DGX 8-K
Quest Diagnostics Inc (DGX)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
CURRENT REPORT PURSUANT TO SECTION 13 OR
15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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Item 7.01. Regulation FD Disclosure
On March 16, 2023, Quest Diagnostics Incorporated (the “Company”) hosted an Investor Day during which management provided updated views of the U.S. laboratory market and the Company’s business strategy, capital deployment priorities and long-term outlook.
In connection with Investor Day, the Company issued a press release that, among other things, discusses its business strategy, reiterates its previously issued guidance for full-year 2023 and updates its outlook for the 2023 to 2026 period. A copy of the press release and the Investor Day presentation materials used by members of management of the Company are furnished as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5 to this Current Report on Form 8-K and are incorporated into this Item 7.01 of this Current Report on Form 8-K by reference. The Investor Day presentation materials include information regarding the matters discussed by management of the Company at Investor Day and in the press release.
The information in the preceding paragraphs, as well as Exhibits 99.1, 99.2, 99.3, 99.4 and 99.5, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section. It may only be incorporated by reference into another filing under the Exchange Act or the Securities Act of 1933, as amended, if such subsequent filing specifically references this Current Report on Form 8-K.
The statements in the following presentations which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management’s current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the Company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the Company’s most recently filed Annual Report on Form 10-K and in any of the Company’s subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the “Business,” “Risk Factors,” “Cautionary Factors that May Affect Future Results” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of those reports.
Item 9.01. Financial Statements and Exhibits
| d. | Exhibit |
| 99.2 Investor Day Presentation (Davis) | |
| 99.3 Investor Day Presentation (Gardner) | |
| 99.4 Investor Day Presentation (Doherty) | |
| 99.5 Investor Day Presentation (Samad) | |
| 104 The cover page from this current report on Form 8-K, formatted in Inline XBRL. |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
March 17, 2023
| QUEST DIAGNOSTICS INCORPORATED | ||
| By: | /s/ William J. O’Shaughnessy, Jr. | |
| William J. O’Shaughnessy, Jr. | ||
| Deputy General Counsel and | ||
| Corporate Secretary | ||
Quest Diagnostics to Discuss Strategic Priorities to Drive Growth and Create Shareholder Value at 2023 Investor Day
| • | Updates 2023-26 compound annual growth rate (CAGR): Revenues expected to grow at mid single-digit rate; adjusted diluted earnings per share (EPS)* expected to grow at high single-digit rate |
| • | Recommits to Invigorate savings and productivity improvements of approximately 3% annually |
| • | Guidance for 2023 provided on February 2, 2023 remains unchanged |
SECAUCUS, N.J., March 16, 2023 -- At a meeting with analysts and investors at its Investor Day, members of the executive leadership team of Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, will discuss the company's priorities to grow revenues and create shareholder value. The company is also updating its long-term financial outlook to extend from 2023 through 2026.
"We have made refinements to our strategy to accelerate growth from our physician and hospital customers, and are building strong platforms to win in the important areas of molecular genomics and oncology as well as consumer health," said Jim Davis, CEO and President. “In addition, we have a range of initiatives underway to continue to drive operational productivity while further improving the customer experience. For the 2023 through 2026 period, we expect to generate revenues at a mid single-digit CAGR and adjusted EPS at a high single-digit CAGR.”
At the meeting, members of the company’s executive leadership team will highlight strategic initiatives underway to drive growth, including:
| • | Building on the company's strong position in physician lab services by partnering with health plans as well as expanding value-based care and retail relationships; |
| • | Achieving growth with hospitals by expanding reference capabilities, enhancing Professional Lab Services offerings and acquiring outreach laboratory testing services; |
| • | Growing in the consumer health market through direct sales, menu expansion and partnerships; |
| • | Increasing share in advanced diagnostics through ongoing investments in molecular genomics and oncology; and |
| • | Delivering 3% annual savings and productivity improvements by executing the company's Invigorate program, which includes leveraging automation and artificial intelligence, reducing denials and write-offs, enhancing the digital experience, and selecting and retaining talent. |
The company will also discuss its capital deployment strategy at the meeting.
Mr. Davis continued: “Quest’s nearly 50,000 employees are united by our common purpose, which is: Working together to create a healthier world, one life at a time. They certainly brought our purpose to life during the pandemic and live it every day. Inspired by our employees, we recently introduced this new purpose, which serves as a compass for our business strategy evolution, growth and culture.”
Guidance for Full Year 2023
The Company's guidance for 2023 remains unchanged as follows:
| Low | High | ||
| Net revenues | $8.83 billion | $9.03 billion | |
| Net revenues decrease | (10.7)% | (8.6)% | |
| Base business revenues (a) | $8.65 billion | $8.75 billion | |
| Base business revenues increase | 2.6% | 3.8% | |
| COVID-19 testing revenues | $175 million | $275 million | |
| COVID-19 testing revenues decrease | (88.0)% | (81.1)% | |
| Reported diluted EPS | $7.61 | $8.21 | |
| Adjusted diluted EPS | $8.40 | $9.00 | |
| Cash provided by operations | At least $1.3 billion | ||
| Capital expenditures | Approximately $400 million | ||
(a) excludes COVID-19 testing
The additional table attached below includes reconciliations of non-GAAP adjusted measures to GAAP measures.
*Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to measures under accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, amortization expense, and excess tax benefits ("ETB") associated with stock-based compensation.
The company has provided a compound annual growth rate projection for 2023 to 2026 of high single-digits for adjusted diluted EPS, which is a non-GAAP measure. The company is unable to present a reconciliation of adjusted diluted EPS to reported diluted EPS, the most comparable GAAP measure due to the inherent uncertainty and variability in the nature and amount of special items referenced above, and the amount of these items could be significant in any of the associated periods.
Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance.
Participating in Investor Day
Advance registration is required. To register for the event, please go to: Quest Diagnostics Investor Day 2023 Registration.
A live webcast of the event will be broadcast on the Quest Diagnostics Investor Relations website.
A copy of the presentation materials discussed at the meeting and an archived copy of the webcast will be available on the Quest Diagnostics Investor Relations website.
About Quest Diagnostics
Quest Diagnostics empowers people to take action to improve health outcomes. Derived from the world's largest database of clinical lab results, our diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve health care management. Quest Diagnostics annually serves one in three adult Americans and half the physicians and hospitals in the United States, and our nearly 50,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives. www.QuestDiagnostics.com.
The statements in this press release which are not historical facts may be forward-looking statements, including statements regarding our projected results for future periods. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10-K and in any of the company's subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.
This earnings release, including the attached financial tables, is available online in the Newsroom section at www.QuestDiagnostics.com.
