Welcome to the Quest Diagnostics First Quarter 2025 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 written consent to Quest Diagnostics is strictly prohibited. Now, I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Please go ahead. Thank you and good morning. I'm joined by Jim Davis, our Chairman, Chief Executive Officer, and President, and Sam Samad, 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. Any 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, and references to adjusted EPS refer to adjusted diluted EPS. Growth rates associated with our long-term outlook projections, including consolidated revenue growth, revenue growth from acquisitions, organic revenue growth, and adjusted earnings growth, are compound annual growth rates. Now, here is Jim Davis. Thanks, Shawn, and good morning. In the first quarter, we delivered strong revenue growth of approximately 12%, including nearly 2.5% in organic growth, as demand rebounded in March following weather impacts early in the quarter. Our growth was due to contributions from acquisitions and large enterprise accounts, demand for our advanced diagnostics portfolio, and expanded health plan access. We also continue to expand our use of automation, robotics, and AI with the goal of improving quality, customer and employee experiences, and productivity. We are reaffirming our revenue and adjusted EPS guidance for the full year 2025. Now, before turning to highlights from the quarter, I'd like to briefly comment on the recent court case that vacated the FDA rule to regulate laboratory-developed tests as medical devices. The court's decision will ensure patients and providers can continue to access innovative laboratory testing services regulated under CLIA without additional regulatory cost to comply with the FDA LDT rule. We also recognize that several growing areas of our business already operate under the FDA's existing quality management system regulations, including companion diagnostics and lab services for clinical trials. In addition, our business is increasingly global as we expand in Canada through LifeLabs and provide reference testing for many countries. We continue to invest in quality management processes and technologies to navigate the complexity of the global regulatory environment. Now, I'll recap our strategy and discuss highlights from the first quarter. Sam will provide more detail in our results. Our strategy to drive growth is focused on delivering solutions that meet the evolving needs of our core clinical customers, physicians, and hospitals, as well as customers in the higher growth areas of consumer-initiated testing, Life Sciences, and data analytics. We enable growth across our customer channels through faster-growing advanced diagnostics in five key clinical areas, which are advanced cardiometabolic, autoimmune, brain health, oncology, and women's and reproductive health. In addition, acquisitions are a key growth driver, and our strategy emphasizes accretive outreach purchases and independent labs. Finally, we are focused on driving operational improvements across the business with the deployment of automation, robotics, and AI for improved quality, customer and employee experiences, and productivity. Here are some of the updates on the progress we have made in these areas in the first quarter of 2025. In the physician channel, we delivered revenue growth in the high teens, driven largely by acquisitions. Organic revenue growth in the physician channel was mid-single digits. Our expanding portfolio of advanced diagnostics continued to deliver solid growth. We also generated volume and revenue growth through access to new geographies as a result of new health plan partnerships that took effect on January 1st. In addition, we also grew from large enterprise accounts, including functional medicine providers, which are often early adopters of advanced diagnostics tests that, over time, move to broader adoption. For example, we saw impressive uptake of our novel PFAS Forever Chemicals Test, which we launched a little over one year ago. Our ability to scale diagnostic innovation is attractive to large enterprise organizations seeking to improve access, quality, and affordability. During the quarter, Quest was named as the first independent national lab to be selected to the Optum Health Preferred Lab Network. The Optum Health PLN requires labs to meet rigorous quality and economic criteria to improve patient affordability and access. The Optum Health Network represents more than 85,000 Optum employed, contracted, and affiliated physicians. Our addition to this PLN is an example of our attractiveness as a partner to enterprise providers seeking to improve quality and economic value. We also announced an agreement to provide comprehensive lab testing for Fresenius Medical Care's dialysis center, serving more than 200,000 kidney dialysis patients in the U.S. Under a separate agreement, we also plan to acquire select lab assets from Fresenius Medical Care in the U.S. In the hospital channel, revenue growth in the quarter was largely driven by contributions from our Collaborative Lab Solutions, formerly known as Professional Lab Services. Running a lab and developing lab tests requires investing in equipment, hiring specialized talent, and keeping pace with innovation in lab technology. Health systems continue to face supplies inflation, workforce challenges, and reduced access to capital. Through our reference testing, Co-Lab solutions, and outreach lab acquisitions, Quest provides hospitals with strategic options for accessing