Quest Diagnostics Inc (DGX) Q2 2025 Earnings Call Transcript

Welcome to the Quest Diagnostics second quarter 2025 conference call. At the request of the company, this call is being recorded. The entire contents of this 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 without the written consent of Quest Diagnostics is strictly prohibited. Now, I would like to introduce Sean Bavick, Vice President of Investor Relations for Quest Dynastix. Please go ahead.

Thank you and good morning. I am 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, Sean, and good morning, everyone. At our Investor Day in March, we communicated our strategy to drive growth through innovative solutions that meet the evolving needs of our customers. Our strong second quarter results reinforce this strategic direction. Given our performance in the quarter and continued utilization trends, we're raising our full year 2025 guidance. During the quarter, we saw strong top-line growth of 15.2%, including 5.2% organic revenue growth, as increased demand for our innovative clinical solutions and expanded business from enterprise accounts complemented growth from acquisitions. Our adjusted earnings per share grew 11.5% as a result of strong top-line growth combined with productivity gains from our deployment of automation, digitization, and other advanced technologies. Before Sam provides more detail on our results, I'll highlight a few ways our strategy is enabling growth. We are 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, life sciences, and data analytics. We enable growth across our customer channels through faster-growing advanced diagnostics in five key clinical areas, which are advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health. In addition, acquisitions are a key growth driver, and our strategy emphasizes accretive outreach purchases and independent labs. Finally, we are focused on driving operational improvements across the business with the deployment of automation, AI, and other advanced technologies for improved quality, productivity, and customer and employee experiences. Here are some of the updates on the progress we have made in these areas in the second quarter. In the physician channel, we delivered approximately 20% revenue growth driven primarily by acquisitions complemented by organic revenue growth in the high single digits. Demand for our innovative clinical solutions contributed significantly to organic revenue growth as physicians ordered more tests per requisition across our portfolio, supported by strong commercial execution. We also saw robust growth from large enterprise accounts, particularly in functional medicine, a growing area of preventative healthcare in which providers often order a range of lab tests to identify and act on multiple health risks. Large enterprises value our ability to scale diagnostic innovation to improve access, quality, and affordability. Later this summer, we expect to begin providing laboratory testing under our previously announced relationship with Fresenius Medical Care to support, over time, more than 200,000 kidney dialysis patients in the U.S. In the hospital channel, revenues grew low single digits with collaborative lab solutions driving our growth in the quarter. As hospitals grapple with financial pressures and shortages of skilled lab technologists, they are choosing quests to access our best-in-class expertise, innovation, and efficiency instead of running their own lab. Our acquisition of outreach labs also provides hospitals with capital for investment in their core care missions. Our pipelines for hospital outreach M&A and collaborative lab solutions remain strong. In addition to our physician and hospital channels, we are highly focused on expanding access for our consumer channel. During the quarter, we continue to see strong growth across our expanding array of offerings, including a new women's hormone panel on QuestHealth.com. We recently fulfilled our one millionth customer order since launching this enhanced online platform in the fall of 2022, demonstrating ongoing consumer demand for greater health information. Complementing our consumer-initiated channel, we continue to expand our partnerships with top consumer and wellness brands who value our high-quality lab testing, broad access, and flexible technology integrations as the lab engine inside of their offerings. In advanced diagnostics, we deliver double-digit revenue growth in several areas, including advanced cardiometabolic especially testing for metabolic and endocrine disorders and chronic kidney disease as well as for our analyzer autoimmune solution in brain health we drove robust growth for our ad detect blood tests for alzheimer's disease during the quarter we launched our new ab 4240 and p tau 217 ad detect panel which is designed to help physicians confirm amyloid brain pathology in symptomatic patients. In oncology, we are ramping up our commercial outreach to drive Haystack MRD market adoption while we also continue to convert participants from our early experience program. A recent study in the New England Journal of Medicine affirmed the high sensitivity and specificity of our Haystack MRD test, finding it identified complete response to an immunotherapy in Phase II trials several months before standard imaging tests. Finally, Quest continues to be at the forefront of serving public health needs. Earlier this month, we announced the launch of a molecular test for diagnosing Oropush virus, which we developed under a CDC contract to enhance the nation's preparedness for emerging infectious diseases. Turning now to operational excellence, we continue to target 3% annual cost savings and productivity improvements through our Invigorate program. We are deploying innovative automation and AI technologies, including digitizing processes to improve quality, productivity, and customer and employee experiences. We have now installed our front-end automation solution which speeds specimen aliquoting and labeling in half a dozen sites. We also recently completed a successful pilot of our automated accessioning platform at our Clifton lab. We plan to roll out both solutions across our lab network through the rest of the year and into 2026. Along with automation enhancements, strong employee retention improves productivity across our operations and service lines. During the quarter, employee retention further improved, building on trends in recent quarters. Overall, we are pleased with our progress in the quarter, executing on our strategy to serve customers and drive gains in revenue and productivity. And now Sam will provide more details on our performance and 2025 guidance. Sam?