Contacts:
Shawn Bevec (Investors):
973-520-2900
Dennis Moynihan (Media):
973-520-2800
Logo - http://photos.prnewswire.com/prnh/20150422/200883LOGO
ADDITIONAL TABLES FOLLOW
| 1) | The outlook for adjusted diluted EPS represents management’s estimates for the full year 2023 before the impact of special items. Further impacts to earnings related to special items may occur throughout 2023. Additionally, the amount of ETB is dependent upon employee stock option exercises and our stock price, both of which are difficult to predict. The following table reconciles our 2023 outlook for diluted EPS under GAAP to our outlook for adjusted diluted EPS: |
| Low | High | ||
| Diluted EPS | $7.61 | $8.21 | |
| Restructuring and integration charges (a) | 0.21 | 0.21 | |
| Amortization expense (b) | 0.73 | 0.73 | |
| ETB | (0.15) | (0.15) | |
| Adjusted diluted EPS | $8.40 | $9.00 |
| (a) | Represents estimated pre-tax charges of $32 million primarily associated with workforce reductions, systems conversions and integration costs incurred in connection with further restructuring and integrating our business. Income tax benefits were calculated using a combined statutory income tax rate of 25.5%. |
| (b) | Represents estimated pre-tax amortization expenses of $112 million. Income tax benefits were calculated using a combined statutory income tax rate of 25.5%. |
2023 INVESTOR DAY Driving Sustainable Growth in a Post-Pandemic World Jim Davis Chief Executive Officer and President
SAFE HARBOR DISCLOSURE The statements in the following presentations which are not historical facts may be forward looking statements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10 K and in any of the company's subsequently filed Quarterly Reports on Form 10 Q and Current Reports on Form 8 K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports. In the following presentations, references to adjusted EPS refer to adjusted diluted EPS. Any references to base business, testing, revenues, or volumes refer to the performance of our business excluding COVID 19 testing. Any references to operating margin(s) refer to adjusted operating income as a percentage of net revenues. Any references to free cash flow refer to cash flow from operations less capital expenditures. 2023 INVESTOR DAY 2
Key highlights We are poised to grow based on our exceptional capabilities and relationships We have the right strategy to accelerate growth Investments in advanced diagnostics and CIT will drive profitable growth Invigorate will continue to drive operational productivity while improving the customer experience Long-term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 2023 INVESTOR DAY 3
Introducing The Quest Way with an ambitious Purpose and refreshed Strategy and Culture PURPOSE Working together to create a healthier world, one life at a time STRATEGY We help people make the best decisions to improve health by providing high-quality and affordable diagnostic testing insights and services using our scale and extensive reach Collaborating with payers, providers and partners to leverage our broad access Offering the most extensive menu of testing and services Leveraging our data assets and services to improve population health and enable Value-based care Continuously improving our quality and efficiency by embracing AI, automation and other innovation technologies Who we serve: Patients, Consumers, Physicians, Hospitals, Life Sciences Companies, Employers, Insurers, Retailers, Public Health Agencies and Communities CULTURE Customer First, Care, Collaboration, Continuous Improvement, Curiosity 2023 INVESTOR DAY 4
We have an established core team and have added experienced leaders focused on profitable growth Jim Davis CEO & President Sam Samad EVP Chief Financial Officer Cathy Doherty SVP Regional Businesses Mark Delaney SVP Chief Commercial Officer Patrick Plewman SVP Diagnostic Services Karthik Kuppusamy SVP Clinical Solutions Mark Gardner SVP Genomics and Oncology R&D Richard Adams VP/GM Consumer-Initiated Testing Dermot Shorten SVP Strategy, M&A and Ventures Gabrielle Wolfson SVP Chief Information and Digital Officer Cecilia McKenney SVP Chief Human Resources Officer Mike Prevoznik SVP General Counsel Gary Samuels SVP Chief Communications Officer Kristin Wallace SVP Chief Compliance Officer 2023 INVESTOR DAY 5
Quest is the leader in diagnostic testing insights and services Serves 50% of US hospitals and physicians Serves 1/3 of the US adult population annually and 50% within 3 years ~208M requisitions in 2022 >60B patient data points ~13,600 phlebotomists across ~7,300 access points ~9,400 health and wellness professionals ~ 4,000 couriers and 20 aircraft 26 regional and esoteric labs ~4,900 Med Techs ~ 600 MDs and PhDs $9.9B 2022 REVENUES 2023 INVESTOR DAY 6
Approximately 90% of our revenues come from physicians and hospitals ~$8.4B 2022 base business revenues ~$1.5B 2022 COVID-19 revenues Physician Office $5.9B 70.2% $8.4B Health Systems Reference: >$1B Professional Lab Services: ~$600M $1.6B 19.1% Consumer Health & Other Consumer Pharma Services Employer Solutions & Population Health Life Insurance (Risk Assessment) Other $0.9B 10.7% 2023 INVESTOR DAY 7
Quest fully participates in an $85 billion U.S. lab market PHYSICIAN LAB SERVICES $55B POLs 11% DGX 11% Hospital Outreach 35% Other Independent Labs 43% 2-4% CAGR 2022 TOTAL US LAB MARKET $85B Physician Lab Services $55B 64% Hospital Lab Services $30B 36% Total Lab Market growing 1-3% CAGR HOSPITAL LAB SERVICES $30B DGX 5% Other Independent Labs 13% Other Hospital 82% 0-2% CAGR Note: Excludes COVID-19 testing. 2023 INVESTOR DAY 8
Trends in technology and consumerism will continue to shape healthcare and favor Quest Advancements in genomic and oncology testing Greater adoption of artificial intelligence and automation New point of care and collection devices Consumers are more engaged in their healthcare 2023 INVESTOR DAY 9
We have the right strategy to accelerate growth Physician Lab Services 4-5% CAGR Partnering with health plans Value based care Retail expansion Hospital Lab Services 5-6% CAGR Expanding reference capabilities PLS 2.0 Acquire outreach Consumer Health $250M revenue Direct sales Partnerships Menu expansion Advanced Diagnostics Long-term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 2023 INVESTOR DAY 10
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We grow our physician business by leveraging our industry leading health plan access 90% Access We will improve access over the next three years ACCESS CAPTURE Focused on high access, low capture regions: Leakage programs Redirection programs Outreach acquisitions Health Plans Partnerships to engage with: Patients Physicians Employers 2023 INVESTOR DAY 11
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We expect to add ~$600M in incremental health plan revenue through our expanded access and value-based contracting 2026 REVENUE TARGET FROM EXPANDED ACCESS ~$580M 2018 ~$900M 2022 ~$1.5B Target PERCENT OF BASE REVENUE FROM VALUE-BASED CONTRACTS ~30% 2021 ~40% 2022 >50% Target 2023 INVESTOR DAY 12
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH As value-based care gains momentum, providers taking on risk are relying more on diagnostic testing and services Medicare Beneficiary Medicare Medicare Advantage Delegate lives ACO Reach Large Physician Group ACOs and large physician groups taking risk More focus on early diagnosis and prevention are key to managing risk Value and affordable care are paramount CMS to transition virtually all Medicare beneficiaries to ACOs by 2030 2023 INVESTOR DAY 13
