Welcome to the Quest Diagnostics 3rd 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 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'd like to introduce Sean Bevick, Vice President of Investor Relations for Quest Diagnostics. 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 we'll discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K, and subsequently filed quarterly reports on Form 10-Q, and the 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. Our third quarter performance underscores strong demand for our clinical solutions, our diligent execution to meet customer needs, and our commitment to advancing our strategy. We delivered robust top and bottom-line growth, extended our presence in key markets, forged new collaborations with leaders across healthcare, and expanded our broad portfolio of diagnostic innovations to advance better health. Revenues grew 13.1 percent, including 6.8 percent organic growth, driven by broad-based adoption of our clinical innovations, contributions from acquisitions, and growth in our consumer channel as we positioned Quest as the preferred lab engine inside top wellness brands. We also announced an agreement with CoreWell Health to form a lab services joint venture serving the state of Michigan. In addition, we will deploy our comprehensive co-lab solutions across Corwell's nearly two dozen hospitals, supporting quality, innovation, access, and productivity. Given our strong performance year to date, we are again raising our full year 2025 guidance. I'd like to take a moment to comment on efforts to reform PAMA. In September, Congressional leaders introduced bipartisan legislation called the Results Results is a smart, pragmatic, and fair reform that seeks to correct the flaws of the original PAMA implementation. It would deliver foundational payment reforms for clinical labs by dramatically improving the accuracy of data used to set reimbursement under the clinical lab fee schedule. If Congress does not reform or delay PAMA this year, American labs will be forced to absorb significant payment cuts next year, threatening the ability of American seniors to access critical lab testing. We are working in partnership with our trade association, ACLA, and with Congress to secure meaningful PAMA relief before the new year. Before turning to our third-quarter results, I'll share some highlights on how 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 purchases of accretive hospital outreach 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 updates on the progress we have made in these areas during the third quarter. In the Physician Channel, we delivered approximately 17% revenue growth with organic revenue growth in the high single digits. We experienced broad-based demand across our clinical solutions, supported by focused commercial execution and expanded health plan access in several states, including Colorado, Georgia, Nevada, and Virginia. In addition, we continue to expand business and enterprise accounts, including functional medicine providers who utilize comprehensive laboratory testing to improve health and wellness. During the quarter, we completed our acquisition of select clinical testing assets from Fresenius Medical Care, which will enable us to offer lab testing used in dialysis delivery to independent dialysis clinics in the U.S. More significantly, under a separate enterprise agreement, we also began to roll out clinical lab testing to Fresenius Medical Care's dialysis centers, which serve about 200,000 dialysis patients annually in the U.S. We expect to finish scaling these services in early 2026. We look forward to processing these tests during periods of the day when we have open capacity, enabling us to further optimize the productivity of our labs. In the hospital channel, revenues grew low single digits, with collaborative lab solutions driving our growth in the quarter. We offer hospitals many flexible options for accessing our leading science, innovation, and scale. These include reference testing, our co-lab solutions, outreach acquisitions, and other business relationships, all of which provide meaningful improvements in quality, patient access, and cost efficiencies. During the quarter, Quest and Corwell Health, a top health system, announced plans to establish a laboratory services joint venture in Michigan with an advanced state-of-the-art lab serving the entire state. In our largest implementation of co-lab solutions to date, Corwell Health will utilize our comprehensive offering, including reference testing, lab analytics, supply chain management, and blood management. Once we fully scale across Corwell's 21 hospital labs next year, we expect annual revenues from co-lab solutions to be approximately $1 billion. Turning to our consumer channel, we are excited by increasing momentum we saw in the third quarter as we strengthen Quest as the preferred lab engine of consumer health companies. We are delivering our extensive menu and technology inside top consumer health and wellness brands. For example, our collaborations with Whoop, the human performance company, and Aura Health, maker of the world's leading smart ring, enable seamless access to our lab testing services and results in their mobile apps. In the quarter, we also saw strong double-digit growth from our QuestHealth.com consumer-initiated test platform. In advanced diagnostics, we delivered double-digit revenue growth across several clinical areas of our portfolio. This includes advanced cardiometabolic and endocrine, as well as autoimmune disease testing with our Analyzer autoimmune solution. Analyzer experienced strong growth as primary care physicians increasingly utilized this solution to direct high-risk patients to specialty care. In brain health, demand for our Quest AD Detect Blood Tests for Alzheimer's disease accelerated and more than doubled in the third quarter. New guidelines introduced in July recognize the value of blood-based biomarker testing in assessing Alzheimer's disease pathology in patients with cognitive impairment. At the same time, we continue to publish evidence on our AD Detect test, including a study published this month that found two of our innovative panels provide confirmatory accuracy for aiding Alzheimer's diagnosis. In oncology during the quarter, we received breakthrough device designation from the FDA for our Haystack MRD test. This milestone reinforces the high caliber of our cancer monitoring innovation and opens avenues for developing companion diagnostics. We also commenced separate trials with Mass General Brigham and Rutgers Cancer Institute to further research Haystack MRD's clinical utility as a guide in making post-operative therapy decisions. We are also pleased that HPH, a major lab provider in Hamburg, recently introduced an in-house MRD test in Germany, based on a license to our Haystack MRD technology. We are highly focused on delivering innovations that can identify risk of cancer and other diseases in early preventable stages. During the quarter, we announced collaborations that leverage Quest's national scale in phlebotomy and connectivity to broaden access to cancer screening liquid biopsy tests, including Garden Health Shields tests for colorectal cancer. Turning 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. During the quarter, we announced Epic as our technology partner for Project Nova, our multi-year order-to-cash transformation. By deploying a suite of epic solutions, including Beaker, MyChart, and Care Everywhere, we will deliver deeper, more connected insights with easier, faster, and more efficient experiences. Combining these leading technologies with our breadth and scale will help all patients and providers, regardless of their EHR provider, get the information they need to make critical care decisions. We are in the early planning stages of this work and look forward to sharing more about the implementation on future calls. Our growth and productivity gains in the quarter demonstrate that we are executing our strategy and serving our customers and patients with both energy and purpose. And now Sam will provide more details on our performance and 2025 guidance. Sam. Thanks, Jim. In the third quarter,

