Good morning. Welcome to the Quest Diagnostics first quarter 2021 conference call. At the request of the company, this call is being recorded. The entire contents of the call, including the presentation and 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 the written consent of Quest Diagnostics is strictly prohibited. Now, I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please. 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 will 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. The company continues to believe that the impact of the COVID-19 pandemic on future operating results, cash flows, and/or financial condition will be primarily driven by the pandemic's severity and duration, healthcare insurer, government, and client payer reimbursement rates for COVID-19 molecular tests, the pandemic's impact on the U.S. healthcare system and the U.S. economy, and the timing, scope, and effectiveness of federal, state, and local government responses to the pandemic, which are drivers beyond the company's knowledge and control. For this call, references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS. References to base testing volumes or base business refer to testing volumes 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. Now, here's Steve Rusckowski. Thanks, Shawn, and thanks, everyone, for joining us today. Quest had a strong first quarter with our base business continuing to recover to near pre-pandemic levels. Contributions from acquisitions and PLS relationships accelerated growth in the base business and helped offset the reduction in demand for COVID-19 testing, which was in line with industry trends. In March, for the first time since the pandemic began, monthly organic revenue in the base business grew versus our 2019 baseline. We noted at our recent Investor Day, Quest is well-positioned to grow as the U.S. exits the pandemic and people return to normal activities and address the routine care issues that have been neglected over the past year. As you saw in our press release this morning, our Board of Directors increased the company's share repurchase authorization by $1 billion for the second time this year, and we expect to launch an accelerated share repurchase, or ASR, in the amount of $1.5 billion in the coming days. This morning, I'll discuss our performance for the first quarter of 2021, provide perspective on industry dynamics, and update you on our base business. Mark will provide more detail on our financial results. Before we get into the details of the quarter, we wanted to share our perspective on the ongoing role of COVID-19 testing more than a year into the pandemic, as well as provide our thoughts on recent news regarding PAMA. COVID-19 testing remains critical as supplies of vaccine continue to be available to all Americans. Testing will help control the spread of the virus. In addition to reducing hospitalization and saving lives, continued testing will be key to helping segments of the economy reopen as more Americans become vaccinated. Vaccination is front and center in the minds of most people now, testing remains a critical element of safely returning to life. I'd also like to share our perspective on some of the most recent developments regarding PAMA. We're encouraged that MedPAC recently suggested methods under PAMA that are less burdensome for laboratories. One of the alternatives mentioned is surveying a representative sample of independent hospital and physician office laboratories instead of requiring all laboratories to submit data. We've been saying for years that CMS got the data collection process wrong and didn't follow the intent of Congress. MedPAC found that hospital outreach and physician office labs reported higher payer rates than independent labs, and that independent labs were overrepresented in the first round of PAMA data reporting. We agree on both counts. The independent analysis by MedPAC also provides evidence that the Medicare clinical lab fee schedule would have been 10%-15% higher if CMS had used a more representative sample that included more data from hospitals and physician office labs. The parties refute the claim that CMS collecting more hospital outpatient and physician office lab data would not have impacted the rates calculated by CMS. We believe that access to accurate and reliable testing remains critical, not just as part of our nation's ongoing response to the pandemic, but also for the millions of seniors who have delayed routine screening and care over the past year. We need to fix PAMA to avoid the next round of cuts on the horizon in 2022, and to help ensure seniors have continued access to critical lab services they need and rely on. We were disappointed by the recent dismissal by a U.S. district court of ACLA's challenge to PAMA. We are working with ACLA to determine next steps with respect to this litigation. We continue to work with policymakers to establish a clinical laboratory fee schedule that is truly representative of the full market and supports continued innovation and access to vital laboratory services, as Congress originally intended. Turning to our results for the first quarter. Total revenues grew by more than 49% to $2.7 billion. Earnings per share increased by more than 375% on a reported basis to $3.46, and nearly 300% on an adjusted basis to $3.76. Cash provided by operations nearly tripled to $731 million. As I mentioned earlier, in the first quarter, our base business performed at its highest level since the start of the pandemic and continued to recover throughout the quarter. Demand for COVID-19 testing slowed in the quarter, reflecting an industry-wide trend. We performed an average of 101,000 COVID-19 molecular tests a day in the first quarter, which is well below our current capacity of approximately 300,000 tests per day. We are engaged on several fronts to bring needed testing to schools, businesses, and industries like travel and entertainment, which rely on bringing people back together safely and in large