Quest Diagnostics Incorporated (DGX) Earnings Call Transcript & Summary

Good afternoon, everybody. Thanks for being here on Day 2, the end of Day 2 of the UBS Healthcare Conference. I'm Kevin Caliendo, UBS health care services analyst, and I am happy to be joined by the management team from Quest Diagnostics, Steve Rusckowski, Chairman, CEO and President; and Jim Davis, CEO-elect; and the EVP of General Diagnostics business. Gentlemen, thank you so much for coming today. Thanks for coming to New York. Hope the flights and everything was good.

It's easy because I live here.

Is this your first sort of in-person.

No.

You've done a couple. I know you did some meetings, Jim met with everybody, but...

Yes, we did swing through Boston and New York and met with some individual investors.

This is all [indiscernible]

A little bit...

Got it. Fair enough.

We'll take it easy.

So let's talk a little bit -- I mean, management transition is never easy. You guys handled it as well as can be done. It was announced. It was done. It was a very logical thing. Take us through how the transition work like on a day-to-day basis. Jim, what are you taking responsibility for that you didn't before. Steve, what are you stepping back and saying, Jim. I'll let Jim do.

So Kevin, first of all, we wanted to announce this in the right time and the right sequence. And we thought it would be good to do that around earnings. So we did on February 3, and we announced both myself and Jim transitioning. It was important for us to do that because at the same time, Mark Guinan, our CFO is retiring. So we thought it would be good to announce all 3 of those changes. And the reason for that, as Jim and myself are working on replacing Mark ASAP. So that's first part of our transition is to report -- replace the CFO. Secondly, as Jim had a big chunk of the organization already. And so the second order of business is for Jim to replace himself, if you will. And so he has worked through replacing himself, to free himself up really in the second half of the year to take on more of the operating responsibilities that I had. And then in November 1, of this year, he will take on the CEO role. And I'll stay as the Executive Chair through the end of March of '23. So that's the plan. So Jim, you'd like to add a little bit about how you're replacing yourself?

Sure. But let me first touch on -- Steve and I have worked together for 9 years in the company. So we know each other well and the transition has been seamless. As Steve mentioned, I was overseeing 70% to 80% of the company. What Steve was focused on, obviously, investor work, Board work, our advanced diagnostics strategy and strategy in general, and much of the M&A activities. So these are the things that learning from Steve, we continue to transition that work every day. In terms of replacing myself, we named Cathy Doherty, who is a long-time Quest, 30-year Quest person, has run all different parts of Quest Diagnostics from our employer solutions, ExamOne, ran several of our franchises, our test franchises. So great experience in Quest Diagnostics. So we've made that transition about 6 weeks ago, and everything is moving forward.

So you're going to have to, over the next 10 months or so, pick up advanced diagnostics and M&A and investor-facing, that's got to be by far the worst part of this whole endeavor, right? Is that fair? I mean, is that...

I think that's fair. And certainly, with Steve and Shawn, we've met with many investors along the way, albeit I come at it from a more operational bent given the role that I was in. In terms of advanced diagnostics, I have 20 years now in health care -- in GE Healthcare, I ran their magnetic resonance imaging business but also did quite a bit of work in the molecular imaging business. So cancer genetics are not new topics to me. I've played in that space, especially on the oncology side in MRI and molecular imaging. So things to learn, but certainly play in that space too.

Yes, 1 of the things, too, we did is really move to the next level, Kevin, of augmenting our organization to support our strategy. We announced back a number of years ago is to think about Quest through the lens of General Diagnostics, which Jim has managed over the years. And then we snapped in place about 5 years ago, our advanced diagnostics leadership and structure. And then we have a group of various businesses that we call Diagnostic Services, and we manage that throughout the management team. And so what Jim also has done to put in place a new leader for that who truly cements that third leg of the stool.

Right. A gentleman named Patrick Plewman, who previously was running our West region. Patrick comes with 25 years of health care experience between pharmaceutical as well as running his own start-up diagnostics company before he came to Quest Diagnostics and oversaw our infectious disease franchise. So seasoned health care professional, curious individual. And I think we've got the right individual on a very growth-minded aspect of the portfolio.