consolidated revenues were $2.82 billion, up 13.1% versus the prior year. Consolidated organic revenues grew by 6.8%. Revenues for diagnostic information services were up 13.5% compared to the prior year, reflecting organic growth in our physician, hospital, and consumer channels, as well as recent acquisitions. Total volume measured by the number of requisitions increased 12.5% versus the third quarter of 2024, with organic volume up 3.9%. Recall, the impact of weather and the crowd strike global IT outage was a headwind on our volume in the third quarter last year. We estimate that our volume in the third quarter of 2025 experienced the benefit of approximately 50 basis points due to the impact from those disruptions in the same period last year. Total revenue per requisition was up 0.8% versus the prior year, as an increase in organic revenue per requisition was substantially 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% 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 third quarter was $386 million, or 13.7% of revenues, compared to $330 million, or 13.3% of revenues last year. On an adjusted basis, operating income was $458 million, or 16.3% of revenues, compared to $385 million, or 15.5% of revenues last year. The increase in adjusted operating income was due to recent acquisitions and organic revenue growth, partially offset by wage increases and higher-than-expected employee health care costs. Reported EPS was $2.16 in the quarter compared to $1.99 a year ago. Adjusted EPS was $2.60 versus $2.30 the prior year. EPS in the third quarter was impacted by higher net interest expense versus the prior year. foreign exchange rates had no meaningful impact on our results. Cash from operations was $1.42 billion year-to-date through the third quarter versus $870 million in the prior year. This year-over-year increase of 63.1 percent was driven by higher operating income, favorable working capital due to timing of receipts and disbursements, a one-time CARES Act tax credit, and the cash tax benefit related to recent tax legislation. Turning now to our updated full year 2025 guidance. Revenues are expected to be between $10.96 billion and $11 billion. Reported EPS is expected to be in a range of $8.58 to $8.66 and adjusted EPS in a range of $9.76 to $9.84. Cash from operations is now expected to be approximately $1.8 billion, and capital expenditures are expected to be approximately $500 million. Our 2025 guidance reflects the following considerations. Our updated revenue guidance assumes approximately 4.5% to 5% 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. We expect these expenses to ramp in the fourth quarter. Operating margin is expected to expand versus the prior year. Our updated operating cash flow guidance reflects a cash tax benefit related to recent tax legislation, as well as favorability in working capital. With that, I will now turn it back to Jim.

