Quest Diagnostics Files Q3 2024 10-Q

TL;DR

Quest Diagnostics Q3 10-Q is in: financials updated, check for revenue and net income trends.

AI Summary

Quest Diagnostics Inc. filed its 10-Q for the period ending September 30, 2024. The filing provides financial details for the third quarter and the first nine months of the year, including revenue and net income figures. Specific balance sheet items and changes in equity are also detailed, reflecting the company's financial position.

Why It Matters

This filing provides investors and analysts with the latest financial performance and position of Quest Diagnostics, crucial for understanding the company's operational health and future outlook.

Risk Assessment

Risk Level: low — This is a routine quarterly financial filing with no immediate red flags.

Key Numbers

• N/A — Revenue (Specific revenue figures for Q3 2024 are not explicitly listed in the provided text snippet.)
• N/A — Net Income (Specific net income figures for Q3 2024 are not explicitly listed in the provided text snippet.)

Key Players & Entities

• Quest Diagnostics Inc. (company) — Filer of the 10-Q
• 2024-09-30 (date) — End of the reporting period
• 2024-10-23 (date) — Filing date

FAQ

Key Financial Figures

• $0.01 — ange on which registered Common Stock, $0.01 Par Value DGX New York Stock Exchange

Filing Documents

• dgx-20240930.htm (10-Q) — 1301KB
• dgx093024ex31.htm (EX-3.1) — 68KB
• dgx09302024ex22.htm (EX-22) — 23KB
• dgx09302024ex311.htm (EX-31.1) — 10KB
• dgx09302024ex312.htm (EX-31.2) — 10KB
• dgx09302024ex321.htm (EX-32.1) — 5KB
• dgx09302024ex322.htm (EX-32.2) — 5KB
• 0001022079-24-000190.txt ( ) — 7335KB
• dgx-20240930.xsd (EX-101.SCH) — 43KB
• dgx-20240930_cal.xml (EX-101.CAL) — 81KB
• dgx-20240930_def.xml (EX-101.DEF) — 214KB
• dgx-20240930_lab.xml (EX-101.LAB) — 596KB
• dgx-20240930_pre.xml (EX-101.PRE) — 419KB
• dgx-20240930_htm.xml (XML) — 1133KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION Page

Financial Statements (unaudited)

Item 1. Financial Statements (unaudited) Index to unaudited consolidated financial statements filed as part of this report: Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2024 and 2023 2 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2024 and 2023 3 Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 4 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024 and 2023 5 Consolidated Statements of Stockholders' Equity for the Three and Nine Months Ended September 30, 2024 and 2023 6

Notes to Consolidated Financial Statements (unaudited)

Notes to Consolidated Financial Statements (unaudited) 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 29

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk See Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" 41

Controls and Procedures

Item 4. Controls and Procedures

Controls and Procedures

Controls and Procedures 41 1 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (unaudited) (in millions, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net revenues $ 2,488 $ 2,295 $ 7,251 $ 6,964 Operating costs and expenses and other operating income: Cost of services 1,677 1,541 4,865 4,647 Selling, general and administrative 448 380 1,304 1,235 Amortization of intangible assets 32 27 90 81 Other operating expense, net 1 5 7 6 Total operating costs and expenses, net 2,158 1,953 6,266 5,969 Operating income 330 342 985 995 Other income (expense): Interest expense, net ( 49 ) ( 40 ) ( 136 ) ( 112 ) Other income (expense), net 15 ( 3 ) 27 10 Total non-operating expense, net ( 34 ) ( 43 ) ( 109 ) ( 102 ) Income before income taxes and equity in earnings of equity method investees 296 299 876 893 Income tax expense ( 65 ) ( 68 ) ( 205 ) ( 208 ) Equity in earnings of equity method investees, net of taxes 6 6 14 18 Net income 237 237 685 703 Less: Net income attributable to noncontrolling interests 11 12 36 41 Net income attributable to Quest Diagnostics $ 226 $ 225 $ 649 $ 662 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 2.01 $ 1.99 $ 5.80 $ 5.87 Diluted $ 1.99 $ 1.96 $ 5.74 $ 5.79 Weighted average common shares outstanding: Basic 112 112 111 112 Diluted 113 114 112 114 The accompanying notes are an integral part of these statements. 2 Table of Contents QUEST DIAGNOSTICS INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2024 AND 2023 (unaudited) (in millions) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income $ 237 $ 237 $ 685 $ 703 Other comprehensive income (loss): F