Thanks, Jim. In the second quarter, consolidated revenues were $2.76 billion, up 15.2% versus the prior year. Consolidated organic revenues grew by 5.2%. Revenues for diagnostic information services were up 15.7% compared to the prior year, reflecting recent acquisitions as well as well as organic growth in our physician and hospital channels. Total volume measured by the number of requisitions increased 16.3% versus the second quarter of 2024, with organic volume up 2.1%. Total revenue per requisition was down 0.4% versus the prior year, driven primarily by the impact of the LifeLabs acquisition, which carries a lower revenue per rec. On an organic basis, revenue per requisition was up 3.3% in the quarter versus last year, driven primarily by an increase in the number of tests per requisition and test mix. Unit price reimbursement remained consistent with our expectations. Reported operating income in the second quarter was $438 million, or 15.9% of revenues, compared to $355 million, or 14.8% of revenues last year. On an adjusted basis, operating income was $466 million, or 16.9% of revenues, compared to $398 million, or 16.6% of revenues last year. The increase in adjusted operating income was due to recent acquisitions and organic revenue growth, partially offset by wage increases. Reported EPS was $2.47 in the quarter, compared to $2.03 a year ago. Adjusted EPS was $2.62 versus $2.35 the prior year. EPS in the second quarter was impacted by higher interest expense versus the prior year. Foreign exchange rates had no meaningful impact on our results. Cash from operations was $858 million year-to-date through the second quarter versus $514 million in the prior year. This year-over-year increase of 67.1% was driven by higher operating income, a one-time CARES Act tax credit, and the timing of receipts and disbursements. Turning now to our updated full year 2025 guidance. Revenues are expected to be between $10.8 billion and $10.92 billion. Reported EPS is now expected to be in a range of $8.60 to $8.80, and adjusted EPS in a range of $9.63 to $9.83. Cash from operations is now expected to be approximately $1.55 billion, and capital expenditures are expected to be approximately $500 million. Our 2025 guidance reflects the following considerations. Our updated revenue guidance assumes approximately 3.5% to 4% organic revenue growth, in addition to contributions from acquisitions completed in 2024 and announced to date. It does not assume any contribution from prospective M&A. We are making investments in 2025 related to Project Nova, which we expect will modernize our entire order-to-cash process. Most of these investments will occur in the second half of the year. Operating margin is expected to expand versus the prior year. Our below-the-line assumptions for net interest expense, adjusted tax rate, and full-year share count remain unchanged from our prior guidance. Finally, our updated EPS guidance assumes that we can absorb the impact of tariffs currently in place, primarily in Europe and China. With that, I will now turn it back to Jim.

Thanks, Sam. To summarize, we delivered robust top line and bottom line growth in the second quarter on strong execution of our strategy and utilization trends. Through our sharp customer focus, we grew demand for innovative clinical solutions and expanded business from enterprise accounts to complement growth from acquisitions. Given our performance in the quarter and continued utilization trends, we are raising our full year 2025 guidance. Finally, I want to thank our more than 55,000 colleagues for their hard work this quarter to fulfill our purpose to create a healthier world one life at a time. Now we'd be happy to take your questions. Operator?

Thank you. We will now open it up to questions. At the request of the company, we ask that you please limit yourself to one question. If you have additional questions, we ask that you please fall back in the queue. To be placed in the queue, please press star 1 from your phone. To withdraw your question, you may press star 2. Again, to ask a question, please press star 1. Our first question comes from Ann Hines with Mississu Securities. Your mind is open. You may ask your question.