best-in-class diagnostic innovation without having to maintain a lab. At our recent investor day, we shared our plans to expand in three high-growth areas: consumer-initiated testing, Life Sciences, and data analytics. We recently enhanced the online shopping experience of our consumer-initiated test platform, questhealth.com, streamlining the order process, which contributed to a sharp uptick in first-time orders during the quarter. We also introduced 10 new tests on the platform. questhealth.com features fast access, physician consults, and for STIs and several other conditions, access to prescriptions for treatment. We recently shared our long-term outlook for double-digit growth in advanced diagnostics across five key clinical areas. Advanced cardiometabolic and autoimmune testing both grew at double-digit rates, similar to trends seen last year. These areas help providers support preventative care for patients by identifying early health risks conventional lab tests can miss. In brain health, we generated double-digit growth from our innovative AD- Detect blood tests for Alzheimer's disease. We are particularly excited about our latest AD- Detect blood test panel, which we launched this month. This new panel combines results of amyloid beta and p-tau-217, two well-established Alzheimer's biomarkers, to give physicians even greater confidence to confirm Alzheimer's brain pathology in symptomatic patients. In women's and reproductive health, prenatal and hereditary genetic testing grew double digits. In March, we launched a solution that enables a patient to self-collect a specimen for HPV cervical cancer screening at a doctor's office. We plan to roll out this self-collect option at our 2,000 patient service centers in the U.S. early next month, complementing our STI-related self-collect option, which has already seen high rates of adoption since its launch last year. During the quarter, we started to receive commercial orders for our Haystack MRD test for assessing early risk of cancer recurrence. We are investing in our connectivity with electronic medical records preferred by oncologists to improve ease of account setup and ordering. For instance, we plan to deploy Haystack MRD via Epic's Aura specialty EMR module later this year. Finally, Quest continues to be at the forefront of serving public health needs. We saw an uptick in our measles offerings, including testing that can be used for diagnosis or to assess vaccination status or prior infection. Turning to operational excellence, we continue to target 3% annual cost savings and productivity improvements through Invigorate. We are automating several areas of our laboratories, from tuberculosis testing to cervical cancer screening, to improve quality, customer and employee experiences, and productivity. We also recently shared goals for Project Nova, which we expect will modernize and simplify our entire order-to-cash process. While this initiative will take several years to fully implement, we expect to realize the benefits sooner, including lower IT spend and improved productivity. Project Nova will also support our ability to optimize data insights in GenAI. During the quarter, we announced a collaboration with Google Cloud to streamline data management and employ GenAI to personalize customer and employee experiences. Finally, I want to thank our more than 55,000 Quest and LifeLabs colleagues for their dedication to living the Quest purpose, working together to create a healthier world, one life at a time. Now, Sam will provide more details on our performance and 2025 guidance. Sam? Thanks, Jim. In the first quarter, consolidated revenues were $2.65 billion, up 12.1% versus the prior year. Consolidated organic revenues grew by 2.4%. Revenues for diagnostic information services were up 12.7% compared to the prior year, reflecting recent acquisitions as well as growth in our key physician and hospital channels. Total volume, measured by the number of requisitions, increased 12.4% versus the first quarter of 2024, with organic volume down by 0.9%. During the quarter, weather and one less day versus the prior year reduced volume growth by approximately 160 basis points. Total revenue per requisition was up 0.3% versus the prior year, driven primarily by an increase in the number of tests per req, mostly offset by the impact of the LifeLabs acquisition, which carries a lower revenue per requisition. On an organic basis, revenue per req was up 3.6% in the quarter versus last year. Unit price reimbursement was relatively flat, consistent with our expectations. Reported operating income in the first quarter was $346 million, or 13% of revenues, compared to $300 million, or 12.7% of revenues last year. On an adjusted basis, operating income was $406 million, or 15.3% of revenues, compared to $349 million, or 14.8% of revenues last year. The increase in adjusted operating income was due to the impact of recent acquisitions and organic revenue growth, partially offset by the impact of weather, one less day versus the prior year, and wage increases. Reported EPS was $1.94 in the quarter, compared to $1.72 a year ago. Adjusted EPS was $2.21 versus $2.04 the prior year. EPS in the first quarter was impacted by higher interest expense versus the prior year. Cash from operations was $314 million in the first quarter versus $154 million in the prior year. Turning now to full-year 2025 guidance. Despite the economic uncertainty and unstable macro backdrop, and given Quest's essential role in healthcare and comparative resilience, we are reaffirming guidance for revenues