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We augment our testing with a range of programs and services that enable value-based care COMPREHENSIVE TESTING Breadth of testing across clinical areas COMPREHENSIVE SOLUTIONS Data analytics and member insights Mobile phlebotomy services Health coaching and medication adherence Convenient locations for testing Gap-in-care services Prescription check Food delivery and SDOH resources Screening programs 2023 INVESTOR DAY 14
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We have expanded our retail presence, from patient service centers to COVID-19 testing sites, to reaching consumers directly INITIAL RELATIONSHIPS PANDEMIC PARTNERSHIPS FUTURE OPPORTUNITIES 2023 INVESTOR DAY 15
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We are expanding and enhancing our reference testing solutions for health systems Improved health system workflow Utilization management systems Menu expansion (e.g., oncology & genetics) Discrete outsourcing (e.g., microbiology, cytology, pathology) 2023 INVESTOR DAY 16
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH PLS 2.0 will expand our offerings to drive continued growth and help health systems achieve their strategic objectives PROFESSIONAL LAB SERVICES REVENUE ($M) ~$280 2019 ~$590 2022 ~28% CAGR RECENT PLS RELATIONSHIPS PLS 2.0 EXPANDED OFFERINGS Support achievement of health system operational and quality metrics Provide solutions to alleviate workforce challenges Enhance the delivery of population health and meet patients where they are 2023 INVESTOR DAY 17
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Outreach monetization and support provide compelling benefits to health systems Integrated data sharing Enhanced physician workflow and satisfaction Broadest test menu Source of capital 2023 INVESTOR DAY 18
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Our recent launch of QuestHealth.com is off to a strong start The benefits of testing You can get the information you need to support a healthy life - for yourself Take control of your health Conveniently shop and pay online for lab tests without a doctor's visit. An independent physician will review your request and if appropriate, confirm your order and offer oversight Schedule and manage your appointments Conveniently schedule your appointment online at one of our Quest Patient Service Centers or drive-through locations. Certain tests may also offer self-testing home delivery Get your results online View your results through your secure account online. And it's easy to share the result with your doctor. Sniff out what's giving you the spring sniffles. Save 15% for a limited time on respiratory allergy tests Shop allergy tests How Does it Work? In-Person at Quest Patient Service Centers We are never far. Make an appointment at one of our 2,000+ U.S. locations 1. Purchase your test Schedule your appointment after purchasing a test to minimize wait time Browse tests 2. Visit a center Enter your zip code to find a Quest center closest to you Find a location 3. Get results online We will email you when your confidential results are available View results PWNHealth and its affiliates will review your purchase to ensure it's medically appropriate before submitting a test order for processing. They will also review your test results and contact you directly if your results require prompt attention. Should you have any questions, PWNHealth and its affiliates are available to discuss. Nearly doubled conversion rate Increased order volume and fulfillment rates Improved customer acquisition cost and return on ad spend 2023 INVESTOR DAY 19
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Our CIT business serves diverse customer types with different needs TOP CUSTOMER TYPES Watchful Worriers Privacy Seekers Healthcare Avoiders TOP TEST TYPES Chronic diseases STIs and STDs Comprehensive health profiles 2023 INVESTOR DAY 20
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Strategy to reach our revenue goal of $250M for CIT Drive direct sales Expand product portfolio Open distribution channels Unlock insurance revenue Help our customers "beyond the test" 2023 INVESTOR DAY 21
Advanced Diagnostics Advanced Diagnostics fuels growth in physician offices, hospitals and among consumers across all clinical areas Neurology Rare disease Cardiovascular Oncology Reproductive health Consumer health Infectious disease Platform approach 2023 INVESTOR DAY 22
Advanced Diagnostics Investments we are making will enable us to drive profitable growth in molecular genomics and oncology PROJECTED GERMLINE AND SOMATIC TESTING MARKET Germline Somatic (cancer) ~$15B $4B $11B 2022 ~$30B $11B $19B 2030 ~10% CAGR Source: LEK Analysis 2023 INVESTOR DAY 23
Invigorate will continue to deliver operational productivity while improving the customer experience through four major initiatives Leverage automation and AI Reduce denials and write-offs ~3% Annual Productivity Savings Select and retain talent Enhance the digital experience 2023 INVESTOR DAY 24
Key takeaways We are poised to grow based on our exceptional capabilities and relationships We have the right strategy to accelerate growth Investments in advanced diagnostics and CIT will drive profitable growth Invigorate will continue to drive operational productivity while improving the customer experience Long-term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 2023 INVESTOR DAY 25
2023 INVESTOR DAY Appendix Non-GAAP Reconciliations
Note on Non-GAAP Financial Measures As used in this press release the term "reported" refers to measures under accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, amortization expense, and excess tax benefits ("ETB") associated with stock-based compensation. The company has provided a compound annual growth rate projection for 2023 to 2026 of high single-digits for adjusted diluted EPS, which is a non-GAAP measure. The company is unable to present a reconciliation of adjusted diluted EPS to reported diluted EPS, the most comparable GAAP measure due to the inherent uncertainty and variability in the nature and amount of special items referenced above, and the amount of these items could be significant in any of the associated periods. Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. 2023 INVESTOR DAY 27
Adjusted Diluted EPS from Continuing Operations The following table reconciles adjusted diluted earnings per share from continuing operations ("Diluted EPS") to reported results under GAAP. Diluted EPS - as reported Amortization of intangible assets (a) Restructuring and integration charges (b) COVID-19 impact (c) Gain on remeasurement of equity interest (d) Other (e) Gains and losses on investments (f) Quest for Health Equity costs (g) Gain on sale of ownership in joint venture (g) Excess benefits associated with stock-based compensation Diluted EPS - as adjusted Twelve months ended December 31, 2019 $6.13 0.61 0.42 - (0.50) - - (0.10) $6.56 2020 $10.47 0.63 0.32 0.39 (0.46) 0.08 (0.10) 0.02 - (0.17) $11.18 2021 $15.55 0.62 0.36 0.03 - (0.24) 0.08 (2.02) (0.14) $14.24 2022 $7.97 0.74 0.56 - (0.05) 0.26 0.59 - (0.12) $9.95 Twelve months ended December Low $7.61 0.73 0.21 - - - (0.15) $8.40 High $8.21 0.73 0.21 - - - (0.15) $9.00 2023 INVESTOR DAY 28
