QUEST DIAGNOSTICS INC

Our strategy aims to achieve two key goals: generate growth and optimize our operating efficiency. Our growth strategy focuses on continually developing solutions to meet the evolving needs of our customers. We help people make the best decisions to improve health by providing high quality, innovative, convenient and affordable diagnostic testing insights and services using our scale and extensive reach. We drive growth by:

•offering an industry-leading menu of testing and other services;

•collaborating with healthcare providers and partners to leverage our broad access;

•leveraging our data assets and services to improve population health and enable value-based care; and

•continuously improving our quality and efficiency by leveraging the Quest Management System and by embracing innovative technologies, such as automation and artificial intelligence ("AI").

Our growth strategy is focused on our primary customer channels – physicians, hospitals, patients and consumers – supported by Advanced Diagnostics™ (defined below), strategic acquisitions, and continuous quality improvement.

Physicians

We serve approximately half the physicians in the United States each year. We serve virtually all types of physicians from primary care physicians and internists to specialists, including rheumatologists, cardiologists, neurologists, and obstetricians/gynecologists. We also serve physicians associated with accountable care organizations (“ACOs”), and Federally Qualified Health Centers (“FQHCs”). Physicians determine which laboratory to recommend or use based on a variety of factors, but we believe that we provide the most attractive service offering in the industry, including the most comprehensive test menu, innovative test offerings, a positive customer experience, deep medical and scientific expertise, high quality, leading access and distribution, and data-powered integrated information-technology solutions.

Hospitals

We believe that the growing market challenges faced by hospitals, including continued consolidation, price transparency, cost and utilization pressure, evolving healthcare payment models, capital needs, changing technology and limited resources, provide us with an opportunity to partner with them as they consider more effective ways to implement their laboratory testing strategy and drive demand for our expertise and services.

We serve approximately half the hospitals in the United States each year in many ways, including:

•Serving as a hospital lab’s laboratory. In 2024, we generated over $1 billion in revenue from “reference testing,” where we perform testing that hospitals do not perform in their own in-hospital labs.

•Helping hospitals operate their labs more efficiently. In 2024, our Professional Laboratory Services offering generated approximately $800 million in revenues and management fees supporting hospitals in the operation of their own labs. Our key Professional Laboratory Services offerings include lab management outsourcing, test menu optimization and spend consolidation, supply chain management and providing, advanced data solutions.

•Acquiring outreach lab operations from hospitals. Quest looks for opportunities to acquire assets of outreach lab operations from hospitals whose in-house labs have expanded from supporting in-patients to supporting out-patients and ambulatory patients who see physicians that may or may not be employed or otherwise affiliated with the hospitals.

We also have joint venture arrangements with leading hospitals and health systems. These joint venture arrangements, which provide diagnostic information services for affiliated hospitals as well as for unaffiliated clinicians and other local healthcare providers, serve as our principal facilities in their service areas. Typically, we have either a majority ownership interest in, or day-to-day management responsibilities for, our joint venture relationships.

Patients and Consumers

We have taken steps to be recognized as the consumer-friendly provider of choice of diagnostic information services. Patients increasingly expect their healthcare experiences to be consumer-centric, which includes being more transparent, accessible and convenient. Most patients have a choice when selecting a diagnostic testing provider, and our goal is to provide leading services in conveniently located patient service centers that can provide a comprehensive suite of testing services. Many of our 2,400 patient service centers are located inside large retail stores or in convenient retail settings. We continue to enhance our operations to improve the patient experience in these locations. For example, our "Schedule at Check In" capability encourages patients to make appointments, and our self-serve kiosks provide wait-time estimates for walk-in and standby patients and offer many language options. These improvements allow us to better manage demand and productivity and have reduced average wait times in the patient service centers. We also provide mobile phlebotomy services in many parts of the United States so patients who prefer an in-home blood draw may access our services for a fee.

We work to improve our digital experience, from making it easier for patients and consumers to locate a patient service center and receive results on our MyQuest® patient healthcare portal to enabling providers to access their patients’ test result reports. We are also integrating the patient payment process into the digital customer experience, which improves the patient experience, provides greater pricing transparency, helps our patient concession rate and reduces demands on phlebotomists.

As people are increasingly seeking to be more directly involved in and have more control over their health outcomes, we are seeking to meet this need. Our QuestHealth.com platform empowers health-minded consumers to purchase testing directly from us without first having to visit their doctor. Consumers who want to evaluate their health or monitor certain chronic conditions, such as diabetes or hepatitis, as well as those seeking privacy can use these self-directed options to identify and more frequently monitor health issues than their health plan or other payer may be willing to reimburse. We are enabling a third-party physician to review and place test orders and be available to consult with the consumer via a teleconsult about their test results. We also launched health coaching on our QuestHealth.com platform. Our QuestHealth™ offering reflects our belief that by building on the foundation of our strong consumer focus we can capture the growing opportunities presented by the growth of consumer-initiated testing and demand for expanded access to basic healthcare services.

In 2024, we launched a new service that offers patients experiencing symptoms of several common genital tract infections the option to self-collect a swab specimen, aimed at increasing privacy, convenience and speed of testing. We also provide opportunities for companies with telehealth and retail business models to rebrand our testing and utilize our patient service centers to provide access.