Great. Thank you. Good morning. I want to focus my question just on the Washington backdrop. Obviously, with the one big, beautiful bill passed and the CBO came out yesterday and said this will lead to 10 million more uninsured over the next few years between the ACA and Medicaid. How do you view, you know, that many people going uninsured? How should we view that impact on Quest over the coming years? And then secondly, as it relates to Washington, what are your thoughts on PAMA going into 2026? Thanks.

Okay, good morning, Nan, and thanks for the question. So first, let's put the one big, beautiful bill into some context here. First, you know, the U.S. healthcare system, we spend $5 trillion a year. And over the next 10 years, with a 5% inflation, you know, that'll amount to sixty two trillion dollar sixty two trillion what the one beautiful bill act is taking out is one trillion dollars so less than right right around 1.5 percent now what we didn't read yesterday yes about ten million lives could come out over the next ten years from a Medicaid standpoint it's actually no impact in 26 very very little impact in 27 given that they're giving the states time to react to the to these changes on the exchange we estimate that no more than four to five percent of our revenue today comes from the exchange and again given the timing of when these lives would come out of those plans uh at best we you know worst case scenario we estimate no more than a 30 to 40 basis point impact on volume in 2026. So we don't really see that big of an impact, you know, in 26 or in 27. I think the other thing to keep in mind is with the people that are on the exchange, these people are working, they have jobs. In some cases, they're small business owners or they're self-employed. And so they have incomes. And so they may be able to pay higher premiums to keep their insurance. We also know that some people go to the exchange because they are subsidized and they could hop on to their employer's health insurance, but they're choosing the exchange today because it is a cheaper alternative than signing on to their own employer's health plan.

So, Anne, this is Sam. Good morning. Just to underscore or, you know, reemphasize the financial assumptions that Jim briefly mentioned and make sure that I'm sure we'll get more questions on this on the call, so I just want to make sure people are clear. For the Medicaid impact, we don't believe there's a material impact. We don't believe there's any impact in 26 and an immaterial impact in 27.

For the exchange impact, you know, assuming these subsidies are not renewed at the end of this year you know we expect in 26 approximately 30 basis points of impact on our volumes that's what we've sized obviously there's assumptions around that but that's that's what we believe now and you also asked about Pamela so here's the most recent update so look we're pursuing two strategies number one is Pam a reform and number two is it is a six delay in the cuts with respect to hammer reform our ACLA trade association has introduced language that would turn into legislation and a bill to the three committees uh two in the house and one in the senate that ultimately decide on health care policy in in the u.s that language is in front of the committees we expect that to be turned into a bill later this summer and then the traditional process will start from there the committees you know, discuss the bills, that there's differences between the two committees in the House and the one in the Senate, they get together, they reconcile this. And our hope is that it will turn into a bill. And whether it gets, you know, voted on as an independent bill or it gets put into some larger health care type of package towards the end of the year, um that remains to be seen the alternative path is obviously uh continue to push uh for another delay if we don't believe if we don't see the pamra reform getting enacted this year but i can tell you we have strong bipartisan support in each of the three committees uh where this legislation will be discussed operate our next question please thank you our next question comes from Kevin Calando with UBS.

Your line is open. You may ask your question.

Good morning, guys. Thanks for taking my question. I wanted to talk about the comment, the modernization investments. It sounds like some of it may have come forward into 2Q. Are you still anticipating sort of 20 cents for the full year?

And I guess the second part of that is in the context of margins expanding year over year you've been able to do that the first two quarters do you still anticipate that happening in the second half even with these modernization investments yeah so uh hey good morning kevin so this is sam let me tackle uh your two the two components of your question here with regards to modernization expenses um you know we had called out approximately 20 cents around modernization and we have talked about also some qra expenses that we're going to incur as well so and we said you know that we're going to incur these expenses this this year we've had some QRA expenses already in the first half we haven't had much in terms of modernization expenses yet in the first half so the bulk of those are going to occur in the second half you know in terms of margin expansion yes we had good healthy margin expansion in Q2 and in the first half and our expectation for the full year is that we continue to have operating margin expansion for the full year. So that's still the prevailing assumption in our guidance.

Great. Thank you. Operator, next question please.

Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open. You may ask your question.

Hi, guys. Good morning and thanks so much for the question. Maybe a follow-up from Ann's question about the HICS exposure and maybe brought more broadly. If we think back to sort of uninsured utilization rates, are there the 30 bits of impact that you're talking about? What are you assuming in your assumptions for potential utilization of like an uninsured population? And how do we think about that as maybe a potential offset to some of the headwinds that you described from the One Big Beautiful Bill?

