Quest Diagnostics Inc
NYSE:DGX
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Quest Diagnostics Inc
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0:00 Welcome to the Quest Diagnostics First Quarter 2022 Conference Call. At the request of the company, this call is being recorded. The entire contents of this call, including the presentation, and the 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.
00:16 Now, I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.
00:23 Thank you and good morning. I'm joined by Steve Rusckowski, our Chairman and Chief Executive Officer and President; Jim Davis, CEO-Elect; and Mark Guinan, our Chief Financial Officer.
00:34 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, including the impact of the COVID-19 pandemic that may affect Quest Diagnostics' future results include, but are not limited to those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q, and current reports on Form 8-K.
01:08 The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows and/or its financial condition will be primarily driven by the pandemic severity and duration, health care insurer, governments and clients payer reimbursement rates for COVID-19 molecular tests, the pandemic's impact on the U.S. health care system and the U.S. economy, and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic, including the impact of vaccination efforts, which are drivers beyond the company's knowledge and control.
01:40 For this call, references to reported EPS refer to reported diluted EPS, and 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. Growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth, are compound annual growth rates. Finally, revenue growth rates from acquisitions will be measured against our base business.
02:14 Now, here is Steve Rusckowski.
02:18 Thanks, Shawn and thanks everyone for joining us today. Well, we’re off to a good start in 2022. We drove a strong year-over-year growth in our base business, which excludes COVID-19 testing. COVID-19 volumes remain strong early in the quarter and decreased in February and March, in line with the market.
02:42 We continue to make investments to further accelerate growth in the base business, and our efforts to improve productivity are helping us to offset inflationary pressures. So, based on the strength of our business we’re raising our 2022 guidance. This morning, I’ll discuss our performance for the first quarter of 2022 and then Mark will provide more detail on the financial results and talk about our updated financial outlook for 2022.
03:12 But first, I like to ask Jim Davis to give us an update on our leadership transition. Jim?
03:19 Yeah, thank you Steve. We are making very good progress on the transition. Yesterday, we announced a series of organizational changes and leadership appointments of seasoned executive designed to help us accelerated growth and drive operational excellence. First category is a Senior Vice President of the regional businesses. Kathy has deep knowledge of our business gained through three decades of leadership at Quest. She will oversee the regional and enterprise operations, the commercial organization and marketing. She will also be responsible for driving operational excellence, including [program drive] [ph] for company's quality and productivity initiatives.
04:01 Next, Carrie Eglinton Manner is taking on an expanded role as Senior Vice President, , Advanced and General Diagnostics Clinical Solutions. For more than five years, Carrie has been responsible for bringing innovative solutions to the market through Quest clinical franchises. Before joining Quest, Carrie had nearly two decades of leadership experience in healthcare and medical technologies.
04:25 Patrick Plewman, who has led our West region and has been with Quest Diagnostics for more than nine years is named Senior Vice President, Diagnostics Services, which is a portfolio of data driven analytics and services businesses, which enabled employers, providers, pharma companies, and others to deliver healthcare more effectively and efficiently. This portfolio includes employer population health, employer solutions, ExamOne, Healthcare Analytics Solutions, and Quest HealthConnect. And before joining Quest, Patrick had over 20 years of leadership experience in the biotech and molecular diagnostics industries.
05:09 Mark Delaney has joined Quest as Senior Vice President and Chief Commercial Officer. Mark has responsibility for the commercial team, including sales and sales operations. Previously, he helped senior sales and marketing leadership roles over his 30 year career at GE Healthcare and Hillrom.
05:29 And finally, Richard Adams has joined Quest as Vice President and General Manager of our Consumer Initiated Testing Business, a new role. Richard has two decades of varied leadership experience in e-commerce, digital marketing, and customer experience, and will lead our rapidly growing direct-to-consumer testing business. These appointments demonstrate the investment strength of our management team and we're really excited about the leadership and expertise that both Mark and Richard Adams will bring to us.
06:00 Additionally, we're making very good progress on our CFO selection process and are on track to name a leader in the next several months. The management transition is going very well and the changes we've announced yesterday are an important step in positioning us for the future.
06:16 Steve, I'll now turn it back to you.
06:18 Thanks, gentlemen. I agree the transition is going well. Now, turning to our results, our base business continued its strong recovery up more than 6% from the prior year. Total revenues were $2.6 billion; earnings per share was $2.92 on a reported basis, and $3.22 on an adjusted basis. Cash provided by operations was $480 million.
06:50 COVID-19 testing revenues were approximately $600 million in the first quarter and that’s down approximately 28% from 2021. Nearly 60% of the COVID-19 revenues came from the Omicron peak in January. We project [indiscernible] demand for PCR testing through the end of the year and into 2023, albeit at lower levels.
07:16 The public health emergency was extended into July, maintaining our current level of reimbursement. And based on these factors, we raised our COVID-19 revenue guidance for the full-year of 2022 to between $850 million to $1 billion.
07:36 Turning to our base business, in the first quarter, we continue to make progress executing our two-point strategy to accelerate growth and drive operational excellence. So, here are some highlights from the quarter. We continue to make in-roads with our health plans, gaining share and increasing revenues faster than the market.
07:58 Our health plan revenues without COVID-19 grew faster that our overall base business did in the quarter. We also deepened relationships with payers through value based contracting. We currently had about 30% of our health plan revenues are tied to value based elements. And these included patient health outcomes, quality or shared savings.
08:23 We think we could grow this about 50% over the next few years. And we believe these value based contracts are achieving better alignment with health plans, which we believe will allow us to gain shares.
08:37 We're also working with our hospital health system leaders to help them execute their last strategy. A lot of partnerships of Hackensack Meridian Health in New Jersey, Memorial Hermann in Texas, and those which really helped that work in [indiscernible] are performing well.
08:58 Hospitals look to us for their help with through laboratory design, staffing and management and we can enable them to monetize outreach lab assets that help them free-up needed capital. We have continued to make important investments to strengthen our advanced diagnostics capabilities and are already seeing results.
09:21 We continue to make investments to accelerate growth in oncology, hematology, hereditary genetics, genomic sequencing services, and power services. Since we’ve ramped up our investments, and our advanced diagnostics portfolio, we have already accelerated growth by several 100 basis points and expect to deliver the 8% growth earlier than 2024, which we committed to at our 2021 Investor Day.