Okay. And this question for you, Jim. No disrespect to you. As you take over, do you see opportunities or anything different that you -- your vision for the business? Is it in any way, shape or form may be different?

Yes. So the first thing I would say is the current strategy is working. We went from a period when Steve first joined the company where we were just trying to grow the company, right? Recall, prior to Steve coming in, Quest Diagnostics was not growing. So we established a 2% to 3% growth platform and our recent guidance of 4% to 5% top line growth we believe, is achievable. There's not going to be any major -- don't look for any major tacks in the strategy at all. We have great presence with our health plans, and we're going to -- we have great access today. But recall, we just got into network with UnitedHealthcare and there's still parts of Anthem that we're working with. We just got back into network with Horizon. So tremendous growth ahead of us within those 3 plans. Our health system strategy, we believe more than ever, especially coming out of COVID that health systems will need our help more than ever. You're acutely aware of some of the labor issues they have, some of the cost pressures that they have. And to the extent we can help them run their laboratories through our professional lab management business and take 10% to 15% of cost out of their laboratory spend. That's a very attractive value proposition. Our work in advanced diagnostics will continue on. And if anything, I'll push harder and further. The continued development of genetics in the cancer space, especially in the reoccurrence, minimally residual disease space appears to be growing more attractive every day. We have some assays that are available, but I would expect some bigger and potentially bolder moves there. And then we remain incredibly bullish on our consumer-initiated testing business. We're at the very beginning here, call it the second inning. We continue to build out an entirely new platform. We've invested in new platforms, new people. We brought on a gentleman named Richard Adams, who came from the digital space, had not worked in health care before, but that's the kind of fresh eyes and fresh thinking we need as we build out this new platform.

I definitely want to talk about that later in more detail. Maybe let's talk a little bit about the business and all the trends that we always have to ask these questions. But base business recovery, are you there? Do you feel like we're sort of almost back to normal or 95%, 99% of the way there? How is that?

We're largely recovered, Kevin. We've progressed through recoveries from really the end of the second quarter of 2020 and progressively got back to business we had before in 2019, and we actually have recovered sooner than expected, and there's a few holdouts geographically, this city has been a hold out. We're still down versus where we were in 2019.

And you can see it.

And we have a couple of what we call clinical franchises that are a little soft in than where we entered the pandemic. But we also have some areas in some businesses that are significantly better than where we were, growing nicely and up versus 2019. So Jim, you want to comment a little bit about the clinical franchises that are beyond and what's going on in New York.

Yes. So New York still remains down in the mid-teens relative to pre-pandemic volume levels. It's not just here in Manhattan where much of our business relied on people coming into the city and then getting -- either visiting their physician or coming to Quest Diagnostics for blood draw, urine collection. It's true in the other boroughs as well. So Bronx, Queens, Staten Island, the business there is down. We think some of that is attributed to public transportation, a fear of getting on buses and subways. But we've seen a recovery, modest recovery since the first of this year. In terms of -- when we look across our clinical franchises, molecular diagnostics significantly stronger than 2019. Our anatomical pathology business back to where it was above 2019 levels. I would say the one portion of our testing that has not quite recovered is prescription drug monitoring. And really, much of that is tied to behavioral health centers still not reopening or behavioral health centers that have gone to televisits. And remember, much of these -- many of these behavioral health centers are people coming in to get treatment. And in order to get treatment, you have to test and prove that you're not taking anything at that time. So I think as these behavioral health centers continue to reopen, that business will reemerge. It's a very important part of what we do, and it's a very important part of our mission to this country is to keep the pandemic of drug abuse in check.

We track the SICAN data, we try to use it as sort of a proxy. There's been a couple of weird things that have popped up. We saw a big spike in pathology testing recently. I don't know if that's a real thing or if that's a data issue?

