Quest Diagnostics to Discuss Strategic Growth Drivers and Financial Outlook at 2018 Investor Day
SECAUCUS, N.J., Nov. 28, 2018 /PRNewswire/ -- At a meeting with analysts and investors at its Investor Day tomorrow, members of the senior management team of Quest Diagnostics Incorporated (NYSE: DGX), the world's leading provider of diagnostic information services, will discuss the company's two-point strategy and range of initiatives underway to accelerate growth and drive operational excellence, and also will outline its near-and long-term financial outlook.
"Quest Diagnostics is well positioned to accelerate growth and drive operational excellence in 2019 based on a range of unique capabilities and the strategic initiatives we are executing," said Steve Rusckowski, Chairman, President and Chief Executive Officer. "Expanded access to health plan lives, the benefit of acquisitions and our strong brand will drive top- and bottom-line growth, despite reimbursement challenges related in part to PAMA. Looking ahead, over the next four years we remain committed to our existing target to generate a 3-5% revenue CAGR and have updated our earnings goal to a 4-6% CAGR."
At the meeting, members of the company's senior management team will highlight the special capabilities and strategic initiatives underway to accelerate the company's growth, including:
-- Delivering more than 2% revenue CAGR through strategically aligned
accretive acquisitions
-- Capitalizing on the company's expanded access to more than 43 million
incremental insured lives, with total access now representing more than
90% of insured lives across the U.S.
-- Strengthening the company's relationships with hospital health systems
-- Expanding access to innovation with advanced diagnostics
-- Enhancing the company's position as the consumer lab provider of choice
-- Extending diagnostic data services
In addition, the Quest Diagnostics team will discuss the company's strategy to drive operational excellence and continue to generate cost savings of approximately 3% per year.
The company will reiterate its capital deployment strategy, including its focus on returning a majority of free cash flow to shareholders through share repurchases and dividends. In conjunction with the meeting, Quest Diagnostics announced that its Board of Directors has increased the company's quarterly dividend to $0.53 per share from $0.50 per share, or by 6% to an annual rate of $2.12 per share, commencing with the dividend payable January 30, 2019 to holders of record of the common stock on January 15, 2019. The dividend raise will be the company's eighth increase since 2011.
Outlook for Full Year 2018
The company is updating its outlook for the full year 2018. The updated EPS guidance primarily reflects an increase in reserves associated with revenue and accounts receivable (refer to footnote (b) to the table below). The updated revenue guidance also reflects volume softness, some of which is driven by Hurricane Michael, California wildfires, and the recent East Coast snowstorm. The updated outlook is as follows:
Current Outlook Previous Outlook
Low
High
Low
High
Revenues (a)(b) Approximately $7.57 billion Approximately $7.62 billion
Revenue increase (a) Approximately 2.3% Approximately 3%
Reported diluted EPS
Greater than $5.34 $5.57 $5.64
Adjusted diluted EPS excluding amortization
Greater than $6.30 $6.53 $6.60
Cash provided by operations Approximately $1.25 billion Approximately $1.3 billion
Capital expenditures
$350 million
$400 million
$350 million
$400 million
(a) The updated outlook for revenue
growth in 2018 represents
management's estimates for 2018
versus 2017 reported revenues
adjusted to reflect the impact of
new revenue recognition rules that
became effective January 1, 2018.
Full year 2017 revenues adjusted to
reflect the new rules were $7,402
million. See note 2 of the
financial tables attached below.
(b) As discussed in the company's Form
10-K, recording revenues and
accounts receivable involves
judgement and estimation. The
company follows a standard process,
which considers historical denial
and collection experience and other
factors, to estimate contractual
allowances and implicit patient
price concessions, and regularly
updates its estimates, recording
adjustments in the current period
as changes in estimates. Based on
this process, during the fourth
quarter the company expects to
increase its reserves for revenues
and accounts receivable.
Note on Non-GAAP Financial Measures
As used in this press release the term "reported" refers to measures under the accounting principles generally accepted in the United States ("GAAP"). The term "adjusted" refers to non-GAAP measures as follows: (i) for the purpose of income measures the term "adjusted" refers to operating performance measures that exclude special items such as restructuring and integration charges, excess tax benefit ("ETB") associated with stock based compensation and other items; and (ii) the term "adjusted diluted EPS excluding amortization" represents the company's diluted EPS before the impact of special items (described above) and amortization expense.
The company has provided a four-year compound annual growth rate projection of 4-6% for adjusted diluted EPS excluding amortization, which is a non-GAAP measure. The company is unable to present a reconciliation of adjusted diluted EPS excluding amortization to the most comparable GAAP measure due to the inherent uncertainty and variability in the nature and amount of special items referenced above.