09:54 We remain excited about the opportunities we see in the direct-to-consumer testing market. As you know, we're ramping up investments in our consumer business and it’s having an impact.
10:06 In the quarter, our direct-to-consumer revenues more of than doubled compared to the prior year, driven by strong growth in both our COVID-19 testing operations as well as our base business testing. We’re seeing continuous solid demand for [indiscernible] comprehensive metabolic panels and complete blood counts. Also our new and approved digital experience is on track to launch later this year.
10:33 Finally, we've been expanding our diagnostics services portfolio. We are collaborating with a small digital [indiscernible] software firm to deliver diabetic retinal imaging services through designated Quest Diagnostic patient service centers across the United States. This will aid in the screening of patients as part of the diabetes management program.
10:58 The second part of our strategies is to drive operational excellence. We remain focused on improving our operational quality, service and costs thereby driving productivity gains. We are not immune to the current inflationary environment, but we're tightly managing our operations and are expecting another good year of the bigger rate savings and productivity improvements to help offset these pressures.
11:26 So, by way of our example, our procurement team continues to work with our strategic suppliers to mitigate potential price increases and improved productivities through our long-term relationships. Also today, the team has effectively managed challenges in our global supply chain.
11:46 We also look to our suppliers to deliver innovation to help us a lower overall cost of testing and improved quality. The most recent example is the rollout of our new [Euro analysis platform] [ph] that is being deployed across our laboratory network.
12:04 Our new lab in Clifton, New Jersey has been operational for about a year and we are seeing incremental productivity gains from the investment we’ve made in automation and artificial intelligence.
12:16 Our new [schedule add champion] [ph] initiative encourages patients to make appointments allowing us to better manage demand and [indiscernible] productivity while enhancing the patient experience. The system has been successfully deployed to over 700 patient service centers. Our continued invested in operations is producing results. And we are well on our way to achieving our targeted productivity gains of 3% of our cost structure in 2022.
12:50 Now, Mark will provide more details on our performance and share more insights and our updated guidance for the remainder of 2022. Mark?
12:59 Thanks, Steve. In first quarter, consolidated revenues were 2.61 billion, down 4% versus the prior year. Base business revenues grew 6.3% to more than 2 billion, while COVID-19 testing revenues declined 27.6% to approximately 600 million. Revenues for Diagnostic information services declined 3.9% compared to the prior year. The decline reflected lower revenue from COVID-19 testing services versus the first quarter of 2021, partially offset by strong growth in our base testing revenue.
13:39 Total volume measured by the number of requisitions increased 1.3% versus the prior year and was roughly flat under an organic basis. Total base testing volumes increased more than 6% versus the prior year. Excluding acquisitions, total base testing volumes grew nearly 5%. We experienced some modest softening of base testing volumes in January during the peak of the Omicron surge. The volume has rebounded in February and March.
14:11 COVID-19 testing volumes surged during the spread of Omicron variant during the winter and volumes peaked in January, but declined through the month of February and into March. Together with our JV partners in our Quest, we resulted approximately 7.2 million molecular tests.
14:30 Quest [indiscernible] resulted roughly 6.3 million molecular test, down approximately 2 million tests and 1 million tests versus the prior year in fourth quarter respectively. We also resulted nearly 450,000 serology tests in the first quarter. Our COVID-19 molecular volumes have generally stabilized and the average of roughly 30,000 tests per day over the last four weeks, excluding similar request.
14:59 Revenue per acquisition declined 5.2% versus the prior year, driven primarily by lower COVID-19 molecular volume. Base business revenue per rep was up modestly. Importantly, we continue to see an improving price environment. Unit price reimbursement pressure was less than 100 basis points in the quarter.
15:21 Reported operating income in the first quarter was 513 million or 19.7% of revenues compared to 660 million or 24.3% of revenues last year. On an adjusted basis, operating income was 554 million or 21.2% of revenues, compared to 708 million or 26% of revenues last year. The year-over-year decline in adjusted operating income was primarily related to lower COVID-19 testing volumes, a higher portion of COVID-19 molecular testing volume from non-traditional channels, which carry additional expenses or logistics costs, investments to accelerate growth in our base business and lower average reimbursements for COVID-19 molecular tests. These [headwinds] [ph] were partially offset by strong growth in our base business.
16:16 As many of you have heard, the health resources and services administration or HRSA, stopped accepting claims to pass and treat uninsured patients on March 22, due to insufficient funding. [Indiscernible] runs the program to provide funding for COVID-19 testing vaccination and treatment for uninsured patients. Approximately 14% of our COVID-19 molecular testing volume has come from uninsured patients, which is much higher than the 1% to 2% we typically see in our base business.
16:50 As a result, we were unable to build HRSA to over 20 million in COVID-19 testing work that was performed just prior to the March 23 HRSA cut-off date. Moving forward, we are now dealing uninsured patients for COVID-19 testing directly upfront. As a result, we've seen a decline in our uninsured COVID-19 molecular testing volumes in late March and into April, and this is reflected in trends I shared earlier.
17:19 Reported EPS was $2.92 in the quarter, compared to $3.46 a year ago. Adjusted EPS was $3.22, compared to $3.76 last year. Cash provided by operations was $480 million in Q1 versus $731 million in the prior year period. And we repurchased 350 million of stock during the first quarter.
17:47 Now, turning to our updated guidance. Revenues are now expected to be between 9.2 billion and 9.5 billion, a decline of approximately 12% to 15% versus the prior year. Base business revenues are expected to be between 8.35 billion and 8.5 billion, an increase of approximately 4% to 6%.
18:10 COVID-19 testing revenues are expected to be between 850 million and 1 billion, a decline of approximately 64% to 69%. Reported EPS is expected to be in a range of $7.88 and $8.38, and adjusted EPS to be in a range of $9 and $9.50. Cash provided by operations is expected to be at least 1.6 billion and capital expenditures are expected to be approximately 400 million.
18:43 Before concluding, I'll touch on some assumptions embedded in our updated 2022 guidance, as well as some additional considerations. Our guidance assumes COVID-19 molecular volumes to average approximately 10,000 to 20,000 tests per day for the rest of the year. This reflects modest continued declines in Q2 from the roughly 30,000 tests per day we are seeing in April. And some degree of stabilization during the second half of the year.