and adjusted EPS. Therefore, revenues are expected to be between $10.7 billion and $10.85 billion. Reported EPS now expected to be in a range of $8.62-$8.87, and adjusted EPS to remain in a range of $9.55-$9.80. Cash from operations is now expected to be approximately $1.5 billion, and capital expenditures are expected to be approximately $500 million. Our 2025 guidance reflects the following considerations. Our revenue guidance continues to assume approximately 3% organic revenue growth, with the remainder coming from the acquisitions completed in 2024 and announced to date. It does not assume any contribution from prospective M&A. We continue to anticipate that Haystack Oncology will be slightly less dilutive versus the prior year. We are making investments in 2025 related to Project Nova, which we expect will modernize our entire order-to-cash process. Also, despite the decision by a federal court to vacate the FDA rule on lab-developed tests, we still intend to make some investments this year to strengthen our regulatory capabilities to serve our growing Global and Life Sciences businesses. Operating margin is expected to expand versus the prior year. We continue to anticipate net interest expense to be approximately $275 million. Adjusted tax rate is expected to be approximately 25%. Our share count for the full year is expected to be approximately 114 million diluted shares outstanding. Finally, we raised our operating cash flow guidance by $50 million, which primarily reflects a pre-tax gain to be taken in Q2 related to a payroll tax credit under the CARES Act that we received in April. With that, I will now turn it back to Jim. Thanks, Sam. To summarize, we delivered strong consolidated and organic revenue growth in the first quarter as demand rebounded in March following weather impacts early in the quarter. In addition to acquisitions, key drivers of growth included large enterprise partnerships, advanced diagnostics, and expanded health plan access. We are reaffirming our revenue and adjusted EPS guidance for the full year 2025. Now we'd be happy to take 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 fall back into the queue. To be placed into the queue, please press star one from your phone. To withdraw, press star two. Again, to ask a question, press star one. Our first question comes from Luke Sergott with Barclays. Your line is open. You may ask your question. Great. Thanks, guys. Good morning. I just wanted to touch on the organic, you know, the volumes that you guys had. When you kind of break it down on a test per day, it's roughly flattish to what you guys had last year. As you're thinking about as you roll out through the rest of the year, is the pacing going to be relatively similar to what we had last year? Anything to call out there from days or, you know, what you guys have baked in from the downside on, you know, from weather, et cetera? Yeah. Good morning and thanks for your question. Just on the organic volume, reported was down 90 basis points. If we correct for the leap year impact and the weather impact year over year, it would have increased that by 160 basis points. We would have been up, you know, about close to 1%. That really does compare, you know, with what we saw both in the third quarter and fourth quarter last year. There was a progression through 2024, only because the first and second quarter were really still impacted by COVID from 2023. The other thing I'd mention is, you know, while January and February were certainly soft because of the weather, we did see a nice bounce back, in particular during the last three weeks of March. I would tell you our volume trends in the first 19, 20 days of April have also been consistent with our expectations and what we saw last year. I think we're pleased with the utilization levels that we're seeing out there right now. Great. Thanks. You're welcome. Thank you. Our next question comes from Kevin Caliendo with UBS. Your line is open. You may ask your question. Thank you. Good morning. Thanks for taking my question. I want to ask the tariff question and just try to understand sort of what kind of exposures Quest has to this, you know, in the context of how much of your supply costs come OUS, how much of it is fixed contracts. How should we think about the risks of this going forward? Have you adjusted your model or your expectations for tariffs in any way? Any details you can provide would be super helpful. Sure. Thanks, Kevin. Let me just start with, look, we buy about $2 billion of, you know, reagents, supplies. In that $2 billion is capital, you know, equipment cost, and also, you know, service contracts. So about $2 billion of total spend. Now, first of all, less than 1% of that we source directly from China ourselves, okay? We have plans already activated where that less than 1%, small number, we are moving some of those. By the way, that less than 1% is pre-analytical supplies, gowns, gloves, masks, tubes, you know, really simple types of things. Some of it we've already moved. We're in the process of moving others. We actually think our exposure there is not that great. Now, if you come back to that $2 billion, about 75-80% of that spend is really reagents and supplies for the laboratory. That is actually manufactured here in the U.S. We can have global suppliers like Siemens and Roche, but the manufacturing of that is in the U.S. Again, we believe our exposure is small. The other thing I'd say is most of our supplies are under multi-year contracts. Obviously, those contracts come up every four to five years. You know, 20% will