Quest Diagnostics(DGX) - 2025 Q3 - Quarterly Results

Executive Summary & Business Highlights Third Quarter 2025 Performance Overview Quest Diagnostics reported robust financial performance for the third quarter of 2025, demonstrating significant top- and bottom-line growth driven by strong demand for clinical solutions, strategic acquisitions, and expansion in its consumer channel - The company achieved robust top- and bottom-line growth, underscoring strong demand for clinical solutions and diligent execution of its strategy[3] Third Quarter 2025 Key Financial Highlights | Metric | Q3 2025 Value | Change from Q3 2024 | Source | | :-------------------------------- | :-------------- | :------------------ | :----- | | Revenues | $2.82 billion | +13.1% | chunk_num: [5] | | Organic Growth (Revenues) | N/A | +6.8% | chunk_num: [3] | | Reported Diluted EPS | $2.16 | +8.5% | chunk_num: [5] | | Adjusted Diluted EPS | $2.60 | +13.0% | chunk_num: [5] | | Year-to-date Cash provided by operations | $1.4 billion | +63.1% | chunk_num: [5] | | Requisition volume | N/A | +12.5% | chunk_num: [7] | | Organic requisition volume | N/A | +3.9% | chunk_num: [7] | Key Strategic Developments and Collaborations Quest Diagnostics advanced its strategic objectives through a major joint venture, key acquisitions, and several collaborations aimed at expanding its market reach, enhancing service offerings, and driving innovation in diagnostic testing - Entered into an agreement with Corewell Health to establish a lab services joint venture in Michigan, with Quest deploying comprehensive Co-Lab Solutions across 21 Corewell hospitals, expected to reach approximately $1 billion in annual revenues next year[3][6] - Completed the acquisition of select dialysis testing assets from Fresenius Medical Care and began scaling clinical lab testing for approximately 200,000 dialysis patients annually[6] - Formed collaborations with WHOOP and ŌURA Health to integrate lab services into their mobile apps, catering to growing consumer interest in wellness and preventive health[6] - Announced a collaboration with Epic for Project Nova, a multi-year initiative to streamline systems and improve experiences for patients and providers[6] - Secured FDA breakthrough device designation for the Haystack MRD™ test and formed collaborations with Mass General Brigham and Rutgers Cancer Institute for trials[6] Updated Full Year 2025 Guidance Quest Diagnostics raised its full-year 2025 financial guidance, reflecting strong year-to-date performance and a positive outlook for net revenues, adjusted diluted EPS, and cash provided by operations Updated Full Year 2025 Guidance Comparison | Metric | Updated Guidance (Low) | Updated Guidance (High) | Prior Guidance (Low) | Prior Guidance (High) | | :-------------------------- | :--------------------- | :---------------------- | :------------------- | :-------------------- | | Net revenues | $10.96 billion | $11.00 billion | $10.80 billion | $10.92 billion | | Net revenues increase | 11.0% | 11.4% | 9.4% | 10.6% | | Reported diluted EPS | $8.58 | $8.66 | $8.60 | $8.80 | | Adjusted diluted EPS | $9.76 | $9.84 | $9.63 | $9.83 | | Cash provided by operations | Approximately $1.8 billion | N/A | Approximately $1.55 billion | N/A | | Capital expenditures | Approximately $500 million | N/A | Approximately $500 million | N/A | Consolidated Financial Statements Consolidated Statements of Operations The consolidated statements of operations show significant year-over-year growth in net revenues and operating income for both the three and nine months ended September 30, 2025, reflecting strong operational performance Consolidated Statements of Operations Highlights (Three Months Ended September 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :--------- | | Net revenues | $2,816 | $2,488 | 13.1% | | Operating income | $386 | $330 | 16.8% | | Net income attributable to Quest Diagnostics | $245 | $226 | 8.4% | | Diluted EPS | $2.16 | $1.99 | 8.5% | Consolidated Statements of Operations Highlights (Nine Months Ended September 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :------------------------------------ | :-------------- | :-------------- | :--------- | | Net revenues | $8,229 | $7,251 | 13.5% | | Operating income | $1,170 | $985 | 18.8% | | Net income attributable to Quest Diagnostics | $747 | $649 | 15.1% | | Diluted EPS | $6.57 | $5.74 | 14.5% | Consolidated Balance Sheets As of September 30, 2025, Quest Diagnostics maintained a stable financial position with total assets slightly increasing, while managing its debt and enhancing stockholders' equity Consolidated Balance Sheet Highlights (September 30, 2025 vs. December 31, 2024) | Metric | Sep 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (Millions) | | :-------------------------------- | :---------------------- | :---------------------- | :---------------- | | Total assets | $16,197 | $16,153 | +$44 | | Cash and cash equivalents | $432 | $549 | -$117 | | Accounts