19:12 As we look toward 2023, our expectation for COVID-19 molecular and serology testing volumes assumes that the COVID-19 testing run rates in the second half of 2022 continues into next year.
19:27 Last week, the public health emergency was again extended another 90 days through mid-July. We assume average reimbursements of COVID-19 molecular testing to hold relatively steady through this period, while the public health emergency [indiscernible] renewed beyond July, additional extensions are not captured in our guidance.
19:47 We remain prepared for additional future surges collecting COVID-19 testing volume from a range of customers. While the PHE is in effect, we continue to incur incremental costs from non-traditional channels for supplies, special logistics [indiscernible] and channel expenses for this volume, which can represent roughly $30 in incremental cost per test. Therefore, you should not assume the higher reimbursement due to the PHE extension drops right to the bottom line.
20:16 As Steve noted earlier, we're already seeing some returns in our investments to accelerate growth, particularly in the areas of advanced diagnostics and direct-to-consumer testing. And would expect a margin tailwind on these investments in 2023.
20:33 As a reminder, we are planning to spend approximately 160 million on these investments this year. We spent approximately 30 million in the first quarter and are looking for these investments to ramp up in Q2 to support the launch of our new consumer site later this year. A portion of these stand-up IP costs are temporary, but variable marketing costs will increase [volume the] [ph] launch of the new site.
20:58 We’ll also be adding additional headcount this year to support our consumer offering, as well as bioinformatics capabilities within advanced diagnostics.
21:08 Finally, we know there's a lot focus on expectations for 2023. While it’s clearly too early to provide specific guidance for next year based on everything we know and see today, we expect to deliver topline and earnings consistent with our long-term outlook that we provided at our 2021 Investor Day. I’ll now turn it back to Steve.
21:30 Thanks Mark. Well to summarize, we're off to a good start in 2022 driving strong year-over-year growth in the base business. We continue to make important investments to accelerate growth and we are seeing the results. Now based on the strength of our base business, we've raised our outlook for the remainder of the year. Now, we'd be happy to take your questions. Operator?
21:54 Thank you. [Operator Instructions] Our first question comes from Ricky Goldwasser from Morgan Stanley. Your line is open.
22:12 Good morning. So, a really nice job in the quarter managing cost and improving margins. So, how has the performance in Q1 compared to your expectations? And how should we think about the margin expansion opportunity for the rest of the year from 1Q level? If we look at that as a baseline?
22:33 Yes. Ricky thanks for the question. As you look at the way the quarter played out, Omicron was more severe than we had anticipated, which drove higher COVID revenues, but we also saw the base business impacted by that. So, definitely in January as we mentioned the base business was softer, so relative to our expectations in Q1 more COVID, less base business, but as we exited the quarter and certainly as we talked about in February and March the base business bounced back to our expectations.
23:08 So, while we're very pleased with where we see the base business, growth for the year, it would have been even higher had it not been for Omicron. And the margin is really were what we were expecting. So, we walked through in the last call how some of the margin impacts in Q4 was really temporary around annual incentive plan and some costs related to some special things that we needed to do for COVID testing in that quarter, some over time that we're having in fair amount of [indiscernible] and some things that we really saw as temporary.
23:44 Look [indiscernible] is that once we got the Omicron, those costs, generally did go away and we anticipate further reduction in some of the special expenses related to COVID safety and protection for employees that we continue to advance hopefully and get into the endemic and end of the pandemic. So, I'd say other than the higher COVID revenue and a little lower base in January, generally the [indiscernible] is expected, and that's why we're comfortable raising the bottom and upper end of our guidance at the midpoint.
24:15 Just like to reiterate what Mark said about the base business, just underscore that we're pleased with what we saw in Q1. It would have been better, if it didn't have the softness that Mark talked about in January. We remind everyone that we posted about 6.3% growth in our base business, which had only about 100-days’ worth of acquisitions.
24:38 So the organic growth was around five. And again, if January was stronger, it would have been stronger than that. So, we feel good about that to be the start of the year, which gives us confidence for the full-year. So feel bit about the start of the year for our base business. And that gave us the confidence to raise guidance for the full-year beyond COVID.
24:56 One additional comment on that. When you look at the compares, the easiest compare on the basis was Q1. So, to Steve's point, we've credited that even better. We would have done it better than the 6.3 of January not been impacted by Omicron, but as we go through the balance of the year, it compares to get a little tougher because lot the recovery from other pandemic, occurred late in 2020 and early in 2021. So, the growth going forward is more going to be driven by share and less about utilization and the market recovery.
25:35 So, can I just quickly follow-up on that? You talked about the improvement in [7 March] [ph] with more difficult comps. So, how is demand shaping up in April to date?
25:47 Yes. So, the business continues to perform at a high level as it was happening in Q1. So, it wouldn't be updated in our guidance if we weren't confident that what we saw in terms of the performance early is continued. So, we’re more focused on overall growth as opposed to the percentage year-over-year because obviously the compare makes it complicated. So, we're very happy as we get into April and we see the performance of our base business. And as we mentioned, COVID is kind of stabilized. We're not sure how long that will continue. We certainly took a little bit of a volume hit from the change in HRSA.
26:25 And because there's been a little bit of a spike I'd say some of that was partially offset by the market growing a little bit recently. So that's probably the way you get to a reasonably flat level of COVID testing over the last month.
26:44 Thank you.
26:47 Our next question comes from Patrick Donnelly from Citi. Your line is open.
26:51 Good morning, Patrick.
26:53 Hey, good morning. Thank you guys for taking the questions. Maybe just another one on the margins. You touched on a little bit there in the first question. Can you just talk about, I guess given the ongoing growth investments, wage inflation, can you just talk about, kind of your thoughts as we work our way through this year and into 2023. Obviously, the PHE extension should help on that front in terms of kind of the margin side. So, again, I guess, when we look at the earnings raise, how should we think about the base margin piece again ex-ASP as we work our way through this year and again into 2023?
27:24 Yeah. So, as Mark indicated in his prepared remarks, changing dynamics that are business with investments in the second quarter and then less COVID in the back half of the year and what we indicated we will be coming out of the year in the back half with – the amount of COVID testing we would expect, there's a good level to think about in 2023.
27:49 And so what we also expect is to continue to get the investment returns that we expect in advanced diagnostics and in consumer testing, starting in the back half, and again, what Mark said in his prepared remarks, and we believe that investment return will be a tailwind for us in 2023. So, this is a transitional year with those investments. Transitional year for COVID, and Mark you like to give a little perspective on Q2 and then the back half?