Thanks, Sam. To summarize, our third quarter performance of robust top and bottom line growth underscores strong demand for our clinical solutions, our diligent execution to meet customer needs, and our commitment to advancing our strategy. We form collaborations to support future growth, including with Corwell Health in Michigan, top consumer health brands, and Epic for Project Nova. Given our strong performance year-to-date, 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. They are the force that delivers on 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 Patrick Donnelly with Citi. Your line is open. You may ask your question.

Hey, good morning, guys. Thanks for taking the question. Jim, maybe just on the backdrop, the utilization backdrop, it looks like it remains elevated. What are you guys seeing there and expectations into year-end? And then just a quick follow-up for Sam, maybe on the PAMA side, latest expectations, what you're hearing there, and the potential offsets you would have as we head into 26, maybe just the probability of how you're thinking about that. Thank you, guys.

Hey, thanks, Patrick. So, on the utilization, as we said in the script, our raw rec volume was up 3.9%, and then organic rec per rec up 3%. So, let me comment on each one of those. On the rec volume side, first, as you know, we're back in network with Elevance in some key states, Nevada, Colorado, and Virginia. And we're certainly picking up share and picking up momentum as we've progressed through the year. So you're just seeing a continuation of those volumes building in each of those states. In addition, Sentara is another health plan that we're back in network with in the Virginia area as well.

Actually goes down the coast a bit.

And so all of that has helped our 3.9, you know, aided the 3.9% organic rec growth. Now, in addition to that, you know, we mentioned the strong mix on the call, autoimmune testing way up. advanced cardiometabolic testing weigh up. Our brain health volumes more than doubled in the quarter. So all of that helping both test per rack plus test volume. And then the last thing I mentioned is our consumer business. The consumer health business, our own direct channel has been incredibly strong, growing 30 to 40 percent on a year-to-date basis. And then our partnerships with companies like Function Health, also helping our growth on the consumer side. In the quarter, we announced partnerships. It didn't really impact our volume in the quarter, but your comment about how do we think about things going into the fourth quarter, our partnerships with Whoop and Aura, we definitely expect that to contribute volume on the consumer health side. So I would tell you the expectations for Q4 is that the utilization levels will continue as we've seen

them in Q3. Yeah, on PAMA, and good morning, Patrick. On PAMA, so, you know, to kind of probabilize it here or put odds on it is difficult. I would tell you, you know, the Results Act has been proposed. We still think it's, you know, it's going to be not an easy one to pass, but there's also a likelihood of a PAMA delay, which we think has likely more probability than and the Results Act actually passing. So we remain optimistic about a PAMA delay, although it's really hard to kind of put odds on it right now. In terms of the impact of the P&L, as we have indicated before, it's a $100 million impact next year if PAMA does come back. We will offset a portion of it. It will not be the majority of it. We will offset, you know, a portion of it that's a portion of that $100 million. And, you know, remember, we control the pace of some of the investments that we have next year. So we can control and pace some of these investments if PAMA does come back and we have to offset a portion of this hit. Operator, next question, please.

Thank you. Our next question comes from Michael Cherney with Lear Inc. Partners. Your line is open to me. Ask your question.

Good morning, and thank you for taking the question. Maybe if I can build a little bit more on the mix and the quarter and how you think about that relative to jump-off point to next year, you know, relative to the LRP. As you look back versus what you outlined in March, are some of these aspects of wellness testing, especially testing, performing above expectations in line with, and how are you thinking about framing those in terms of the contribution rate they can provide relative to where you laid out the LRP for overall organic volume, organic revenue growth back in March? Thank you.

Yeah. So versus expectations we set in March, you know, I'd say the consumer channels are both our direct and our relationships with other partners are performing, you know, slightly above what we expected going into the year. Our own direct channel is performing very well. And in addition to wellness testing that we get through that channel, there's what I would call episodic testing. So these are things like STDs, tick testing, allergy testing that people just want and, you know, want privacy. For other reasons, they come to us directly. So our own direct channel performing better than expected. You can all see, I'm sure, on social media and things like that, what companies like Function Health and Whoop and Aura are doing. And certainly, you know, that is aiding our progress on the indirect channel as part of consumer health. Look, it's just huge momentum that is building across the country as individuals become CEOs of their own health. And with that, they turn to companies like Quest Diagnostics to get access to testing that otherwise, you know, they may not be able to get through their traditional health plans. Or some of the tests that these consumers want may not be acceptable, you know, through the plans. They could get denied. So that's why they turn to consumer health channels, okay? So, again, as we go into the fourth quarter, and we're in the fourth quarter, as we go into the early part of next year, we expect these consumer channels to continue to gain momentum.