numbers. With the current focus on schools, Quest is well-positioned to help with our extensive logistics network, as well as our ability to offer high-quality, cost-effective classroom PCR testing using pooling. We want to help get the kids back in school, and we're working with a range of partners to get it done quickly and efficiently. We continue to make progress on our two-point strategy to accelerate growth and drive operational excellence. We discussed our strategy in detail a few weeks ago at our Investor Day. The talk today will tend to be through a few highlights of the quarter. We are excited about our agreement to acquire the Outreach Laboratory Services business of Mercy, one of the nation's most highly integrated multi-state healthcare systems. As we indicated at Investor Day, we're having board discussions with leaders of larger health systems like Mercy. The Mercy Outreach Laboratory Services business currently operates from 31 hospitals and clinical laboratories serving providers and patients in Arkansas, Kansas, Missouri, and Oklahoma. We're on track to complete this January, and it's off to a good start contributing revenue for the quarter. We recently announced the sale of our Q² Solutions to IQVIA for $760 million. The strategic vision and ability to lead Q² Solutions on the next phase of its journey as a global leader in central lab services, and Quest will support it as a strategic lab partner. We made good progress taking advantage of health plan access in the first quarter. UnitedHealthcare implemented an initiative removing out-of-network benefits for insured groups in selected states. We also broadened leakage and redirection efforts with Anthem in eight more states during the quarter, and we're seeing benefits from these initiatives. Finally, we renewed our long-standing strategic for more than 3 million members of EmblemHealth and its affiliated ConnectiCare. Turning to our strategy to drive operational excellence, we are on track to once again deliver 3% savings across the business. In the process, we're also improving the customer experience and quality. In the quarter, we achieved year-over-year improvement in 14 of 19 top-tier quality metrics, which we track to gauge our operational performance. Now I'll turn it over to Mark to provide more details on the financial performance. Mark? Thanks, Steve. In the first quarter, consolidated revenues were $2.72 billion, up 49% versus the prior year. Revenues for diagnostic information services grew approximately 52% compared to the prior year, which reflected ongoing demand for COVID-19 testing services and, to a lesser extent, continued recovery in our base testing revenue. Which increased versus the prior year. Acquisitions increased 25.6% versus the prior year, with acquisitions contributing 4%. The impact of severe winter weather during the quarter negatively impacted volumes by approximately 2.5%. Compared to our first quarter 2019 baseline, total base testing volumes increased 1.5% and benefited from M&A and new PLS partnerships that began in 2020. Including the net impact of weather in the first quarter, as well as M&A and new PLS wins over the last year, base testing volumes declined approximately 7% in the first quarter versus the 2019 baseline, and down 5% in March. While COVID-19 testing volumes declined faster than expected throughout Q1, the decline coincided with reduced demand across the industry. Importantly, these volumes have stabilized over the last several weeks. We resulted approximately 9.11 billion molecular tests and nearly 900,000 serology tests, contributing nearly 21% of the prior year. We exited the first quarter averaging approximately 73,000 COVID-19 molecular tests and 8,000 serology tests per day. Revenue per requisition increased 20.5% versus the prior year, driven largely by COVID-19 testing. Modest unit price headwinds were in line with our expectations. Reported operating income in the first quarter was $660 million, or 24.3% of revenues, compared to $175 million, or 9.6% of revenues last year. On an adjusted basis, operating income in Q1 was $708 million, or 26% of revenues, compared to $225 million, or 12.3% of revenues last year. The year-over-year increase in operating margin was driven by the strong revenue growth in the first quarter due to continued demand for COVID-19 testing and the ongoing recovery in our base business. Reported EPS was $3.46 in the quarter, compared to $0.73 a year ago. Adjusted EPS was $3.76, compared to $0.94 last year. Cash provided by operations was $731 million in the first quarter, versus $247 million in 2020. We completed $410 million in share repurchases in Q1, and we ended the quarter with approximately $1.2 billion in cash on the balance sheet. Including the net proceeds from the Q² divest following the $1 billion increase in our share repurchase authority that we announced today, we now have the ability to execute approximately $2.5 billion in additional buybacks this year. We expect to launch an accelerated share repurchase transaction of approximately $1.5 billion in the coming days. Turning to guidance, we've updated our outlook for the first half of 2021 as follows. Revenues expected to be between $5 billion and $5.2 billion, an increase of approximately 37%-43% versus the prior. EPS expected to be in a range of $7.51 and $8.01, and adjusted EPS to be in the range of $6.30 and $6.80. Cash provided by operations is expected to be at least $1 billion, and capital expenditures are expected to be approximately $200 million. Before concluding, I'll briefly review some assumptions embedded in our updated first half outlook and considerations to think about for the remainder of 2021. We expect continued steady improvement in our base business throughout 2021. On a same-store view, excluding M&A and new PLS wins, we see the base business remaining slightly below our 2019 baseline in the second quarter. We continue to anticipate a full recovery in our base business compared to our 2019 baseline in the