28:22 Yes. And I’ll try to answer your questions Patrick. So, on inflation, we talked about building in an extra 100 basis points or so in our wages costs. And that was in our original guidance. And through 3.5 months of the year we haven't seen anything that suggests that wasn't a reasonable assumption. So, basically, inflation was about where we’re expecting. And I'd say, our non-wage items, such as materials and supplies and so on, surely fuel costs have been bouncing around, but nothing has deviated significantly from our critical assumptions coming into the year around inflation.
29:03 The PHE is significant revenue and from a dollar margin perspective, it certainly is helpful, but from a percentage margin and perspective, I want to be clear that it's not significantly higher than the post PHE world because those costs go away that reference, that are more than $30. So, the people are focused on percentage margins, the base is not a big change in terms of what you will see.
29:03 And I guess the important thing is that as the base volume grows, we've always shared that incremental organic growth in the base business as a very high level of drop through. So, the other margin consideration as we grow as we expected and as we've signaled in our guidance, that that will help drive margin expansion. And then finally, just a reminder that we are in a much better place in price than we've been historically. And so, therefore, a lot of the [indiscernible] productivity savings that in the past help pay for inflation, [indiscernible] inflation is a little bit worse. Certainly the pricing environment is better. So, there's more of that to cover that inflation and also to drive bottom line margin expansion.
30:16 So remember too as you think about, as we transition for the year, and Ricky asked about April. We have higher level testing in April going on. We do periodically update you on that. And that number we expect in our guidance to come down. And as we indicated as we come out of 2022, we'll be running around 10,000 to 15,000 tests per day. And we're assuming that the PHE will expire because we didn’t know nothing beyond what we've heard so far, which will add sometime in July.
30:51 So, as you think about that transition, and then think about the investments we're making and thinking about the nice momentum we're building in the base business it gives you some perspective of how we're going to come through the three remaining quarters of this year, and then guide us to a reasonable place to be able to deliver what Mark indicated for 2023.
31:15 Okay. That's helpful. And then maybe just on the balance sheet, cash flow obviously has been pretty strong for the past few quarters here, capital allocation is in focus for investors, can you just talk about your priorities there? What the M&A pipeline looks like, what the funnel looks like? And then maybe compare that to kind of the share repo opportunities?
31:35 Sure. So, our capital priorities haven't changed. We have that commitment return majority of free cash flow as we shared, you know normal times we get pretty close with the dividend and we do some share repurchases to offset dilution, obviously with the COVID [indiscernible] cash generation, and we've had the inability to deploy more cash. We always preferred to do M&A because we've got very high standards around the deals that we executed. So, would always be the preference, but at given point in time, given our strong cash from the balance sheet and our ability to generate cash, we're not going to sit on it.
32:13 So, the 350 million in the first quarter is more of a reflection of how much cash we had at year-end and the fact that we didn’t do a transaction in Q1 as opposed any change in priority. So, Steve, would you want to comment on the pipeline?
32:29 Yes. Yes. So, we feel good about again, our commitment of 2% growth through acquisitions. As you know, we've delivered that consistently. We feel good about our ability to – on a routine basis to deliver the consolidation strategy we've been executing against. We've got a few step we are working on and we still feel that we will be able to get to a number close to that 2% in 2022. So, as I have said in the first quarter, we're lighter than that. This is lumpy, but we do expect that we'll be moving on a few in the second quarter and into the third quarter to deliver what we expect.
33:09 Great. Thank you.
33:10 Operator, next question.
33:11 Our next question comes from A.J. Rice from Credit Suisse. Your line is open.
33:16 Good morning, A.J.
33:19 Hi, everybody. Obviously, the value based arrangements are becoming more significant as you described in your prepared remarks. I wondered if we could get you to step back and talk about a few of the key features of these arrangements and discuss how they allow Quest to do better economically? It sounds like you think you can do better economically under these types of arrangements. And I know you referred to pricing being better. We used to always think a managed care pricing is being a 1% to 2% negative headwind each year, has that dynamic changed and is it mainly because of these value based arrangements?
33:56 Yes. So, let me start and then I'll ask Mark and Jim to kind of add to this. As we have said in our strategy here and health plan access change there is a big opportunity for us, number one. Number two is, we do plan that gaining share. And number three, we are gaining shares. So, our health plan revenues are growing faster than overall revenues and we believe growing faster in the markets. So, we're making progress. So, in that regard, the second question is the environment has gotten better.
34:29 We've indicated in prior calls and prior quarters, and it's proven to be true as we go throughout this year. As we get into renegotiations with the plans, we believe we have stronger position to negotiate and in some cases, modest prices because we're delivering more and more value. Our quality is improving, service performance is better, and we have an opportunity to help them narrow the network and narrow the number of providers they have with the number of these programs.
34:59 So, it has gotten better and we indicated that less than 100 basis points overall. I'll remind you that when we talk about price, there's a lot of focus around the plans, but we have price pressures in the hospital business and our client build business, but at least on the health plan side, it has gotten better and we have gotten modest increases for some of the contract renewals that we've had.
35:21 In terms of value-based contracting, the biggest opportunity we have, which you indicated in the past is around United. And United is a very different relationship for us and what we had years ago. It is clearly a relationship that we're working different aspects to be able to pick up share. And as part of that, now it's indicated in my remarks, we do have shared savings opportunities and we have opportunities together to do a better job with their membership than their clients. And then beyond United, we have extended that thinking to other parts of our health plant portfolio with other concepts, they’re not all identical. But they have similar characteristics in general where we have better alignment between what they're trying to accomplish and what we're trying to accomplish.
36:13 In the end, we’re all trying to achieve what's been described as the [triple aim] [ph], which is better quality, better experience, at lower cost, and that's resonating very well in the marketplace. Overall, as you know, this is an entirely focused organizations on that [indiscernible] plan for the greater delivery systems as well. So, Mark you like to add something to…
36:37 Yes. So, A.J., personally we think about value based care and arrangements. This is not necessarily being [indiscernible]. So, this is being indicated with both United Healthcare [indiscernible] many of these value based care incentives come to us through performance on leakage agreements where they provide us list of physicians that are using how to connect for [plans] [ph] and what we move that for, there's a value base, there's an incentive for Quest.