Hard to tell, but some of this can be routine visits to a dermatologist that people just put off. There's something a mole that looks funny, but you can put that off. So some of that could be just routine visits to dermatologists that result in biopsies. A lot of it could be from colonoscopies, right? Let's face it. Those are the kinds of things that people delayed during the pandemic. They're not urgent. If there's no major issue, it's something you can put off for 3 months and 6 months. And I have -- we can look at the segments of our pathology business that's growing and our dermatology business is strong and our GI business in terms of specimens we get from colonoscopy is strong.

Yes, that could be it. that SICAN data that we track, clinical lab volumes never came back as fast as sort of the hospital volumes and molecular volumes. I know hospital volumes probably have some COVID in there. But just -- is that what you're seeing as well?

Well, we saw last year, our hospital volumes ex COVID fully recovered in the third and fourth quarter of last year. And recall, as the pandemic wound down last year and those hospital beds freed up and elective procedures started to come back, those volumes returned to 2019 levels. But remember, the types of testing that we get from health systems is generally more advanced testing. It could be rare infectious diseases. It could be people in for a kidney transplant, where we do type matching types of services. So some of that work was actually sort of resistant to the pandemic, right? If you needed a kidney transplant, you still needed a kidney transplant, right? There are some things that you could just not put off. And then there were other people going into hospitals, just routine infectious diseases, they end up in the ICU. And it's that kind of work that generates testing for us. So it never really fell off to the extent that the physician market did and it recovered more quickly.

And as you guys know, as you were walking out, you ran into your peers. We had a long discussion about the excess investments that were made for COVID and what they were doing with them and how they would roll off. You guys did the same. You still have some excess investments just from COVID. We can talk about the other investments. How do you think about the sustainability of those? How much flexibility exists in that business.

Yes. Let me start, Kevin, I think [indiscernible] were able to realize where we have our 50,000 people at Quest. So often, we think about Quest in the laboratory, which we are, but that is only a fraction of our resources. There's a lot of the resources in the front end, phlebotomy with our patient service centers or carriers that move specimens to our laboratory, the sorting that goes on within the laboratory and then we have the laboratory processing and then there's the back-end call centers and billing operations. So when you think about COVID, the majority of the resources we added are really around that molecular portion of the laboratory, and there was capital added to that, and there was laboratory resources added to that. So it's a small fraction of the 50,000. So Jim will talk through what do we add and what do we have as overhang, if you will.

Yes. So our major investments were in the Hologic Panther platform as well as the Roche Cobas systems. On the Hologic side, pre-pandemic, we had already standardized all of our women's health care testing but it was on an older platform called the Tigris. And that Tigris had hit the end of life. And prior to the pandemic, we had just signed a deal with Hologic that we were going to replace an entire fleet of Tigris instruments. So turning to pandemic, we decided to keep those Tigrises to do our women's health care testing. We took on all of those Panther units, and that's what we were doing much of our COVID testing on. Now that, that testing has slowed down, we've started the retirement of those Tigris assets and we're shifting that work over to the Panther platform. So it could not have worked out better. If I told -- I tried to tell Steve that we actually strategically planned this, but there was a little bit of luck in the timing of all of this. But it's worked out. On the Roche side, we had a fleet of Cobas units that we were doing all of our viral load testing on. The capacity matched the demand. We now have more capacity than demand for the viral load testing. But what we had done is we had concentrated that viral load testing down to 4 centers of excellence because we took on more Roche assets, we distributed those assets into all of our regional labs. So we can now do this viral load testing in 24 hours. Do we have too much capacity? Well, the answer is yes. But the capacity is paid for. We depreciated those assets quickly, thinking that COVID actually would be mostly over by now. So there's no financial hangover from the money we spent on those assets. And Roche and we'll continue to innovate on that platform. They'll continue to develop new assays. There's also open channels on the Roche Cobas units, which give us the flexibility to actually run LDTs, our own laboratory tests on that platform, that's what we choose to do.