come up this year. You know, we compete those things. As we said in the prepared remarks, any tariff impact we think we can cover at this point, given the guidance that we've put out there. Yeah. I would just add, Kevin, this is obviously based on under current law and current regulations, you know. This is what we're assuming based on today, what we know today. The impact is not zero, but the impact is very manageable for us, and it's baked into our current guidance. That's super helpful. I appreciate the color. Can I ask a quick follow-up? Just in the last week or so, we've read some stories about strikes up in LifeLabs. The stories don't give a ton of details. It sounds like it's somewhat organized, but non-union. Can you just maybe talk about what that is and if it's impacting LifeLabs in any way or impacting the potential accretion from LifeLabs? Yeah, sure, Kevin. First of all, the strike is just on the British Columbia side. Recall, LifeLabs broadly participates in the Ontario marketplace and the British Columbia marketplace. British Columbia is actually the smaller of the two sides. There are about 1,200 employees that are involved in the strike. Those 1,200 employees are part of a much bigger union of roughly 70,000 employees called the BCGEU. It's largely a public service union. Now, there are certain statutes about how strikes are conducted in British Columbia. One of those is you can only—we have 128 patient service centers in British Columbia. You can actually only strike at 17 of those 128. On any given day, actually, there's a small amount of people that are actually out on strike. Our management team in British Columbia has to backfill those open positions, which they've been doing. We do have a mediator involved. We are making progress, and we hope to have things settled within the next 30-45 days. Great. Thank you guys so much. Yep. You're welcome. Thanks, Kevin. Thank you. Our next question comes from Patrick Donnelly with Citi. Your line is open. You may ask your question. Hey, guys. Thank you for taking the questions. Sam, maybe just a quick one. Just on pacing on margins, can you talk a little bit about 2Q? I know typically seasonally, you know, that's the strongest quarter. Just wanted to talk through margins and earnings there. Any impact, again, from some of the tariff noise, you know, freight surcharges, things like that? Just quickly, LifeLabs outside the strike, just how it performed this year or in the quarter would be helpful. Sure. Good morning, Patrick. Listen, let's talk first about margins in Q1, and then I'll talk about the pacing and address your question about LifeLabs. Q1 margins came in operating margins at 15.3%. A 50 basis point expansion from prior year. That was driven by volume, impacted somewhat negatively by the weather impacts that we talked about, which were more severe than what we saw last year. In general, strong margins, 15.3% operating margins. As we think about the full year, Patrick, the pacing is really very consistent with what we expect to see in terms of traditional or historic seasonality, even going back pre-COVID seasonality because COVID impacted a little bit the seasonality. Traditionally what we've seen, and I'm talking really here EPS pacing, not necessarily operating margin pacing. EPS pacing, you know, usually what we see is roughly, you know, 49% in the first half of the year, you know, about 51% in the second half of the year. You see Q2 being the best quarter, Q3 slightly lower than that, Q4 lower than Q3. Usually Q1 is actually the lowest quarter of the year in terms of EPS contribution. You know, that's what we expect in terms of pacing. In terms of expectation for full year 2025, still the expectation is that we continue that we grow operating margins rate versus last year, both dollars and rate. In terms of LifeLabs. Yeah. Let me just give you a little color on LifeLabs in the quarter. First of all, I think, as you all know, most of the revenue is capitated. So there's generally not surprises on the revenue side. There's a small amount of patient physician revenue where you're selling tests directly to physicians outside of the capitated agreement. But the revenue was really basically in line with our expectations. On the margin side, you know, as we indicated, we expect to have LifeLabs at the corporate average within two to three years. I would just tell you, we made, again, nice progress in the quarter. We've seen quarter-over-quarter improvements in margin rate. We expect to be, if anything, on the early side of our plans of having it at the company corporate margin in two to three years. Operator, next question. Thank you. Our next question comes from Elizabeth Anderson with Evercore ISI. Your line is open. You may ask your question. Hi, guys. Good morning. Thanks so much for the question. Are tariffs or any of the potential hospital reimbursement challenges creating an opportunity in the hospital lab management space or outreach space? Or would you say sort of too soon? If you could just sort of talk about maybe the progression of some of those questions and debates that you've been hearing recently. Yeah. I think it's a bit too soon. It's not to say we won't contemplate price increases if tariffs start to hit us in a meaningful way. As you know, the health plan contracts probably don't give us a chance to go back and open those up. Having said that, 20%-25% of the contracts come up every year. If we're seeing a meaningful impact on our business, we're certainly going to try to pass that through. The health system pricing landscape, I