37:07 We proactively work with both payers on moving work out of extensive health system laboratories. If selective [indiscernible] list of physicians that are using that those labs and we go after it. Finally, we worked hand in hand with both of those plans and others on approaching employers and getting employers to see the benefits of steering their employees to the independent labs like Quest Diagnostics.
37:34 When we do enter into these capitated arrangements, I can assure you going forward, we're going to have a much greater stake in what we call the clinical pathways that are used by physicians to ensure that utilization makes sense for the clinical condition that the physician diagnosed.
37:55 Yeah. The only thing I'll add, A.J. is, there’s elements in those contracts, that Jim just described. The one I'll add is also [indiscernible] we've talked about in the past, when we do an acquisition of hospital outreach, and instead of the rates immediately dropping to our rates, there's a step down a majority of our large contracts right now. So, we kind to share the value of movement network through an acquisitions, which aligned our incentives and really the greatest value is, is it moves the conversation around away from price being the way they create value and more towards [indiscernible] which Jim talked about and partnering and working together to get connections of work to [indiscernible] better price, but also there's things that come with it that benefit the patients, the physicians, it's our tools and our technology, it's our quality.
38:50 I mean, you know that in the [POM] [ph], it's not about the price, it's really about a couple of the metrics around quality and tools and I mean what is their experience in the patient drop center to how we feed the data to the payer and the frequency in quality. So, there’s a lot beyond price that determines [indiscernible] space and that's where we've been successful in moving the conversation.
39:16 And yes, then within the contracts themselves, there will be shared savings and these other value driven parameters that can get us a better price or more value as we demonstrate to them where we’re creating value for them as well.
39:31 Alright, great. Thanks a lot.
39:34 Our question comes from Pito Chickering from Deutsche Bank. Your line is open.
39:39 Good morning, Pito.
39:40 Very good morning, guys. [Just taking] [ph] my questions. Back to the guidance question, previously, it didn't assume any share repo besides offsetting dilution, what does your current guidance assume? Back into net income guidance, you know from the previous guidance using 124 million diluted shares in fourth quarter, versus the current guidance at 121 million shares backing into the midpoint range and net income, essentially flat despite revenues up $200 million or at the low-end. So, it’s got us into a margin compression of about 10 basis points. So, a long way of saying, is margin guidance down today versus previous guidance and any [indiscernible]?
40:21 Yes. At this point, the share repurchases is definitely done pretty much offset our equity programs. So, it's not there's a huge decline in waste so based on what we've done. And in terms of going forward, it'd be dependent on M&A opportunities versus buybacks. So, there's no material change in our way so contemplated in our guidance so it is to what we gave back to [indiscernible].
40:52 And as you see in our results, [we have set] [ph] Q1 with about $700 million worth of cash. And obviously, we're going to put that to use to a good way. We're looking at acquisitions as we talked about. And we'll handle that in due course throughout the remainder of the year.
41:17 I think just as you drill into that, you know backing into previous guidance as your current guidance with the share counts you had before versus current share counts, I get to net income of about $1.1 billion for both the current Quest, the current guidance versus previous guidance, despite revenues going up, is that the right math? Does that would imply margin impression about 10 basis points?
41:38 Yes. So, I would not want to take away an implication of margin compression Pito. And remember that we don't do point estimates. We do ranges. So, there's a lot of moving parts, everything from topline mix, clinical mix, exactly, precisely, how much COVID testing we get going forward. And share obviously deployment of cash.
42:04 So that's why we give a range. So, we feel very good about the margins. We would expect that the margins would improve on the base business going forward. Certainly, the COVID elements and everything from the PHE to the volume we have could impact margins as well.
42:21 I’ll give you one example if you're looking at income margin, certainly some of the JVs where specifically some of our Quest where they have done a lot of COVID testing, we have no revenue, but we get their earnings contribution from that. So, there's a lot of things that they kind of skew margins, but I think what people really want to understand is the base business.
42:41 So, what’s going to happen going into 2023? We're very comfortable with the base business, we’ll be at or above pre-pandemic levels and we'll have a larger base business in 2023 with some level of COVID testing and in the margin performance that you saw in Q1, we're not expecting it to erode, even despite the factor, we did talk about raising up some of our CIT investments in Q2. So, it's also been contemplated, it’s all in that range of guidance and so it’s kind of hard to pin down specific margin at this point, but it's not bad news.
43:16 Great. Thanks so much.
43:19 Our next question comes from Kevin Caliendo from UBS. Your line is open.
43:25 Good morning, Kevin.
43:28 Good morning. Want to follow-up on the guidance question just a little bit, so you'd beat in the quarter by roughly $0.25 and you raised your COVID revenues by 150 or so, which depending on what margin you use could almost equate to that same sort of $0.25, was the guidance range, was the guidance range raise related to the first quarter beat? Was it related to the COVID increases there an overlap there? How should we think about that?
43:58 So, the guidance range was related to the totality of the business. And again, if you look at Q1 as we shared, the base business was [indiscernible] extremely well. Didn’t do as well as we expected when we entered the year because of Omicron.
44:15 So, some of the raise in COVID for the year and the performance in Q1 was really offsetting a slightly softer base business. Now, the good news is that the base business came back. So that softness in the base business was temporary. The other dynamic is that, we do have the PHE being extended and we also have this change in HRSA, which is not insignificant. So, we mentioned there was over $20 million of loss opportunity that will get paid for the uninsured from more than we did in late March.
44:49 So, there's a lot of moving pieces here, and so it's really hard to parse precisely what is driving the rate, it's really our greater confidence in the business performance for the year in totality with all of those pieces. And so again, well a lot people focus as they rightly understood on the midpoint, I'd say just in general business is in better shape and in total than we would have expected 90 days ago and that's why we're comfortable raising both the topline in the bottom line.
45:20 Yes. As we enter the year, what we indicated for COVID is around 700 to 1 billion and obviously we're delivering 600 million in the first quarter. We have more certainty around what is left within that initial guidance.
45:37 Obviously going into the year, there's a lot of uncertainty of what would happen now, [indiscernible] how fast would decline, and how each testing would go on in the back half of the first quarter. So, the timing up of the range, the asset range is hit by this, as Mark indicated there’s puts and takes of this in terms of the impact on our bottom line. But I'll just reiterate, we feel good about our start with our based business and we're tracking well for a strong year based on our initial guidance.