receivable, net | $1,456 | $1,304 | +$152 | | Goodwill | $8,901 | $8,856 | +$45 | | Total current liabilities | $2,134 | $2,169 | -$35 | | Long-term debt | $5,171 | $5,615 | -$444 | | Total Quest Diagnostics stockholders' equity | $7,258 | $6,778 | +$480 | Consolidated Statements of Cash Flows For the nine months ended September 30, 2025, Quest Diagnostics generated significantly more cash from operating activities compared to the prior year, while cash used in investing activities decreased substantially due to lower business acquisition spending Consolidated Statements of Cash Flows Highlights (Nine Months Ended September 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (Millions) | | :------------------------------------ | :-------------- | :-------------- | :---------------- | | Net cash provided by operating activities | $1,421 | $870 | +$551 | | Net cash used in investing activities | $(440) | $(2,046) | +$1,606 | | Net cash (used in) provided by financing activities | $(1,101) | $1,254 | -$2,355 | | Net change in cash and cash equivalents | $(117) | $78 | -$195 | | Business acquisitions, net of cash acquired | $(51) | $(1,781) | +$1,730 | | Repayments of debt | $(1,011) | $(302) | -$709 | | Purchases of treasury stock | $(150) | — | -$150 | Non-GAAP Financial Measures and Reconciliations Definition and Rationale for Non-GAAP Measures Quest Diagnostics utilizes non-GAAP 'adjusted' financial measures, which exclude specific special items, to provide a clearer view of the company's core operating performance and underlying business trends, complementing GAAP results for management and investor analysis - The term 'reported' refers to measures under GAAP, while 'adjusted' refers to non-GAAP operating performance measures that exclude special items[9] - Special items excluded from adjusted measures include restructuring and integration charges, amortization expense, excess tax benefits (ETB) from stock-based compensation, gains/losses on strategic investments, impairment charges, and other items[9] - Management uses these non-GAAP measures to evaluate performance, analyze underlying business trends, establish budgets, and for incentive compensation purposes, believing they are useful to investors and analysts[10][11] Reconciliation of Reported to Adjusted Results - Three Months Ended September 30, 2025 For the third quarter of 2025, adjusted financial results, which exclude specific non-recurring and non-operational items, show higher operating income and diluted EPS compared to reported GAAP figures Q3 2025 GAAP to Adjusted Reconciliation | Metric | As Reported (GAAP) | Adjustments (Millions) | As Adjusted (Non-GAAP) | | :------------------------------------ | :----------------- | :--------------------- | :--------------------- | | Operating income | $386 | +$72 | $458 | | Operating income as a percentage of net revenues | 13.7% | +2.6% | 16.3% | | Net income attributable to Quest Diagnostics | $245 | +$51 | $296 | | Diluted EPS | $2.16 | +$0.44 | $2.60 | Reconciliation of Reported to Adjusted Results - Nine Months Ended September 30, 2025 For the nine months ended September 30, 2025, adjusted financial results, excluding various special items, demonstrate a stronger underlying performance with higher operating income and diluted EPS compared to reported GAAP figures YTD 2025 GAAP to Adjusted Reconciliation | Metric | As Reported (GAAP) | Adjustments (Millions) | As Adjusted (Non-GAAP) | | :------------------------------------ | :----------------- | :--------------------- | :--------------------- | | Operating income | $1,170 | +$160 | $1,330 | | Operating income as a percentage of net revenues | 14.2% | +2.0% | 16.2% | | Net income attributable to Quest Diagnostics | $747 | +$98 | $845 | | Diluted EPS | $6.57 | +$0.86 | $7.43 | Reconciliation of Reported to Adjusted Results - Three Months Ended September 30, 2024 For the third quarter of 2024, adjusted financial results, which exclude specific non-recurring and non-operational items, also showed higher operating income and diluted EPS compared to reported GAAP figures Q3 2024 GAAP to Adjusted Reconciliation | Metric | As Reported (GAAP) | Adjustments (Millions) | As Adjusted (Non-GAAP) | | :------------------------------------ | :----------------- | :--------------------- | :--------------------- | | Operating income | $330 | +$55 | $385 | | Operating income as a percentage of net revenues | 13.3% | +2.2% | 15.5% | | Net income attributable to Quest Diagnostics | $226 | +$36 | $262 | | Diluted EPS | $1.99 | +$0.31 | $2.30 | Reconciliation of Reported to Adjusted Results - Nine Months Ended September 30, 2024 For the nine months ended September 30, 2024, adjusted financial results, excluding various special items, indicated a stronger underlying performance with higher operating income and diluted EPS compared to reported GAAP figures YTD 2024 GAAP to Adjusted Reconciliation | Metric | As Reported (GAAP) | Adjustments (Millions) | As Adjusted (Non-GAAP) | | :------------------------------------ | :----------------- | :--------------------- | :--------------------- | | Operating income | $985 | +$147 | $1,132 | | Operating income as a percentage of net revenues | 13.6% | +2.0% | 15.6% | | Net income attributable to Quest Diagnostics | $649 | +$109 | $758 | | Diluted EPS | $5.74 | +$0.96 | $6.70 | Notes on Adjustments to Financial Measures The adjustments to GAAP results primarily include restructuring and integration charges, legal and impairment charges, gains/losses on strategic investments, and other non-recurring gains, with income tax impacts calculated using a combined statutory rate of 25.5% - Restructuring and integration charges primarily relate to workforce reductions and integration costs, impacting cost of services and selling, general and administrative expenses[32] - Other charges for 2025 include a $15 million charge for legal matters and impairment charges of $5 million (Q3) and $29 million (YTD) on long-lived assets due to a business exit, plus losses from contingent consideration accruals[32] - Other gains for 2025 include a $46 million pre-tax gain from a CARES Act payroll tax credit and a non-recurring gain related to a lease[34] - Income tax impacts for most adjustments were calculated using a combined statutory income tax rate of 25.5% for both 2025 and 2024[33][37] Reconciliation of Full Year 2025 EPS Guidance The company provided a reconciliation of its full-year 2025 diluted EPS outlook from GAAP to adjusted figures, detailing the estimated impact of various special items Full Year 2025 Diluted EPS Guidance Reconciliation | Metric | Low (Dollars) | High (Dollars) | | :-------------------------------- | :------------ | :------------- | | Diluted EPS (GAAP) | $8.58 | $8.66 | | Restructuring and integration charges (a) | +$0.30 | +$0.30 | | Amortization expense (b) | +$1.02 | +$1.02 | | Other charges (c) | +$0.39 | +$0.39 | | Other gains (d) | -$0.36 | -$0.36 | | Gains and losses on investments (e) | -$0.01 | -$0.01 | | ETB | -$0.16 | -$0.16 | | Adjusted diluted EPS | $9.76 | $9.84 | - The outlook for adjusted diluted EPS represents management's estimates before the impact of special items, which are subject to further changes and difficult to predict[36] - As of September 30, 2025, $0.7 billion remained available under the company's share repurchase authorization, with 0.9 million shares repurchased for $150 million during the three and nine months ended September 30, 2025[36] Additional Information Conference Call Details Quest Diagnostics hosted a conference call to discuss its financial results, providing access via dial-in and live webcast, with a replay available for a limited period - A quarterly conference call was held on October 21, 2025, at 8:30 a.m. Eastern Time to discuss financial results[12] - Access was available via phone (888-455-0391 U.S./Canada, 773-756-0467 international, passcode: 7895081) or live webcast at www.QuestDiagnostics.com/investor[12](index=12&type=chunk) - A replay of the call is accessible online or by phone until midnight Eastern Time on November 4, 2025[13] About Quest Diagnostics Quest Diagnostics is a leading provider of diagnostic information services, leveraging its extensive network and data to empower healthcare decisions and improve health outcomes for a significant portion of the U.S. population - Quest Diagnostics provides diagnostic insights from laboratory testing to empower people, physicians, and organizations to improve health outcomes[14] - The company serves one in three adult Americans and half the physicians and hospitals in the United States annually, with over 55,000 employees[14] - Diagnostic insights are derived from one of the world's largest databases of de-identifiable clinical lab results[14] Forward-Looking Statements The press release contains forward-looking statements that are subject to various risks and uncertainties, which could cause actual results to differ materially from current expectations - Statements in the press release that are not historical facts are considered forward-looking statements, reflecting management's current estimates and expectations[15] - Readers are cautioned not to place undue reliance on these statements, as they involve risks and uncertainties that could materially affect actual results[15] - Risks include uncertain economic conditions, adverse government investigations or lawsuits, competitive environment, billing complexities, changes in government policies, and other factors detailed in SEC filings[15] Investor Relations Contact Contact information for media and investor inquiries is provided, along with details on where to access the full earnings release - Media inquiries can be directed to Wendy Bost at 973-520-2800[16] - Investor inquiries can be directed to Shawn Bevec at 973-520-2900[16] - The earnings release, including financial tables, is available online in the Newsroom section at www.QuestDiagnostics.com[16](index=16&type=chunk)