Quest Diagnostics Incorporated · NYSE:DGX
Quest Diagnostics — Investor Day (March 2023)
33 slides from Quest Diagnostics's investor day presentation, Mar 16, 2023
Slide 1: Driving Sustainable Growth in a Post-Pandemic World
Driving Sustainable Growth in a Post- Pandemic World Jim Davis Chief Executive Officer and President
Slide 2: Safe Harbor Disclosure
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 cu
Slide 3: Key highlights
We are poised to grow based on our exceptional capabilities and relationships We have the right strategy to accelerate growth Key highlights Investments in advanced diagnostics and CIT will drive profitable growth Invigorate will continue to drive operational productivity while improving the custome
Slide 4: Introducing The Quest Way with an ambitious Purpose and refreshed Strategy and Culture
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 We help people make the best decisions to improve health by providing high-quality and affordable diagnostic testing insights and services u
Slide 5: We have an established core team and have added experienced leaders focused on profitable growth
We have an established core team and have added experienced leaders focused on profitable growth Sam Cathy Patrick Karthik Mark Jim Mark Gardner Davis Samad Doherty Delaney Plewman Kuppusamy SVP SVP EVP SVP SVP SVP CEO & President Clinical Solutions Genomics and Oncology Chief Financial Officer Regi
Slide 6: Quest is the leader in diagnostic testing insights and services
Quest is the leader in diagnostic testing insights and services Serves 1/3 of the ~208M >60B Serves 50% of US US adult population requisitions patient hospitals and annually and 50% in 2022 data points physicians within 3 years ~13,600 ~4,900 ~ 4,000 26 phlebotomists ~9,400 Med Techs couriers and re
Slide 7: Approximately 90% of our revenues come from physicians and hospitals
Approximately 90% of our revenues come from physicians and hospitals Health Systems • Reference: >$1B ~$8.4B • Professional Lab Services: ~$600M 2022 base business revenues $1.6B 19.1% Consumer Health & Other ~$1.5B • Consumer 2022 COVID-19 revenues • Pharma Services $0.9B $8.4B 10.7% • Employer Sol
Slide 8: Quest fully participates in an $85 billion U.S. lab market
Quest fully participates in an $85 billion U.S. lab market PHYSICIAN LAB SERVICES 2022 TOTAL US LAB MARKET HOSPITAL LAB SERVICES $55B $85B $30B DGX 5% Other Independent POLs Labs 11% DGX 13% 11% Hospital Lab Services Hospital $30B Outreach Physician Lab 36% 35% Services Other Independent $55B Other
Slide 9: Trends in technology and consumerism will continue to shape healthcare and favor Quest
Trends in technology and consumerism will continue to shape healthcare and favor Quest Advancements in Greater adoption of New point of care and Consumers are genomic and artificial intelligence collection devices more engaged in oncology testing and automation their healthcare 9
Slide 10: We have the right strategy to accelerate growth
We have the right strategy to accelerate growth Physician Lab Services Hospital Lab Services Consumer Health 4-5% 5-6% $250M CAGR CAGR revenue • Partnering with health plans • Expanding reference capabilities • Direct sales • Value-based care • PLS 2.0 • Partnerships • Retail expansion • Acquire out
Slide 11: We grow our physician business by leveraging our industry leading health plan access
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We grow our physician business by leveraging our industry leading health plan access ACCESS 90% Health Access plans CAPTURE We will improve access over Focused on high access, Partnerships to engage with: the next three years low capture r
Slide 12: We expect to add ~$600M in incremental health plan revenue
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 PERCENT OF BASE REVENUE FROM EXPANDED ACCESS FROM VALUE-BASED CONTRACTS ~$1.5B >50% ~40% ~$900M ~30% ~$5
Slide 13: As value-based care gains momentum, providers rely more on diagnostic testing and services
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH As value-based care gains momentum, providers taking on risk are relying more on diagnostic testing and services • More focus on early diagnosis Medicare ACOs and and prevention ACO Reach Delegate large are key to physician managing risk l
Slide 14: We augment our testing with programs and services that enable value-based care
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We augment our testing with a range of programs and services that enable value-based care COMPREHENSIVE TESTING COMPREHENSIVE SOLUTIONS Data analytics and Gap-in-care services member insights Mobile phlebotomy Prescription check Rx Breadth
