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"We grew our base business revenues nearly 5% in the third quarter, largely due to strength in our physician and hospital channels,” said Jim Davis, Chairman, CEO and President. “In addition, we are pleased that we have now successfully negotiated all of our strategic health plan renewals that were scheduled for this year."


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023			2022			Change		2023			2022			Change
	(dollars in millions, except per share data)
Reported:
Net revenues	$	2,295		$	2,486		(7.7)	%	$	6,964		$	7,550		(7.8)	%
Base business revenues (a)	$	2,269		$	2,170		4.6	%	$	6,778		$	6,280		7.9	%
COVID-19 testing revenues	$	26		$	316		(92.0)	%	$	186		$	1,270		(85.4)	%

Diagnostic Information Services revenues	$	2,228		$	2,419		(7.9)	%	$	6,755		$	7,344		(8.0)	%
Revenue per requisition							(7.2)	%							(6.6)	%
Requisition volume							(0.5)	%							(1.4)	%
Organic requisition volume							(1.0)	%							(1.7)	%
Operating income (b)	$	342		$	392		(13.0)	%	$	995		$	1,293		(23.1)	%
Operating income as a percentage of net revenues (b)	14.9		%	15.8		%	(0.9)	%	14.3		%	17.1		%	(2.8)	%
Net income attributable to Quest Diagnostics (b)	$	225		$	256		(12.2)	%	$	662		$	845		(21.7)	%
Diluted EPS (b)	$	1.96		$	2.17		(9.7)	%	$	5.79		$	7.05		(17.9)	%
Cash provided by operations	$	207		$	502		(58.8)	%	$	745		$	1,384		(46.2)	%
Capital expenditures	$	105		$	118		(10.1)	%	$	336		$	257		31.1	%

Adjusted (b):

Operating income	$	380		$	423		(10.1)	%	$	1,119		$	1,412		(20.7)	%
Operating income as a percentage of net revenues	16.6		%	17.0		%	(0.4)	%	16.1		%	18.7		%	(2.6)	%
Net income attributable to Quest Diagnostics	$	254		$	279		(8.8)	%	$	749		$	952		(21.3)	%
Diluted EPS	$	2.22		$	2.36		(5.9)	%	$	6.56		$	7.94		(17.4)	%

Updated Guidance

Prior Guidance

Low

High

Low

High

Net revenues

$9.19 billion

$9.24 billion

$9.12 billion

$9.22 billion

Net revenues decrease

(7.0)%

(6.5)%

(7.7)%

(6.7)%

Base business revenues (a)

$8.99 billion

$9.04 billion

$8.92 billion

$9.02 billion

Base business revenues increase

6.7%

7.3%

5.8%

7.0%

COVID-19 testing revenues

Approximately $200 million

COVID-19 testing revenues decrease

(86.2)%

Reported diluted EPS

$7.61

$7.71

$7.52

$7.92

Adjusted diluted EPS

$8.65

$8.75

$8.50

$8.90

Cash provided by operations

Approximately $1.3 billion

At least $1.3 billion

Capital expenditures

Approximately $400 million

As used in this press release the term “reported” refers to measures under accounting principles generally accepted in the United States (“GAAP”). The term “adjusted” refers to non-GAAP operating performance measures that exclude special items such as restructuring and integration charges, amortization expense, excess tax benefits ("ETB") associated with stock-based compensation, costs associated with donations, contributions, and other financial support through Quest for Health Equity (our initiative with the Quest Diagnostics Foundation to reduce health disparities in underserved communities), gains and losses associated with changes in the carrying value of our strategic investments, and other items.

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 non-GAAP adjusted measures to GAAP measures.

Quest Diagnostics will hold its quarterly conference call to discuss financial results beginning at 8:30 a.m. Eastern Time today. The conference call can be accessed by dialing 888-455-0391 within the U.S. and Canada, or 773-756-0467 internationally, passcode: 7895081; or via live webcast on our website at www.QuestDiagnostics.com/investor. We suggest participants dial in approximately 10 minutes before the call.

A replay of the call may be accessed online at www.QuestDiagnostics.com/investor or, from approximately 10:30 a.m. Eastern Time on October 24, 2023 until midnight Eastern Time on November 7, 2023, by phone at 800-945-5759 for domestic callers or 203-369-3502 for international callers. Anyone listening to the call is encouraged to read our periodic reports, on file with the Securities and Exchange Commission, including the discussion of risk factors and historical results of operations and financial condition in those reports.