Okay. I think that's an underappreciated part of all this. I want to talk about the broader costs and everything else because I think we are all struggling with trying to understand how to get from point A to point B in terms of how much of the cost and the investments that you made in the fourth quarter or late last year. How much of that is sort of onetime in nature? How much of it will roll off, how much of it is sticky investment? And if we were to break it out or maybe I'll just ask you what's the best way for us to think about or model it, I guess, is the right way to say it, those investments that you made last year?

Well, first of all, if you look at the investments in COVID, it's very manageable. We're managing our way through that. And as Jim said, a lot of the equipment was fully depreciated and we matched up the acceleration of that depreciation around the opportunity we saw around COVID. So there's not a lot of overhang but there's concern about..

But there's also advanced diagnostics in there.

Sure. But in parallel, we took some of the proceeds from COVID. We did $5.5 billion of COVID testing in 2 years and we generated more cash than we would have expected, and we invested in the business. And we primarily have placed that investment in the 2 areas that we see the most opportunity for growth. One is in advanced diagnostics. And the second is consumer-initiated testing. And so we sized that last year to about $75 million. This year, that's about $160 million. So year-on-year, it's about $85 million. Both of those [indiscernible] based on a business case. So you ask me where the overhang might be for that? Well, eventually, they're going to pay for itself. We're already starting to see the returns earlier. For that advanced diagnostics business, we talked about that in '21. We feel good about the progress we've made there. And then secondly is our consumer-initiated testing that business is growing rapidly. And it's a business that we said last year was about $70 million, including COVID, and we have a goal of getting that to $250 million by 2025. And that's base business alone. So we expect that business to be a nice grower for us that we don't have in a current run rate as far as growth going forward. So good investments of resources that we found with COVID investing in 2 businesses that we believe will propel our growth going forward that we haven't seen before.

Okay. That's helpful. And so when we think about the margins for the business, you say it pays for itself over a period of time. I know you have -- you're running your own economic models. How should we think about that? Is it a 3-year, 5-year return on investment? I mean that...

So if you remember back in '21, we had an Investor Day, and we moved up our growth, as Jim said, to a 4% to 5% growth. And then we also said our earnings growth to be 7% to 9%. We're tracking against that. We never guided margins, Kevin, in this business because we think for us, we're always making a trade-off of how do we get better economics to grow the top line, get great ROIC. By way of example, we're in the middle of a number of deals with hospital systems in those, what we call professional lab services arrangement are lower margin, but they're all growth and they're great return on invested capital. And so therefore, they're very value creating. And so that's in that 7% to 9%. We have this mixture and also initially, that consumer-initiated testing will be lower margin. And I expect eventually, it could be low margin for some time. But again, it's going to be all growth, it's going to be a great return on invested capital, and it's going to build value. So I think what you need to look at is are we on track for that 7% to 9%? With what we've indicated we are.

Okay. Fair enough. And I want to talk about some of those segments. I think the issue that people have is trying to understand how those investments laid out against this overhang, this macro-overhang of inflation, right? I think John and we've talked about this, we all did our checks with the regional guys. And without COVID, we would have been -- we would be losing money right now. That narrative echoed through the investment community and made everyone very concerned about the outlook for the larger clinical labs. I understand your cost base is different. The inflation hasn't necessarily slowed down either, right? It's not getting easier, labor is not getting any easier. Take us through what you've said before about it and sort of where we stand now. Is there any increased concern about it? Is there a point where it needs to get a little bit better or else it starts to impact that 7% to 9%.

Yes, I got you. I got you. Well, there's 2 parts of it. One is labor and one is material cost. So Jim, why don't you...

