10-QPeriod: Q1 FY2020

QUEST DIAGNOSTICS INC Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 4, 2020For Securities:DGX

Summary

Quest Diagnostics Incorporated (DGX) reported its first-quarter results for the period ending March 31, 2020, reflecting a challenging start to the year significantly impacted by the onset of the COVID-19 pandemic. Total net revenues decreased by 3.7% to $1.82 billion compared to the prior year. This decline was primarily driven by a 3.8% drop in revenues from the Diagnostic Information Services (DIS) segment, which constitutes over 95% of the company's revenue. While the early part of the quarter showed growth, the latter half experienced a material decline in testing volumes, exceeding 40% in the last two weeks of March due to COVID-19 related measures. Net income attributable to Quest Diagnostics stockholders fell by 39.9% to $99 million, translating to diluted earnings per share of $0.73, down from $1.20 in the prior year. The company's cash flow from operations also saw a decrease. Despite these headwinds, Quest Diagnostics has been actively involved in the COVID-19 response, investing in testing capabilities and managing supply chain challenges. Management acknowledges the significant uncertainty and potential for continued adverse impacts due to the pandemic and ongoing economic conditions.

Financial Highlights

57 data points
Beta

Revenue

$1.82B

30.3% Gross Margin

Net Income

$99.00M

5.4% Net Margin

EPS (Diluted)

$0.73

Total Assets

$12.05B

Cash & Equivalents

$342.00M

Free Cash Flow

$164.00M

Financial Statements
Beta
Revenue$1.82B
Cost of Revenue$1.27B
Gross Profit$552.00M
SG&A Expenses$347.00M
Operating Expenses$1.65B
Operating Income$175.00M
Interest Expense$42.00M
Net Income$99.00M
EPS (Basic)$0.74
EPS (Diluted)$0.73
Shares Outstanding (Basic)134.00M
Shares Outstanding (Diluted)135.00M

Key Highlights

  • 1Total net revenues declined 3.7% year-over-year to $1.82 billion.
  • 2Net income attributable to Quest Diagnostics stockholders decreased by 39.9% to $99 million.
  • 3Diluted earnings per share (EPS) fell to $0.73 from $1.20 in the prior year.
  • 4The company experienced a significant decline in testing volumes in March 2020 due to the COVID-19 pandemic, with volumes down over 40% in the last two weeks of the month.
  • 5Net cash provided by operating activities decreased to $247 million from $275 million in the prior year.
  • 6Quest Diagnostics made a strategic acquisition of Blueprint Genetics Oy for $108 million in January 2020.
  • 7The company temporarily suspended share repurchases under its existing authorization through the end of 2020.

Frequently Asked Questions

The COVID-19 pandemic had a significant negative impact on Quest Diagnostics' financial performance starting in March 2020. This resulted in a material decline in testing volumes, with volumes down by over 40% in the last two weeks of March. This led to a decrease in net revenues and net income compared to the prior year period.

Management expects the COVID-19 pandemic to continue to adversely impact the company's results of operations, financial position, and cash flows. The extent of this impact will depend on the severity and duration of the pandemic, its effect on the healthcare system and economy, and the effectiveness of government responses. The company is taking measures to preserve liquidity and manage costs.

Yes, Quest Diagnostics completed the acquisition of Blueprint Genetics Oy on January 21, 2020, for $108 million. Blueprint Genetics is a specialty genetic testing company.

Quest Diagnostics has temporarily suspended additional share repurchases under its existing authorization through the end of 2020 due to the economic uncertainties arising from the COVID-19 pandemic. As of March 31, 2020, $1.2 billion remained available under its share repurchase authorizations.