and we can share some more comments on that, and it really relates to the FDA LDT compliance investments to get us in compliance with that and to build up our regulatory capabilities, in addition to some investments in terms of modernizing our systems and our IT systems. And we can talk some more about that. Interest expense, we've talked about the fact that we had to fund the acquisitions that we took on, especially LifeLabs. That represents a $0.50 headwind. And then there are some other headwinds that are laid out there. In terms of weather, we have not built any specific explicit assumption related to worse weather as a result of what we're seeing. But obviously, we’re monitoring Q1 and January closely because there have been some higher-than-expected weather disruptions, specifically the wildfires in California, specifically the freeze in the south and some of the snow that we've seen, also some lower temperatures in the Northeast and snow as well. So, there are some of these. In terms of operating margin, we are expecting operating margin expansion in terms of what we report; you don't have to normalize or make adjustments to get to expanded operating margins. We are expecting that our operating margin percentage, which finished at 15.6% in 2024, will expand in 2025.

Yes. Hey, Kevin, let me just provide a little more color on the investment. So, as Sam said, there's two parts to it. One is in preparation for the FDA requirements. Now, the first set of requirements go into effect on May the 6th this year. And notably, we have to stand up a complaint handling unit and enable ourselves to report any, what we call medical device reporting to the FDA. So, that does require some investment. It requires some additional resources to do that. So, in part that is what some of those investments are used for. The second and more substantial piece is, look, as you all know, this is a digital enterprise that we operate today, from order intake to our logistics systems, to how we operate the labs, to how we provide results through our MyQuest application, and our entire billing system. We think about that as our entire order to cash spectrum of systems. And while we have been making investments from time to time, we need to make some more substantial investments this year and next year. And the benefits from those investments are certainly going to help us improve operations and improve the entire customer experience. So, we're modernizing this IT infrastructure. We're going to migrate some of our current systems into cloud-based systems. And over time, that's going to dramatically reduce the complexity. It's going to create more efficiencies between our labs, and it's really, really going to improve the overall customer experience. Ultimately, it's going to lower our IT costs, and there's going to be a good ROI on these investments. We're going to lay this out more at our Investor Day on March 19th, but that's really what that $0.20 is being used for.

The next question will come from Patrick Donnelley of Citi. Your line is open.

Hey guys, thank you for taking the questions. Sam, maybe one for you to start. Just helpful to hear you talk about the margin expansion this year overall. Can you just talk about the cadence, anything to call out as the year progresses? I know LifeLabs is starting lower margin. It's heading to corporate average at some point. So, maybe just talk through that. Would be helpful. And then, Jim, just quickly on utilization, obviously been elevated here. What have you seen as you exited 4Q into this year? And just the assumptions on utilization as we work our way through 2025. Thank you, guys.

Yes, thanks Patrick. So, on margin, so yes, again, let me reiterate, we are expecting margin expansion this year versus 2024. I think the components that you see in the bridge that we laid out in the guidance, organic revenue growth, approximately 3% at the midpoint. That's basically assumed at a contribution margin that comes in at roughly about 40%. Then you have the acquired revenue growth, which is roughly, let's call it $0.70 at the midpoint, is basically a combination of LifeLabs, which is the more significant piece because of the fact that we have three quarters in 2025 that we didn't have in 2024, or at least the better part of three quarters. And that will come at a margin rate, which is in the lower double digits or in the low double digits, I should say, so below our corporate average. I think you mentioned it and you're right. LifeLabs will start at a margin rate which is low double digits. Will ramp up over two to three years to get to our corporate average. But this year it will be lower and it's a bit of a drag on the margin rate. But in terms of the other acquisitions, they come in at somewhere in the 35% to 40% contribution margin. So, all in that, acquired revenue growth is probably coming in at the high teens in terms of contribution margin. Now, you asked about the cadence and I won't talk about margin rate, although it is a bit of a proxy in terms of how EPS will come in, but I think the best way to talk about cycling is really go back to our pre-COVID averages in terms of what the cycling was by quarter. And I'll just mention these just as a comparative point. It doesn't necessarily mean that our cycling is going to be exactly that in 2025, but it's a good proxy and it's a good proxy for how margin rate also will be across the quarters. But in terms of contribution from EPS, I would say roughly 22.5% is what we used to see pre-COVID in the first quarter, 26.5% in the second, 26% in the third, and or approximately 25% in the fourth. Now, again, I'm not telling you this is what our cycling is in 2025, but it's directional and it's a good proxy for what you would expect close to cycling to be in 2025. So, that's what we used to see pre-COVID.