Sure. So on the labor side, we're different from health systems. And I know HCA and others came out and said they had substantial wage inflation. But most of that was driven by their nursing costs. We don't have nurses. If you look at our large labor pools, the first one is phlebotomy. Did we see some wage inflation? Sure. We did. But with phlebotomy, very different from nursing, you can increase the labor supply very quickly. These are generally high school educated individuals that either go to a community college for 6 months to a year or a technical school or we will train you. And so we can create a pool of phlebotomists pretty quickly and increase that supply. Logistics. Logistics, we target -- we don't target the same people that Amazon is targeting. We're going to target people who can go into a physician office, have a thoughtful conversation with the staff in the physician office. They're not just there picking up specimens. They're a source of intelligence for us and they build a relationship with that office. We're very comfortable hiring people as a second job, people in their 50s, in their 60s. And that's a more stable workforce. The area where we saw higher turnover than we would have liked is in what we call specimen processing. These are the people that open up the specimen bags, scan the specimens in, maybe you have to do a little paperwork. And those jobs, they started at 10:00 at night, they go through the morning. They're always tough jobs to fill. But in this kind of environment, it became a little more difficult to fill. But we said that our wage inflation will be between 2% to 3% this year. And we've gone through the first quarter. We have nothing to indicate that it's not going to be 2% to 3% for the whole year. Are there spikes in certain markets? Sure. We get that from time to time. On the material side of the thing, about 80% of our spend is under long-term contract. And I can assure you those long-term contracts with our suppliers don't contemplate price increases for reagents. If anything it goes in the other direction. Now I had several questions today. Well, what about when those contracts expire this year and next year and the year after? Don't you think you're going to get hit with large price increases? And the answer is just the opposite. Because every time one of those contracts expire, it generally means we're going to change a platform in a department. And that gives us opportunity to run a competition. And generally, over a 5-year period, our suppliers, our partners in this industry that can be Roche, Siemens, Hologic, Thermo Fisher. They've been hard at work coming up with a new platform. That always uses less reagents, less labor because they've automated certain things. They can bring artificial intelligence on board. And so we view these end of contract periods as an opportunity to drive better quality, better productivity and savings for the company. And that's really what we rely on as part of our Invigorate program is those big technology changes, platform changes.

So Kevin, I think it's on the labor piece because there's so much energy around what's going on with inflation [ related ] labor. Let me dimensionalize a little bit to add to what Jim just said. If you think about the highest turnover where we see more inflationary pressure, it's in that frontline position that we call specimen processing. We have 50,000 people in the company. It's around 15% of our workforce that are there, and we see more pressure on that. But that -- the wage bill on that is anywhere from $15 an hour to $20 an hour. So it's 15% of the workforce, but about 10% of the wage bill. To give you an idea, right? So then you go to the next largest risk we have, if you will, in terms of inflationary pressures, it's careers of 4,000 people. And then you get into the phlebotomy, less turnover, less concerns. The laboratory is fairly stable, okay? And then we have our professional workforce, which is competing generally in the marketplace. So if you think about the different categories of our work classes, you get down to the granularity, what happens at Quest Diagnostics with 50,000 people. It's not as acute as most people are thinking.

That's fair. That's actually helpful because some of those numbers, I don't think we've heard before. So that's actually really helpful. What about fuel costs? It's always -- we always question, you have a lot of planes presumably, right? Your couriers, I'm guessing or not the ones we have in Manhattan on bicycles. So how does that impact you? How should we think about it? I know we've run analysis, I think Andrea has done that analysis as well. But we weren't assuming $6 gas in California.

No. And certainly, our fuel costs are up. Shawn, I think we mentioned a number this year that we expected a $7 million to $8 million increase in fuel spend. But in the scope of our total Invigorate program, it's a cost that we think we can manage. And most of our fuel spend is actually on the vehicles. We have a small fleet of 25 aircraft, but these are small turbo prop planes that are actually single engine, very fuel efficient and we buy -- we don't fly into Newark Airport. We fly into very small regional airports where the fuel prices tend to be a lot lower.

And I think you need to realize, too, on this piece of inflationary pressure concern, Kevin, we've been now on a perennial basis, driving 3% productivity and Jim's been leading this effort. And then a 3% productivity has always been getting better in terms of our procurement costs. Well, dialed into that 3% was any kind of price increase that we saw historically. And so when we talk about 3% productivity, it included any kind of inflationary pressure. And so that's already dialed in, and we're going to offset some of that with better negotiation with our suppliers.