Adjusted Diluted EPS from Continuing Operations (a) Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (b) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (c) For the twelve months ended December 31, 2021, represents the impact of certain items resulting from the COVID 19 pandemic including incremental costs incurred to protect the health and safety of our employees and customers. For the twelve months ended December 31, 2020, principally includes expense associated with payments to eligible employees to help offset expenses they incurred as a result of COVID 19, incremental costs incurred primarily to protect the health and safety of our employees and customers, and certain asset impairment charges. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (d) For the twelve months ended December 31, 2020, represents a pre-tax gain of $70 million based on the difference between the fair value and the carrying value of an equity interest. On August 1, 2020, we completed the acquisition of the remaining 56% interest in Mid America Clinical Laboratories, LLC ("MACL") from our joint venture partners. As a result of the transaction, we remeasured our previously held minority interest in MACL to fair value and recognized a gain. Income tax expense was calculated based on an effective income tax rate on the transaction of 11.8%, which is lower than the statutory income tax rate due to a permanent difference in the financial reporting and tax basis of goodwill. 2023 INVESTOR DAY 29
Adjusted Diluted EPS from Continuing Operations (e) For the twelve months ended December 31, 2022, primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accruals associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act associated with the retention of employees. Additionally, the twelve months ended December 31, 2022 includes an $18 million income tax benefit due to the adjustment to state deferred tax liabilities related to depreciation expense. For the twelve months ended December 31, 2020, primarily represents a loss on retirement of debt. For the twelve months ended December 31, 2019, primarily represents a gain associated with the sale and leaseback of a property, a gain associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, and a gain associated with an insurance claim for hurricane related losses, partially offset by costs incurred related to a data security incident and non-cash asset impairment charges. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. For the gain associated with an insurance claim for hurricane related losses in 2019, there was no net income tax expense as we were able to utilize net operating loss carryforwards for which a valuation allowance had previously been established. For the gain in 2019 associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, there was no net income tax expense related to acquisitions for which the gain was non-taxable. (f) Primarily represents gains and losses associated with changes in the carrying value of our strategic investments. For the twelve months ended December 31, 2021, the pre-tax impact also includes a non-cash impairment to the carrying value of an equity method investment. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. 2023 INVESTOR DAY 30
Adjusted Diluted EPS from Continuing Operations (g) Represents the costs associated with donations, contributions and other financial support through Quest for Health Equity our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities). Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (h) Represents a gain of $314 million following the sale of our 40% ownership interest in Q2 Solutions, our clinical trials central laboratory services joint venture, to IQVIA Holdings, Inc., our joint venture partner, for $760 million in an all-cash transaction. Income tax expense on the transaction resulted in an effective income rate of 17.6%. 2023 INVESTOR DAY 31
Adjusted Operating Income as a Percentage of Net Revenues The following table reconciles adjusted operating income as a percentage of net revenues to reported results under GAAP. Operating income - as reported - as a percentage of net revenues Amortization of intangible assets Restructuring and integration charges (a) COVID-19 impact (b) Other (c) Quest for Health Equity costs (d) Operating income - as adjusted - as a percentage of net revenues Twelve months ended December 31, 2019 15.9% 1.2% 1.0% - (1.1%) - 17.0% 2020 20.9% 1.1% 0.6% 0.8% - 23.4% 2021 22.1% 1.0% 0.6% - 0.1% 23.8% 2022 14.5% 1.2% 0.9% - 0.1% 0.9% 17.6% 2023 15.3% 1.3% 0.4% - - 17.0% 2023 INVESTOR DAY 32
Adjusted Operating Income as a Percentage of Net Revenues (a) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business. (b) Principally includes expense associated with payments to eligible employees to help offset expenses they incurred as a result of COVID-19, incremental costs incurred primarily to protect the health and safety of our employees and customers, and certain asset impairment charges. (c) For the twelve months ended December 31, 2022, primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accruals associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act associated with the retention of employees. For the twelve months ended December 31, 2019, primarily represents a gain associated with the sale and leaseback of a property, a gain associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, and a gain associated with an insurance claim for hurricane related losses, partially offset by costs incurred related to a data security incident and non-cash asset impairment charges. (d) Represents the costs associated with donations, contributions and other financial support through Quest for Health Equity our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities). 2023 INVESTOR DAY 33
2023 INVESTOR DAY Molecular Genomics and Oncology Mark Gardner Senior Vice President, Molecular Genomics & Oncology
The statements in the following presentations which are not historical facts may be forward looking statements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10 K and in any of the company's subsequently filed Quarterly Reports on Form 10 Q and Current Reports on Form 8 K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports. In the following presentations, references to adjusted EPS refer to adjusted diluted EPS. Any references to base business, testing, revenues, or volumes refer to the performance of our business excluding COVID-19 testing. Any references to operating margin(s) refer to adjusted operating income as a percentage of net revenues. Any references to free cash flow refer to cash flow from operations less capital expenditures. 2023 INVESTOR DAY 2
Key highlights Advancements in Next Generation Sequencing (NGS) are changing the genomics market, favoring those with scale Our clinical expertise, combined with our infrastructure, position us to compete in genomics and oncology We generate $1B+ in oncology revenue and will strengthen our position by leveraging digital pathology and AI From our leadership position in pathology, we will win in oncology, therapy selection and liquid biopsy 2023 INVESTOR DAY 3
Rapid technology change and broader adoption will drive large market expansion PROJECTED GERMLINE AND SOMATIC TESTING MARKET Germline Somatic (cancer) ~$15B $4B $11B 2022 ~$30B $11B $19B 2030 ~10% CAGR Key drivers: Lower cost of sequencing More favorable reimbursement Synergy with precision therapeutics Source: LEK Analysis 2023 INVESTOR DAY 4