second half of 2021. We are assuming COVID-19 molecular testing volumes will average roughly 50,000 tests per day in Q2, and no meaningful change in COVID-19 serology testing volumes compared to Q1. Given the significant progress of vaccination in the U.S., we continue to expect a decline in clinical demand for COVID-19 molecular testing in the second half of 2021 versus our expectations for the first half. Return-to-life testing, such as the K-12 school testing program, should partially offset declining clinical demand later in the year. While we continue to believe strongly in the value of COVID-19 serology testing, we are not assuming a material increase in demand for serology testing going forward. Finally, COVID-19 molecular reimbursement held relatively steady in the first quarter. Our mix of COVID-19 molecular volume shift from clinical diagnostic testing to return to life surveillance testing. I will now turn it back to Steve. Thanks, Mark. To summarize, we're off to a very strong start in 2021. Our base business continues to recover back to near pre-pandemic levels as people address the routine care issues that they have neglected over the past year. Finally, I'd just like to thank all Quest employees who continue to serve the needs of people who rely on Quest every day. With that, we're happy to take your questions. Operator? Thank you. We will now open it up to questions. At the request of the company, we ask that you please limit yourself to one question. If you have additional questions, we ask that you please fall back in the queue. To be placed in the queue, press star one from your phone. To withdraw, press star two. Again, to ask a question, press star one. Our first question comes from Kevin Caliendo with UBS. Your line is open. Hi. Thanks for taking my call. Hey, Kevin. Hey, Kevin. Hey, good morning. I guess with some of the commentary around 2Q, I sort of want to understand the expectation. It looked like March, the base business was sort of up year-over-year, and your guidance is suggesting that 2Q would be down year-over-year. You don't expect it to recover fully. Is there anything that sort of changed, or was March an anomaly? Sort of take us through what you're seeing in the base business in terms of the volumes. Sure. Kevin, when we talk about the base business, and sorry for any confusion, it being up in March, that included our new PLS wins, which were significant, and also M&A. It's the total base business. It was not an organic number. What we tried to do was delineate where the, what we call same store, so kind of the apples-and-apples versus 2019, to give you a sense of where we think utilization is. Separate from new significant PLS wins and M&A, where that base business performance is. When we talk about it expecting to be slightly down in Q2, that's that organic, non-PLS kind of utilization same store number, not our total base business performance. Mark, it would be good to share kind of our implied view on what's going to happen with COVID testing in Q2. We talked about 100,000 a day in Q1. We talked about an expectation about 50,000. We also shared that we exited Q1 over 70,000, that would imply a significant ramp down throughout the second quarter. That's based on our expectation that vaccines will continue to roll out. We'll get more and more people who'll be protected and less and less clinical demand. Of course, we'll see how that plays out, that is certainly within the guidance that we're providing today, how we see the next several months. We do assume, Kevin, that our base business, when we say base business, it would include acquisitions and PLS and organic growth. Just focus on organic growth. The steady improvement that we've seen in Q1 continues in Q2, and then it's somewhat offset by what we are anticipating with COVID. That gives us the expectation on our ranges of guidance in the second quarter. Hopefully that's helpful. Yeah. Just to close it out, Kevin, I would point to the numbers that we quoted for Q1 of minus 7%. That's the same store performance number. We know obviously March was stronger than that. February was impacted by weather, as we said. We expect that minus seven to improve, as Steve said, throughout Q2, but not yet to get positive. Our next question comes from Erin Wright with Credit Suisse. Your line is open. Great. Thanks. Yeah. Capital deployment is still one of the biggest questions we're getting from investors. Are there any meaningful changes now, in your view, from an M&A pipeline perspective and in what's assumed in guidance in terms of inorganic growth? Longer term here over the next few years, do you anticipate the pace of consolidation across the lab industry to accelerate, or do we anticipate at a similar pace to what we've seen historically? Just somewhat tied to that as well, how should we be thinking about the broader excess capacity across the competitive landscape post-COVID, and how does that impact your positioning? Hey, Steve, let me take the guidance question first, and then I'll turn it over to you. Sure. Erin, our current guidance obviously is only through the second quarter, and we're not counting on any M&A that hasn't already been transacted. Even the deal that we announced, Mercy, is not going to close and generate any significant volume of revenue in the second quarter. The current guidance does not anticipate future M&A. Steve? We feel good about the discussions and the funnel of prospects we have for what we have characterized as our hospital strategy. There continues to be a lot of pressure on integrated delivery systems. They are considering their lab strategy as one of the options to help them. We have a number of examples over the past six months on delivering on the strategies that we've talked about for years. To answer your question, we do see a continuation of interest in the building funnel with more prospects to come. What we shared at Investor Day is we reaffirmed our outlook that we would grow through acquisition around 2% per year. What