Okay Jim, you were very important part of the Invigorate program, that is my understanding. One question we've got and a concern that we've gotten is who's going to be running Invigorate now if you're going to be talking to investors and handling M&A.

It falls under Cathy Doherty, but we have a very capable leader with good Quest tenure and lots of operational excellence types of experience. Regardless of my position and even in Steve's position, he never took his eye off it, and I never took my eye off it. And there is always opportunity out there. And I would say we're in the third or fourth inning when it comes to automation, we're in the first or second inning when it comes to the use of artificial intelligence. I'm sure you've talked to others about digital pathology. We're still in the pilot phase. We feel very optimistic that over the next 10 years, we'll be 100% digital in this company. Anywhere you go in the laboratory and you still see people looking under a microscope, it's an opportunity for the use of automation and artificial intelligence. Our microbiology departments where we've recently adopted some of the Copan instruments. Everything is automated from opening up the tube of urine, plating the wafer, capping it, putting it in the oven, taking pictures of it, 100% automated, including segmenting the negatives and positives, quick read through the negatives. You do still have to apply to confirm the positive analysis, but then the machine learns as you're making these diagnoses and it becomes smarter. So there's so much more room in this industry for the use of artificial intelligence, and it's not just to replace labor. It will improve the quality of the work we do.

Yes, Kevin, we're often asked, which Jim and I get frustrated about, can you guys keep on cutting cost. That was literally going to. So Jim and I, we've talked about this. The reason why we talk about productivity, it's not just about cost cutting. It's about working smarter. And while we've gotten more efficient, okay, our quality has gotten better and our service performance has gotten better. So our mindset is a total quality approach. And so what Jim is doing around automation and artificial intelligence is taking that next innovation leap into improving our operations, and that's going to benefit everyone that's buying health care for Quest Diagnostics. And so there's a lot more we can do to get smarter how we run our operations. So that's how we're driving this program. It's not about cutting cost. Jim and I have a joke that you [ any it ] could cut cost but not any it, that could drive productivity gains.

Yes. And much of this is coming through the continued digital transformation of our business as well. I mean, I could give you a couple of examples. When you walk into our patient service center, and you see the digital check-in, right? Recall before we had have a person standing out there kind of managing the queue, managing people signing in, that's all automated now. Physicians ordering supplies. They used to send us faxes. All of that can be done online. So we don't need people taking paper off or responding to an e-mail. It's 100% fulfilled. You order, it goes to our fulfillment center. It's picked, packed and shipped.

Sure. How many reqs are still that are on paper.

Yes. We're still -- what hits our lab about 80% of the requisitions are electronics, still 20% coming in paper. And so every one of those reqs represents a $1 of savings and 20% of 150 million reqs, that's a lot of money. The other process that we digitize. And again, we do it -- we go into this because it's what the customer wants, but it saves us money. So pickups for specimens. Not all of our customers we stop in every single day. There's customers that don't generate labs every day. So we ask them to call us and they used to call us. And we used to have 150 people answering the phones, just yes, doctor we'll be there at 3:00 today. Now it's just like ordering an Uber service. You get online literally in seconds. They can request a pickup. We confirm the pickup, and we can wrap that pick up to the driver that's nearest to that customer at that point in time. So it's 100% automated, and we obviously took out many of the people that we're answering those phones. So we put them into different positions. So these are some of the things where you start with how do I improve the experience, you digitize it experience. And every time you digitize the front end of a process, you're generally taking out work on the back end as well.

So the logical question is in the next -- what's peak margins for this business? It sounds like they can be -- they could be higher just simply -- I know you don't want to commit and Shawn is over there waving his hands, don't say anything.

So Kevin, what we said is our top line is going to grow 4% to 5%, okay? Our EPS is going to grow 7% to 9%. That's the next step...

Free cash flow that covers that delta that almost implies negative margin.

We got to keep on moving that. We're going to get through COVID, make these investments, get the yield on those investments. And then with that, with PAMA, eventually being in back of us, which will happen, either we're going to have one last cut and then we'll be without PAMA. Then you remember that was 100 basis points for the headwind in our growth, right? It's historically. So you get that in a better pricing environment, you can start to see where going past that outlook period that we've indicated so far, you can get the higher growth rates and our margin growth.