Today, most testing is performed on gene panels; we expect the market will shift to whole genome sequencing Germline - Inherited Rare disease, pediatric Cancer risk Somatic - Solid Tumor Treatment selection Somatic - Liquid Biopsy Treatment selection Minimal Residual Disease (MRD) Single Gene ~1,000-10,000 Base pairs BRCA EGFR EGFR Gene Panels ~100,000-1M Base pairs Hereditary cancer panel TSO 500 (ILMN) Treatment selection MRD Whole Exome 20,000 Genes ~40M Base pairs Blueprint WES MRD baseline (tumor specific approaches) Pharma services Not currently economically feasible Whole Genome 20,000 Genes ~3B Base pairs Rapid WGS for NICU patients MRD baseline (tumor specific approaches) Pharma services Not currently economically feasible 2023 INVESTOR DAY 5
The $100 genome is a tipping point for those with scale Cost of testing by NGS methodology by year COST IN 2022 $1,200 $0 100 Gene Panel Whole Exome Whole Genome COST IN 2024 $1,200 $0 100 Gene Panel Whole Exome Whole Genome Sample Acquisition Sample Preparation Sequencing Costs Sample Interpretation 2023 INVESTOR DAY 6
Investments in clinical expertise and genomics, combined with our infrastructure, will support growth for Quest and external partners GENOMIC SEQUENCING SERVICES Hardware Platforms Software Platforms Collection Biobank Extraction Automation Sequencing Analytics Data Workflow Mgmt Expert Systems User / Customer Experience CLINICAL EXPERTISE Oncology Women's Health Rare Disease Neurology Cardiology Infectious Disease QUEST INFRASTRUCTURE Modular and/or end to end genomics capabilities 2023 INVESTOR DAY 7
We've built a team of industry leaders in genomics... Jim Godsey, Ph.D. Vice President, Chief Security Officer, Genomics & Oncology Tina Hambuch-Hawks, Ph.D. Medical Director, Mol Gen R&D Sarah South, Ph.D. Exec Director, Clinical Innovations Ray Veeraraghavan, Ph.D. Exec Director, Advanced Diagnostics Technologies Jussi Paananen , Ph.D. Exec Director, Advanced Diagnostics Technologies Samuel Myllykangas, Ph.D. Exec Director, Specialty Genetics Ian Wilson, Ph.D. Sr. Director, Molecular Genomics Larry LaPointe, Ph.D. Sr. Director, Data Platforms Ryan Serra, Ph.D. Sr. Director, Genomics & Oncology Juha Koskenvuo Exec Director, Medical and Laboratory ....who joined us from: Ancestry.com Broad Institute Genuity Science Invitae Illumina N-of-One Thermo Fisher 23andMe 2023 INVESTOR DAY 8
We generate $1B+ in oncology revenue and will leverage our leadership in pathology to win in therapy selection and liquid biopsy Revenue CAGR 6-8% ~$1.3B Generic Risk 20%+ ~$1.4B CRC/MCED Screening ~1-2% ~$1.5B Other Screening ~1-2% ~$9.5B Diagnosis/Pathology ~1-2% ~$1.2B Prognosis 12-16% ~$1.5B Therapy Selection 20%+ ~$0.8B MRD Testing Source: LEK Analysis Quest has $1B+ in revenue today 2023 INVESTOR DAY 9
Digital pathology requires traditional tissue preparation, but enables significant changes in network operations COMPARISON BETWEEN MANUAL AND DIGITAL PATHOLOGY Traditional Pathology Workflow Tissue preparation Transport glass slide Analyze slide in lab Patient diagnosis Digital Pathology Workflow Tissue preparation Create digital slide Analyze digital slide Computer aided diagnosis Source: Pathkids.com 2023 INVESTOR DAY 10
Technology unlocks incremental value in the tissue block Digital pathology and AI strengthen our leadership position in anatomic pathology WORKFLOW SUPPORT Triage, prioritization, and orientation COMPUTATIONAL PATHOLOGY Identification and quantification using FDA approved AI products DIAGNOSIS Utilization of FDA approved products Digital pathology and AI vastly improve workflow and margins... PROGNOSTICS Breast prognostics/predictive AI/melanoma BIOMARKER DISCOVERY Novel biomarkers and therapies ....which can help support new applications 2023 INVESTOR DAY 11
Precision medicine depends heavily on genomic sequencing and fast turnaround time (TAT) RETROSPECTIVE STUDY OF 525 NEWLY DIAGNOSED STAGE IV NSCLC PATIENTS HARBORING ACTIONAL ONCOGENIC DRIVERS 1,2 Survival Rate Time Genomic sequence plus targeted therapy Chemo before genomic sequencing and targeted therapy No genomic sequence; chemo only THE PATIENTS ARE WAITING FROM 35 DAYS TO 15.8 DAYS Quest drove TAT to 15.8 days from 35 days (ASCO 2022) 7-10 DAYS Programs to drive TAT to 7-10 days from diagnosis Source: 1. Smith RE, et al., J Clin Oncol 40, 2022 suppl 16; abstr 15300; 2. Choksi et al., ESMO 2022; 3 Smith RE et al., AMP 2021 Poster ST59 2023 INVESTOR DAY 12
We have multiple options for entering new categories like therapy selection and MRD testing Leverage suppliers' innovations Example: TSO 500 License and create innovation from third party IP Example: NIPS Develop organic innovations via internal R&D Example: LeukoVantage Offer other test send out options Example: Agilent Res Bio Acquire new capabilities to extend portfolio Example: MED FUSION Therapy Selection 2023 INVESTOR DAY 13
Why MRD companies want to work with us Physician awareness/education Physician orders MRD test Tissue sample collected & processed Blood sample collected Sample analysis & result generated Test result reported Test reimbursement Quest Synergies Commercial capabilities Test ordering in EMR Infrastructure (e.g., tissue block control, TAT workflows, etc.) National phlebotomy network IVD content experience Test results in EMR Payer contracting expertise 2023 INVESTOR DAY 14
Key takeaways Advancements in Next Generation Sequencing (NGS) are changing the genomics market, favoring those with scale Our clinical expertise, combined with our infrastructure, position us to compete in genomics and oncology We generate $1B+ in oncology revenue and will strengthen our position by leveraging digital pathology and AI From our leadership position in pathology, we will win in oncology, therapy selection and liquid biopsy 2023 INVESTOR DAY 15
2023 INVESTOR DAY Optimizing Operations to Drive Growth Cathy Doherty Senior Vice President, Regional Businesses
SAFE HARBOR DISCLOSURE The statements in the following presentations which are not historical facts may be forward looking statements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10 K and in any of the company's subsequently filed Quarterly Reports on Form 10 Q and Current Reports on Form 8 K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports. In the following presentations, references to adjusted EPS refer to adjusted diluted EPS Any references to base business, testing, revenues, or volumes refer to the performance of our business excluding COVID 19 testing. Any references to operating margin(s) refer to adjusted operating income as a percentage of net revenues. Any references to free cash flow refer to cash flow from operations less capital expenditures. 2023 INVESTOR DAY Confidential / Internal Use Only 2
Key highlights We have a strong track record of delivering Invigorate savings while improving the customer experience Opportunities remain along our value chain to continue to deliver ~3% in annual productivity savings Our path includes: Productivity improvements through automation and AI Getting paid for the work we do Enhancing our provider and patient digital experiences Attracting, developing and retaining frontline talent 2023 INVESTOR DAY Confidential / internal Use Only 3
Delivering the promise of a superior customer experience at lower cost Superior Customer Experience + Cost excellence It's not an "either/or" imperiative... We are delivering BOTH 2023 INVESTOR DAY Confidential / Internal Use Only 4
Invigorate helps address headwinds, increases capacity and improves productivity INVIGORATE PRODUTCIVITY SAVINGS $ Millions $1,645 $240 $210 $225 $230 $2,550 '11-'18 2019 2020 2021 2022 Total Excludes the benefit of COVID 2023 INVESTOR DAY Confidential / internal Use Only 5