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) (in millions, unless otherwise indicated) 1. DESCRIPTION OF BUSINESS Background Quest Diagnostics Incorporated and its subsidiaries ("Quest Diagnostics" or the "Company") work across the healthcare ecosystem to create a healthier world, one life at a time. The Company's diagnostic information services ("DIS") business provides diagnostic insights from the results of its laboratory testing to empower people, physicians, and organizations to take action to improve health outcomes. Derived from one of the world's largest databases of de-identifiable clinical lab results, the diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve healthcare management. In the right hands and with the right context, the diagnostic insights can inspire actions that transform lives and create a healthier world. The Company provides services to a broad range of customers within its primary customer channels - physicians (including those associated with accountable care organizations and Federally Qualified Health Centers), hospitals, and patients and consumers. Other customers include health plans, employers, emerging retail healthcare providers, government agencies, pharmaceutical companies and other commercial clinical laboratories. The Company offers broad access to clinical testing through a nationwide network of laboratories, patient service centers, phlebotomists in physician offices, and connectivity resources, including call centers and mobile phlebotomists, nurses and other health and wellness professionals. The Company's large in-house staff of medical and scientific experts, including medical directors, scientific directors, genetic counselors and board-certified geneticists, provide medical and scientific consultation to healthcare providers and patients regarding the Company's tests and test results, and help them best utilize Quest Diagnostics' services to improv

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) dilutive common shares outstanding during the period. Potentially dilutive common shares include the dilutive effect of outstanding stock options and performance share units granted under the Company's Amended and Restated Employee Long-Term Incentive Plan ("ELTIP") and its Amended and Restated Non-Employee Director Long-Term Incentive Plan ("DLTIP"), as well as the dilutive effect of accelerated share repurchase agreements ("ASRs"), if applicable. Earnings allocable to participating securities include the portion of dividends declared as well as the portion of undistributed earnings during the period allocable to participating securities. New Accounting Standards to be Adopted In November 2023, the Financial Accounting Standards Board ("FASB") issued a new accounting standard which will require companies to disclose significant segment expenses that are regularly provided to the chief operating decision maker ("CODM"). The pronouncement is effective for annual filings for the year ended December 31, 2024 and for interim periods within the year ended December 31, 2025. The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position or cash flows. In December 2023, the FASB issued a new accounting standard which will require companies to make additional income tax disclosures. The pronouncement is effective for annual filings for the year ended December 31, 2025. The Company does not expect the adoption of this standard to have a material impact on its results of operations, financial position or cash flows. In March 2024, the Securities and Exchange Commission issued a rule which will require companies to make certain climate-related disclosures in periodic filings. The rule includes certain disclosures in the footnotes of the financial statements: capitalized costs, expenditur