we shared is that we historically have delivered on that for the three years prior to 2021. We believe that's still a good guidance number for us for this year and going forward. It's implied in our outlook for growth. Finally is we do see the trends in general, just like all of healthcare, around consolidation. We do see systems interested in and thinking about what's most important to them and what's their strategy, and Quest to help them with their lab strategy. Likewise, we see, if you will, fewer and fewer in-network providers with the health plans. If you want to think about that is a consolidation play as well. With those two forces happening, there'll be more share in the hands of fewer. Our plan is to gain share. All the mega trends and changes that are happening in our industry, we believe, have actually improved to support what we've said for some time, and that, I would argue, is both for what's happening with hospitals and also what's happening with health plans. Our next question comes from Pito Chickering with Deutsche Bank. Your line is open. Good morning, guys. Thanks for taking my q uestion. Within the routine market, can you give us some more color on strengths and weaknesses of different parts of the country? Looking at your customers, can you give us some color on doc offices versus hospitals versus the baseline? Yeah. Within the routine tests, any details you can give us on what types of tests are normalizing and from where the laggard areas? Sure. Let me give you a run around all the different cuts of the way we look at markets. Geographically, we have seen good recovery in Texas and the Southwest. We're actually seeing, really in the last several weeks, starting a much better recovery in California, in the West Coast, which is good news. We see the Southeast starting to recover and get us back to those 2019 levels that we spoke to earlier. I would say those are moving in the right direction. Now, the offset to that is, one is you've seen the spikes and the hotspots in the Midwest, and when that happens and there's lockdowns and people are concerned about going into healthcare delivery, that's going to affect our business. We've seen some of that, let's say, in the Midwest. Finally, the Northeast. In the Northeast, including New York and Pennsylvania and going into New England, it's still behind and it's recovering slowly, but we're the most off, if you will, in the Northeast. That's the geographic swing. As far as physician business versus hospital business, the hospital business is actually very close to where we were. We're encouraged by that. We see physicians getting back to 2019 levels. We see outpatient procedures getting back to 2019 levels. That business is tracking nicely compared to where we were. The physician side, it all depends on what type of physician. Primary care is starting to turn on. Oncology, particularly those that have postponed diagnosis and treatment for oncology, is starting to turn on. At the same time, we still see our prescription drug monitoring business for mental health and behavioral health and drugs and abuse still down versus where we were at 19. That's an issue that varies by state, but we're working that. I'll give you a feel for what's going geographically, what's going on by physician, but also by what we've described as our clinical franchises. Mark, would you like to add to that? No, I think that's a good summary, Steve. Thanks. Okay. Our next question comes from Ralph Giacobbe with Citi. Your line is open. Good morning, Ralph. Good morning. Morning. The higher revenue guidance, just want to understand, is that upside from 1 Q? Because it sounded like COVID-19 was maybe lower than you had expected. Just trying to understand if it reflects assumption of better core or is it deals, just maybe color there reconciling the higher revenue. Second, is the ASR included in the guidance? Because just based on the revenue increase and the recent margin performance, it doesn't look like that's factored in, or otherwise there would be an assumption of much lower margin. Just trying to reconcile that as well. Thanks. Yeah. Let me take a shot at that, Ralph. Thanks. The higher revenue is absolutely driven by stronger than expected recovery in the base business. As you point out, we've acknowledged and we report every couple of weeks, COVID testing has ramped down faster than we had anticipated throughout the first quarter, and continue to expect to have that ramp down. The base business has recovered stronger, certainly more than an offset on the revenue side. In terms of the ASR, it is in the guidance. I just want to remind everyone that we had committed to $900 million in share repurchases that was already in the guidance for the first half. We did $410 million in Q1. A part of the ASR is related to the proceeds from the sale of our 40% ownership in our JV with IQVIA, and that is slightly accretive when you consider the loss of the equity earnings. You need to look at over $600 million of the ASR as really offsetting foregoing those equity earnings. We had already committed to $900 million in the previous guide in the first half. Almost $500 million there. When you combine that, the share repurchases are really just up by several hundred million. I want to make sure everyone's clear on the math there. It is reflected in the guidance. Our next question comes from Brian Tanquilut with Jefferies. Your line is open. Good morning, guys. Congrats on the quarter. I guess my question for you guys, Steve, as you think about what you saw in Q1, specifically in March with the resumption of volumes in the core, what are you seeing in terms of acuity levels, kind of like number of tests per rec? Or even revenue per req that you saw in March. Is that carrying over already into April? Just any color you can share with us on that. Thank you. Thanks. Appreciate the question. March was encouraging, and we're watching April carefully. We do look at the number of tests per requisition to see if we're getting more