Yeah, so thanks for the question. So the uninsured is a very small portion of our revenue today. Now, again, if you take all the lines that you expect to fall out of the exchange, again, we believe, you know, call it 65, 70 percent are going to find other alternatives. Okay. Alternative number one is they just simply pay the higher rate. Alternative number two is they hop on to uh an employer's insurance plan that already exists out there the third alternative is is that they go uninsured but again we don't think that's going to be the majority of the people because again the majority of the folks that are on exchange programs today they have income uh by definition they're not on Medicaid because they have incomes and um again they've got the two alternatives so we don't feel like it's going to be a major impact as Sam said you know, 30 basis point impact on volume in 2026.

Okay, that's helpful. Thank you.

Operator, next question, please.

Thank you. Our next question comes from Erin Wright with Morgan Stanley. Your line is open to me after question.

Right. Thanks so much. So last quarter, you talked a little bit about how it progressed throughout the quarter in terms of utilization trends and how that was accelerating. Some of that was because of the weather dynamics at the time. But how are we trending now into kind of the third quarter? I guess, how would you characterize the utilization throughout the quarter as well? And was it relatively consistent? And anything you can, I guess, parse out in terms of underlying utilization versus market share gains that would be helpful? Thanks.

Yeah, thanks for the question. So, we did see strong utilization in the second quarter and yes it was a definite um uptick from the first quarter i would tell you that the drivers of that utilization you know first and foremost it's our expanded access um that you know that we gained on january 1st of this year and you don't instantly just start to pick up that business so we saw a nice steady increase from q1 to q2 and uh what i'm talking about is our access through Elevance and our access through Centera. Elevance got us, you know, we're in network in Nevada, Colorado, West Virginia, Georgia, and together with the Centera plan, we picked up a million new lives. So we feel good about the progress that we're making there. Second is our advanced diagnostic tests, our Alzheimer's AB4240 tests, our advanced cardiometabolic tests, we continue to see nice, nice volume growth in some of these advanced diagnostics testing. And then finally, as you said, yes, weather had a big impact in our Q1 results. So I'm sure just the timing of people coming back into the healthcare system after they missed general health and wellness exams certainly did help in the second quarter. In terms of utilization rates, as we sit here in the first part of Q3, no real changes. It's consistent with what we've been seeing. And again, there's a combination of good utilization plus some big wins and the expanded access through the new health plan access.

Operator, next question, please.

Thank you.

Our next question comes from Michael Cherney with Learank Partners. your line is opening me ask your question good morning and thanks for taking the question maybe if i can just ask a question on mix i think jim you said uh 3.3 organic route correct mix do you dive a little bit more into what were the drivers of that dynamic how much of it was um contracting on your side offensive moves versus just the way the market developed and how that should factor into your guidance for the remainder of the year Yeah, I would say the majority of it is offensive.

So you're right, 3.3% organic rep per rec increase. We've said for the year price is flattish. It'll come in somewhere between plus or minus 30 basis points. So the other components in rep per rec are test per rec and test mix and business mix, payer mix. Tests per rec, again, continue to be very strong. And we see it, again, with the advanced diagnostics testing, our AB4240, significant growth, you know, quarter over quarter, as well as year over year. Our work with functional medicine entities continues to grow in a very meaningful way. Our own CIT business, as we mentioned in the script, was up 40%. And with that comes strong test mix, strong test per rec improvement. So those are the underlying drivers. I don't see a change in those drivers, to tell you the truth, and we just kind of expect it will continue here in the rest of the year.

Operator, next question, please.

Thank you. And this question comes from Patrick Donnelly with Citi. Your line is open. You may ask your question.

Hey, guys. Thanks for taking the questions. Maybe a quick one, Sam, just on the cadence of the second half. Can you just talk about, you know, the 3Q setup in terms of margins, earnings would be helpful. And a follow-up on PAMA, can you just talk about the financial setup here, what the implications are, how you guys think about potential offsets, what the pacing there would be, would be helpful just to frame up the PAMA piece of it. Thank you, guys.