would still say, is the most challenging of all that we deal with. Again, if we are hit in a meaningful way, we're certainly going to try to pass that along to both health systems, client bill, consumer bill, and anything outside of health plans. Sorry, Jim. I meant more like are hospitals increasingly seeking relations, like in your acquisition strategy. Sorry if my question was not clear. Okay. You know, the funnel of opportunities on what we now call our Co-Lab, Collaborative Lab services agreement, continues to be very robust. We're in the process of negotiating with several institutions on this. If anything, you're right. It can accelerate those opportunities if suppliers start to pass those tariffs in the form of price increases to our health systems. Got it. Thank you. Thank you. Our next question comes from Michael Cherny with Leerink Partners. Your line is open. You may ask your question. Good morning. Thanks for taking the question. Maybe to kind of get at the market dynamics in a little different fashion, you know, I appreciate the color you gave on the tariff impact. That's certainly helpful. I would assume that other entities in the market, smaller than you and your largest peer, are going to be in a slightly more challenging position in trying to get to managing any offsets on costs, similar to potentially what happened with the inflationary environment on the wage side from a couple of years back. How do you think about the strategic discussions you're having with payers on potentially driving more share about opportunities you have to service a wider swath of their membership bases, given your reach, your scale, and your ability to absorb and/or offset any of these cost dynamics? Curious, I know it's early, but if you're seeing any changes in terms of that strategic payer dynamic and them looking to you more closely, given you're on much more stable financial footing. Yeah. Mike, I would tell you that our discussions and collaborations with the health plans are ongoing, continuous. As you know, we have all sorts of programs in place on the redirection of work to try to redirect work from expensive out-of-network labs, from expensive health system labs. Several of our large payers, we have, you know, collaborative relationships. They provide us with information of physicians that are using these very expensive labs. Our teams go and work those lists really hard and try to convert that over. As we also mentioned in the prepared remarks, we are now a preferred lab network provider for Optum Health Services. That went into place during the quarter. In a similar way, we work with the roughly 85,000 physicians that are in the Optum Network. We work with the management team at Optum Health to try to redirect as much of that work into, you know, labs to Quest Diagnostics, where you're going to get really great quality at a great value. If anything, yeah, I agree. These tariffs may push, probe, and help do and move that work even quicker. Thank you. Operator, next question, please. Thank you. Our next question comes from Pito Chickering with Deutsche Bank. Your line is open. You may ask your question. Hey, good morning, guys. A follow-up to Kevin's question on the tariffs. I think I missed one of the numbers that you gave out. Of the $2 billion spend, what's the spend on supplies on the sort of low end that could be sourced in China, like syringes, gloves, and gowns? What I did, what I didn't give that exact number. The number I gave is of the $2 billion, less than 1% is sourced directly from suppliers in China by Quest Diagnostics. Within that less than 1% are mostly pre-analytical supplies, so gowns, gloves. Now, that's not to say that the entirety of our pre-analytical low-tech supplies comes out of China. They come across, you know, in all parts of the world. What I said is to minimize our exposure on that spend in China, we've actively been moving from suppliers, you know, in China to outside of China, including suppliers in the U.S., including suppliers around, you know, the rest of the globe where tariffs are significantly lower. Yeah. A couple of percentages, though, Pito, just to keep in mind is, you know, we also said roughly 80% is basically manufactured or sourced in the U.S., though at least based on the law today, not impacted by tariffs. You know, also 70%-80% of the total supplies that we have are under contract. So, you know, they have fixed pricing, and we think we can manage the exposure. The exposure is not zero, but we think it's manageable. Yeah. Just to clarify, the 80% that is manufactured in the U.S. are really the reagents, the expensive reagents for running the lab tests. Right. Of the $2 billion, 20% price source outside the U.S., a combination obviously split between, you know, Malaysia, China, or, you know, a series of other sources. That is sort of to think about that, right? That's about right. Okay. Okay. Fair enough. For your M&A pipeline, just, you know, just can you sort of, you know, talk about sort of how the pipeline looks? It's just been a while since we haven't seen a deal close in a quarter. You know, going back in the cash flow statement since fourth quarter 2023, you know, does the pipeline for outreach still look as robust as it has been? Do you sort of see the pace continuing as expected or as hospitals continue to do well operationally, excluding the current political environment? You know, do you see that, you know, change the pace of as you view outreach deals? Thanks so much. Yeah. The funnel is still healthy, and it's a mix of hospital outreach types of