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 nearly 50,000 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, the complexity of billing, reimbursement and revenue recognition for clinical laboratory testing, 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.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net revenues	$	2,295	$	2,486	$	6,964	$	7,550

Operating costs and expenses and other operating income:
Cost of services	1,541		1,618		4,647		4,875
Selling, general and administrative	380		464		1,235		1,311
Amortization of intangible assets	27		27		81		81

Other operating expense (income), net	5		(15)		6		(10)
Total operating costs and expenses, net	1,953		2,094		5,969		6,257

Operating income	342		392		995		1,293

Other income (expense):
Interest expense, net	(40)		(33)		(112)		(106)
Other (expense) income, net	(3)		(8)		10		(61)
Total non-operating expense, net	(43)		(41)		(102)		(167)

Income before income taxes and equity in earnings of equity method investees	299		351		893		1,126
Income tax expense	(68)		(81)		(208)		(268)
Equity in earnings of equity method investees, net of taxes	6		6		18		41


Net income	237		276		703		899
Less: Net income attributable to noncontrolling interests	12		20		41		54
Net income attributable to Quest Diagnostics	$	225	$	256	$	662	$	845






Earnings per share attributable to Quest Diagnostics’ common stockholders:


Basic	$	1.99	$	2.20	$	5.87	$	7.17




Diluted	$	1.96	$	2.17	$	5.79	$	7.05

Weighted average common shares outstanding:
Basic	112		116		112		117

Diluted	114		118		114		119


	September 30, 2023		December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	143	$	315
Accounts receivable, net	1,281		1,195
Inventories	184		192
Prepaid expenses and other current assets	207		196

Total current assets	1,815		1,898
Property, plant and equipment, net	1,830		1,766
Operating lease right-of-use assets	607		585
Goodwill	7,732		7,220
Intangible assets, net	1,219		1,092
Investments in equity method investees	130		132
Other assets	149		144

Total assets	$	13,482	$	12,837

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	1,157	$	1,396
Current portion of long-term debt	304		2
Current portion of long-term operating lease liabilities	157		153

Total current liabilities	1,618		1,551
Long-term debt	3,946		3,978
Long-term operating lease liabilities	505		489
Other liabilities	874		812

Redeemable noncontrolling interest	76		77
Stockholders’ equity:
Quest Diagnostics stockholders’ equity:
Common stock, par value $0.01 per share; 600 shares authorized as of both September 30, 2023 and December 31, 2022; 162 shares issued as of both September 30, 2023 and December 31, 2022	2		2
Additional paid-in capital	2,302		2,295
Retained earnings	8,711		8,290
Accumulated other comprehensive loss	(20)		(21)
Treasury stock, at cost; 50 and 51 shares as of September 30, 2023 and December 31, 2022, respectively	(4,570)		(4,673)
Total Quest Diagnostics stockholders’ equity	6,425		5,893
Noncontrolling interests	38		37
Total stockholders’ equity	6,463		5,930
Total liabilities and stockholders’ equity	$	13,482	$	12,837


	Nine Months Ended September 30,
	2023		2022
Cash flows from operating activities:
Net income	$	703	$	899
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	330		321
Provision for credit losses	—		1
Deferred income tax (benefit) provision	(39)		45
Stock-based compensation expense	58		55


Other, net	12		37
Changes in operating assets and liabilities:
Accounts receivable	(86)		162
Accounts payable and accrued expenses	(231)		(169)
Income taxes payable	—		(1)

Other assets and liabilities, net	(2)		34
Net cash provided by operating activities	745		1,384

Cash flows from investing activities:
Business acquisitions, net of cash acquired	(611)		(106)


Capital expenditures	(336)		(257)


Increase in investments and other assets	—		(6)
Net cash used in investing activities	(947)		(369)

Cash flows from financing activities:
Proceeds from borrowings	1,703		—
Repayments of debt	(1,426)		(1)
Purchases of treasury stock	—		(947)
Exercise of stock options	60		96
Employee payroll tax withholdings on stock issued under stock-based compensation plans	(28)		(28)
Dividends paid	(234)		(230)
Distributions to noncontrolling interest partners	(41)		(58)


Other financing activities, net	(4)		(19)
Net cash provided by (used in) financing activities	30		(1,187)

Net change in cash and cash equivalents and restricted cash	(172)		(172)

Cash and cash equivalents and restricted cash, beginning of period	315		872
Cash and cash equivalents and restricted cash, end of period	$	143	$	700





Cash paid during the period for:
Interest	$	97	$	110
Income taxes	$	233	$	187


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
	(in millions, except per share data)
Amounts attributable to Quest Diagnostics' common stockholders:


Net income attributable to Quest Diagnostics	$	225	$	256	$	662	$	845


Less: earnings allocated to participating securities	2		2		4		4
Earnings available to Quest Diagnostics' common stockholders - basic and diluted	$	223	$	254	$	658	$	841

Weighted average common shares outstanding - basic	112		116		112		117
Effect of dilutive securities:
Stock options and performance share units	2		2		2		2
Weighted average common shares outstanding - diluted	114		118		114		119

Earnings per share attributable to Quest Diagnostics' common stockholders:


Basic	$	1.99	$	2.20	$	5.87	$	7.17




Diluted	$	1.96	$	2.17	$	5.79	$	7.05


	Three Months Ended September 30, 2023
	(dollars in millions, except per share data)
	Operating income		Operating income as a percentage of net revenues		Income tax expense (d)		Equity in earnings of equity method investees, net of taxes		Net income attributable to Quest Diagnostics		Diluted EPS
As reported	$	342	14.9	%	$	(68)	$	6	$	225	$	1.96
Restructuring and integration charges (a)	6		0.3		(1)		—		5		0.05