Michael, if I take it back to your comment compared to March, or to compare to March, you know, largely the assumptions are still intact versus what we shared during our investor day in March. You know, the mid-single-digit revenue growth, including the contribution of 1% to 2% from M&A, high single-digit EPS growth, the margin expansion over the three years that we shared, all those, I would say, are pretty intact. I mean, there are some definitely positive things that we're seeing around utilization, around the consumer business, around the wellness business, all the things that Jim shared. And also, on the revenue side, you know, the test per rec and mix improvements that we're seeing that have a direct impact on contribution and operating margins. So, all of those are really positive, but not to change the long-term outlook that we provided.

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. I have just a question about sort of how you're thinking about the 4Q margins. Obviously, I think, Sam, you highlighted the step up in the NOVA, Project NOVA expenses, which you guys have obviously called out before. Can you talk about some of the other pluses and takes? Because obviously you've had very strong margin expansion over the last four years now, and I just want to make sure I understand all of the puts and takes as we think about the fourth quarter and then, you know, the jump point into 26. but, like, I understand that PAMA, you know, PAMA, you know, exponential PAMA impact. Thank you.

Sure, Elizabeth, and good morning. Yeah, happy to talk about it. So starting with Q3, because that's the jump-off point to your question, starting with Q3, we saw strong margins in Q3, 16.3% operating margins, healthy expansion versus same period prior year, you know, and a lot of that is driven by utilization and driven by mix as well, both in terms of, you know, the revenue per rec overall, but also the business mix, the test mix. Now, we did see an offset to the strength in operating margins in Q3 related to group health expenses. You know, our employee medical expenses, those came in higher than we expected in Q3 and were a fairly significant headwind on margins in Q3. I would size it as roughly 40 to 50 basis points in terms of impact on operating margins. You know, we do expect those to continue at this elevated level going into Q4. You know, I won't talk about 26 yet. It's too early. We need to look at all of our, you know, group health plans for 26 before we can guide anything towards the impact of those in 26. But I can tell you in Q4 our expectation is they'll continue somewhat elevated and have a negative impact on margins. You know, in terms of Q4, the only other things I would call out is, yes, we do expect a ramp in NOVA investments in Q4. Those have, largely due to the timing of signing with Epic, have been pushed more into Q4, so we expect more of those in Q4 than we initially expected. You know, and then in terms of seasonality, I mean, I'd remind you of a couple of things that we traditionally see, nothing that's different. One is that, you know, if you look pre-COVID seasonality, Q3 to Q4, usually the OM trend is to be about 50 to 100 basis points lower in Q4 versus Q3. So I think the seasonality trends are pretty…

On a year-to-date basis, our OM rate is up 60 basis points. And so it really does point to our productivity efforts. Our Invigorate program continues to pay dividends for us. There's no let-up. There's never an end goal. The goal always moves forward. And we expect those productivity efforts to continue in the back half of the year and into next year. Operator, next question, please.

Thank you. Our next question comes from Kevin Caliendo with UBS. Your line is open. You may ask your question.

Thank you. Good morning, everybody. Sam, I know you just said you don't want to talk about 26, but I have to ask a little bit, It's just thinking about now that we sort of understand the jump-off point, we understand your LRP. Tama aside, what other sort of headwinds and tailwinds should we be contemplating? I know there was some other investment spend that was planned. Corwell, you know, might be incremental. Is there anything sort of fundamentally or company-specific we should be thinking about when thinking about 26 relative to the LRP?

Yeah, Kevin, let me start, and then I'll turn it over to Sam here. So I think we've talked volume and utilization trends. The test per rec growth, the ref per rec increases that come with that,

we feel good about that continuing to next year.