endeavors plus small regional labs that are still left out there. I think it's healthy. We did, as we mentioned in the prepared remarks, enter into a collaboration with Fresenius Medical Care, where we are now going to start doing the lab testing associated with dialysis treatment in our regional labs. In addition, Fresenius also provided third-party laboratory testing services for other dialysis centers. We purchased that small book of business, and that too will come into Quest Diagnostics. That represents, as I mentioned, over 200,000 dialysis patients, patients getting tested at least once a month. That represents a nice chunk of volume that will be coming our way when we officially close on this later in this year. Great. Thanks so much. Thanks. Operator. Thank you. Our next question comes from Tycho Peterson with Jefferies. Your line is open. You may ask your question. Hey, this is Noah on for Tycho. Thanks for taking our question. I wanted to ask about Haystack, particularly in how you're receiving commercial orders, how you're thinking about reimbursement submissions and timelines. On the data side, anything you think still needs to be done to generate more evidence. Thanks. Yeah. As we discussed in the remarks, we launched the Haystack assay commercially in the quarter. We are pleased with the progress that we've made. We had over 75 customers that were part of the early experience program. Many of those customers are continuing to do business with Quest Diagnostics. In terms of reimbursement, the test is being offered to Medicare and patients in commercial plans, and we offer it to any patient. We've just started to submit for reimbursement. We're working with one of the big MACs on getting the coding and coverage policies in place. You know, that requires a bit of time, and it requires a bit of reimbursement experience. That experience is well underway. You know, and in terms of evidence, stay tuned. We'll continue to work on potential evidence as we move forward here. Yeah. You'll see more and more publications and the fruits of the ongoing clinical trials that Haystack had in place even before we purchased them well more than a year ago. Operator, next question. Thank you. Our next question comes from David Westenberg with Piper Sandler. Your line is open. You may ask your question. Hi. Thank you very much. I just wanted to, on the collaboration with Google Cloud to streamline data management and use GenAI to personalize customer experience and employee experiences, how does that translate into some of the financial benefits? I was thinking about maybe the personalized customer one. Maybe you get a higher compliance rate in testing or something like that. You know, does the employee one lead to maybe some benefits from the cost side? What kind of specific KPIs should we be looking at to measure success in here this thing? Step one in the overall relationship with Google Cloud is simply the movement of what I call pockets of data that reside in a lot of various places across Quest Diagnostics, mostly on-premise. The benefits of moving that information to the cloud, I'll give you a couple. One, we have a data analytics business. Whenever we have to search the entire Quest database, you know, it's a complex task today to, you know, basically conduct searches across data that's sitting in pockets all across the country in various places. It's really going to improve the efficiency and the effectiveness of our data analytics business. That business is primarily serving pharmaceutical companies, CROs. It serves the health plans. It's really going to make that business more efficient, more effective, and will lead to greater growth. In terms of, you know, some of the, you know, benefits for employees, for customers, you know, our employees that are constantly searching databases to get information for patients, to get information for physicians, it'll speed up those searches. You know, at some point, we're going to allow, you know, AI-based chat services for physicians and patients to get the information that they need. Honestly, at some point, look, patients and physicians, you know, we have a test menu of over 4,500 tests. If you think every physician knows exactly what test to order at what specific time for what specific condition they're seeing, it's just beyond the capability of many, many physicians. Having those types of GenAI interactive tools that allow patients and physicians to query our test menu and understand what is the best type of vitamin D test to order, what is the best type of testosterone test to order, is really going to make their lives easier, faster, simpler, and actually get, you know, the best information into their hands. Those are some of the quick, easy things that we're anticipating with this. It all starts with having our data in one location, easy to access, streamlined, efficient, and leading to higher quality answers. Thank you so much. Thank you. Our next question comes from Michael Ryskin with Bank of America. Your line is open. You may ask your question. Great. Thanks for taking the question. I got just one. I'll roll everything together. Just wondering if you could give us your latest thoughts on other policy regulatory updates from D.C. that could happen this year, especially anything on PAMA, also, just what your latest thoughts are on that. And then sort of tying into that, you know, some concern about potential cuts to Medicare and Medicaid. Just how should we think about, how should we think about that potential risk to the business? Thanks. Yeah. Let's start with the