density, if you will, of testing per requisition in. We talked about the main explanation for our increase in the calculation of revenue per req had to do with the COVID mix, the straight calculation. We have historically seen a, let's say, modest expansion of the number of tests for a variety of reasons. We offer more secondaries at a higher level of acuity in chronic disease and aging of the population. We have generally seen a general increase in that, but nothing that was really notable that's standing out within March. Our next question comes from Jack Meehan with Nephron Research. Your line is open. Hey, Jack. Good morning. I was wondering if you could give us an update around your thinking around COVID testing for the second half of the year. What do you expect in terms of the base, in terms of testing levels? Also, if you could give us an update, as to how you think the school testing opportunity could shake out. You referenced that at the beginning. How do you feel your positioning is for the upcoming awards there? Yeah. You go back to where we started off the year, what we said is we do expect COVID PCR testing to decline throughout the year. We mentioned in our remarks, we did see that in Q1, and we see it happening in the country. As Mark said earlier, we do expect that continuing trend in Q2, and that will continue into the second half. With that all said, we do see this transition from what we describe as more clinical uses of the PCR testing, rule in, rule out COVID for hospitals, rule in, rule out patients seeing their physicians and moving into return to life activities. There's a lot of activity around that, Jack, a lot of activity. I mentioned in the remarks what's going on around schools. There's two funding mechanisms for that from the U.S. government. We've actively engaged with a number of what's called systems integrators that will be coordinating the efforts beyond the laboratory testing. We're well positioned there. Secondly is corporations are now thinking about how do we get people back physically into their places of work, maybe albeit not as full-time as they once were. Despite the vaccination progress, there's still going to be testing requirements for the return to work activities. Let me just say, the entertainment piece of this is big too. We see the sports teams wanting to put fans back in the stands. We see New York City interested in getting people back, the tourism as we get into the fall and turning back on as a city. We mentioned in our prior remarks and other calls and meetings that we participated in this pilot study with New York to provide a check, if you will, to provide access for an individual over the course of the day. That type of activity will be a larger portion of what we do for COVID testing in the back half. With all that said, we're not providing guidance for the back half, but we do see continued PCR testing in the back half, but it's going to change in its nature. Also, we do believe COVID-19 testing and PCR testing will continue into 2022. This is not going away fast. Our next question comes from Matt Larew with William Blair. Your line is open. Hey, good morning, Matt. Yeah, good morning. Thanks for taking my question. I guess maybe a two-parter. The first would just be a follow-up to Jack's question, Steve, in terms of how much of that return to life testing opportunity really is going to be in a sort of a reference lab setting with a day or two turnaround time versus a point-of-care setting. My question though was about the consumer markets, and I just wanted to get your take on sort of the- Yeah. PWNHealth, Everlywell combination, and if that changes any of your approach or the competitive dynamics in that space. First of all, as you know, not all tests are created equal, okay? PCR still is the gold standard. We do provide a solution with antigen testing, okay, as part of appropriate utilization of that testing, particularly for surveillance. As we know, the antigen testing sensitivity and specificity is good for, let's say, day two through day five of a potentially infected person. The PCR test is really the gold standard to rule out if someone's been exposed in the early days or rule out if they've been exposed in the late days. The sensitivity and specificity we have with our PCR testing is quite good. Physicians know that, and therefore, that's why we're so confident that it will continue to be an important part of how we fight this pandemic. As far as the consumer, the consumer's trying to figure out to get easy access to testing, and they will get that access in a variety of forms. Oh, by the way, our turnaround times now for PCR testing are much better on average than the two-ish days that we often thought about several months ago. We're now delivering results in less than a day for many tests that come in. The reason for that is that, remember the remarks are they're testing about 101,000 tests per day, and we have approximately 300,000 per day for capacity. That allows us to have much better turnaround times, which we believe as that becomes more and more visible, when people want to get good access to the gold standard, they're going to rely on those places that can get access. We continue our relationships with retailers. We're expanding our relationship with CVS. That's gone quite well. CVS is active on promoting good access to PCR testing along their drive-ins, and Walmart as well. Then also with our QuestDirect capability that we talked about at our investor day, we have put on that platform both PCR testing as well as serology testing. We are seeing high levels of interest from a consumer perspective of what they could do simply by getting a collection kit in the mail and a FedEx envelope to ship it back, and good turnaround times with the startup with MyQuest. That will continue to build as the consumers, as we start to return to life in a safe way, want to be assured that even if they are vaccinated or they have natural immunity, they are not walking into a situation