Yeah, thanks, Patrick. I think I heard your question. Just let me know if I didn't quite capture it all. So I think you had mentioned, you know, what's the pacing here, especially as it relates to Q3 in terms of margin and earnings. And then you wanted some more color on PAMA, the financial impact and potential actions. So in terms of the pacing, really, you know, I reiterate what we've said at the beginning of the year and I think on the Q1 call as well, which is, you know, we do expect that the pacing usually is that Q2 is our best margin and earnings quarter of the year. Q3 is usually, and I'm talking about traditionally what we've seen, and especially if you take out and normalize some of the COVID impacts that we've seen in past years, at least the last few years. But usually Q3 is a slight step down from Q2. And then Q4 is a step down from Q3, with Q1 being the weakest quarter. And so that's usually our, I would say, normal pacing in terms of margin and earning. In terms of PAMA, I would say, you know, the impact that we currently size is approximately 100 million. If PAMA does not get deferred for another year, or if we don't get a permanent fix, we're looking at about 100 million in terms of pricing impact on our business. We've mentioned that previously. Now, we will take some actions to offset some of that. I will not give you a number in terms of how much exactly that would be, but we will offset a portion of that. It's not going to be the majority. We're unable to take actions to offset the majority of $100 million, but we will take some actions to offset a portion of this negative impact if there is no permanent fix or if there is no delay.

Operator, next question, please.

Thank you. And this question comes from Peto Chikering with Deutsche Bank. Your line is open. You may ask your question.

Hey, good morning, guys, and thanks for taking my question. A question here on tariffs for your presentation that you talked about, how you are absorbing the impact of tariffs. Can you quantify the impact that you're absorbing in any color and how it hits the third quarter and fourth quarter? And should we analyze the fourth quarter impact of something about 2026?

Yeah, we're not going to give a specific number, Peto, but as we've said before, I'll go back to our previous comments, we think the impact is manageable within our guidance, and so we are estimating that we would absorb this impact. Did we have tariff impact in Q2? Yes, we had some impact from tariffs in Q2 that we absorbed in our results. Q3 and Q4, we do expect some negative impact, but again, we can manage it within our guidance and the updated guidance that we provided on the call. What's assumed in our guidance today is the tariffs that are in place, that are currently in place and currently implemented it per law. I know there's a lot of uncertainty around what's going to happen, you know, August 1st, or I mean, there's always a lot of scenarios around that. We have contracts in place with almost 80% of our spend on the supply side. So again, we believe that even with an August 1st scenario where tariffs do go up on certain products, that we can offset that impact through the contracts that we have in place, and through the alternate sourcing, you know, supply channels that we have looking at different vendors where we can resource some of the supplies from U.S. manufacturers or at least U.S.-based manufacturing, not China-based manufacturing.

Yeah, just again to frame this, our spend of $2 billion, 80% of that spend is in the U.S. We said less than 1% was China. We had already executed on some moves away from China that minimized, as Sam said, the impact in Q1 and Q2. The other 20% is spread outside the U.S., outside of China, with the majority of that coming from Europe with our traditional big suppliers that are located there. But as Sam said, you know, we have contracts in place. The language is favorable to us, so we feel very comfortable that it is manageable within the guidance that we've given this year. Great.

Our next question, please.

Thank you. Our next question comes from Jack Mann with Neffon Research. Your line is open. You may ask your question.

Thank you. Good morning, everyone. I wanted to ask about the LifeLabs acquisition. Is it possible you could call out within the $240 million or so of M&A contribution in the quarter, how much came from LifeLabs versus other deals? And then just more broadly, how's the integration going and just latest thoughts around EPS accretion?

Thanks. let me i'll start and maybe talk just briefly on the financials maybe jim can give some qualitative commentary on the acquisition listen the acquisition is going really well as the punch line but in terms of the contribution jack from uh on revenue so we had 10 growth from m a in the quarter i would say approximately uh eight percent was from life labs so that's the portion of the the growth that came from LifeLabs of the 10% contribution from M&A. You know, in terms of financial cadence or improvements that we're seeing, you know, we had said operating margin is going to take a couple of years to get to be on parity with overall enterprise quest rates. I think we're tracking to that goal.