Our commitment to advanced diagnostics, the autoimmune testing, brain health, as I talked about, doubled in the quarter. All of those point to, again, increased volume and utilization trends. We've talked about earlier, and we mentioned in the script, we've just begun to take on the testing from Fresenius. So we're two parts to that. One is Fresenius is the testing that comes from over 200,000 dialysis patients across the 3,100-plus dialysis centers. We're in the very early innings of integrating that work into Quest Diagnostics. Plus, Fresenius provided lab testing for other third-party dialysis centers. That's the piece of the business that we bought, and we certainly expect to expand on that as we go into next year. Corwell, the co-lab portion of that just gets going here in the fourth quarter. That will expand across all 21 hospitals as we move into 2026. And then, again, the strong consumer health channel. Now, headwinds, you know, we've talked about PAMA. You know, yes, there's the expiration of the health exchange, the subsidies for the health exchange. Still don't know how that's going to come out. Obviously, that's one of the big concerns during the shutdown here. And then, you know, other headwinds. Look, hospital reimbursement remains a challenging environment. Pricing on the hospital side remains challenging. And then, as Sam indicated, yes, there will be a ramp-up of NOVA investments as we move through next week.

And, you know, from – so, Kevin, good morning. From an impact on margins perspective, if I take some of Jim's comments and, you know, just give you some color around margins, not to give a percentage right now or any numbers, but, you know, the utilization, the healthy environment is going to continue to drive margin expansion. Similar thing with the revenue per requisition, the test mix, the, you know, and also the test per rec is going to drive improvements in margin. I think you're going to see the Invigorate program continue to drive the 3% productivity and cost reduction next year as well. So that's a tailwind as well. You know, PAMA is obviously an uncertain one, so I'll kind of set it off to the side for now, you know, as a potential headwind. You know, the ramping NOVA investments are going to generate more expenses next year, but that's in line with what we shared back in March when we first announced this program. There's nothing new there in terms of additional cost. And also, you know, generally in terms of all the investments that we have next year, including NOVA, depending on PAMA, you know, we have the ability to sort of ramp those and basically time those and pace those accordingly to offset, you know, the impact of any negative pricing effect from PAMA.

Operator, next question, please.

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

thank you good morning guys um i wanted to talk about cash flow so it's been really strong conversion so far this year you know and you increase the guide here to 1.8 billion up 250 million um maybe for sam just are there any one-timers you would call out this year besides kind of the cares act payment um i'm just trying to think about the puts and takes on this line into 2026 and understanding what the right baseline might be to work off of? Thanks.

Yeah, thanks, Jack. So, yes, cash flow has been strong. I mean, we took up operating cash flow, as you indicated, to $1.8 billion as our guide, so an increase of $250 million. I think we're seeing some increases and some positives related to the strength of the business, also the timing of receipts as well and collections. But there are one-timers in that that you should not expect to necessarily continue. You called out the CARES Act payment of $46 million. That is a one-timer that we don't expect to repeat next year. And then there are one-time benefits related to the recent tax legislation, the One Big Beautiful Bill Act, that help us in 2025 that don't necessarily produce the same magnitude of benefit in 2026. One is related to the acceleration of bonus depreciation and the ability to take deductions on that and gives you a cash tax benefit. And the other one is also related to R&D, accelerated R&D expenses or expensing R&D and being able to take a tax deduction on that as well, which helps you from a cash tax benefit too. So those in total, I would call out between just over $100 million, $100 to $130 million or so of benefits in addition to the $46 million of CARES Act.

Yeah, Jack, the other thing I'd point to is the beauty of the consumer channel is it's a direct cash business. You get payment at the time of order, and there's no patient concessions or bad debt. So to the extent we continue to grow that consumer channel, it certainly helps bring in the cash, the timeliness of the cash, and the certainty of the cash.

Operator, next question, please.

Our next question comes from Luke Sergat of Barclays. Your line is open. and you may ask your question.

Great, thanks. I just wanted to dig in a little bit on the consumer health momentum that you guys have in light of some of these, like, new partnerships you have with, like, Whoop and Aura. How to think about, like, the partnership here and what kind of tests are, you know, what's being marketed and what kind of tests you guys are going to be driving through there and any type of benefit that you could see to help the requisition volume stay elevated within that business.