46:11 Okay. Just a quick follow-up on the 160 million in investments. You said part of it would be temporary, part of it would be permanent. I think one of the things we're all trying to figure out here is, sort of what the base margins look like in a non-COVID or a COVID would [indiscernible] flat year-over-year or whatever, which seems like we're moving into, what the base margins normalize would look like? So, if we think about how much might linger, any help on that? And maybe the question would be, what do you think base margins look like in 2023 or exiting when COVID becomes endemic versus where they were in 2019? Like, is it possible that those base margins are higher going forward? That you guys have figured out a way to be more productive [Multiple Speakers]?
47:02 Remember, we're vesting $160 million, we’re vesting [$160 net million] [ph] sixty million because we have a strong business piece to get the returns. So, what we had indicated, we are ahead of our plan to get the returns in advanced diagnostics and we feel bullish about the opportunities of the consumer. And the results on both of those fronts have been good news. And so, when we talk about the second part that you mentioned of putting in place a new platform, also where a consumer business we're investing in some marketing to get the growth we expect, and we are getting the results so far and we'll continue to see the results in the back half of the year.
47:43 What we also said is that as we come out of 2022 into 2023, when you think about a year-on-year compare, with the returns we expect from Advanced Diagnostics and the returns we expect from the consumer, that a year-on-year improvement in those businesses will be tailwinds for our margins in 2023.
48:10 So, again, we're investing to grow, we're investing to get a return. We feel good about getting those returns actually quicker than expected, and next year, the year-on-year compare related to that 160 million will be a net tailwind for us in terms of our earnings in 2023. Mark anything you like to add?
48:31 Yes. So, just a reminder that we shared a view that we could [indiscernible] business to [a quarter billion] [ph] by 2025. And remember, especially if you strip out the COVID testing revenue this was a business that was small millions, not that long ago. So, very significant growth projected in this business and we’re still very comfortable and confident. We just talked about the performance in this past quarter and we don't have our new customer experience IT capability that we think is really going to make a difference in terms of the ease and use of that site.
49:09 So, as Steve said, we’ll create tailwinds because we'll be investing less relative to the revenue. But in terms of the margin, what I'd say is, on the business ex-consumer, the margins will be as good or better than you're used to talking about pre-pandemic. But we will have a sizable consumer business that is still an investment mode because we're still looking to grow. So, the overall enterprise margin you should not expect to be expanded. The good news is, we would expect stronger growth.
49:44 And as for some reason that consumer business doesn't deliver and we can turn off the marketing expense. So, it's not as if we’re adding tons of people or infrastructure or costs. So, we’re very confident in our ability to grow that business. We want to invest to optimize that growth for a period of time, it is going to improve its bottom line next year relative to this year and then certainly over the years beyond that, we would expect to have a nice healthy margin on that business as well. And it will be quite sizeable.
50:15 And as Mark said, as we go through thinking by the way, we indicated in our Investor Day, and we're not going to give you 2023 guidance, so Mark indicated is when we think about 2023, we're still believing we're comfortably in the range we would expect in 2023 in terms of EPS in growth. And the second half sets its up nicely and what we've implied in our guidance for the full-year implies a set-up, so we would be able to deliver what Mark indicated in 2023 and a view that we indicated in our Investor Day in spring of 2021.
50:57 So, we're consistent and we believe we're on track to delivering what we expect and what you would expect in 2022 and 2023.
51:07 Thank you for all that detail.
51:09 Thanks.
51:11 Our next question comes from Jack Meehan from [Wolfe Research] [ph]. Your line is open.
51:15 Hey, Jack.
51:15 Hey, Jack.
51:17 Hello, and happy to say, Nephron Research. So, Steve, on 2023, I know still premature to give a specific number, but at the Analyst Day, you talked about 7% to 9% earnings growth, kind of off of an $8 number you were gearing us to at that point? Now, talking about some tale of COVID here too, can you just like make sure we're doing the math right? Can we take 8% grow it, add some COVID on top? There's obviously some other moving parts, but is that the right way to think about it or where am I wrong?
51:57 We're going to refresh all of your memories of what we said in [indiscernible] through.
52:02 Yes. So at that point, we said $7.40 to $8 and then 7% to 9% CAGR from 2022 and beyond. And then as we got further along past Investor Day we started to signal that we would expect it would be closer to the $8 or on the upper end of the range and because 2022 has more COVID revenue, I would just remind everybody, the growth rate in 2023 is going to be below that CAGR, but the absolute number we're saying should still be where you would have calculated it back in March of 2021. So, just happens to be that the pandemic hung around for a little bit longer.
52:47 I also mentioned at Investor Day that we did not assume COVID would go away. So, in that outlook, I had a level kind of a sustained COVID testing, we do expect that COVID testing will be around part of our portfolio. And certainly nowhere here the levels of 2020 and 2021 or even what we're projecting this year, but not insignificant. So, I did not take COVID as upside for that. We certainly have some COVID built into that outlook.
53:13 Yeah, what we said, remember this is the spring of 2021. We expected 2022 to be able to grow that we indicated both topline to bottom line, but we also said and it continues to this day, we expect that COVID will continue to be part of our portfolio of tests going forward.
53:35 So that was 2021, thinking about 2022 the same is true for 2022 going into 2023. So, we're going to come out of 2022 with some COVID testing. You see the volumes we indicate, which is about 10,000 and 15,000 per day. Obviously, we're assuming right now we're a lower price, we will continue to have COVID testing in 2023 and we’ve always assumed in our outlook going forward for growth in the topline and bottom line will be COVID testing [indiscernible] portfolio.
54:04 And frankly, we think it's a good opportunity. Because if you go through the math, even at lower price points, this is a sizable market and we have a good size share right now. We think there’s dynamics to the marketplace and we're working on plans to actually gain share in the COVID testing marketplace that could be with us for the foreseeable future.
54:25 Great. As a follow-up, wanted to ask you about the consumer directed testing. You talked about the growth rate; how much revenue did that area generate in the quarter? And can you also talk about interest beyond COVID? Is there any specific areas of menu that you're targeting or you think are resonating and where that investments getting directed?
54:48 Well, first of all, Jeff, we like to give you specific numbers for the quarter. What we share with you, it grew nicely double-digits on both the base business as well as on COVID. Jim, why don’t you talk about the portfolio and what we're seeing growth in?