Non-GAAP adjusted measures are presented because management believes those measures are useful adjuncts to GAAP results. Non-GAAP adjusted measures should not be considered as an alternative to the corresponding measures determined under GAAP. Management may use these non-GAAP measures to evaluate our performance period over period and relative to competitors, to analyze the underlying trends in our business, to establish operational budgets and forecasts and for incentive compensation purposes. We believe that these non-GAAP measures are useful to investors and analysts to evaluate our performance period over period and relative to competitors, as well as to analyze the underlying trends in our business and to assess our performance. The additional tables attached below include reconciliations of adjusted measures to GAAP measures.
Webcast Attendance
A live webcast of the event will be broadcast simultaneously on the Investor Relations page of the Quest Diagnostics website for all interested parties. To access the webcast or a replay of the event, visit: www.QuestDiagnostics.com/investor. The webcast will begin promptly at 8:00 am ET and conclude at 12:30 pm ET. A replay will be available following the meeting.
About Quest Diagnostics
Quest Diagnostics empowers people to take action to improve health outcomes. Derived from the world's largest database of clinical lab results, our diagnostic insights reveal new avenues to identify and treat disease, inspire healthy behaviors and improve health care management. Quest annually serves one in three adult Americans and half the physicians and hospitals in the United States, and our 45,000 employees understand that, in the right hands and with the right context, our diagnostic insights can inspire actions that transform lives. www.QuestDiagnostics.com.
The statements in this press release which are not historical facts may be forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date that they are made and which reflect management's current estimates, projections, expectations or beliefs and which involve risks and uncertainties that could cause actual results and outcomes to be materially different. Risks and uncertainties that may affect the future results of the company include, but are not limited to, adverse results from pending or future government investigations, lawsuits or private actions, the competitive environment, changes in government regulations, changing relationships with customers, payers, suppliers or strategic partners and other factors discussed in the company's most recently filed Annual Report on Form 10-K and in any of the company's subsequently filed Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, including those discussed in the "Business," "Risk Factors," "Cautionary Factors that May Affect Future Results" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" sections of those reports.
This earnings release, including the attached financial tables, is available online in the Newsroom section at www.QuestDiagnostics.com.
TABLES FOLLOW
1) The outlook for adjusted diluted EPS
excluding amortization expense
represents management's estimates
for the full year 2018 before the
impact of special items, including
ETB, and amortization expense.
Further impacts to earnings related
to special items may be incurred
throughout the remainder of the
year. Additionally, the amount of
ETB is dependent upon employee
stock option exercises and the
company's stock price, which are
difficult to predict. The
following table reconciles our 2018
outlook for adjusted diluted EPS
excluding amortization expense to
the corresponding amounts
determined under GAAP:
Diluted earnings per common share $
5.34
Restructuring and integration
charges (a) 0.62
Amortization expense (b) 0.58
Other (0.01)
Certain income tax benefits (0.10)
ETB (0.13)
Adjusted diluted EPS excluding
amortization expense $
6.30
(a) Represents estimated full year
pre-tax charges of $115
million primarily associated
with systems conversions,
integration and workforce
reductions incurred in
connection with further
restructuring and integrating
our business. Income tax
benefits were calculated using
a combined tax rate of 25.5%.
(b) Represents the estimated impact
of amortization expense for
2018 on the calculation of
adjusted diluted EPS excluding
amortization expense.
Amortization expense used in
the calculation is as follows
(dollars in millions):
Amortization of intangible assets $
90
Amortization expense included in
equity in earnings of equity
method investees, net of taxes 17
Total pre-tax amortization
expense $
107
Total amortization expense, net
of an estimated tax benefit $
80
2) The outlook for 2.3% revenue growth
in 2018 represents management's
estimates for 2018 versus 2017
reported revenues adjusted to
reflect the impact of new revenue
recognition rules that became
effective January 1, 2018. Under
the new rules, the company will
report uncollectible balances
associated with patient
responsibility as a reduction in
net revenues when historically
these amounts were classified as
bad debt expense within selling,
general and administrative
expenses.
The following tables reconcile our
2017 net revenues determined under
previous revenue recognition rules
with 2017 net revenue adjusted to
reflect the impact of the new
revenue recognition rules:
Three Months Ended Year Ended
March 31, June 30, September 30, December 31, December 31,
2017 2017 2017 2017 2017
---
(dollars in millions)
2017 Revenue on an adjusted basis:
---
Net revenues $
1,899 $
1,943 $
1,931 $
1,936 $
7,709
Adjustment for adoption of new revenue (82) (79) (75) (71) (307)
recognition standard
2017 Revenue on an adjusted basis $
1,817 $
1,864 $
1,856 $
1,865 $
7,402
2018 Revenue outlook:
---
2017 Revenue on an adjusted basis $
7,402
2018 Equivalent revenue growth 2.3
%
2018 Revenue outlook $
7,570
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SOURCE Quest Diagnostics