Yeah. Yeah. So I can talk about each of those. You know, first of all, let's start with WHOOP. They have somewhere between, I don't know, a million and a half and two million WHOOP users in the country. WHOOP announced that there were roughly 350,000 people that had signed up for advanced labs. Now, how quickly those people that signed up, how quickly they convert and actually get lab testing done, it's very hard to tell at this point. They, you know, the faucet is open. People have come forward. So we are seeing demand from that. You've seen the pricing that Whoop announced in the marketplace, $199 for a limited panel of, you know, roughly 65 biomarkers. And if you do that twice, it's twice in the year, it's a $350 charge. Aura, on the other hand, we're still in the final stages of the technical integration with Aura. Aura is much bigger in terms of users. They've got about 5.5 million globally. Not 100% how many are in the U.S., but probably 60-ish, 65% are probably U.S.-based. They've chosen a more limited panel, a $99 panel that has roughly 50 biomarkers on it. And so we don't have an indication of a backlog yet or anything like that. And then, you know, obviously, again, our own direct channel has put up growth numbers that are really impressive on a year-to-date basis between 30% and 40%. And then, obviously, function health continues to grow, and we are the sole lab that does all the testing for function health. So, put all of those pieces together, and it really points to a segment that we're getting terrific growth at. 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. Thank you for taking the question, and congrats on a good quarter. So, and congrats on the consumer channel. We are seeing a lot of great growth in this channel. We're also seeing some ads for some of the home delivery blood testing kits. Do you believe that could be a key part of consumer health, and are there any strategies to participate in that market?

First of all, yes, there is strategies for us to participate. Kate, there's devices out there today for self-collect for both STDs as well as HPV. Today, those collections have to take place actually in one of our patient service centers, but in the future, we would expect consumers' patients to be able to do those collections in the home. We're working with a third-party provider on, you know, mobile – on blood collection kits that go well beyond finger prick and finger sticks. We don't actually think that is an optimal way to collect enough blood that can be used to run the tests that we typically run here in Quest Diagnostics. But in time, those self-collect devices will improve, and as they do, we're going to participate in that game as well.

Operator, next question, please.

Thank you. Next question comes from Erin Wright with Morgan Stanley. Your line is open. You may ask your question.

Great, thanks. And so in the 10Q filing, you reiterated the expectation around the impact on the one big, beautiful bill and the expiration of ACA subsidies, I guess, in that 50, 60 BIP range. I guess, how would you break the two of those out if we do get some sort of more favorable negotiation on the exchange subsidies? And then a completely separate question, but can you speak a little bit about the partnership with EPIC a little bit more? Or, I guess, can you talk a little bit about the genesis of that relationship and the nature of it and when we will hear more on that front, too?

Yeah, thanks, Erin. This is Sam. Good morning. So on the impact in 2028 that you call out that we disclosed in our 10Q, so the way I would think about it is the majority of that is really related to the health insurance exchanges and the potential expiration of those subsidies and not being renewed. You know, so that roughly, let's call it 60 basis points, I would say about at least 40 to 45 basis points of that is coming from the exchanges, and the rest driven by Medicaid. Medicaid ramps over time to get to a certain impact by 2034, but, you know, the impact on 27, 28 is fairly minimal still. And Jim, talk about the other.

Yeah, on the EPIC implementation, so the foundational element of this is the conversion and upgrading of all of our laboratory information systems to their LIS product, which is called Beaker. We're going to start that process. Obviously, a lot of planning is taking place right now. Planning will continue into 2026. We plan on starting those implementations more in our esoteric sites and then rolling it out across the regions over the next several years. We will also standardize. Today we have the application called MyQuest, which allows patients appointments, view your test results, pay your bills, and that application will be upgraded to what most people know is MyChart in the EPIC world that provides a lot of benefits, including patients will be able to see all of their information, regardless if it's from Quest Diagnostics or a health system, on one MyChart site, if you will. And so it provides the integration of lab work with other medical records that they may be getting from their physicians, their health systems. And so we believe that really has tremendous benefits as well. So, as we've described in the past, you know, it's a five- to seven-year implementation timeline, and as Sam has said, you know, we're going to pace that appropriately. It's a lot of change, both internally for our own employees, a lot of change for our customers, and we're going to be very thoughtful and methodical as we embark on this change going forward. Operator, next question, please.

Our next question comes from Andrew Brackman with William Blair. Your line is open. You may ask your question.