Other (b)	5		0.2		—		—		5		0.04



Amortization expense	27		1.2		(6)		—		21		0.18
ETB	—		—		(2)		—		(2)		(0.01)
As adjusted	$	380	16.6	%	$	(77)	$	6	$	254	$	2.22


	Nine Months Ended September 30, 2023
	(dollars in millions, except per share data)
	Operating income		Operating income as a percentage of net revenues		Income tax expense (d)		Equity in earnings of equity method investees, net of taxes		Net income attributable to Quest Diagnostics		Diluted EPS
As reported	$	995	14.3	%	$	(208)	$	18	$	662	$	5.79
Restructuring and integration charges (a)	32		0.5		(8)		—		24		0.22

Other (b)	11		0.1		(2)		—		9		0.08
Gains and losses on investments (c)	—		—		(1)		3		2		0.02

Amortization expense	81		1.2		(20)		—		61		0.53
ETB	—		—		(9)		—		(9)		(0.08)
As adjusted	$	1,119	16.1	%	$	(248)	$	21	$	749	$	6.56


	Three Months Ended September 30, 2022
	(dollars in millions, except per share data)
	Operating income		Operating income as a percentage of net revenues		Income tax expense (d)		Equity in earnings of equity method investees, net of taxes		Net income attributable to Quest Diagnostics		Diluted EPS
As reported	$	392	15.8	%	$	(81)	$	6	$	256	$	2.17
Restructuring and integration charges (a)	13		0.5		(4)		—		9		0.08
Other (b)	(9)		(0.4)		2		—		(7)		(0.06)
Gains and losses on investments (c)	—		—		—		—		2		0.01

Amortization expense	27		1.1		(7)		—		20		0.17
ETB	—		—		(1)		—		(1)		(0.01)
As adjusted	$	423	17.0	%	$	(91)	$	6	$	279	$	2.36


	Nine Months Ended September 30, 2022
	(dollars in millions, except per share data)
	Operating income		Operating income as a percentage of net revenues		Income tax expense (d)		Equity in earnings of equity method investees, net of taxes		Net income attributable to Quest Diagnostics		Diluted EPS
As reported	$	1,293	17.1	%	$	(268)	$	41	$	845	$	7.05
Restructuring and integration charges (a)	37		0.5		(10)		—		27		0.23
Other (b)	1		—		(1)		—		—		—
Gains and losses on investments (c)	—		—		(9)		9		30		0.24

Amortization expense	81		1.1		(21)		—		60		0.50
ETB	—		—		(10)		—		(10)		(0.08)
As adjusted	$	1,412	18.7	%	$	(319)	$	50	$	952	$	7.94

(a)For both the three and nine months ended September 30, 2023, the pre-tax impact represents costs primarily associated with workforce reductions and integration costs incurred in connection with further restructuring and integrating our business. For both the three and nine months ended September 30, 2022, the pre-tax impact represents costs primarily associated with workforce reductions, systems conversions and integration costs incurred in connection with further restructuring and integrating our business. The following table summarizes the pre-tax impact of restructuring and integration charges on our consolidated statements of operations:

(b)For the three months ended September 30, 2023, the pre-tax impact primarily represents a $5 million loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions. For the nine months ended September 30, 2023, the pre-tax impact primarily represents the impairment of a corporate facility that is currently held for sale and a $5 million loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions. For the three months ended September 30, 2022, the pre-tax impact primarily represents a $10 million gain from a payroll tax credit under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") associated with the retention of employees and a $7 million gain associated with the decrease in the fair value of the contingent consideration accrual associated with previous acquisitions, partially offset by $5 million of costs associated with donations, contributions and other financial support through Quest for Health Equity. For the nine months ended September 30, 2022, the pre-tax impact primarily represents $9 million of costs associated with donations, contributions and other financial support through Quest for Health Equity, offset by the gain from the payroll tax credit under the CARES Act associated with the retention of employees. The following table summaries the pre-tax impact of these other items on our consolidated statements of operations:

3)The outlook for adjusted diluted EPS represents management’s estimates for the full year 2023 before the impact of special items. Further impacts to earnings related to special items may occur throughout 2023. Additionally, the amount of ETB is dependent upon employee stock option exercises and our stock price, which are difficult to predict. The following table reconciles our 2023 outlook for diluted EPS under GAAP to our outlook for adjusted diluted EPS:

(c)Primarily represents the impairment of a corporate facility that is currently held for sale and a loss associated with the increase in the fair value of the contingent consideration accrual associated with previous acquisitions. Income tax benefits were primarily calculated using a combined statutory income tax rate of 25.5%.


	Low		High
Diluted EPS	$	7.61	$	7.71
Restructuring and integration charges (a)	0.32		0.32



Amortization expense (b)	0.71		0.71
Other (c)	0.08		0.08
Gains and losses on investments (d)	0.02		0.02

ETB	(0.09)		(0.09)
Adjusted diluted EPS	$	8.65	$	8.75