Other Customer Channels

Our other customer channels include health plans, employers, emerging retail healthcare providers, government agencies, pharmaceutical companies and other commercial clinical laboratories, which are described in more detail under “ – Customer Channels”. While we principally focus on the U.S. market, we serve customers globally and have a growing business that provides advanced reference testing to laboratory providers in other countries. For more information about our operations, see “ – Business Operations”.

Advanced Diagnostics

We support the needs of all our customers with a focus on Advanced Diagnostics™. Clinical laboratory testing can be characterized as routine, non-routine or advanced. Non-routine tests are tests that may require professional “hands-on” attention from highly-skilled technical personnel, generally require more sophisticated data analysis, technology, equipment or materials, may be performed less frequently than routine tests and may be reimbursed at higher levels than routine tests. Some non-routine tests are advanced (“Advanced Diagnostics™”). Advanced Diagnostics™ includes certain procedures in the areas of molecular diagnostics (including next-generation sequencing), oncology, neurology, companion diagnostics and non-invasive pre-natal and other germline genetic testing.

We are a leading provider of Advanced Diagnostics™ and provide an array of offerings across the spectrum, including in high growth areas such as Molecular Genomics and Oncology. We have a portfolio of oncology tests that includes traditional oncology screening and anatomic pathology, such as cervical cancer and skin cancer screening and diagnosis. We are also well positioned to take advantage of advances in next generation sequencing to grow our business in cancer and other disease state testing. This includes inherited genetics, newborn screening, and rare disease diagnosis, and solid tumor sequencing, such as to aid treatment selection and monitoring.

Our investments in our Advanced Diagnostics™ offerings enhance our innovation capabilities and strengthen our service offering, making our Advanced Diagnostics™ offerings more attractive and accessible to physicians and hospitals. We are also seeking to apply the capabilities gained by these efforts to support other areas where we can make a meaningful difference in healthcare, including offerings to pharmaceutical companies and consumers.

We are also particularly focused on the rapidly growing areas of monitoring recurrence and therapy effectiveness. In 2023, we acquired Haystack Oncology, Inc. ("Haystack Oncology") a cancer testing company that has developed a highly sensitive testing technology for detecting minimal-residual disease (“MRD”) by circulating tumor DNA due to residual or recurring cancer. Circulating tumor DNA ("ctDNA") refers to DNA fragments shed by a solid tumor, such as colorectal or breast cancer, into the blood stream. We believe this acquisition strengthens our comprehensive oncology portfolio by positioning us well to compete in the higher-growth clinical area of ctDNA solid-tumor MRD testing. Since the acquisition, several organizations have used the Haystack Oncology MRD test in research, including for clinical trials. During 2024, we also developed the test as a clinical offering in anticipation of making it available to oncologists. In 2023, we also launched our QUEST AD-DETECT® test portfolio for assessing Alzheimer's disease risk using blood specimens, as opposed to testing by more costly or invasive methods, such as testing of cerebral spinal fluid by lumbar puncture. We continue to add new testing to this suite of services for assessing the risk of Alzheimer's Disease, including isoform and plasma testing for patients with cognitive impairment. In addition, our Autoimmune ANAlyzeR™ service helps primary care physicians comprehensively screen for autoimmune disorders to accelerate diagnosis and care by specialists.

Acquisitions and Capital Deployment

Our strategy includes generating growth through value-creating, strategically aligned acquisitions using disciplined investment criteria. We screen potential acquisitions using guidelines that assess strategic fit and financial considerations, including value creation, return on invested capital and impact on our earnings. We endeavor to grow revenues each year by 1-2% through acquisitions. We will continue to invest in our business in a disciplined manner, including focusing on enhancing our solid foundation of strategic assets and capabilities. During 2024, we completed acquisitions for an aggregate purchase price of $2.2 billion. We acquired select assets of the outreach laboratory services business of Allina Health, which serves providers and patients in Minnesota and Wisconsin, as well as select assets of the outreach laboratory services business of OhioHealth and the outreach laboratory services business of University Hospitals, which each serve providers and patients in Ohio.

In August 2024, we also acquired all of the issued and outstanding common shares of LifeLabs Inc. and all of the partnership interests of BPC Lab Finance LP (collectively, "LifeLabs"), which provides laboratory diagnostic information and digital health connectivity systems in Canada. During the full year of 2024, LifeLabs performed approximately 140 million laboratory tests to help diagnose, treat, monitor and prevent diseases for millions of Canadians. LifeLabs operates approximately 15 laboratories, over 350 collection centers in British Columbia, Ontario and Saskatchewan, and an extensive network of couriers and mobile phlebotomists. LifeLabs also partners with governments and companies to develop technologies and customized services.

Our significant acquisitions in each of the last three years are further discussed in Note 6 to the audited consolidated financial statements (Part II, Item 8 of this Report).

Acquisitions are part of our disciplined capital deployment framework, which also includes investment in our business, dividends and share repurchases and is grounded in maintaining an investment grade credit rating. We expect to return a majority of our free cash flow to stockholders through a combination of dividends and share repurchases. Consistent with that expectation, in January 2025, we announced that we increased our quarterly common stock cash dividend by approximately 6.7%, from $0.75 per common share to $0.80 per common share. This represents our 14 th increase in the dividend since the beginning of 2012. For many years, we have maintained a common stock repurchase program. Since the beginning of 2012, we have returned approximately $7.7 billion to stockholders through repurchases of our common stock.