Quest Diagnostics (DGX) Q2 2023 Earnings Call Transcript

For the period ending June 30, 2023

July 26, 2023 8:30 a.m. ET

Prepared Remarks

Questions and Answers

Call Participants

Prepared Remarks:

Operator

Welcome to the Quest Diagnostics Second Quarter 2023 Conference Call. At the request of the company, this call is being recorded. [Operator Instructions].

Now I'd like to introduce Shawn Bevec, Vice President of Investor Relations for Quest Diagnostics. Go ahead, please.

Shawn Bevec

Thank you, and good morning. I'm joined by Jim Davis, our Chairman and Chief Executive Officer; and President; and Sam Samad, our Chief Financial Officer. During this call, we may make forward-looking statements and will discuss non-GAAP measures. We provide a reconciliation of non-GAAP measures to comparable GAAP measures in the tables to our earnings press release. Actual results may differ materially from those projected. Risks and uncertainties that may affect Quest Diagnostics' future results include, but are not limited to, those described in our most recent annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K.

For this call, references to reported EPS refer to reported diluted EPS and references to adjusted EPS refer to adjusted diluted EPS. Any references to base business, testing, revenues or volumes refer to the performance of our business excluding COVID-19 testing.

Growth rates associated with our long-term outlook projections, including total revenue growth, revenue growth from acquisitions, organic revenue growth and adjusted earnings growth are compound annual growth rates.

Finally, revenue growth rates from acquisitions will be measured against our base business. Now here is Jim Davis.

James Davis

Thanks, Shawn, and good morning, everyone. We had strong base business performance in the second quarter with nearly double-digit revenue growth year-over-year. Demand for our services remains strong across all regions boosted by the collaborations we have formed with health plans, hospitals and physicians amid an environment where people are returning to care.

We are particularly encouraged by the revenue growth in our base business of nearly 10% from our health system customers. Also in the second quarter, we made substantial progress improving the profitability of our base business compared to the first quarter and prior year despite persistently high employee turnover.

Total adjusted operating margin improved more than 170 basis points compared to the first quarter despite a decline of approximately $80 million in COVID revenue.

This morning, I'll discuss highlights from the second quarter, then Sam will provide more detail on our financial results and talk about our updated financial guidance for 2023.