Quest Diagnostics Reports Second Quarter 2024 Financial Results; Raises Guidance for Full Year 2024
- Second quarter revenues of $2.40 billion, up 2.5% from 2023
- Second quarter reported diluted earnings per share ("EPS") of $2.03, down 1.0% from 2023; and adjusted diluted EPS of $2.35, up 2.2% from 2023
- Full year 2024 revenues now expected to be between $9.50 billion and $9.58 billion; reported diluted EPS now expected to be between $7.57 and $7.77; and adjusted diluted EPS expected to be between $8.80 and $9.00
SECAUCUS, N.J., July 23, 2024 /PRNewswire/ -- Quest Diagnostics Incorporated (NYSE: DGX), a leading provider of diagnostic information services, today announced financial results for the second quarter ended June 30, 2024.
"We delivered another strong quarter, with base business revenue growth of nearly 4% and total revenue growth of 2.5% as well as continued improvement in productivity and profitability in the base business," said Jim Davis, Chairman, CEO and President. "This performance is due to growth of new physician and hospital customers, more favorable test mix that includes greater adoption of advanced diagnostics and continued strength in healthcare utilization. We also made progress improving our operational quality and efficiency through greater use of automation and AI."
Mr. Davis added: "In addition, we are excited to announce four acquisitions that meet our criteria for growth, profitability and returns, and that will enable us to expand in strategic growth areas. Our planned acquisition of LifeLabs will position us to help this trusted lab leader grow and better serve Canada's growing and aging population. The acquisitions we recently announced of select outreach lab assets of Allina Health in Minnesota and Wisconsin and OhioHealth in Ohio reflect our ability to partner with high-quality health systems and extend our presence in key geographies. Our recently completed PathAI Diagnostics acquisition positions us to rapidly scale digital pathology innovation to help health systems and other providers improve cancer diagnoses."
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||
2024 | 2023 | Change | 2024 | 2023 | Change | |||||||
(dollars in millions, except per share data) | ||||||||||||
Reported: | ||||||||||||
Net revenues | $ 2,397 | $ 2,338 | 2.5 % | $ 4,763 | $ 4,669 | 2.0 % | ||||||
Diagnostic Information Services revenues | $ 2,333 | $ 2,268 | 2.8 % | $ 4,631 | $ 4,527 | 2.3 % | ||||||
Revenue per requisition | 1.6 % | 0.9 % | ||||||||||
Requisition volume | 1.1 % | 1.4 % | ||||||||||
Organic requisition volume | 0.7 % | 0.9 % | ||||||||||
Operating income (a) | $ 355 | $ 348 | 1.9 % | $ 655 | $ 653 | 0.2 % | ||||||
Operating income as a percentage of net revenues (a) | 14.8 % | 14.9 % | (0.1) % | 13.7 % | 14.0 % | (0.3) % | ||||||
Net income attributable to Quest Diagnostics (a) | $ 229 | $ 235 | (2.4) % | $ 423 | $ 437 | (3.1) % | ||||||
Diluted EPS (a) | $ 2.03 | $ 2.05 | (1.0) % | $ 3.75 | $ 3.83 | (2.1) % | ||||||
Cash provided by operations | $ 360 | $ 444 | (18.9) % | $ 514 | $ 538 | (4.4) % | ||||||
Capital expenditures | $ 92 | $ 104 | (10.8) % | $ 196 | $ 231 | (14.9) % | ||||||
Adjusted (a): | ||||||||||||
Operating income | $ 398 | $ 389 | 2.1 % | $ 747 | $ 739 | 1.0 % | ||||||
Operating income as a percentage of net revenues | 16.6 % | 16.7 % | (0.1) % | 15.7 % | 15.8 % | (0.1) % | ||||||
Net income attributable to Quest Diagnostics | $ 266 | $ 263 | 1.4 % | $ 496 | $ 495 | 0.2 % | ||||||
Diluted EPS | $ 2.35 | $ 2.30 | 2.2 % | $ 4.39 | $ 4.34 | 1.2 % | ||||||
(a) | For further details impacting the year-over-year comparisons related to operating income, operating income as a percentage of net revenues, net income attributable to Quest Diagnostics, and diluted EPS, see note 2 of the financial tables attached below. |
Updated Guidance for Full Year 2024
The company updates its full year 2024 guidance as follows:
Updated Guidance | Prior Guidance | ||||||
Low | High | Low | High | ||||
Net revenues | $9.50 billion | $9.58 billion | $9.40 billion | $9.48 billion | |||
Net revenues increase | 2.7 % | 3.5 % | 1.6 % | 2.5 % | |||
Reported diluted EPS | $7.57 | $7.77 | $7.57 | $7.82 | |||
Adjusted diluted EPS | $8.80 | $9.00 | $8.72 | $8.97 | |||
Cash provided by operations | Approximately $1.3 billion | Approximately $1.3 billion | |||||
Capital expenditures | Approximately $420 million | Approximately $420 million | |||||
The company's updated guidance does not include the impact of the pending LifeLabs acquisition given the uncertainty around when the transaction will close. The company continues to expect to complete the transaction by the end of the year, subject to certain customary closing conditions and approvals, including Canadian regulatory approvals.
Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to measures under accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, amortization expense, excess tax benefits ("ETB") associated with stock-based compensation, gains and losses associated with changes in the carrying value of our strategic investments, and other items.
Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. The additional tables attached below include reconciliations of non-GAAP adjusted measures to GAAP measures.
Conference Call Information
Quest Diagnostics will hold its quarterly conference call to discuss financial results beginning at 8:30 a.m. Eastern Time today. The conference call can be accessed by dialing 888-455-0391 within the U.S. and Canada, or 773-756-0467 internationally, passcode: 7895081; or via live webcast on our website at www.QuestDiagnostics.com/investor. We suggest participants dial in approximately 10 minutes before the call.
A replay of the call may be accessed online at www.QuestDiagnostics.com/investor or, from approximately 10:30 a.m. Eastern Time on July 23, 2024 until midnight Eastern Time on August 6, 2024, by phone at 866-363-1805 for domestic callers or 203-369-0193 for international callers. Anyone listening to the call is encouraged to read our periodic reports, on file with the Securities and Exchange Commission, including the discussion of risk factors and historical results of operations and financial condition in those reports.
About Quest Diagnostics
Quest Diagnostics works across the healthcare ecosystem to create a healthier world, one life at a time. We provide diagnostic insights from the results of our laboratory testing to empower people, physicians and organizations to take action to improve health outcomes. Derived from one of the world's largest databases of de-identifiable clinical lab results, Quest's diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management. Quest Diagnostics annually serves one in three adult Americans and half the physicians and hospitals in the United States, and our nearly 50,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives and create a healthier world. www.QuestDiagnostics.com.
Forward Looking Statements
The statements in this press release which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners, acquisitions and other factors discussed in the company's most recently filed Annual Report on Form 10-K and in any of the company's subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.
This earnings release, including the attached financial tables, is available online in the Newsroom section at www.QuestDiagnostics.com.
ADDITIONAL TABLES FOLLOW
Quest Diagnostics Incorporated and Subsidiaries Consolidated Statements of Operations For the Three and Six Months Ended June 30, 2024 and 2023 (in millions, except per share data) (unaudited) | |||||||
Three Months Ended | Six Months Ended | ||||||
2024 | 2023 | 2024 | 2023 | ||||
Net revenues | $ 2,397 | $ 2,338 | $ 4,763 | $ 4,669 | |||
Operating costs and expenses and other operating income: | |||||||
Cost of services | 1,593 | 1,546 | 3,188 | 3,106 | |||
Selling, general and administrative | 416 | 416 | 856 | 855 | |||
Amortization of intangible assets | 29 | 28 | 58 | 54 | |||
Other operating expense, net | 4 | — | 6 | 1 | |||
Total operating costs and expenses, net | 2,042 | 1,990 | 4,108 | 4,016 | |||
Operating income | 355 | 348 | 655 | 653 | |||
Other income (expense): | |||||||
Interest expense, net | (44) | (37) | (87) | (72) | |||
Other income, net | 3 | 6 | 12 | 13 | |||
Total non-operating expense, net | (41) | (31) | (75) | (59) | |||
Income before income taxes and equity in earnings of equity method investees | 314 | 317 | 580 | 594 | |||
Income tax expense | (74) | (75) | (140) | (140) | |||
Equity in earnings of equity method investees, net of taxes | — | 7 | 8 | 12 | |||
Net income | 240 | 249 | 448 | 466 | |||
Less: Net income attributable to noncontrolling interests | 11 | 14 | 25 | 29 | |||
Net income attributable to Quest Diagnostics | $ 229 | $ 235 | $ 423 | $ 437 | |||
Earnings per share attributable to Quest Diagnostics' common stockholders: | |||||||
Basic | $ 2.05 | $ 2.08 | $ 3.79 | $ 3.88 | |||
Diluted | $ 2.03 | $ 2.05 | $ 3.75 |
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