Yes, and then your question on utilization. Look, we're pleased with the utilization coming out of the fourth quarter. We look at it in many ways and across many segments. In terms of overall requisition volume, we did have a slight weather impact in the quarter because of the hurricane early in Q4, so that cost us probably 50 basis points. And then we've been getting out of certain capitated business arrangements in California that were impacting just business we weren't making money on. So, we walked away from that, and that cost us a little volume. But when we look at the volume in our core physician and hospital segment, the requisition volume from those segments was very, very strong in the quarter. Now, as Sam also mentioned, our revenue per requisition organically excluding LifeLabs was up 3.3% in the quarter. And as you know, there's a lot of things that go into that revenue per requisition calculation. The first thing we look at is price per test. That was relatively flat in the quarter, but the second and biggest driver of that revenue rec increase is tests per requisition. And that was probably two-thirds of the increase in the overall organic revenue per requisition in the quarter. And so, that's utilization as well. And what's driving it is some of the new tests that we've rolled out, the brain health AB 42/40 in the tau markers, our advanced cardiometabolic testing, we're seeing big increases in things Lp(a) and ApoB. Our autoimmune testing has been really propelling some of the tests per requisition growth. And then finally, I'd mention, we're seeing a nice uptick in volume from what we call functional health types of physicians. And as you probably know, they look at a lot of things and a lot of hormone testing and things like that. So, the trends on tests per requisition, the trends on volume in our core physician and hospital segment remain very, very strong.

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

Good morning. Congratulations on a great quarter. Maybe if I can just pull a little bit that thread there on revenue per requisition. It's obviously a really strong year over the course of 2024. As you think about that dynamic heading into 2025 and beyond, how much of the continued technological advancements are the drivers of this versus payer arrangements and marketing, and how should we think about this in terms of a long-term trajectory?

Okay, so again, let's fast forward into 2025. We'll start with price, price per test. At this point in the year, it could probably swing between plus or minus 30 basis points, okay? There's still lots of contracts to negotiate as we go through the year. And the one segment that has been experiencing some price pressure is the hospital segment, in particular reference testing. I think we've indicated on the past calls, during the entire COVID period from 2020 through 2023, hospitals really didn't go out to RFP for reference testing providers, right? They weren't so busy with other things. So, we're seeing an uptick in RFPs, and there's still price pressure in that segment. So, on par though, look, we think it's, again, within a range of plus or minus 25 to 30 basis points. The tests per requisition, we expect it to continue. We’re still at the very early stages. So, when I talk about incredible test growth on things like ApoB and Lp(a) and the brain health portfolio, the overall volume of these tests is still relatively low. So, we still think there's significant growth in these segments left. Autoimmune disorders is another one. We're just seeing skyrocketing autoimmune disorders across the country. So, we expect those trends to continue. The last thing that goes into it is payer mix. And I didn't mention, but in the fourth quarter, and we saw it all last year, our mix of Medicare, Medicare Advantage, that segment of our business has been growing faster than the rest of the business. And so, that is actually good business mix because they're generally heavier requisitions. They're more frequent requisitions. And as you know, many Medicare beneficiaries have comorbidities that just lead to more testing. So, all of that is pretty favorable.

Maybe I can add just a couple of comments, Mike, from a financial standpoint. In terms of, if you look at the revenue per requisition, in Q4 it was up 3.3% organically. If you break that down between the components that Jim talked about, two-thirds of that is really a benefit from tests per requisition, which has been increasing continuously over the last number of quarters. And then the other third benefit is really a combination of payer mix and test mix, test mix being some of the innovations that we have. Payer mix is just driven off of reimbursement and which payers were getting the contribution from the different payers. As we look towards 2025 or this year, tests per requisition will continue to improve, although our expectation is that it will slow in terms of the improvement. So, that improvement, we don't expect it to be at the same pace that we've seen. I mean, we have been increasing quite substantially over a number of quarters. And I wouldn't say we've peaked, but definitely that rate of improvement is not going to be at the same rate. So, that's the only other comment that I would provide with regards to revenue expectations in 2025.

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

Hi, thanks for the question. This is Joanna for Elizabeth. Maybe go back to that $0.20 IT investment for 2025. I think you guys said it is most related to the LDT regulation. Is that expected to be a one-time investment or should we kind of expect to repeat in 2026 and beyond? Thanks.