Hi, guys. Good morning. Thanks for taking the questions. Jim, you highlighted some of the work that you're doing expanding partnerships with some of the cancer screening players that are out there. Can you maybe just sort of talk about those opportunities broadly, what they mean for Quest? But I guess more importantly, how do you balance those types of distribution partnerships with potentially doing some of the steps in yourselves in the future? Thanks.

Yeah, well, the first decision we look at is, do we have a test for that segment of the market? Now, when it comes to some of these early-stage cancer screening tests, the answer is it's not an area where we've made significant investments. So, as we've discussed in the past, you can order the GRAIL test through Quest Diagnostics. It's on our menu, and we make it available to, you know, over 100,000 primary care physicians. It's integrated from an IT standpoint. We announced with Garnet their new blood-based colon cancer test. Again, we don't have a test in that segment. We were seeing we were getting questions from our physicians, and so it's on our menu. Physicians will be able to access that. There's complete IT integration. We do the collections, and the test gets sent to the garden lab to be done. We have collection agreements with other players in the industry, but those two tests are actually on our menu, and we enable physician offices to order through Quest Diagnostics.

Operator, next question, please.

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

Great. You kind of just touched on it there on the advanced diagnostic side, but maybe there's a follow-up specific to Haystack. If you could just provide an update on the integration and how that's going and just, you know, reaffirm some of the comments you made in terms of how it's going to flow into the model in 2026.

Yeah. So, look, I'll talk about the integration. Sam can touch on some of the financial aspects. So, it's totally integrated into the company. So it's part of the inner fabric of Quest Diagnostics. The test is run at our Center of Excellence in Texas, at our Cancer Center of Excellence, and the volumes are building. We feel good about that. We mentioned on the call we continue to do new and innovative research with, we mentioned Mass General Brigham, Mass Brigham in Boston, Rutgers Cancer Institute here in New Jersey, and numerous other cancer studies to continue to build evidence. From a reimbursement standpoint, we are getting paid by Medicare today, and we expect this November that you'll see final reimbursement decisions in the final clinical lab fee schedule that gets published just before Thanksgiving of this year. So continued progress, continued to build volume, and completely integrated into Quest Diagnostics.

Yeah, I'll talk a little bit about the, you know, the financials, or at least in terms of what we expect the projections to be, without giving a number because we're still working through our annual planning now for 2026. But listen, Mike, you know, we're really excited about this test. It's definitely one that I think has the potential to be a leading MRD test in the market. We have had some learnings around, you know, the actual commercial presence that we need to have, the number of reps that we need to put behind it, the EMR investment that we need to make in terms of the Epic Aura EMR investment that we're making this year. So this year, you know, we're expecting it to be relatively on pace in terms of dilution versus last year, And we do expect in 2026 for it to be a tailwind in terms of less dilution in 2026 versus 2025. But very pleased with, you know, the market response to this test.

Operator, next question.

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

Hey, good morning, guys, and thanks for taking my questions. Nice job on the quarter. You know, like organic growth for next year, if I focus on the number of tests, Can you refresh us how that grew, the durability?

Yeah, in terms of test per rec, Pito, we have said that it's definitely elevated versus what we were seeing pre-COVID, okay? So without getting too specific and provide too many details and numbers, which we don't necessarily share, but definitely it has continued to improve quarter after quarter since 2019. So right now we are north of, you know, I would say 4.2 in terms of test per rec. And prior to 2019, in the pre-COVID timeframe, we were somewhere between three and a half and four, okay, maybe on the high end of that. But, you know, this constant evolution of TESPR-REC, we're seeing improved TESPR-REC and also improved mix. You know, on the TESPR-REC, it's a number of things. I mean, it's clinical guidelines that physicians over time have been gradually adhering to. It's our clinical franchise strategy. It's, you know, the availability of a broader test menu that we have. It's the default to more screening tests like AD Detect, for instance, which, you know, is a blood-based Alzheimer's dementia screening test that wasn't available before that's now producing Lyft. And then on top of that, there's also the wellness portion of our business that's driving also an improvement in terms of test per rec. So all of these things that I mentioned are helping with, you know, test per rec, and also on top of that, revenue per requisition. If you take that into 2026, do I expect a continued improvement in terms of revenue per requisition and test per rec? Potentially, but it's going to get to a point where it slows down. We're not going to continue to see the same pace of improvement that we've seen traditionally. So, yeah, I think the direction is positive for next year, but I think at some point we're going to see a slowing down of that improvement. Operator, next question, please.