that they might have been exposed in some way because they fell through the cracks with all the caveats we have with the effectiveness of the vaccines and the questions about natural immunity, and then also with the new variants as well. Because of that, we keep on working on better and more efficient and easier ways for Americans to get access to PCR testing, and we've got now, I think, a lot of good chances to do that, and that will continue to be an opportunity for us in the back half. Okay. Steve, I'd like to add, I want to make sure that Matt and others understand how the surveillance works. In this case, when you pool, you get the economics to where it's affordable to do more broadly and more regularly, because we're going to be putting up to 10 individual samples in a single well. Hence the cost will be 10% or less per individual. What you sacrifice is it's not a diagnostic because we're not going to have the individuals identified in that well. The school or the entity that provides us the sample will have pooled it. They will know and test to detect who the 10 people are. If we come back to them with a positive result, they will apply a real diagnostic to those 10 individuals. With that, we also don't have the obligation or the ability to retest. Whereas today, when we do pooling for clinical purposes, if we get a positive, we have to go back and retest the individual sample, so it actually is an inefficiency in our process. In order to get this to work, we don't do retesting of the sample. We don't have the capability of doing that. We notify the submitting entity that we had a positive in one of the pooled collection specimen tubes, and then they go forward and test those individuals. Our next question comes from Tycho Peterson with JP Morgan. Your line is open. Good morning. Hey, Tycho. Tycho, you on mute? You on mute. Hi, sorry about that. This is Casey for Tycho. No. Can you give us some color as to what the implied operating margin is for the EPS guide and sort of what the upside is from the ASR? Just on serology, can you talk a little bit about, you're not modeling a decrease in 2Q from 1Q, but PCR is going down. Can we assume the same level of serology testing throughout the back half of the year and explain maybe what the resiliency is there? Thanks. ASR, as I tried to walk through the math, about a little less than $400 million of the repurchases are truly incremental in terms of a EPS lift because we had already committed to the full $900 million, and we had about $500 million remaining in Q2 that was already in the guidance. That $1.5 billion goes down to $1 billion incremental. A little over $600 million of that is the proceeds from our divestiture of our stake in Q². That's slightly accretive, not materially relative to the forfeiture of the equity earnings there. It's really less than $400 million of share repurchases that are incremental to what we guided to previously, and that is built into the updated guidance. In terms of implied operating margin, obviously, we have a range, we can't answer that with precision. If you take the midpoint, you can all do the math. As we get a lower mix of COVID testing at our assumption of the $100 reimbursement, obviously, a realization in AWR that's less than that, but $100 price point, and that mixes toward the base business, that will erode the margin slightly. The offset to that is as the base business recovers, we're very leveraged. The variable drop-through on that base business recovery is certainly much higher than our enterprise and historical fully loaded operating margin, but it's not quite as high as the COVID PCR. Comment on serology? Yeah, serology, we imply that it will continue at the same level. We are pushing on the value of serology going forward. We believe that the semi-quant capability that we offer has nice insight into what response is happening in patients in general with the virus, and therefore that has value. We also believe that between historic PCR and serology, knowing that you've had the virus is important for Americans to know. We keep on pushing on the value, and we will continue to look at new tests beyond that, where the immune response long term includes T cells. We don't have that. We continue to look at that as being in the prospect. We should assume for now it's stable with what we've seen so far. We continue to believe it's more and more valuable and important. We continue to work on developing the test to support that. Our next question comes from Ricky Goldwasser with Morgan Stanley. Your line is open. Yeah. Hi, good morning. Good morning. Two questions, one is a follow-up. When we think about the first half guidance, it does imply the meaningful operating income sequential decline. I fully realize you're still not giving second half guidance, but just to give maybe everybody on the call some sort of a framework as we think about a more normalized pace of the core business, how should we think about that margin headwind? I think it's just going to help us all as we think about the second half modeling. That's first. Second, more of kind of like long-term strategically, we're hearing the payers talk a lot about digital first strategies and being sort of kind of like at the front door to healthcare. I think you guys talked about expanding relationship with payers like Anthem. Are you having any conversations with payers on how you can be part of that digital first strategy in those kind of like digital networks? If so, do you see that kind of like as an opportunity to accelerate sort of more nearer networks that will drive volumes toward you? Lastly, would that require any additional investments, or you think you have the infrastructure for that already? Mark, you want to take the first one? I'll take the second one. Sure, Steve. Thanks for the question, Ricky. Again, just to reiterate, first half, we delivered over 100,000 PCR COVID tests per day. We're assuming half that in Q2. that's certainly contributing to the margin decline, as you