10-QPeriod: Q1 FY2022

QUEST DIAGNOSTICS INC Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 22, 2022For Securities:DGX

Summary

Quest Diagnostics Incorporated (DGX) reported its first quarter 2022 results, showing a slight decline in net revenues to $2.61 billion from $2.72 billion in the prior year period. This decrease was primarily driven by a significant reduction in COVID-19 testing volumes, which offset growth in the company's base business and contributions from recent acquisitions. Diluted Earnings Per Share (EPS) also saw a decrease to $2.92 from $3.46 year-over-year. Despite the revenue headwinds from lower COVID-19 testing, the company's core operations demonstrated resilience. Base business revenues, excluding COVID-19 testing, grew by 7.0%, indicating a continued recovery. The company also actively managed its capital structure, repurchasing $350 million in common stock during the quarter and increasing its share repurchase authorization. Quest Diagnostics continues its 'Invigorate' program aimed at cost reduction and operational efficiency.

Financial Highlights

57 data points
Beta

Revenue

$2.61B

37.0% Gross Margin

Net Income

$355.00M

13.6% Net Margin

EPS (Diluted)

$2.92

Total Assets

$13.44B

Cash & Equivalents

$712.00M

Free Cash Flow

$417.00M

Financial Statements
Beta
Revenue$2.61B
Cost of Revenue$1.65B
Gross Profit$965.00M
SG&A Expenses$425.00M
Operating Expenses$2.10B
Operating Income$513.00M
Interest Expense$37.00M
Net Income$355.00M
EPS (Basic)$2.97
EPS (Diluted)$2.92
Shares Outstanding (Basic)119.00M
Shares Outstanding (Diluted)121.00M

Key Highlights

  • 1Net revenues decreased by 4.0% to $2.61 billion in Q1 2022, largely due to a 26.7% decrease in COVID-19 testing revenues.
  • 2Base business revenues (excluding COVID-19 testing) increased by 7.0% year-over-year, demonstrating recovery and growth in core operations.
  • 3Diluted EPS declined to $2.92 from $3.46 in the prior year period, impacted by lower COVID-19 testing and increased operating costs.
  • 4Operating income decreased by 22.3% to $513 million, reflecting higher cost of services and SG&A expenses.
  • 5The company acquired Pack Health, LLC for $123 million to enhance its patient engagement capabilities within the DIS segment.
  • 6Quest Diagnostics repurchased $350 million of its common stock in Q1 2022 and increased its share repurchase authorization by $1 billion.
  • 7Net cash provided by operating activities was $480 million, down from $731 million in the prior year, primarily due to lower operating income and working capital timing.

Frequently Asked Questions

The primary driver for the decrease in net revenues to $2.61 billion was a significant reduction in COVID-19 testing revenues, which fell by 26.7% compared to the prior year. This was partially offset by growth in the company's base business and contributions from recent acquisitions.

Quest Diagnostics is executing its 'Invigorate' program, a multi-year initiative focused on reducing its cost structure and improving performance, aiming for approximately 3% annual savings and productivity improvements. In Q1 2022, they incurred $11 million in pre-tax charges related to this program, primarily for systems conversion and integration costs.

The company's base business, which excludes COVID-19 testing, showed positive momentum. Revenues in the base business increased by 7.0% year-over-year, and testing volume in the base business was up 6.2%, indicating a continued recovery from the impacts of the COVID-19 pandemic.

In Q1 2022, Quest Diagnostics generated $480 million in net cash from operating activities. The company utilized this cash for strategic acquisitions, notably Pack Health for $123 million, and for returning capital to shareholders through share repurchases totaling $350 million. They also declared a quarterly cash dividend of $0.66 per common share.