It's not better, you know, and it's generating the EPS contribution that we expect when we size this deal and when we put our plans in place for this year. so progressing really well but maybe i'll let them speak to the other qualitative yeah so jack first we have a very strong management team in place in canada that is doing a terrific job from an execution standpoint i would tell you that we've already gotten you know some really good procurement synergies as you would expect when we look at contracts that we have contracts that they have we've gotten what I would call nice operational know-how synergies right how we do things how they do things and by the way some things you know it's not just a one-way street you know we've certainly learned some things from them from an operational standpoint that have helped us so put all that together and as Sam said we're really pleased with with the execution we're pleased with the acquisition it's generating nice top-line growth for us obviously it's inorganic. But when we look at the growth of LifeLabs itself, even though it wasn't in our numbers last few, too, we're pleased with that growth. So all in all, we're really happy with how we're tracking.

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.

Thank you very much. And congrats on a good quarter. Well, first of all, I want to talk about uh one of the slides that has client pay it looks like it's contracted by about five percent over the last few years and then government has kind of gone up is some of that life lab and if not what else would that be and then how should we look at that on on kind of a go forward basis and then just a clarity on on on wage increases you kind of mentioned um acquisitions helped um drive net operating income offset by a little bit of wage inflation are we trending back to normal at least still going down. I know you had that. That's been a headwind for the last few years.

So, I mean, at least is that heading in the right direction now?

Thank you.

Yeah. Just in terms of the payer mix, it's all driven by you're adding in, you know, what will be over $700 million of LifeLab revenue this year. So, all of the other categories are just going to mix down by that amount.

So, that's what's driving that. Yeah. And, David, we kind of lost you there on the other parts of the question.

Can you repeat because we maybe it's on our end but we didn't hear the other part of the question um it was on the uh the wage increases oh yeah the wage increases yeah wage uh inflation um has stayed in the three to four percent um range for the year um for the first half of the year we don't expect that to change in the second half of the year um what has changed um from a labor standpoint though is our attrition continues to come down and we're in the you know mid teens and getting very, very close to where we were pre-pandemic. And so, as you know, that really helps us from a productivity standpoint. So pleased with that.

Operator, next question, please.

Thank you. Our next question comes from Andrew Brachman with William Blair. Your mind is open. You may ask your question.

Guys, good morning. Thanks for taking the question. Jim, a few times you mentioned working with functional medicine entities, that's sort of a larger growth driver for you guys. Can you maybe help excise that as a broader opportunity? and what further investments are you making there?

Yeah, I don't want to give exact numbers, but it's a sizable chunk of our business that's growing almost in line with our own consumer-initiated testing business. And in many ways, when we sell through functional health, it is generally either patient paid or physician paid, and then the physician is charging the consumer. As you know, in functional medicine, the goal is to analyze a lot of things in the human body, hormone levels, obviously all the cardiometabolic, all the chemistry testing, and then functional medicine seeks to treat the patient through nutritional changes, exercise changes, sleep changes, maybe supplements, but treat the patient in a very natural and holistic way. And, you know, we're seeing just a surge in this across the U.S. with all the focus on prevention, wellness, and, you know, and just people wanting to live longer. You see it in the podcasters, Peter Atiyah, Rich Roll, Andrew Humerman. These guys, in essence, are generating a lot of free marketing for us. They have these podcasts. They start talking about ApoB and LP little a. And the next thing you know, we see a surge in APOB and LP little a testing. So it's become a real trend in the U.S. as people are focused again on prevention and wellness and longevity, and it's sizable, and we expect it to grow double digits here as we move forward.

Question, please.

Thank you. Again, if you'd like to ask a question, just press star one. Our next question comes from Tycho Peterson with Jeffrey. Your line is open. You may ask your question.

Hey, this is Noah on for Tyco. Thank you for taking our question. I wanted to unpack the revenue guidance a little bit. You had raised it by around 80, 85 million. And I'm wondering, you know, what contribution you have baked in from new tests, you know, things like Haystack, AD Detect, Luma Pulse, and then other buckets there like acquisitions would really be helpful.