talked about, implied in the guidance for the first half, implicitly in Q2. When you think about the base business, we're still uncertain how all those moving parts will play out in the second half, which is why we've not provided second half guidance yet. We want to wait till we can confidently give guidance that we're highly confident will be delivered. what I would point to is that's a transition period. Really look at our investor day and how we talked about 2022 and talking about getting our base business fully recovered by the end of this year back to growth through the growth pillars and back to a margin level pre-pandemic. Obviously improving beyond that as we talked about a CAGR where our bottom line grows significantly faster than our top line by several hundred basis points. We feel very confident in the earnings power of the base business. Certainly, we're going to have a step down from the pandemic bubble where we did several billion dollars of COVID testing last year and significant COVID testing this year. The base business should be very healthy coming out of the pandemic. Once COVID testing drops to a minimal level, we'll be right back to the operating rhythm our expectation is what you saw early in 2019 when we were growing our business January, February more than 5% on a volume basis, and you saw strong improvements in our operating margin. Steve? Yeah. Just to transition. As you recall, in our investor day, we went through a walk, if you will, to bridge you from the pandemic years of 20 and 21 into 22. Mark went through charts and maps with COVID-19 as our indication for 22. Also, as I said earlier, is we do believe there will be some COVID testing, but the base business will be recovering, and we'll get growth going forward in 22 based upon our outlook. The last question you had, Ricky, had to do with the digital front end and digital first, and we're excited about this because we're very well positioned. This isn't something that we have just started working on. We've been working at it for a while. First of all, if you go back to a large provider like Quest, we're very much embedded in the ecosystem of connectivity already. We have over 500 interfaces of all the different electronic medical records. Obviously, that's the big players like Epic and Cerner, but there's hundreds of others, and so therefore, we have a real strong interoperability capability. That's helpful because when you're in the workflow, particularly from a physician perspective, it allows you to more streamline the different service offerings like laboratory to a fewer players. Secondly is, this past year, we've seen the acceptance, if you will, of telehealth. It had been growing nicely but not explosively, and we did see explosive growth in 2020. We believe that overall that acceptance, if you will, of that front end being an accepted way to first engage with the healthcare system will continue, and the payers are working on that and providers are working on that. They're working with other partners, and we're very well-positioned with those other partners. Now, who are those partners? Those partners are some of the telehealth companies that you know, and those telehealth companies as they become much more embedded in healthcare delivery, let's call it the dual brand then, will rely on a fewer number of laboratory service providers, and therefore, we're very well-positioned as one of the small handful of let's just describe as the true lab network that we are already with United, but for this new world that we see. With all that, we do believe that our direct-to-consumer initiative will have an opportunity as well because consumers equally are wanting to engage with healthcare delivery. They not always need to engage with a physician and therefore, for the prospects we see of growing that business and the opportunity for consumers to serve themselves is really perceived to be a big opportunity for us. As far as investment, we are investing. We were fortunate enough to have the capabilities in 2020 and 2021. If you again go back to what we shared in Investor Day, we said we were investing about $75 million over the last two years, 2020 and 2021. Some portion of that is related to what we're discussing here. So we're not rate limited by investments. We're rate limited by logistics time to get some traction, and we're very well-positioned with the telehealth companies, very well-positioned with the plans. Yes, we do see a change. Yes, this will allow us again to gain share as we go forward because they can't do this with tens of laboratories. They could only do it with a select group like us. We have another question? Operator? Our next question comes from Derik de Bruin with Bank of America. Your line is open. Hi, good morning. Thank you for taking my question. Hey. Hey. Two questions. One is, I was on the Danaher call just before this, and they actually pretty sharply raised their COVID testing guidance for the year and also surprisingly gave a very bullish outlook for 2022 and sort of backing that number. I think the first question goes to, this is the question on the point of care shifting from decentralized testing shifting to point of care. Is some of the volume you're seeing coming down just because there are more of these point-of-care platforms out there and just as they ramp capacity, you're seeing volume shifting out of the central lab? That's the first question. I think the second question is, when you look at you're at 100,000-ish tests, you've got 300,000 capacity. How are you utilizing that capacity? Are you ramping down your IVD platforms versus your LDT platforms? I just would assume that it's more the IVD because the LDTs are more profitable, but just would love some ideas on how you're utilizing your installed- Yeah. -base there. Thank you. Yeah. The first part, yes, we did see an increase in the availability and use of the antigen testing and point-of-care testing throughout the last 12 months. It clearly has picked up in the back half