Slide 15: We have expanded our retail presence
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We have expanded our retail presence, from patient service centers to COVID-19 testing sites, to reaching consumers directly INITIAL RELATIONSHIPS PANDEMIC PARTNERSHIPS FUTURE OPPORTUNITIES 15
Slide 16: We are expanding and enhancing our reference testing solutions for health systems
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH We are expanding and enhancing our reference testing solutions for health systems Improved health system workflow Utilization management systems Menu expansion (e.g., oncology & genetics) Discrete outsourcing (e.g., microbiology, cytology,
Slide 17: PLS 2.0 will expand our offerings to drive continued growth
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH PLS 2.0 will expand our offerings to drive continued growth and help health systems achieve their strategic objectives PROFESSIONAL LAB SERVICES REVENUE ($M) PLS 2.0 EXPANDED OFFERINGS ~$590 ~28% Support achievement of CAGR health system o
Slide 18: Outreach monetization and support provide benefits to health systems
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Outreach monetization and support provide compelling benefits to health systems Integrated Enhanced physician Broadest Source of capital data sharing workflow and test menu satisfaction 18
Slide 19: Our recent launch of QuestHealth.com is off to a strong start
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Our recent launch of QuestHealth.com is off to a strong start + Nearly doubled conversion rate + Increased order volume and fulfillment rates + Improved customer acquisition cost and return on ad spend 19
Slide 20: Our CIT business serves diverse customer types with different needs
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Our CIT business serves diverse customer types with different needs TOP CUSTOMER TYPES TOP TEST TYPES Watchful Chronic Worriers diseases Privacy STIs and Seekers STDs Healthcare Comprehensive Avoiders health profiles 20
Slide 21: Strategy to reach our revenue goal of $250M for CIT
PHYSICIAN LAB SERVICES HOSPITAL LAB SERVICES CONSUMER HEALTH Strategy to reach our revenue goal of $250M for CIT Drive direct Expand product Open Unlock Help our sales portfolio distribution insurance customers channels revenue “beyond the test” 21
Slide 22: Advanced Diagnostics fuels growth across all clinical areas
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 22
Slide 23: Investments will drive profitable growth in molecular genomics and oncology
Advanced Diagnostics Investments we are making will enable us to drive profitable growth in molecular genomics and oncology PROJECTED GERMLINE AND SOMATIC TESTING MARKET ~$30B ~10% CAGR $11B ~$15B Germline $4B $19B Somatic (cancer) $11B 2022 2030 23
Slide 24: Invigorate will deliver operational productivity through four major initiatives
Invigorate will continue to deliver operational productivity while improving the customer experience through four major initiatives Leverage Reduce automation denials and and AI write-offs Enhance Standardize, the Digital optimize and experience automate ~3% Reduce Annual denials Productivity Select
Slide 25: Key takeaways
We are poised to grow based on our exceptional capabilities and relationships We have the right strategy to accelerate growth Key takeaways Investments in advanced diagnostics and CIT will drive profitable growth Invigorate will continue to drive operational productivity while improving the customer
Slide 26: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations
Slide 27: Note on Non-GAAP Financial 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 restructurin
Slide 28: Adjusted Diluted EPS from Continuing Operations
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. Twelve months ended Twelve months ended December 31, December 31, 2023 2019 2020 2021 2022 Low High Diluted EP
Slide 29: Adjusted Diluted EPS from Continuing Operations
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
Slide 30: Adjusted Diluted EPS from Continuing Operations
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 accrua
Slide 31: Adjusted Diluted EPS from Continuing Operations
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 imp
Slide 32: Adjusted Operating Income as a Percentage of Net Revenues
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. Twelve months ended December 31, 2019 2020 2021 2022 2023 Operating income - as reported - as a percentage of net revenue
Slide 33: Adjusted Operating Income as a Percentage of Net Revenues
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