Right. Okay. Fair enough. I know we only have a couple of minutes left. I have a couple of really fast questions that people have pinged me with. How much of your volumes actually come from New York? Do you guys ever disclose that or...?

We've sites...

I would just tell you, our East region, New York, New Jersey into Pennsylvania, not all Pennsylvania, it's 1 of 6 regions, and it's more than 1/6 of the company.

It's a good CEO answer, right? The consumer testing business, we didn't get a chance to talk about it -- of time. How meaningful can that be in terms of -- how additive can it be to growth or how additive going to be to profits over time? I mean, I know right now, you said it's not going to be for a period of time. But you don't do something to not make money eventually.

Yes. So we've said by 2025, it can be $250 million ex COVID. We think it's a $2.5 billion market. So we're trying -- our goal is to get 10% share of that. We're on that growth trajectory that we laid out ex COVID. We feel good about it. We're going through a major platform change. You'll see a whole new buying experience later this fall or early winter. And all signs point to it's a great market. There's consumers out there that want to get lab testing. We call it democratizing lab testing without having to go to a physician. And there's 3 or 4 very clear segments. The first one is people with chronic conditions, we call watchful warriors. And why go to your doctor to get a lab order for an A1c test that you know is going to get rejected by the payer because you've already done 2 this year. And these are people that may want to get a test once a month and really manage their chronic disease. The privacy segment, people that don't want their doctor to know what they're getting tested for it. They don't want their insurance company to know because they don't want a bill or something coming in the mail. A big chunk of this can be around STDs and STIs and people just wanted to be private. And then there's people that are just very conscious of what's going on inside their human body. The same people that are wearing devices and watches. These could be marathon runners. These could be high-performance athletes that want to measure hormone levels or measure toxins, nutrient testing, I think, will continue to emerge as the science really starts to back this microbiome testing and the effect on your cardiovascular system and your overall health. So we're really, really bullish on this market. And the millennials, as you know, many of them don't have doctors. They want to know what's going on, and it's quick to just get a lab test, and that can then inform you whether you need to see physician or not.

Kevin, if you think about the 70 million we have, that included COVID, right? So if you assume, let's say, some large portion of that was COVID. That number is going to go to 250 over 3 years. We never had that growth before. This is all accretive to our enterprise-wide growth. So it's a big opportunity for us.

And the gross margins, like all of our lab business are fine. It's just we're going to spend heavily right now.

That DTC spending and...

it's DTC spending. After you build out the new platform with the buying experience, you then have to have systems in place to capture Kevin, when you come to our site, we want to capture it. We want to know who you are. We want to know what types of testing you're interested in. And so when you come back, we know who you are, we know what you've bought. And then there's obviously just the search engine optimization work that has to occur in order -- when somebody types in diabetes, we want Quest Diagnostics to come to the front. Some of that is free, just search engine optimization, other is paid search that you have to invest in. But the game is you've got to get the eyeballs to come to the site. You got to have a superb buying experience. And once you've spent the money to get the eyeballs and you're making a bet on repeat business and then you start to lessen the paid search work.

I have to ask about the CFO. I know we're out of time, but I have to ask what the CFO search. When do you think we'll hear something? Maybe this earnings call...

So we indicated in February, we expect that we'd have something in Q2 through Q3, and we're tracking against that goal. So I feel good. We've had a number of great candidates. We've interviewed both. We've got a good thorough process, and we think we're on track for that time frame.

And with that, would there be another -- a new announcement of capital deployment or buyback or anything like that?

No, it's intended to bring that person in. Mark is still around so we can spend some time with Mark and then Jim and I are available to help transition that person. So don't see initially any kind of deliberate change in any of that.

What's the first question for your candidate $8.50 for next year, yes.

Not yet.

Gentlemen, thank you so much. This has been fantastic. It's always good.

Thank you.

Thank you, everybody, for joining.