Yeah, so just in terms of breaking it down between acquisitions and organic growth, Noah, so we talked about the fact that we expect organic revenue growth now to be between 3.5% to 4%. So by default, that would tell you that acquisitions are 6% to 6.5%. Listen, we're seeing strong, so two things that are driving this, and I won't go into the specifics as to which tests are driving how much, But, you know, we have talked about the fact that some of our advanced diagnostic tests in those high-growth areas that Jim quoted earlier are driving good upside and good performance, AD Detect being one of them. But we have many tests across these high-growth areas that are contributing to it. Utilization is strong. As you saw in Q2, you know, we are seeing positive utilization driven by increased access in some of those states where we got access as of January 1 this year. and, you know, we saw a good bounce back from some tough weather months in January and February, and Q2 generally was strong utilization, which gives us confidence in increasing the guidance for the full year. We're seeing very strong revenue per requisition, 3.3% organic revenue per requisition in Q2, which, again, gives us confidence on the fact that, you know, the test per rec assumptions that we have are durable and sustainable, and we're seeing good healthy mix in terms of payer mix so all of those things are really driving our confidence in terms of increasing the revenue guide by this 85 million at the midpoint that you quoted and one other thing I would just add at the end Noah is the fact that pricing you know is still we are still expecting our price overall across the quest this book of business to be flattish where the potential range of outcomes of plus or minus 30 basis points so pricing is within the assumptions that we had earlier.

Operator, next question please.

Thank you. Our next question comes from Michael Riskin. The Bank of America, your mind is open. You may ask your question.

Hey, this is Aaron on for Mike. Thanks for the question and congrats on the quarter. I wanted to touch on Haystack a little bit and, you know, ask about any oncologist feedback or impressions and just get an overall update on progress made there.

Yeah, so we're making good progress and as we stated previously we ran this early experience program we're seeing really nice conversion of people that that that sent us work as part of the early experience program and becoming full-time customers the the the feedback from oncologists thus far has been very positive they recognize the superior limits of detection that we have with this test uh they like the turnaround time they like the hands-on touch that they get the personal touch from our client team so we're pleased with the progress we continue to make progress from q1 to q2 and we expect to

continue to grow that business significantly q3 q4 and into 2026. thank you operator next question please thank you and our final question comes from luke surgot with barclays your line is open you may ask your question hi guys this is anna krasinski on for luke thank you for taking our questions and congrats on the quarter so now you can ask about organic tests per day saw a nice two and a half step up this quarter i'm just curious how should we be thinking about this going forward since last year this only increased about one percent each quarter and if you could to talk about what's driving that upside.

Yeah, so let me start, and Sam can add, as we said, what's really driving it from Q1 to Q2 was our access, right? We got into network with Elevance and Sentara on January 1st of this year, and so we've seen a nice steady ramp up of new clients as a result of having access to over a million new lives. That includes in the states of Nevada, Colorado, West Virginia and Georgia the other thing driving it we said you know was our advanced diagnostics testing just an uptick in some of these advanced cardiometabolic autoimmune testing women's health care testing especially the advanced diagnostics and IPT and Qherit and then obviously our new brain health offerings has also helped we did cite yes weather impacted the business in Q1, and so people that missed appointments, especially general health and wellness, popped back in Q2. So all of that contributed to the strong organic revenue growth. Now, the other thing we saw in the quarter is, recall last year, we had said that our employer businesses, the two employer businesses, employer POP Health plus our employer drug testing business, were a significant headwind in terms of volume and revenue growth. I would tell you those two businesses have stabilized this year. It's still a bit of a volume headwind, but it actually, those two businesses combined, had revenue growth in the quarter, which obviously means if it's a volume headwind, but it helped from a growth standpoint, it means we've been raising prices in those two segments. And we've raised those prices, and they're sticking, especially in our employer drug testing business, which we're very pleased with. So put all of those things together, and that's what got us the strong organic volume growth. And our expectations is going to continue in that range for the rest of the year.

And just one last point maybe to add to Jim's great explanation is, because I'm not sure if this is also something that you want to color on, rep per rec as well organic rep per rec was up 3.3 percent in the quarter and a big portion of that was driven by tests per rec I would say almost you know close to 70 percent of that was tests per rec appreciation and you know the growth of tests per rec that we've seen over the past few years before the pandemic it was less than four tests per rec that we were seeing and now we're seeing more than four tests per rec. So the rec density that we see from across our business has improved as well.

Operator, any last questions?

Operator, any last questions?

At this time, I'm showing no further questions.

Okay. Thanks, everyone, for joining in today. Appreciate all your questions and feedback and look forward to talking to you all soon. Have a great week ahead. Thank you.

Thank you for participating in the Quest Dynastic Second Quarter 2025 conference call, A transcript of prepare 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 866-388-5361 for domestic callers or 203-369-0416 for international callers. Telephone replays will be available from approximately 1030 a.m. Eastern Time on July 22, 2nd, 2025 until midnight Eastern time on August 5th of 2025. Goodbye.