Yes. First we said on the $0.20, the majority of it will be on modernizing our IT infrastructure, but there is a portion in there that is for FDA readiness. Now, it’s difficult to tell what the future will be for that. As you know, there's a lawsuit in front of the courts right now that ACLA and other trade associations brought, and there'll be oral hearings on that lawsuit on February 19th. And we expect the case to likely be settled by the end of the first quarter or early second quarter. So, depending on the outcome of that, if the outcome supports the FDA position, then yes, there'll be some continued investments. If the outcome favors our trade association, then those investments could certainly moderate. Now, remember outside of what we're doing on the core clinical business to get ready, we do have segments in Quest Diagnostics that already operate under 21 CFR Part A 20. These are segments that serve our pharmaceutical industry customers. And so, there'll continue to be some investments to improve those systems in readiness. But look, a lot of the future investments related to the FDA will depend on the court case.

And then the other part of that $0.20 that you referenced is the IT investments that we're going to make that Jim talked about earlier. Those investments will continue. We have investments to modernize our systems. So, we don't expect that to be just this year. However, we talked on the Q3 call about our long-term guide in terms of expecting high single-digit EPS over the long term, and that we still - we reaffirm. So, those investments will continue, but they're part of our long-term guide expectation.

The next question comes from Luke Sergott of Barclays. Your line is open.

This is (indiscernible) for Luke Sergott. Thanks for the questions. Just to start off, could you guys provide a little more detail on what you expect the revenue contribution will be for the outreach lab services business acquisition you guys had with University Hospitals? And then assuming you'll get some benefit from the value-based contracts you have in place with payers, first, what's like the typical rate you get on top of your average reimbursement at the onset of these contracts, and how does that trend down in the next couple of years? And can we expect that kind of typical rate for this transaction?

Maybe I'll start with the University Hospitals one, and Jim, you want to talk about value-based compensation or incentives in general, but in terms of University Hospitals, we made this acquisition, we closed it at the end of the year, so right at the end of 2024. It's an acquisition of roughly $180 million. We don't usually provide revenue per each of these outreach acquisitions. So, we're not going to provide exactly what the revenue is, but I'll give you a couple of points here to consider. Usually, there's a certain valuation that we pay for those acquisitions, which is somewhere around 3.5x of revenues. That doesn't mean that's what University Hospitals is, but there's a certain valuation we pay for these outreach acquisitions, and this is a ballpark kind of number on average. And then the other piece that you need to consider is that this contribution from University Hospitals is going to be in that acquired revenue growth bar that you see in the bridge that we have included on our website. And so, it's part of that $0.65 to $0.75 contribution in terms of EPS from acquisitions. Now, as I said before, LifeLabs is a healthy portion of that. There's other carryover from outreach acquisitions that we made in 2024 beyond just university, but that is included in that piece. Jim, did you want to give any comments on value-based incentives?

Yes. From time to time, and we didn't really see any in the fourth quarter, but from time to time we get value-based incentive payments that are tied to moving requisitions from expensive health systems into Quest Diagnostics. That generally helps the payer, obviously, and as importantly, it helps the employer and it helps the patient. And so, some of those incentives come at a six-month period. Some come after a 12-month period look-back. So, they're hard to predict. And again, we call them out generally in our quarterly results when they do occur. Now, the other way we do collect some of these incentives is when we make these outreach acquisitions. And as you know, some of these health systems are getting 2x to 3x the rates that we're getting. Over time, our rates don't just migrate exactly to Quest Diagnostics rates. They'll come down over a period of two to three years. And so, there's what I call incremental pricing. So, as we move it from a health system payer rate to a Quest Diagnostics payer rate, sometimes those come as bonus payments and sometimes it's just part of the overall pricing.

The next question comes from Pito Chickering of Deutsche Bank. Your line is open, sir.

Hey, good morning, guys. Thanks for taking my question. Looking at the competitive environment, you expanded access in several States in 2025 with two payers, then lost one State. How do you see the landscape shaping up in 2025? And do you see more RFPs coming up this year that could result in more turnover sort of next year? It’s just been a couple of years since you've seen this much volatility with state turnover. Thanks so much.

Yes, so first of all, net-net on all of the payer changes that came about in 2024, we're better off. So, when we look at the lives that we picked up through Elevance in Colorado, Nevada, Virginia, and we were not in-network with some of the plans in Georgia, when we look at the lives that we pick up from Sentara and then we subtract the lives we lost in Alabama, we're better off by well more than a million lives. So, our access in total has significantly improved as we enter 2025. In terms of agreements that we will negotiate here in 2025, look, as you know, the typical health plan contract is somewhere between three and five years. So, every year we renew somewhere between 25% and 30% of health plan arrangements. And this year will be in that typical range. So, more to come on that, but every year we're renewing agreements in that magnitude and we're going to do it again this year.

