Quest Diagnostics Inc. (NYSE:DGX) Q2 2019 Earnings Conference Call Transcript

Jul 23, 2019 • 08:30 am ET


Quest Diagnostics Inc. (NYSE:DGX) Q2 2019 Earnings Conference Call Transcript


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Welcome to the Quest Diagnostics Second Quarter 2019 Conference Call. At the request of the Company, this call is being recorded. The entire contents of this call, included in the presentation, and a question-and-answer session that will follow, are the copyrighted property of Quest Diagnostics with all rights reserved. Any redistribution, retransmission or rebroadcast of this call, in any form, without written consent of Quest Diagnostics is strictly prohibited.

Now I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Please go ahead.

Shawn Bevec

Thank you and good morning. I'm here with Steve Rusckowski, our Chairman, Chief Executive Officer and President, and Mark Guinan, our Chief Financial Officer. During this call, we may make forward-looking statements and we'll discuss non-GAAP measures. We provided reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K.

For this call, references to reported EPS refer to reported diluted EPS from continuing operations, and references to adjusted EPS refer to adjusted diluted EPS from continuing operations, excluding amortization expense. References to adjusted operating income for all periods excludes amortization expense. Finally, 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.

Now, here's Steve Rusckowski.

Stephen H. Rusckowski

Thanks, Shawn, and thanks everyone for joining us today. This morning I will discuss the second quarter and then review progress on our 2-point strategy, and then Mark will provide more detail on the results.

Our volume growth accelerated in the second quarter and we continued to build momentum through the first half of 2019. Our expanded network access continues to accelerate volume growth and our strategy to drive operational excellence improved efficiency. Both have helped to offset the significant reimbursement pressures, we are experiencing this year.

For the second quarter, we grew revenues, despite significant reimbursement pressure. Reported EPS was $1.51, down about 4% from the same period of 2018. Adjusted EPS was $1.73, down about 1%. Volume growth remained very strong at 4.4%. As we expected, volume continued to accelerate in the second quarter. Year-to-date volume growth is now at 4%.

Now, let me briefly update you on three fundamental changes in the laboratory marketplace, they are PAMA, our expanded network access and increased consumerization of healthcare.

First, PAMA-driven reimbursement pressure remains a catalyst for structural change in the marketplace. Our Medicare rates in the first half of 2019 were down by 10% from the prior year, which is in line with our expectation. The next data reporting period remains scheduled for the first quarter of next year. However, we are encouraged by the introductions of Laboratory Access for Beneficiaries Act, or LAB