Key productivity levers support savings, while delivering an excellent customer experience Patient Service Patients served per FTE per day 16% Logistics Non-productive stops 31% Lab Operations Requisitions per day per FTE 16% National Customer Service Contacts per 100 requisitions 40% All improvements from 2018 Patient Experience Metrics Net Promoter Score (NPS) 73 Healthcare industry average NPS score 58 Customer Satisfaction (CSAT) 91% 2023 INVESTOR DAY Confidential / internal Use Only 6
Invigorate will continue to deliver operational efficiency while improving the customer experience through four major initiatives ~3% Annual Productivity Savings Leverage automation and AI Reduce denials and write-offs Select and retain talent Enhance the digital experience 2023 INVESTOR DAY Confidential / internal Use Only 7
Invigorate will continue to deliver operational efficiency while improving the customer experience through four major initiatives ~3% Annual Productivity Savings Leverage automation and AI Reduce denials and write-offs Select and retain talent Enhance the digital experience 2023 INVESTOR DAY Confidential / internal Use Only 8
Our Strategy Continuous implementation of automation and AI to achieve increased quality and productivity 2023 INVESTOR DAY Confidential / internal Use Only 9
We're making progress along our automation journey End-to-End Lab Automation Fully automated sample handling after accessioning Core Clinical Micro Modular Automation Automation in specific tests and processes to enable increased productivity and quality Automation has led to lab productivity improvements of 15% 2023 INVESTOR DAY Confidential / internal Use Only 10
An example of modular automation We are replacing manual urine aliquoting with an automated solution FROM: Manual Annually 80 FTEs manually process and aliquot 10M non-standard urine cups TO: Automated (allows for different containers) Working with strategic partners to deliver custom solutions 2023 INVESTOR DAY Confidential / internal Use Only 11
Our AI applications focus on the core of our business Lab testing productivity AI support for image and graph interpretation in multiple disciplines Microbiology Drug Monitoring Cytogenetics Pathology Cytology Data extraction AI to recognize and convert handwritten or printed text from paper requisitions Process and flow AI to help us optimize process flows and service quality Assess compliance with standards in labs and patient service centers Driver safety and dynamic route optimization Predictive auto-replenishment in our supply chain Customer service efficiency AI to minimize client wait time and deliver faster response times 2023 INVESTOR DAY Confidential / internal Use Only 12
AI is automating processes in mass spec testing interpretation Reducing non-value-added work, improving medical quality and boosting productivity From 100% manual review of chromatogram to AI rules-based logic 50% Productivity improvement in review time 80% Reduction in total number of reviews 2023 INVESTOR DAY Confidential / internal Use Only 13
Microbiology full process automation: from 8 steps to 2 steps Pre-Automation 8 steps 1 Specimens manually sorted and racked 2 Manual streaking/WASP loading 3 Plates loaded into incubator racks 4 Plates offloaded from incubator 5 Plates triaging / screening 6 Plate reading one at a time 7 VITEK2/MS target and AST set up 8 Specimens scanned and racked for storage Microbiology Automation 2 steps 1 Bulk loading specimens Physical Automation Transport & tracking Plating Incubation Digital Scanning Disposal 2 Move positive plates from auto line to Colibri TAT improvement of 40% for negative cultures ~40% reduction in FTEs 100% plates reported with support of AI Specimens automatically scanned and stored 2023 INVESTOR DAY Confidential / internal Use Only 14
Invigorate will continue to deliver operational efficiency while improving the customer experience through four major initiatives ~3% Annual Productivity Savings Leverage automation and AI Reduce denials and write-offs Select and retain talent Enhance the digital experience 2023 INVESTOR DAY Confidential / internal Use Only 15
Significant opportunity to reduce denials and patient concessions of ~$550M DENIALS ~13% Administrative Requirements 1.1% Test Coverage & Benefits 6.5% Data Quality 5.1% Gross Denials Rate ~7% 0.6% 5.4% 1.4% Net Experience Annual Revenue Opportunity $180M PATIENT CONCESSIONS 100% = ~$370M per year Other 4% Non-covered test 16% Uninsured/hardship 20% Eligibility denied 22% Co-pay or deductible responsibility 38% 2023 INVESTOR DAY Confidential / internal Use Only 16
Improve billing accuracy to reduce denials and increase cash Collect billing info from patient or provider Traditional Quest attempts to bill payer and patient ....will we be paid? Payer response Pays claim Denials Coverage Eligibility Patient responsibility Bill Patient ~7% Net Denials ~$370M Annual Concessions Upfront Collect billing info from patient or provider Electronic order: accurate data & eABNS Real time adjudication: eligibility & coverage determination Patient responsibility & pricing transparency: payment collection Bill payer Higher payment % Reduction/offset denials Reduction in patient bills Goals: $100M - $150M 2023 INVESTOR DAY Confidential / internal Use Only 17
We've made progress on several fronts Electronic orders 72% 2018 82% 2022 Analyze the order before the specimen is collected Alert the physician to order irregularities right away Collection of patients' open invoices 50% 2018 57% 2022 Proactive notification increases compliance with Open Balance payments Integrating clinical and financial data to care for the whole patient Payment information at time-of service 42% 2018 46% 2022 Outreach to the patient with transparent pricing Provides a moment of choice for the patient 2023 INVESTOR DAY Confidential / internal Use Only 18
We continue to partner to change coverage policies Expanded hemoglobin A1C policy to cover a wider range of risk factors Lobbied to cover CMA (Chromosomal Microarray Analysis) testing Removed prior authorization requirements for non-invasive prenatal screening and cystic fibrosis testing Reducing restrictive frequency limits for drug monitoring testing 2023 INVESTOR DAY Confidential / internal Use Only 19
Invigorate will continue to deliver operational efficiency while improving the customer experience through four major initiatives ~3% Annual Productivity Savings Leverage automation and AI Reduce denials and write-offs Select and retain talent Enhance the digital experience 2023 INVESTOR DAY Confidential / internal Use Only 20
We know what matters most to our customers throughout their journeys Patient Awareness Visit prep Visit Results Payment Ongoing relationship Healthcare Provider Investigate & choose Onboarding Visit Results Billing Ongoing relationship 2023 INVESTOR DAY Confidential / internal Use Only 21
We have made progress addressing their needs through a complete digital experience Patient Scheduled appointments 80% Pre-registration 23% Healthcare Provider Online specimen pick-up 178% Online supply ordering 20% 2023 INVESTOR DAY Confidential / internal Use Only 22
We are continuing to enhance the digital experience... Patient Digital Engagement Proactive communications Improved pre-registration Enhanced Check-in Schedule appointment at check-in Capture insurance and ID Healthcare Provider Enable Speed of Business Automated account validation and setup Reduced time for customer to place their first order Centralized Portal Technology Customizable to specific functions to serve their needs Simplifies conducting business Lab Results Contact Us Specimen Tracking Order Testing Alerts & Exception Management 2023 INVESTOR DAY Confidential / internal Use Only 23