of 2020. We see that continuing with 2021. If you look at the industry trackers of how much testing we are doing in this country, clearly it has dropped off and therefore our volumes have dropped off as well. We believe in those tracking mechanisms, it's predominantly PCR. However, we think there could be some point-of-care antigen testing in there, but we believe it does not include all the testing that's happening. If you look at it, well, it's happening for PCR testing throughout the U.S., and if you look at the estimates that are coming from these point-of-care and antigen providers, you see that the actual level of testing is almost at the same level that we were in the summer, but in different forms. To answer your question, yes, there is a transition from PCR as exclusively what we have to more of the capabilities around point-of-care and antigen testing. Going back to what I said, all tests are not created equal. We're also working with clients to make sure they realize where antigen testing can be helpful for a period of time, and also where you need to reflex it to PCR and where you can use point-of-care and costs are not all created equal. It has come down because of what we described, but there continues to be a strong role for PCR through the remainder of 2021 and also into 2022. Our next question comes from Pito Chickering with Deutsche Bank. Your line is open. Hey, guys. Thanks. A follow-up question here. Could you give us a little more details on the changes of what the UnitedHealthcare did for out-of-network providers in the quarter? What markets did they make this change in? What impacts did you see in your volumes from the changes? Thanks so much. Yeah. What we have been working on is the journey to pick up share, if you will, with United. What we shared in March at our Investor Day is we really kicked off the in-network program in 2019, and we saw good progress there. We were actually very encouraged by what we saw in 2020 at the very early days, and then we had the pandemic. It didn't stop our activity, so what we shared is we actually picked up some share over that period of time, but we have more share to gain, and there's a list of activities we're working with United to support picking up share and getting it to at least that 25% level, one of which is what we're providing of limiting the out-of-network policy and benefit design for their fully insured book. Where that has happened, because we have other examples of this happening, it does move share to us. We don't provide specifics on the states and specifics on how much did this contribute to the share, but it did have a nice impact for us to allow us to pick up share, and so we continue that march. I'll also share that we didn't share everything we're doing. We have many other programs, and some of this is working with their plan sponsors, their employers. Some of this is working with their regions, specific opportunities with providers. When we do an outreach purchase in relationship with a geography whose work out of this expensive venue to a less expensive venue, which is Quest, and all of those are active relationships that we have to continue to build share with United and other payers. Equally, we continue to work programs with Anthem and others. Our last question comes from Eugene Kim with Wolfe Research. Your line is open. Hello. Hi, good morning. Just quickly on 2022. At the Investor Day, the company provided a baseline EPS range of $7.40-$8, and I believe pointed to the higher end of that range. That was with the assumption that base business recovery, a return to pre-pandemic levels toward the end of the year. With the recovery coming faster than expectation, how should we think about that range that provided at Investor Day? Thank you. Sure. Hey, Mark, you there? Yep. What I would say is, I'm not in a position to update what we provided at Investor Day, because we could get in a rhythm of constantly getting asked to update that. The next time we'll comment will be when we provide guidance for 2022. Of course, as we have that broad a range, there's a lot of different considerations. What's the remaining level of COVID testing? What's the reimbursement level? Where's the base business at? When we gave a $7.48, as we said, we're expecting the base business to be fully recovered this year, to be back to 2019 baseline and starting to grow. Depending on the pace of some of these initiatives that are being rolled out by several payers, not just United, by Anthem and some of the other major payers, depending on the economy, depending on, obviously, potential expansion of covered lives. There's a lot of variables that we'll know a lot more about by the end of the year before we give guidance for 2022. Stronger recovery of the base business, good fact. I wouldn't say at this point that the faster decline in COVID testing yet necessarily implies anything for 2022 around our comments, because we assumed it would still be around, and you heard from others as well. Nobody thinks it's going away. We were not expecting it to be anywhere near the significance that it was in 2020 and in 2021. You've got the ASR we just announced. There's a lot of different moving pieces. We'll give you an update on 2022 when we provide our guidance for 2022. We just wanted to ground people at Investor Day because the pandemic really confounded everyone's ability to understand our long-term earnings power, and that's why we thought it was important to make a specific comment on 2022. Good. I think we've covered all the questions. We appreciate you joining the call. We appreciate your continued support. Have a great day, everybody. Take care. Thank you for participating in the Quest Diagnostics first quarter 2021 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 888-566-0490 for domestic callers, or 203-369-3053 for international callers. Telephone replay will be available from approximately 10:30 A.M. Eastern Time on April 22nd, 2021, until midnight Eastern Time, May 6th, 2021. Goodbye.