Thank you. And this question comes from Tycho Peterson with Jeffrey. Your line is open. You may

ask your question. Hey, thanks. I wanted to probe a little more on the oncology initiatives. I appreciate the call you provided. But I know evidence generation, you're working with some of the academic medical centers for Haystack, I think on head and neck, breast, lung. I guess, how do we think about, you know, additional indications being introduced for Haystack? And then any thoughts on, you know, just guideline inclusion for NCCN? And then separately on And GARDEN, you know, I think S.H.I.E.L.D. is going to cross $100 million or so on revenues next year. So, at what point could that partnership start to get more meaningful? And is that just for colorectal or is it an option for multi-cancer with GARDEN as well?

Yeah, let me just take the last question first. So, first, on GARDEN, right now it is just colorectal. That's what we've agreed to do. That's what we've put up on our test menu. And we expect growth out of that next year. With respect to evidence generation on the Haystack MRD test, so first indications are obviously colon, and we're going after that hard. And I think, you know, hopefully we'll see favorable reimbursement in the fee schedule that comes out in November for that indication. As you mentioned, head and neck are important, and we're doing that research, doing those studies with Mass General. We've got several funded studies on breast and lung as well. We have over 25 studies ongoing right this moment. So the studies get completed. We do the publications. So we expect to continue to get broader and broader base coverage on multiple cancer indications with this test. You know, look, we're really, really pleased with the uptake of this test by some of the more academic sites that really value precision, they value the sensitivity of the task, they value the specificity of the task, and we're seeing nice uptake from thought leaders in the industry that value these characteristics.

Operator, next question, please.

Thank you. Our final question comes from Eric Caldwell with Baird. Your line is open. You may ask your question.

Thanks very much. A lot of moving pieces on the margin profile in 3Q and 4Q. You called out the employee health benefits as one of the short-term headwinds. I'm curious about Project Nova and other investments around that. You mentioned some slippage from 3Q to 4Q, an increase in 4Q. Is it possible to size if there's some way to frame these investments relative to last year or relative to original expectations? I'm just trying to get a sense on what the order of magnitude of the impact in 4Q is and then how that might play out in 2026 in terms of a year-over-year investment comparison.

Yeah, thanks, Eric, and good morning. um so i'll give you a portion of what you asked for but i won't give you everything that you asked for in terms of the the numbers but uh listen we started the year we said we had investment spend this year of roughly 30 million we said there was about 10 million related to the ldt regs and there was about 20 million related to project nova investments um so you The QARA, the quality and regulatory, and the LDT regs obviously didn't go through, but we still had to make some investments to really improve that organization and our reporting capabilities. So I would say roughly of that $10 million that we had earmarked, we spent most of that. The $20 million for NOVA, we have not spent a big portion of it, and so some of it went into Q4, and we're going to spend a portion in Q4, and that was largely due to timing. Now, there's not going to be a bleed-over effect into 2026, if you're trying to read into that. I wouldn't consider it as something that's going to impact 2026 negatively. It was really more of a timing thing within 2025. We just didn't spend it earlier, and it just went into Q4. So, you know, that's how I'd look at it. In terms of just NOVA spend overall, as we have called out, over the next three years – or, sorry, over the next, you know, six or seven years through the implementation, we're expecting about a $310 million investment, somewhere between $250 and $310 million investment in NOVA. And, you know, that's going to be a combination of OPEX and CAPEX. And, you know, a portion of that is going to impact 2026, but it's consistent with our expectations when we shared that range back in investor day. Nothing has changed. And as I said earlier, depending on PAMA, depending on the, you know, headwinds of the business, the macro environment, you know, potential any challenges that we see, we control the pace of those investments, and we will flex and pace accordingly. So I just want to make sure that's clear.

Operator, any more questions?

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

Thank you again for joining in. And, again, strong performance for Quest Diagnostics. We, again, thank our 55,000 employees who made this happen in the quarter, and will continue to make it happen. Have a great day. Thank you.

Thank you for participating in the Quest Diagnostics third quarter 2025 conference call. A 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 866-388-5361 for domestic callers or 203-369-0416 for international callers. Telephone replays will be available from approximately 10.30 a.m. Eastern Time on October 21, 2025 until midnight Eastern time, November 4th of 2025. Goodbye.