cuts on Medicare. Medicaid at this point, if anything, the Medicare Advantage plans just got a nice rate increase. We are pleased with that, and that should certainly help in our discussions with Medicare Advantage plans around the country. There's a lot being written around Medicaid, around Medicaid potential cuts. There's a lot being written around exchange, the ACA exchange related. At this point, you know, those bills are moving through the House and Senate. There's a reconciliation process. I think it's too early to tell. What I would tell you is, you know, Medicaid and managed Medicaid collectively, it's about 8% of our entire business. It's certainly not the biggest portion of what we do, but we're watching it closely. If anything, I would say there appears to be support of the exchange plan, the ACA plan that's actually in place today. We feel optimistic about that. In terms of other regulatory, you know, things going on in D.C., first, we were pleased with the outcome of the lawsuit on LDT regulation. Very pleased with that outcome. As we said in the prepared remarks, we still have elements of our business that are FDA regulated, including our work around companion diagnostics, our clinical lab work that we do for pharmaceutical companies with patients that are in clinical trials. All of that still remains in a regulated type of environment. In terms of PAMA and PAMA reform, now that we have the FDA LDT issue behind us, I would tell you the most important thing for our trade association, ACLA, and for ourselves to work from a regulatory standpoint is PAMA reform. As you know, we have a new Congress, which means, and you have a new majority position in the House. We are working with, you know, our trade association is actively working with the three committees that really set healthcare policy, the House Ways and Means Committee, House Energy and Commerce, Senate Finance Committee. I would tell you there's broad bipartisan support to actually get something done this year in terms of PAMA reform. If it looks like if we're moving into the back half of the year and we don't see progress, we'll certainly push for another delay, a sixth delay in the cuts that were anticipated six years ago. Great. Thank you so much. Thank you. You're welcome. Thank you. Thank you. Our next question comes from Andrew Brackmann with William Blair. You may ask your question. Your line is open. Hi guys. Good morning. Thanks for taking the question. Maybe another one just on the macro side of things. You know, there's been some discussion around the potential for a recession later this year. As you sort of think about the business, how it's set up today, it would sort of withstand any demand pressures from unemployment rates going higher. How has that changed over the last handful of years? How might a recessionary demand shock be different today versus, say, 2008, 2009? Thanks. Yeah. Good question. You know, the first thing I ask you to keep in mind is, look, it's important to remember patients access the healthcare system, and they need access to affordable lab testing in any environment, whether the economy is booming or the economy is in a recession. We provide really essential services that are needed for both providers and for patients. Now, it's not to say we're recession-proof. If you go back to the great recession of 2009, 2010, we did see a modest impact on our volumes. In 2009, it was about a 70 basis point reduction. In 2010, it was a little bit bigger, about 1%. Remember, when people get laid off, generally, they have benefits that continue or COBRA benefits that provide coverage. There is a layer of insurance for some period of time for most people that lose their jobs. While we're not recession-proof, we believe, you know, healthcare services, in particular diagnostic lab testing, you know, are still really essential for the health and well-being of all human beings. Yeah. Andrew, I would add a couple of things as well to Jim's comments. You know, one, everything that Jim said, but there's also more safety nets today than there were back in 2009. You know, you've got the Affordable Care Act. You know, people have in general some more coverage in terms of, or backup coverage in terms of what's out there through the ACA. You know, even if we look back at the last great recession, patient collection rates held fairly steady. Obviously, we'll monitor those. We'll make sure that we, you know, maintain our patient assistance programs and all that. You know, patient concession rates did not really spike up materially back in 2009. Great. Thanks, guys. Thank you. Our next question comes from Jack Meehan with Nephron Research. Your line is open. You may ask your question. Thank you. Good morning, guys. Morning. Just had a couple of follow-ups. The first was, I don't think I heard it earlier, just what was the final impact from weather when you, you know, take what you experienced in January and February and talked about at the Analyst Day? That is question number one. Then question number two, just, you know, Sam, last quarter, you provided some helpful commentary around EPS cadence. I was just curious if you still think that's a good way to think about how the guidance is set up for the year. Thank you. Sure. Yeah. I'll take the first one, Jack. In terms of weather, we said on a year-over-year basis, it was a 50 basis point impact in terms of volume. We said the one less day, the leap year was worth 110 basis points. So 160 altogether. At our Investor Day, we suggested our revenue would be lighter in the quarter. Remember, that