On February 2, 2023 Quest Diagnostics Incorporated (NYSE: DGX), the world’s leading provider of diagnostic information services, reported financial results for the fourth quarter and full year ended December 31, 2022 (Press release, Quest Diagnostics, FEB 2, 2023, View Source [SID1234626776]).
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"Quest had another strong year in 2022, with base business revenues growing more than 6% in the fourth quarter, and 5% for the full year," said Jim Davis, CEO and President. "COVID-19 testing revenues declined as expected but still exceeded $1.4 billion in 2022.
"In 2023, our focus is on growing our base business and increasing our efforts to drive productivity and expand margins. Our guidance for the full year reflects continued growth in the base business, tailwinds from recent Medicare reimbursement changes, investments to accelerate growth, and declining COVID-19 revenues."
Three Months Ended December 31,
Twelve Months Ended December 31,
2022
2021
Change
2022
2021
Change
(dollars in millions, except per share data)
Reported:
Net revenues
$ 2,333
$ 2,744
(15.0) %
$ 9,883
$ 10,788
(8.4) %
Base business revenues (a)
$ 2,149
$ 2,022
6.3 %
$ 8,429
$ 8,018
5.1 %
COVID-19 testing revenues
$ 184
$ 722
(74.6) %
$ 1,454
$ 2,770
(47.5) %
Diagnostic information services revenues
$ 2,265
$ 2,674
(15.3) %
$ 9,609
$ 10,494
(8.4) %
Revenue per requisition
(5.1) %
(4.5) %
Requisition volume
(11.2) %
(4.5) %
Organic requisition volume
(11.4) %
(5.1) %
Operating income (b)
$ 135
$ 536
(74.9) %
$ 1,428
$ 2,381
(40.0) %
Operating income as a percentage of net revenues (b)
5.8 %
19.5 %
(13.7) %
14.5 %
22.1 %
(7.6) %
Net income attributable to Quest Diagnostics (b)
$ 101
$ 390
(74.2) %
$ 946
$ 1,995
(52.6) %
Diluted EPS (b) (c)
$ 0.87
$ 3.12
(72.1) %
$ 7.97
$ 15.55
(48.7) %
Cash provided by operations
$ 334
$ 481
(30.5) %
$ 1,718
$ 2,233
(23.1) %
Capital expenditures
$ 147
$ 144
2.7 %
$ 404
$ 403
0.3 %
Adjusted (b):
Operating income
$ 330
$ 579
(42.7) %
$ 1,742
$ 2,565
(32.0) %
Operating income as a percentage of net revenues
14.2 %
21.1 %
(6.9) %
17.6 %
23.8 %
(6.2) %
Net income attributable to Quest Diagnostics
$ 229
$ 416
(44.9) %
$ 1,181
$ 1,827
(35.4) %
Diluted EPS (c)
$ 1.98
$ 3.33
(40.5) %
$ 9.95
$ 14.24
(30.1) %
(a)
Excludes COVID-19 testing.
(b)
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.
(c)
The sum of reported and adjusted diluted EPS for the four quarters of both 2022 and 2021 did not equal the totals for the years ended December 31, 2022 and 2021, respectively, due to both quarterly fluctuations in our earnings and in the weighted average common shares outstanding throughout the years.
Guidance for Full Year 2023
We estimate full year 2023 guidance as follows:
Low
High
Net revenues
$8.83 billion
$9.03 billion
Net revenues decrease
(10.7) %
(8.6) %
Base business revenues (a)
$8.65 billion
$8.75 billion
Base business revenues increase
2.6 %
3.8 %
COVID-19 testing revenues
$175 million
$275 million
COVID-19 testing revenues decrease
(88.0) %
(81.1) %
Reported diluted EPS
$7.61
$8.21
Adjusted diluted EPS
$8.40
$9.00
Cash provided by operations
At least $1.3 billion
Capital expenditures
Approximately $400 million
(a)
Excludes COVID-19 testing.
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, certain financial impacts resulting from the COVID-19 pandemic, amortization expense, excess tax benefits ("ETB") associated with stock-based compensation, costs associated with donations, contributions, and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities), gains and losses associated with changes in the carrying value of our strategic investments, a gain on sale of an ownership interest in a joint venture, 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 February 2, 2023 until midnight Eastern Time on February 16, 2023, by phone at 888-566-0462 for domestic callers and 203-369-3609 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.