The next question comes from David Westenberg of Piper Sandler. Your line is open.

Hi. Thank you for taking the question. So, just on the acquisition and integration, I believe you completed, my count is eight acquisitions in 2024, including big ones like LifeLabs had a lot of inorganic growth. How do you expect those acquisitions to enhance the revenue stream? And how should we think about as they lap the organic revenue growth, would that actually accelerate? And just thinking about puts and takes on integration speed, what exactly do you have to do this year, given the amount of acquisitions you did in the last year? And what would make you go back to a little bit more aggressive acquisitions, just given the fact that there is a lot out there available to you? Sorry, that was long.

Yes, sure. So, as Sam indicated in his comments, the 2025 revenue growth that is coming from acquisitions, carryover acquisitions is about 6%. And as you know, we only carry that growth through the date - through the 12-month anniversary. Okay? So, we closed LifeLabs in September of last year. It had five months of impact, four months of impact last year. And so, we carry that through the first seven, eight months of this year. So, in total, it's about six percentage points of our growth in 2025. And more than two-thirds of that is LifeLabs, okay? So, we feel good about that. Now, yes, the team is hard at work at integrating these acquisitions, and yet the funnel of opportunities remains strong. So, we'll continue to assess the opportunities. We're not backing away from any if it fits our criteria of we have great payer access in that market. If our share is very small in that market, then it becomes an attractive opportunity for us to look at. So, while we have a lot of work to do to integrate what we've got on our plate, we're not going to be shy about picking things up and going after things that improve our market access.

Maybe I can add just a couple of quick comments, Dave. You talked about sort of difficulty of integration and complexity of integration, and yes, there were a lot of acquisitions in 2024. Now remember, LifeLabs is more of a standalone entity that's in Canada. It's an established company. They have labs that are established. There's a lot of things that they can learn from us, but we can learn from them as well. So, I would say the integration is lighter there because they are already operating and we're not looking to close labs or move them to our systems at this point. So, that's an easier integration. And then you asked about sort of the cadence of M&A, what would it take to do more? Just keep in mind, I mean, it's not that we're not doing any more M&A in 2025. We have not included in our guide any new M&A that has not been announced, but we do have, in our capital plan, we have allocated certain capital for potential, what we call tuck-in M&A. It's mostly focused on the hospital outreach lab acquisitions. So, we will do more M&A because these are very attractive opportunities that scale very quickly and get to a healthy contribution margin. So, I just want to make sure that people don't expect that we're not going to do any more M&A.

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

Hi guys, good morning. Good morning. Thanks for taking the questions. I wanted to ask on Haystack. First, can you maybe just sort of shed a little bit more light on any volume or reimbursement expectations for that asset in 2025? But I guess also bigger picture here and way more important than 2025, as you're moving these customers to those commercial programs, how should we be thinking about any additional pull-through or halo effect that having this asset now in the commercial phase should allow on the oncology side of the business? Thanks.

Yes, so thanks, Andrew. So, look, we're pleased with the progress that we've made with Haystack. As we mentioned in the comments, we served over 70 customers on a non-revenue basis last year, a really nice mix of academic medical centers, community oncology. And so, the emphasis right now is on moving those customers into full commercial arrangements. Now, as we start, we're going to bill. We're going to bill Medicare. We're going to bill Medicare Advantage. We expect denials to be high at the beginning, but you then fight those denials, and you then begin the conversations with the appropriate MAC or the appropriate Medicare Advantage plan around the goodness of the test and why it is important for patients. And so, we do expect, as Sam indicated, to get modest revenue from that business this year. Now, you asked about other opportunities. First, let me remind everyone, look, oncology is a billion-dollar business for Quest Diagnostics today. That includes some of our screening assays. That includes a very, very strong anatomical pathology business, and it includes a very, very strong hematology business. So, we actually expect to get pull through of our MRD assay from the existing set of customers that we have. And we're already seeing that pay off. We also have, in addition to an MRD assay, we have a therapy planning assay, our TSO 500 assay. And so, we expect to get some benefits in that segment of our business as well.

Our next question comes from Tycho Peterson of Jefferies. Your line is open.

Hey, this is Noah on Tycho. Thanks for taking our call. I wanted to ask about preventative screening, particularly with the braid Well case going on. I was wondering how big your exposure is to preventative screening and if you have any assumptions on potential impact if USPSTF was authority. Thanks.