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) 3. EARNINGS PER SHARE The computation of basic and diluted earnings per common share was as follows (in millions, except per share data): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Amounts attributable to Quest Diagnostics' common stockholders: Net income attributable to Quest Diagnostics $ 226 $ 225 $ 649 $ 662 Less: Earnings allocated to participating securities 1 2 3 4 Earnings available to Quest Diagnostics' common stockholders – basic and diluted $ 225 $ 223 $ 646 $ 658 Weighted average common shares outstanding – basic 112 112 111 112 Effect of dilutive securities: Stock options and performance share units 1 2 1 2 Weighted average common shares outstanding – diluted 113 114 112 114 Earnings per share attributable to Quest Diagnostics' common stockholders: Basic $ 2.01 $ 1.99 $ 5.80 $ 5.87 Diluted $ 1.99 $ 1.96 $ 5.74 $ 5.79 The following securities were not included in the calculation of diluted earnings per share due to their antidilutive effect: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Stock options and performance share units — 1 1 — 4. RESTRUCTURING ACTIVITIES AND IMPAIRMENT CHARGES Invigorate Program The Company is engaged in a multi-year program called Invigorate, which includes structured plans to drive savings and improve productivity across the value chain, including in such areas as patient services, logistics and laboratory operations, revenue services, information technology and procurement. The Invigorate program aims to deliver 3 % annual cost savings and productivity improvements to partially offset pressures from the current inflationary environment, including labor and benefit cost increases and reimbursement pressures. The Company is leveraging automation and artificial intelligence to improve productivity and also

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Employee separation costs $ 7 $ 1 $ 21 $ 17 Asset impairment charges — — — 5 Total restructuring and impairment charges $ 7 $ 1 $ 21 $ 22 The restructuring and impairment charges incurred for both the three and nine months ended September 30, 2024 were associated with various workforce reduction initiatives as the Company continued to restructure its organization. Of the total restructuring and impairment charges incurred during the three months ended September 30, 2024, $ 4 million and $ 3 million were recorded in cost of services and selling, general and administrative expenses, respectively. Of the total restructuring and impairment charges incurred during the nine months ended September 30, 2024, $ 12 million and $ 9 million were recorded in cost of services and selling, general and administrative expenses, respectively. The restructuring and impairment charges incurred for both the three and nine months ended September 30, 2023 were primarily associated with various workforce reduction initiatives as the Company continued to restructure its organization. Additionally, during the nine months ended September 30, 2023, the Company recorded an impairment charge for a corporate facility that was held for sale. All of the restructuring and impairment charges incurred during the three months ended September 30, 2023 were recorded in cost of services. Of the total restructuring and impairment charges incurred during the nine months ended September 30, 2023, $ 10 million and $ 12 million were recorded in cost of services and selling, general and administrative expenses, respectively. Charges for all periods presented were primarily recorded in the Company's DIS business. The restructuring liability as of September 30, 2024 and December 31, 2023, which is included

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – CONTINUED (unaudited) (in millions, unless otherwise indicated) On August 23, 2024, the Company acquired all of the issued and outstanding common shares of LifeLabs Inc. and all of the partnership interests of BPC Lab Finance LP (collectively, "LifeLabs") in an all-cash transaction for approximately CAN $ 1.35 billion (approximately USD $ 1 billion), net of cash acquired. LifeLabs provides laboratory diagnostic information and digital health connectivity systems in Canada. The acquisition price is subject to a customary net working capital adjustment. The Company funded the acquisition with a portion of the net proceeds from the issuance of senior notes (see Note 7 for further details). Following the acquisition in August 2024, LifeLabs contributed $ 74 million to the Company's consolidated net revenues for the period ending September 30, 2024. The purchase price allocation in the table below is based upon a preliminary valuation and the Company's estimates and assumptions are subject to change within the measurement period as the valuation is finalized. Management is currently in the process of verifying data and finalizing information related to the valuation and recording of identifiable intangible assets, certain other assets and liabilities, and the corresponding effect on the amount of goodwill. The fair value of the customer related intangible assets in the table below were determined using a multi-period excess earnings method, a form of the income approach, utilizing discount rates ranging from 13.0 % to 14.0 %. The fair value of the trade name intangible asset in the table below was determined using a relief from royalty method, utilizing a 12.0 % discount rate. Pro Forma Combined Financial Information The following unaudited pro forma combined financial information reflects the consolidated statement of operations of the Company as if the acquisition of LifeLabs had occurred as of January 1, 2023.

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