55:00 Yes. So, Jack, we've talked into the past, there's various segments since consumer initiated testing business. I'll touch on two. One is, we call them watchful warriors, people that have product conditions like diabetes, like cancer, but their insurance company they only pay for, let's just say two A1c test a year and these people worry about the disease that they may come in once the [indiscernible] and get testing. So, it just makes more sense that they do it through us directly rather than have to go to a physician office pay an expensive bill just to get an A1c test.
55:38 So, there's a lot of demand from these types of patients. The second is, we’ve talked about [indiscernible]. People who don't want their insurance company to know they are getting tested, they may not want their doctor to know, they may not want their spouse, they may not want their mother or father, you know, some of this is in relation to STD testing. So, it is a big segment for people that value privacy.
56:05 Finally, there's a generation, a much younger generation that may not want to go to the doctor. They don't have a doctor, but they may want to get lab testing done once a year just to check the underlying health of their body. And so, call it the 20 to 26 year old segment that they don't have primary care physicians, but they are concerned about their health. And they come in and get these once a year comprehensive [indiscernible] for overall health.
56:35 There's other areas as well Jack, physical fitness offset, check one more level before marathons and things like that, but those are the primary ones.
56:44 Yes. Jack, we've talked about this previously. We moved this – what we call blueprint for wellness, which was an offering we gave to employers. It is a battery of diagnostic testing that gives you a good blueprint for how your [indiscernible] and other important metrics. And we're actually offering that now on [indiscernible] testing and people really find that interesting. So, an opportunity to get a full run of diagnostic testing like people have gotten who had employers [indiscernible] we do it for our own employee base and it can be very, very valuable.
57:24 And then obviously if there's anything that’s out of range than go to the doctor. Instead of going to doctor first to get the script.
57:31 Yeah. As Mark said, to, it's a small business particularly on the base business and that number is growing strong double-digits. And what we said is, we're committed to the business dealing of about $250 million in size by 2025. Well, needless to say with the investment that we're making, the new leadership we brought in that Jim indicated and really a very focused organizational model that we have in place.
58:04 We're getting good traction and we believe you're going to start to see acceleration of the revenues we get from it, which should be a net tailwind for us for our growth overall as we go into 2023 and beyond tracking to that $250 million number in [2025] [ph].
58:23 If you just kind of go through the math, you can see this is going to be accretive to our growth in 2023 and 2024 beyond what we've seen so far because the numbers get much more substantial year-on-year to give us a nice lift in our growth rate going forward.
58:39 Operator, next question.
58:42 Our next question comes from Brian Tanquilut from Jefferies. Your line is open.
58:47 Hey, good morning guys. Good morning. Just one question. Mark, I know you don't give quarterly guidance and you've given us some color for the guidance for the year, but just any considerations we need to be thinking about as it relates to Q2? And then maybe just on that $30 cost, you mentioned that goes away related – as COVID volumes go down per test? How quickly does that go away? I'm guessing some of that's payroll and headcount. So, just curious like how does that [indiscernible] function progress over the course of the year, in terms of like eliminating that $30 number?
59:23 Yes. So, that payroll is actually a fee we pay to a partner and that relationship that we have is only permissible during the PHE. So there's absolutely guarantee that when PHE goes away that that payment goes away. So, it's directly 100% correlated to that in addition to some other costs, I mentioned like logistics and so on and so forth. But obviously if we stopped a relationship and stopped the payment, we don't have the logistics cost as well because we're not making those special runs to areas that normally we wouldn't go to pick up specimens.
60:02 So, I think you probably have other pieces Brian, go through it. So, we've talked about a level of testing that’s been averaging about 30,000 here early in the quarter, we talked about a lower level in the second half. So that's one consideration for COVID, you know the PHE is due to the full second quarter. Certainly that's much more of a revenue impact and dollar margin versus percentage margin.
60:29 A change from Q2 to the back half of the year. And then most importantly, we're back to growth mode and every week, every quarter, gives an opportunity to go out and do what we're doing before the pandemic, win over more work with offices grow organically, and all of that will benefit the back half relative to where we were in Q1 and certainly expect to be in Q2. So, COVID rent continue to ramp down, the base business continued to grow, PHE [indiscernible] at least that’s in our guidance, but then also importantly that those incremental costs with the COVID testing will go away with the PHE ending.
61:09 And then just to remind you, what we have told you is this $160 million that we’re investing, we said, we spent about 30 so far. And what we said is in Q2, we've got some investments we're making, particularly we’re releasing a new platform. Okay? So, think about that, someone of this is period expense, it's one-off, okay, but some of this is repeatable that we will see in the back half of the year.
61:34 So some headwinds in the second quarter will be with us. The best that we continue to make, we think in a real great opportunity for us to grow long-term. So, think about that as well. And think about the timing of what will happen when throughout the remainder of the year.
61:52 Appreciate that. Thank you, guys.
61:55 Our next question comes from Derik de Bruin from Bank of America. Your line is open.
62:00 Thank you and good morning. So I want – couple of questions on advanced diagnostic testing. First of all, one of the other public labs that does the oncology testing, talked about weaker volumes, so we're coming out of the pandemic. Could you talk about what you have sort of seen in oncology testing through that market and are you gaining share there? And then as a follow-up to that, your other main competitor has been doing a number of acquisitions and things like with biopsy and the other ones, how are you sort of thinking about building out your pipeline for the advanced market, [indiscernible] booking for potential acquisitions feel better area to enhance or is it all [natural build] [ph]? Thank you.
62:46 Absolutely. So, we shared with you strategically what we're doing, okay. Last year, we indicated that our business and our definition of advanced diagnostics is entirely defined around genetics and molecular. In last year, excluding COVID because that is molecular. It was about $1.3 billion in size. Number one.
63:09 Number two is, what we have done is, we have focused on four areas that have indicated in my prepared remarks, that we're putting additional investments in and that – and those investment dollars are throughout the entire value chain. It's investment upfront and you test in organic convention. It's also in our experience that we work with our physicians and the patients that they serve and that's also around the services that we have to provide, which is not a counseling and with our sales force to be able to have better reach within the markets that we serve.
63:47 So, it's through the full value chain. And what we have been running at historically is to grow 3% to 4% growth in that business. So, what we said in our 2021 Investor Day is we're going to accelerate growth that we’re going to get to high single digits and we indicated today that we're making good progress against that number is about 8%, okay?