I'm sorry. I mean, you mentioned that braid well kits. No, I'm not … Yes, you were cutting out a little bit there, so I'm not familiar with the case. Sam, I don’t think you are. Okay. So, look, in general there seems to be what I would call a shift in focus going on across the country, and that shift in focus from taking - spending all our time and effort on sickness and in curing disease to this shift towards what I would call prevention and wellness. And in general, we actually think that is a wonderful shift for the lab industry, right? We strongly believe it's tied to our purpose, that lab testing should be used early, early and often in order to ensure somebody is not moving from one morbidity to another morbidity. And so, we're excited by a lot of the work that's going on in functional medicine today because that focus is really on prevention and wellness early. So, we feel good about that, and we think those trends are going to help the lab industry.

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

Thank you and good morning. Wanted to get - not sure if this was addressed. I don't think it was, but latest thoughts on Haystack. I know you talked about you’re expecting to generate some initial revenue here. But can you talk about expectations for clinical data updates we might be able to expect this year and just progress in terms of getting Medicare payment for the test? Thank you.

Yes. Thanks, Jack. So, I did give a few brief comments, but just for everyone, we went through this early experience program for six to seven months during 2024. And so, we gathered a lot of insights on our new assay. We gathered a lot of experience with close to 75 customers that touched academic medical centers as well as community oncology centers. So, we're now in the process of moving those customers to full commercial arrangements, which will include billing of Medicare and Medicare Advantage plans. Like any new test, you start the billing process, you expect some denials. You respond to those denials in a very thoughtful way, and you engage with the appropriate MAC as well as the Medicare Advantage plans. And so, look, we have a ton of experience with this, as you know. Our broad reach into every Medicare Advantage plan in the country, our health plan access, our relationships, are all very positive. And so, we will get revenue in this segment this year. So, in terms of new clinical studies, all I would say is stay tuned. Haystack, for many, many years, even prior to ownership by Quest Diagnostics, had funded many clinical trials, some of which are coming near an end, and we'll be able to publish, I think, some great results this year.

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

Great, thanks. Just a bigger picture question as we head into kind of 2025 and how you think about how it's progressing in terms of market share gains versus underlying utilization. What's embedded in your expectations on that front? I know you talked a little bit about the underlying environment, but I particularly want to know because is it accelerating in terms of the market, underlying market share gains that you're seeing as well? And then also just lastly, if I can stick one in there on PAMA SALSA regulatory environment. You spoke to LDT stuff, but any thoughts in terms of the change in kind of administration and how you're viewing your visibility into that? Thanks.

Yes, so let me start with the latter question on PAMA. So, as you know, the rate cuts did not go into place. So, this was the fifth year that rates were left the same. And we feel good about that. I would actually say, there's going to be renewed focus on PAMA reform this year. As you know, there are three committees that we generally work with. There's the Senate Finance Committee, the House and Means committee, and the House Energy and Commerce Committee. Those three committees are really charged with all things healthcare in this country. So, the committee - in two of the three, there's new committee chairpeople. We know who they are. We've already had outreach to them, and I would say, look, there is strong bipartisan support to actually solve it this year. So, we're excited about the opportunity to get a final solution to PAMA as we work throughout 2025. I can tell you, it's the number one priority of our ACLA trade association. And we've been hard at work since January 2 to get a solution in place. Yes. So, on the market share utilization question, look, I think in general for the independent labs, all independent labs are making progress from a market share standpoint. What you see, the outreach acquisitions that we've done is a sign that hospitals are less focused on gathering that work in the communities and more focused on deploying their capital, their assets, their resources, their know-how to other parts of health system operations. So, I feel good about our prospects. It was a share gain year and again, I just think we're seeing health systems pay less attention to that outreach book of business than they have in the past. And I think that's great signs for Quest Diagnostics as well as the independent lab industry.

That was our final question for today, sir. Thank you for participating in Quest Diagnostics fourth quarter and full-year 2024 conference call.

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

A transcript of prepared remarks on this call will be posted later today at Quest Diagnostics’ website at www.Quest Diagnostics.com. A replay of the call may be accessed online at www.Quest Diagnostics.com/investor, or by phone at (866) 360-8701 for domestic callers, or (203) 369-0179 for international callers. Telephone replays will be available from approximately 10:30 a.m. Eastern Time on January 30, 2025, until midnight Eastern Time, February 13th, 2025. Thank you and goodbye.