...and introducing an omni-channel strategy for contact centers Patients call us for many reasons 100%=8.5M calls in 2022 Other 11% Results 19% Appointment scheduling 19% PSC Info 19% Billing 14% MyQuest 18% We've made significant progress Chatbot interactions 72% Live chat interactions 260% MyQuest support inquiries 44% Total number of calls 21% Shifting these calls to digital in more convenient and less costly MyQuest portal Text messaging Chat Email Phone Improvements since 2019 (chatbot, live chat); 2020 (MyQuest, calls) 2023 INVESTOR DAY Confidential / internal Use Only 24
Invigorate will continue to deliver operational efficiency while improving the customer experience through four major initiatives ~3% Annual Productivity Savings Leverage automation and AI Reduce denials and write-offs Select and retain talent Enhance the digital experience 2023 INVESTOR DAY Confidential / internal Use Only 25
Wage inflation and frontline retention impact productivity and increase costs Market Data ~20-25K Medical technologists shortage currently in the US 1 5.1 Wage inflation for the 12-month period ending in December 2022 2 Focus on frontline turnover Percent of annual turnover 14% Q4 '19 28% Q3 '21 23% Q4 '22 Employee Turnover 1. Dark Daily 2. Employment Cost Index: December 2022 (bls.gov) 2023 INVESTOR DAY Confidential / internal Use Only 26
Attracting, developing and retaining frontline talent will help address critical shortage and increase productivity ATTRACT Expand phlebotomy school certification program Reduce time to hire through improved technology Expand early career operations rotation program 92% Improved candidate experience resulting in new hire satisfaction DEVELOP Partner with universities to build medical technologist pipeline Accelerate development of next generation of leaders Strengthen frontline leadership capabilities 26% Reduction in turnover for Patient Services since mid-2022 RETAIN Increase retention through improved onboarding processes and expanded stay interview programs Expand career pathing for frontline talent Improve scheduling functionality to offer employee flexibility 74 Employee engagement index Above healthcare industry benchmark 2023 INVESTOR DAY Confidential / internal Use Only 27
Key takeaways We have a strong track record of delivering Invigorate savings while improving the customer experience Opportunities remain along our value chain to continue to deliver ~3% in annual productivity savings Our path includes: Productivity improvements through automation and AI Getting paid for the work we do Enhancing our provider and patient digital experiences Attracting, developing and retaining frontline talent 2023 INVESTOR DAY Confidential / internal Use Only
2023 INVESTOR DAY Long Term Financial Outlook Sam Samad Executive Vice President, Chief Financial Officer
SAFE HARBOR DISCLOSURE The statements in the following presentations which are not historical facts may be forward looking statements. Readers are cautioned not to place undue reliance on forward looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10-K and in any of the company's subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports. In the following presentations, references to adjusted EPS refer to adjusted diluted EPS. Any references to base business, testing, revenues, or volumes refer to the performance of our business excluding COVID-19 testing. Any references to operating margin(s) refer to adjusted operating income as a percentage of net revenues. Any references to free cash flow refer to cash flow from operations less capital expenditures. 2023 INVESTOR DAY 2
Key highlights Consistent execution throughout the pandemic Operating margin expansion beyond 2023 Balanced capital deployment priorities Long term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 2023 INVESTOR DAY 3
Consistent execution and strong growth through the pandemic We delivered a 9% revenue CAGR and 15% adjusted EPS CAGR since 2019 Revenues 3-year CAGR ~9% $ Millions $7,726 2019 $9,437 $2,723 $6,714 2020 $10,788 $2,770 $8,018 2021 $9,883 $1,454 $8,429 2022 Base Covid-19 Adjusted EPS 3-year CAGR ~15% $6.56 2019 $11.18 2020 $14.24 2021 $9.95 2022 2023 INVESTOR DAY 4
2023 represents a more normalized baseline for future growth Recap of full year 2023 guidance and assumptions 2023 REVENUE GUIDANCE BASE $8,650M - $8,750M +2.6% to +3.8% y-o-y COVID $175M - $275M (88.0%) to (81.1%) y-o-y 2023 ADJUSTED EPS GUIDANCE $8.40 - $9.00 $8.70 Midpoint 2023 GUIDANCE ASSUMPTIONS Base business margin expansion year-over-year More favorable unit price outlook Growth investments less dilutive to earnings $100M reduction in SG&A expense COVID-19 molecular volumes to average 5-10k/day COVID-19 molecular reimbursement <$51 beginning mid-May 2023 INVESTOR DAY 5
COVID-19 testing is part of the base business beyond 2023 COVID-19 REVENUES IN MILLIONS $2,723 2020 $2,770 2021 $1,454 2022 $225 2023E* Note: Midpoint of revenue guidance 2023 INVESTOR DAY 6
Our 2023 operating margin is close to pre-pandemic levels We are setting a new baseline for operating margin expansion beyond 2023 OPERATING MARGIN 17.0% 2019 23.4% 2020 23.8% 2021 17.6% 2022 ~17% 2023E 2023 INVESTOR DAY 7
Unless Congress acts, PAMA cuts will return in 2024 Medicare reimbursement cuts under PAMA expected to be ~$85M in 2024 2023 2024 2025 2026 CURRENT LAW UNDER PAMA No cuts 15% rate cut cap Data submission ~$85M in cuts expected 15% rate cut cap New fee schedule 15% rate cut cap IF SALSA IS ENACTED IN 2023 No Cuts 2.5% rate cut cap 5% rate cut cap Note: Assumes SALSA legislation text and timelines are updated only to reflect a 1-year delay in adoption of the bill introduced in 2022. 2023 INVESTOR DAY 8
We expect operating margin expansion beyond 2023 Targeting ~75-150 bps of operating margin expansion by 2026 OPERATING MARGIN ~17% 2023E +150 bps +75 bps 2026E LOW END ASSUMES: PAMA cuts return in 2024 HIGH END ASSUMES: SALSA is passed in 2023 DRIVERS OF OPERATING MARGIN EXPANSION: Revenue growth More favorable unit price outlook (ex-PAMA) Invigorate 2023 INVESTOR DAY 9
Balanced capital deployment priorities Reinvest in the business Execute on our M&A strategy with a goal to deliver 1-2% revenue growth from acquisitions Execute more share repurchases in the absence of M&A Consistently raise the dividend over time Committed to returning majority of free cash to shareholders 2023 INVESTOR DAY 10
Consistently returning cash to shareholders while investing for growth Majority of free cash flow returned to shareholders since 2012 ~$16.4B CASH GENERATED FROM OPERATIONS AND DIVESTITURES ~$3.5B CAPEX ~$3.1B M&A INVESTED ~$7.3B SHARE REPURCHASES ~$2.6B DIVIDENDS RETURNED TO SHAREHOLDERS 2023 INVESTOR DAY 11
M&A priorities: Continued focus on three key areas Targeting hospital outreach, regional independent labs and capability building assets REGIONAL INDEPENDENT LABS HOSPITAL OUTREACH CAPABILITY BUILDING ASSETS 2023 INVESTOR DAY 12
Positioned for long term profitable growth: 2023-26 Establishing 2023 as the new endemic baseline Total Revenues Mid single-digit CAGR Organic ~3% Acquisitions 1-2% Adjusted EPS* High single-digit CAGR Adjusted EPS* + dividend yield High single-digit to low double-digit CAGR Free cash flow growth commensurate with earnings growth Note: Assumes an adjusted tax rate of ~25.5% and a stable diluted share count beyond 2023. 2023 INVESTOR DAY 13
Key Takeaways Consistent execution throughout the pandemic Operating margin expansion beyond 2023 Balanced capital deployment priorities Long term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 2023 INVESTOR DAY 14