64:10 Now in that, majority of the assumption is we're doing that organically with the investments we're making. However, as you know in the past, we paid some selective acquisitions, quick one, particularly Blueprint genetics, which gives us some bioinformatics capability that enhances our capability around genetics.
64:32 And what we indicated last year is that strategy is working. Those areas of growth, okay are growing strong double-digits, and that strong double digits in 2021 versus 2020 and also in 2021 versus 2019 at pre-pandemic levels. So, we feel our organic strategy of investing is working out and then trying with our share is we continue to look at acquisitions that would make sense to enhance our portfolio, but remember we've been very disciplined about doing acquisitions.
65:08 We have very tight criteria for acquisitions where they have to be accretive to our earnings in a reasonable period time, they have to be accretive to our belief around our earnings opportunities around [OIC] [ph]. They have to be accretive to our growth and therefore when we look at, it's actually buying things versus investing or investing in ourselves, we’re always considering the trade-off of how we continue to build value.
65:35 So, that's been our strategy and our strategy we've put in place is working, it’s ahead of schedule and we feel good about it going forward. Jim, maybe you would like to add to that?
65:44 Yes, Derik you asked about our oncology performance. And when we think about our oncology business it is hard to say a solid tumor [indiscernible] holding to that basic pathology work that then fold off [indiscernible] needed. That business is doing well. And has recovered from 2019 levels. And then there's a core hematology business, which has always been a real, real strength of Quest Diagnostics and that business continues to expand.
66:12 So, our oncology portfolio is in good shape. You mentioned liquid biopsy, there certainly is a market and what we referred to is the MRD side that’s Minimal Residual Disease side. We're working on an assay that’s also commercially available assays from our suppliers and we’re considering both.
66:37 In terms of pre-cancer or cancer spring assays, that's a bit more out there. Something we watch as you know, there's 63, 65 start-up companies with the name liquid biopsy that received a [billion dollars] [ph] of venture capital money last year. And we're certainly keeping an eye in the space on the space as Steve indicated. If we find one that meets all of our criteria, we’ll look closely at it.
67:07 Our next question comes from Ann Hynes from Mizuho Securities. Your line is open.
67:14 Good morning, Ann.
67:15 Hi, good morning. So, one more margin question. I think the issue is, maybe we are over estimating the margins on COVID back into your big base business, and you refer to your partner, which I'm assuming is CVS that you have to pay that $30 fee, can you tell us what percentage of your test is CVS. So, just to make sure that we are estimating, just kind of the consolidated margin for COVID quickly?
67:44 So, when we talk about non-traditional channels, it's not limited to one partner. And what I can share is that it grew before the person changed to where and it was almost up to half of our volume that was coming from the non-traditional channels and a higher proportion of the traditional volumes was uninsured.
68:15 And since the uninsured volumes have dropped off that proportion has dropped off as well as we go, but it’s still significant. And I would not want to comment specifically on any partner and certainly the one you mentioned is not our only partner.
68:35 Yes. And the range, the percent in our volume that comes through these retail partners actually varies. During searches, I would say it's less – it reduces because we start to then get a lot of specimens from physician offices, urgent care centers, and hospitals. When COVID subsides then that becomes slightly larger percentage of our mix.
69:02 Right. There are [surges] [ph], we can do less cooling and we can take a little bit of a hit on the turnaround time, $25 that is in a lot of the contracts and certainly in CMS’ payments. So, there's a lot of dynamics that can offset each other. And that's why we really [indiscernible] focus people that we can make a reasonable margin on the CMS reimbursement grade on COVID going forward, and it's not the price change will all drop to the bottom line.
69:34 Going back to what's in our numbers and what’s based and what's COVID, I'll keep on really reiterating. Remember, we took advantage of the opportunity we had in 2020 and 2021 to invest in accelerating growth. And those investments take time and they're ahead of schedule and that's going to help us next year, year-on-year. So, think about that too as it kind of goes through the plan for this year into next.
70:05 Our final question comes from Rachel Vatnsdal from J.P. Morgan. Your line is open.
70:11 Hi. Thanks for taking the questions. So, could you just elaborate on the POS contract momentum that you've been seeing, especially [indiscernible] return normal, how should we think about the cadence of those wins and revenue contributions for this year?
70:24 Yes. So, I mentioned in our prepared remarks [indiscernible] that we've announced and our relationships are strong and beginning to demonstrate that we can bring real value to these [indiscernible] delivery systems. Remind you all what it is, is, one is, yes, we help them run there labs and we see what you see one, but they save money and provide household systems are struggling as you know.
70:55 Volumes, yes, in some cases of recoveries like the acuity level of patients and the beds, are higher and they have fixed reimbursement. And then secondly, as they are having inflationary pressure in hospital systems, which has been tougher that to offset. So, that's the first piece. Second is, when we have our relationship, our advanced diagnostics business in our overall sophisticated testing business, which we call reference testing with hospitals also is an opportunity, so we typically bring in a larger share of that with hospitals.
71:29 And then finally, we have an opportunity in some cases to buy their offerings business, which has been nice opportunity for us to build value, which helps us sort of the acquisition target, but also helps us because eventually they are accretive because we know [indiscernible] is quite well. So, it's worked. right? Yes. And going forward the funnel continues to build. We have a dedicated team. We've invested in that as well. Jim and I are entirely engaged together.
71:56 Working a large number of these accounts. We personally do a fair amount of travel and spend time with the management team, engaged in these opportunities. So, we do believe it continues to yield us a nice opportunity going forward to continue to accelerate growth. So, Jim, anything you like to add to that?
72:15 I would say that, funnel of opportunities [indiscernible] time negotiate. Obviously, [indiscernible] someone different your helps system laboratory during COVID is that something helps us [indiscernible] trying to. Now that COVID is subsiding, helps us [indiscernible] patients is under control. I think you'll see the deal actually pick-up.
72:48 Okay, great. So thanks again for joining our call. We appreciate your continued support and you all have a great day.
72:56 Thank you for participating in the Quest Diagnostics first quarter 2022 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/investor or by phone at 800-583-8095 for domestic callers or 203-369-3815 for international callers. Telephone replays will be available from approximately 10:30 A.M. Eastern time on April 21, 2022 until mid-night Eastern Time on [May 1, 2022] [ph]. Goodbye.