was at the beginning of March. We prepared those things. The first week of March, our actual volume, and there was some weather during that first week of March, was actually light. We saw a really strong recovery in the last three weeks of March, which we mentioned has continued into April. The first 19-20 days of April, our volume trends have been in line with what we were seeing in Q3 and Q4 of last year. Yeah. And. Yes. Yeah, for sure. And Jack, remember, the half a percent of weather is a year-over-year impact. So it's incremental to what we saw in last year as an impact on growth. And from an EPS perspective, you know, the seasonality is, I think, consistent with what we've talked about in the past in terms of traditional seasonality. So EPS in Q2 being the highest quarter, Q3 is a slight step down, Q4 is a step down from that, but second lowest quarter of the year in terms of EPS cadence. And then Q1 is usually the lowest EPS that we get. So Q1 is the lowest quarter of the year. So, you know, that type of seasonality, I think, is still realistic to assume. Thank you. Our last question comes from Erin Wright with Morgan Stanley. Your line is open. You may ask your question. Great. Thanks. You mentioned continuing investments that you're making that, I guess, that would offset the app or what would have been kind of the LDT rule. I guess, what are those in terms of what you're making there and what's incremental relative to what you were thinking previously? You also mentioned labor expenses. Like, has anything changed on that front in terms of what you're seeing or your expectations there? Just more broadly speaking around kind of expenses, I guess, can you speak to some of the offsetting factors or levers you have from here in response to whether it's inflationary pressures like labor costs or any direct, indirect impacts kind of from tariffs that you were mentioning before? Thanks. All right. Let me comment first on the investments from an FDA perspective, and then I'll have Sam make some comments on the labor outlook and inflation. As we said at Investor Day, we expected to spend about $10 million of incremental cost investment to prepare for the FDA LDT rule. That was really centered on two things that the FDA asked us to have in place for year one. One was the build-out of a complaint handling unit, and two was enabling the output of that complaint handling unit, which is the analysis of complaints that potentially turn into MDRs, medical device reports, and to have the ability to exchange information with the FDA in electronic means. We're not going to spend $0, and we're likely not to spend $10 million this year. However, as I mentioned, we have a growing companion diagnostics business. We have a life sciences business that does clinical trial work for both supporting CROs and supporting pharmaceutical companies. We take in reference testing from close to 40 countries around the world, all which operate in, you know, various ISO frameworks that require some type of regulatory framework. We still have some infrastructure needs to be put in place. We still actually do need to have a complaint handling unit. It may not need 40 resources. It may need something much smaller than that to support the other elements of our business that, again, are growing and operate under, you know, FDA regulation today. The answer is not zero. The answer is not 10, somewhere in between that. We expect to continue to improve the regulatory and quality organization that we have in place here at Quest today. Sam? Yeah. Just in general on expenses. Let me break it down into three things. Labor, first of all, which is, you know, a big piece. Our expectation is still somewhere in the 3%-4% in terms of wage inflation this year. In terms of retention or turnover, turnover is now somewhere in the mid to high teens. An improvement definitely versus where we ended 2024, which was, you know, around 19% or so, approximately 19. I would say we're approaching pre-pandemic rates in terms of turnover, which was somewhere around 14%-ish. We're making good progress there. Turnover is definitely improving, which improves productivity, which improves our expenses as well, and, you know, impacts potentially wage inflation. SG&A, you know, we continue to drive leverage on SG&A. You talked about, you know, some of the areas that we focus on in terms of managing expenses actively. SG&A is one of them. You know, our goal is to not grow SG&A more than half of the rate of growth of revenues at most. I would say that's our target, and that's our focus. Finally, and really importantly, Invigorate as a whole, which is to offset the impacts of inflation, wage inflation, you know, any other major cost drivers in our business, is to offset them through Invigorate of approximately 3% productivity and cost improvement. You know, I would say we're on track, and we've got that target this year, and we're executing towards it. Operator, any more questions in the queue? At this time, I'm showing no further questions. I'll turn the call back over to your speakers. Okay. Thanks again for joining our call today, and we certainly appreciate your continued support, and have a great day, everyone. Thank you for participating in the Quest Diagnostics First Quarter 2025 conference call. The 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 866-361-4757 for domestic callers or 203-369-0183 for international callers. Telephone replays will be available from approximately 10:30 A.M. Eastern Time on April 22nd, 2025, until midnight Eastern Time July 1st of 2025. Goodbye.