Quest Diagnostics(DGX) - 2024 Q2 - Quarterly Results

Second Quarter 2024 Financial Results Overview Quest Diagnostics delivered strong second-quarter 2024 financial results, driven by base business growth and strategic acquisitions, leading to an updated full-year outlook Performance Highlights Quest Diagnostics reported strong Q2 2024 results with revenue and adjusted EPS growth, driven by base business expansion, new customer acquisition, and strategic acquisitions Q2 & H1 2024 Key Financial Metrics | Metric | Q2 2024 | Q2 2023 | Change | H1 2024 | H1 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $2,397 million | $2,338 million | 2.5% | $4,763 million | $4,669 million | 2.0% | | Reported Diluted EPS | $2.03 | $2.05 | (1.0)% | $3.75 | $3.83 | (2.1)% | | Adjusted Diluted EPS | $2.35 | $2.30 | 2.2% | $4.39 | $4.34 | 1.2% | | Cash Provided by Operations | $360 million | $444 million | (18.9)% | $514 million | $538 million | (4.4)% | - Management attributed the strong quarterly performance to several factors:[2] - Growth from new physician and hospital customers.[2] - A more favorable test mix, including higher adoption of advanced diagnostics.[2] - Continued strength in healthcare utilization.[2] - Improved operational quality and efficiency through increased use of automation and AI.[2] - The company announced four strategic acquisitions to drive growth:[18] - LifeLabs: To expand services in Canada.[18] - Allina Health & OhioHealth outreach lab assets: To extend presence in Minnesota, Wisconsin, and Ohio.[18] - PathAI Diagnostics: To scale digital pathology innovation for improved cancer diagnoses.[18] Financial Performance Quest Diagnostics' financial performance for Q2 and H1 2024 showed increased net revenues and operating income, alongside shifts in balance sheet and cash flow dynamics Consolidated Statements of Operations Net revenues for Q2 2024 increased to $2.40 billion, while operating income slightly rose to $355 million, though net income attributable to Quest Diagnostics decreased to $229 million Consolidated Statements of Operations Highlights (in millions, except per share data) | Account | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $2,397 | $2,338 | $4,763 | $4,669 | | Operating Income | $355 | $348 | $655 | $653 | | Net Income Attributable to Quest Diagnostics | $229 | $235 | $423 | $437 | | Diluted EPS | $2.03 | $2.05 | $3.75 | $3.83 | Consolidated Balance Sheets As of June 30, 2024, total assets decreased to $13.88 billion, primarily due to reduced cash, while total liabilities decreased and stockholders' equity increased Key Balance Sheet Items (in millions) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $271 | $686 | | Total current assets | $2,017 | $2,372 | | Total assets | $13,881 | $14,022 | | Long-term debt | $3,816 | $4,410 | | Total liabilities | $7,225 | $7,680 | | Total stockholders' equity | $6,656 | $6,342 | Consolidated Statements of Cash Flows Net cash from operations for H1 2024 decreased to $514 million, while investing activities used less cash, and financing activities primarily focused on debt repayments and dividends Six Months Ended June 30, Cash Flow Summary (in millions) | Cash Flow Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $514 | $538 | | Net cash used in investing activities | ($413) | ($840) | | Net cash (used in) provided by financing activities | ($516) | $113 | | Net change in cash and cash equivalents | ($415) | ($189) | Full Year 2024 Guidance Quest Diagnostics updated its full-year 2024 guidance, raising net revenue and adjusted diluted EPS expectations while maintaining cash flow and capital expenditure outlook Updated Full Year 2024 Outlook Quest Diagnostics raised its full-year 2024 guidance for net revenues and adjusted diluted EPS, while maintaining its outlook for cash from operations and capital expenditures Full Year 2024 Guidance Comparison | Metric | Updated Guidance | Prior Guidance | | :--- | :--- | :--- | | Net Revenues | $9.50 billion - $9.58 billion | $9.40 billion - $9.48 billion | | 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 | Approx. $1.3 billion | Approx. $1.3 billion | | Capital Expenditures | Approx. $420 million | Approx. $420 million | - The company's updated guidance does not incorporate the impact of the pending acquisition of LifeLabs acquisition, as the closing timeline is subject to Canadian regulatory approvals[19] Reconciliation of GAAP to Non-GAAP Financial Measures This section provides a reconciliation of Quest Diagnostics' GAAP financial measures to non-GAAP adjusted metrics, offering a clearer view of underlying business performance Adjusted Performance Metrics Quest Diagnostics provides non-GAAP adjusted financial measures, such as adjusted diluted EPS of $2.35 for Q2 2024, to clarify underlying performance by excluding specific items like amortization and restructuring charges Q2 2024 GAAP to Non-GAAP Reconciliation (per share) | Description | Diluted EPS Impact | | :--- | :--- | | As Reported (GAAP) | $2.03 | | Restructuring and integration charges | $0.06 | | Other | $0.03 | | Gains and losses on investments | $0.05 | | Amortization expense | $0.19 | | ETB | ($0.01) | | As Adjusted (Non-GAAP) | $2.35 | FY 2024 Guidance GAAP to Non-GAAP Reconciliation (per share) | Description | Low End | High End | | :--- | :--- | :--- | | Diluted EPS (GAAP) | $7.57 | $7.77 | | Restructuring and integration charges | $0.30 | $0.30 | | Amortization expense | $0.81 | $0.81 | | Other | $0.11 | $0.11 | | Gains and losses on investments | $0.05 | $0.05 | | ETB | ($0.04) | ($0.04) | | Adjusted Diluted EPS (Non-GAAP) | $8.80 | $9.00 |