10-QPeriod: Q1 FY2019

QUEST DIAGNOSTICS INC Quarterly Report for Q1 Ended Mar 31, 2019

Filed April 24, 2019For Securities:DGX

Summary

Quest Diagnostics reported mixed results for the first quarter of 2019. While net revenues saw a slight increase of 0.4% to $1.9 billion, driven by acquisitions and organic volume growth in the Diagnostic Information Services (DIS) segment, the company experienced a 3.0% decrease in revenue per requisition. This decline is attributed to reimbursement pressures, including PAMA, increased denials, and higher patient concessions, partially offset by a favorable test mix. The Diagnostic Solutions (DS) segment saw a 2.8% revenue decrease. Net income attributable to Quest Diagnostics stockholders decreased by 7.3% to $164 million, resulting in diluted earnings per share of $1.20, down from $1.27 in the prior year. Despite the dip in net income, cash flow from operations significantly improved, increasing by $95 million to $275 million, largely due to lower performance-based compensation and favorable working capital movements. The company also completed a $500 million senior notes offering and continued its Invigorate cost-saving program, which generated $14 million in pre-tax charges primarily related to systems conversion and integration.

Financial Highlights

57 data points
Beta

Revenue

$1.89B

34.2% Gross Margin

Net Income

$164.00M

8.7% Net Margin

EPS (Diluted)

$1.20

Total Assets

$11.94B

Cash & Equivalents

$464.00M

Free Cash Flow

$228.00M

Financial Statements
Beta
Revenue$1.89B
Cost of Revenue$1.24B
Gross Profit$647.00M
SG&A Expenses$384.00M
Operating Expenses$1.64B
Operating Income$248.00M
Interest Expense$45.00M
Net Income$164.00M
EPS (Basic)$1.22
EPS (Diluted)$1.20
Shares Outstanding (Basic)134.00M
Shares Outstanding (Diluted)136.00M

Key Highlights

  • 1Total net revenues increased slightly by 0.4% to $1.9 billion.
  • 2Diagnostic Information Services (DIS) segment revenues grew 0.5% due to acquisitions and volume growth, though revenue per requisition declined 3.0%.
  • 3Net income attributable to stockholders decreased 7.3% to $164 million, with diluted EPS falling to $1.20 from $1.27.
  • 4Net cash provided by operating activities saw a substantial increase of 52.8% ($95 million) to $275 million.
  • 5The company acquired the clinical laboratory services business of Boyce & Bynum for $61 million.
  • 6Quest Diagnostics raised $500 million through a senior notes offering in March 2019.
  • 7The Invigorate cost-saving program incurred $14 million in pre-tax charges for system integration and conversion.

Frequently Asked Questions

Net revenues increased by 0.4% to $1.9 billion, primarily driven by the Diagnostic Information Services (DIS) segment. This growth was fueled by contributions from recent acquisitions and an increase in organic volume, partially offset by a decline in revenue per requisition.

Net income attributable to Quest Diagnostics stockholders decreased by 7.3% to $164 million, and diluted EPS fell to $1.20 from $1.27. This decline was influenced by factors such as increased operating costs (Cost of Services and SG&A), particularly those related to acquisitions and systems integration, along with lower operating income compared to the prior year.

Net cash provided by operating activities significantly improved, increasing by $95 million (52.8%) to $275 million. This improvement was mainly due to lower performance-based compensation payments and favorable timing of working capital account movements, despite lower operating income.

Quest Diagnostics completed a $500 million offering of senior unsecured notes due in June 2029. A portion of the proceeds were used to repay outstanding indebtedness under its secured receivables credit facility and for general corporate purposes. Additionally, in April 2019, proceeds were used to repay senior notes due April 1, 2019.