On April 27, 2023 Quest Diagnostics Incorporated (NYSE: DGX), the world’s leading provider of diagnostic information services, reported financial results for the first quarter ended March 31, 2023 (Press release, Quest Diagnostics, APR 27, 2023, View Source [SID1234630619]).

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"In the first quarter we delivered double digit year-over-year revenue growth in our base business, driven by strong performance across our physician and hospital customers," said Jim Davis, Chairman, CEO and President. "We are excited about our announced acquisition of Haystack Oncology, which supports our molecular genomics and oncology strategy in the fast growing category of minimal residual disease testing."

Mr. Davis continued: "Our updated guidance reflects continued strong performance in our base business, offset by faster than expected declines in COVID-19 revenues and modest dilution from our planned acquisition of Haystack."

Three Months Ended March 31,

2023

2022

Change

(dollars in millions, except per share data)

Reported:

Net revenues

$ 2,331

$ 2,611

(10.7) %

Base business revenues (a)

$ 2,212

$ 2,012

10.0 %

COVID-19 testing revenues

$ 119

$ 599

(80.2) %

Diagnostic Information Services revenues

$ 2,259

$ 2,541

(11.1) %

Revenue per requisition

(7.7) %

Requisition volume

(3.8) %

Organic requisition volume

(3.9) %

Operating income (b)

$ 305

$ 513

(40.6) %

Operating income as a percentage of net revenues (b)

13.1 %

19.7 %

(6.6) %

Net income attributable to Quest Diagnostics (b)

$ 202

$ 355

(43.0) %

Diluted EPS (b)

$ 1.78

$ 2.92

(39.0) %

Cash provided by operations

$ 94

$ 480

(80.5) %

Capital expenditures

$ 127

$ 63

101.3 %

Adjusted (b):

Operating income

$ 350

$ 554

(36.8) %

Operating income as a percentage of net revenues

15.0 %

21.2 %

(6.2) %

Net income attributable to Quest Diagnostics

$ 232

$ 392

(40.7) %

Diluted EPS

$ 2.04

$ 3.22

(36.6) %

(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.

Updated Guidance for Full Year 2023

The company updates its Full Year 2023 guidance as follows:

Updated Guidance

Prior Guidance

Low

High

Low

High

Net revenues

$8.93 billion

$9.08 billion

$8.83 billion

$9.03 billion

Net revenues decrease

(9.6) %

(8.1) %

(10.7) %

(8.6) %

Base business revenues (a)

$8.78 billion

$8.88 billion

$8.65 billion

$8.75 billion

Base business revenues increase

4.2 %

5.4 %

2.6 %

3.8 %

COVID-19 testing revenues

$150 million

$200 million

$175 million

$275 million

COVID-19 testing revenues decrease

(89.7) %

(86.2) %

(88.0) %

(81.1) %

Reported diluted EPS

$7.52

$8.02

$7.61

$8.21

Adjusted diluted EPS

$8.45

$8.95

$8.40

$9.00

Cash provided by operations

At least $1.3 billion

At least $1.3 billion

Capital expenditures

Approximately $400 million

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, 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, 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 April 27, 2023 until midnight Eastern Time on May 11, 2023, by phone at 866-363-1835 for domestic callers or 203-369-0200 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.