2023 INVESTOR DAY Appendix Non-GAAP Reconciliations
Note on Non-GAAP Financial Measures As used in this press release the term "reported" refers to measures under accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, amortization expense, and excess tax benefits ("ETB") associated with stock-based compensation. The company has provided a compound annual growth rate projection for 2023 to 2026 of high single digits for adjusted diluted EPS, which is a non-GAAP measure. The company is unable to present a reconciliation of adjusted diluted EPS to reported diluted EPS, the most comparable GAAP measure due to the inherent uncertainty and variability in the nature and amount of special items referenced above, and the amount of these items could be significant in any of the associated periods. Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. 2023 INVESTOR DAY 16
Adjusted Diluted EPS from Continuing Operations The following table reconciles adjusted diluted earnings per share from continuing operations ("Diluted EPS") to reported results under GAAP. Diluted EPS - as reported Amortization of intangible assets (a) Restructuring and integration charges (b) COVID-19 impact (c) Gain on remeasurement of equity interest (d) Other (e) Gains and losses on investments (f) Quest for Health Equity costs (g) Excess tax benefits associated with stock-based compensation Diluted EPS - as adjusted Twelve months ended December 31, 2019 $6.13 0.61 0.42 - (0.50) - - (0.10) $6.56 2020 $10.47 0.63 0.32 0.39 (0.46) 0.08 (0.10) 0.02 - (0.17) $11.18 2021 $15.55 0.62 0.36 0.03 - (0.24) 0.08 (2.02) (0.14) $14.24 2022 $7.97 0.74 0.56 - (0.05) 0.26 0.59 - (0.12) $9.95 Twelve months ended December Low $7.61 0.73 0.21 - - - (0.15) $8.40 High $8.21 0.73 0.21 - - - (0.15) $9.00 2023 INVESTOR DAY 17
Adjusted Diluted EPS from Continuing Operations (a) Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (b) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (c) For the twelve months ended December 31, 2021, represents the impact of certain items resulting from the COVID-19 pandemic including incremental costs incurred to protect the health and safety of our employees and customers. For the twelve months ended December 31, 2020, principally includes expense associated with payments to eligible employees to help offset expenses they incurred as a result of COVID-19, incremental costs incurred primarily to protect the health and safety of our employees and customers, and certain asset impairment charges. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (d) For the twelve months ended December 31, 2020, represents a pre-tax gain of $70 million based on the difference between the fair value and the carrying value of an equity interest. On August 1, 2020, we completed the acquisition of the remaining 56% interest in Mid America Clinical Laboratories, LLC ("MACL") from our joint venture partners. As a result of the transaction, we remeasured our previously held minority interest in MACL to fair value and recognized a gain. Income tax expense was calculated based on an effective income tax rate on the transaction of 11.8%, which is lower than the statutory income tax rate due to a permanent difference in the financial reporting and tax basis of goodwill 2023 INVESTOR DAY 18
Adjusted Diluted EPS from Continuing Operations (e) For the twelve months ended December 31, 2022, primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accruals associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act associated with the retention of employees. Additionally, the twelve months ended December 31, 2022 includes an $18 million income tax benefit due to the adjustment to state deferred tax liabilities related to depreciation expense. For the twelve months ended December 31, 2020, primarily represents a loss on retirement of debt. For the twelve months ended December 31, 2019, primarily represents a gain associated with the sale and leaseback of a property, a gain associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, and a gain associated with an insurance claim for hurricane related losses, partially offset by costs incurred related to a data security incident and non-cash asset impairment charges. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. For the gain associated with an insurance claim for hurricane related losses in 2019, there was no net income tax expense as we were able to utilize net operating loss carryforwards for which a valuation allowance had previously been established. For the gain in 2019 associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, there was no net income tax expense related to acquisitions for which the gain was non-taxable. (f) Primarily represents gains and losses associated with changes in the carrying value of our strategic investments. For the twelve months ended December 31, 2021, the pre-tax impact also includes a non-cash impairment to the carrying value of an equity method investment. Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. 2023 INVESTOR DAY 19
Adjusted Diluted EPS from Continuing Operations (g) Represents the costs associated with donations, contributions and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities). Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (h) Represents a gain of $314 million following the sale of our 40% ownership interest in Q2 Solutions(R), our clinical trials central laboratory services joint venture, to IQVIA Holdings, Inc., our joint venture partner, for $760 million in an all-cash transaction. Income tax expense on the transaction resulted in an effective income rate of 17.6%. 2023 INVESTOR DAY 20
Adjusted Operating Income as a Percentage of Net Revenues The following table reconciles adjusted operating income as a percentage of net revenues to reported results under GAAP. Operating income - as reported - as a percentage of net revenues Amortization of intangible assets Restructuring and integration of charges (a) COVID-19 impact (b) Other (c) Quest for Health Equity costs (d) Operating income - as adjusted - as a percentage of net revenues Twelve months ended December 31, 2019 15.9% 1.2% 1.0% - (1.1%) - 17.0% 2020 20.9% 1.1% 0.6% 0.8% - 23.4% 2021 22.1% 1.0% 0.6% - 0.1% 23.8% 2022 14.5% 1.2% 0.9% - 0.1% 0.9% 17.6% 2023 15.3% 1.3% 0.4% - - 17.0% 2023 INVESTOR DAY 21
Adjusted Operating Income as a Percentage of Net Revenues (a) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business. (b) Principally includes expense associated with payments to eligible employees to help offset expenses they incurred as a result of COVID-19, incremental costs incurred primarily to protect the health and safety of our employees and customers, and certain asset impairment charges. (c) For the twelve months ended December 31, 2022, primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accruals associated with previous acquisitions, partially offset by a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act associated with the retention of employees. For the twelve months ended December 31, 2019, primarily represents a gain associated with the sale and leaseback of a property, a gain associated with the decrease in the fair value of the contingent consideration accruals associated with previous acquisitions, and a gain associated with an insurance claim for hurricane related losses, partially offset by costs incurred related to a data security incident and non-cash asset impairment charges. (d) Represents the costs associated with donations, contributions and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities). 2023 INVESTOR DAY 22