Quest Diagnostics Incorporated · NYSE:DGX
Quest Diagnostics — Investor Day (March 2021)
21 slides from Quest Diagnostics's investor day presentation, Mar 11, 2021
Slide 1: Quest Diagnostics Investor Day
(@ ) Quest Diagnostics” INVESTOR DAY
Slide 2: Quest by the Numbers
Quest by the Numbers Mark Guinan Executive Vice President and Chief Financial Officer
Slide 3: Safe Harbor Disclosure
SAFE HARBOR DISCLOSURE The statements in the following presentations 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 cu
Slide 4: What you'll hear today
What you’ll hear today Review of 2018-2020 performance Capital deployment – past & future Setting a baseline for future growth beyond 2022 Framing the assumptions for our long-term outlook Long-term outlook
Slide 5: Since our 2018 Investor Day…
Since our 2018 Investor Day… What We Said: 3-5% revenue growth | 4-6% earnings growth What We Delivered: Revenues Adjusted EPS $11.18 $9,437 COVID $7,531 $7,726 $2,723 Revenue $6.31 $6.56 $6,714 Base Revenue 2018 2019 2020 2018 2019 2020
Slide 6: Balanced capital deployment: ~$11B deployed since 2012
Balanced capital deployment: ~$11B deployed since 2012 SINCE 2012 Cash Generated from Deployed ~$11 Billion Operations and Divestitures Share Repurchases ~$3.6 Returned to Shareholders ~ 12B $ Dividends ~$2.0 CAPEX ~$2.7 Invested M&A ~$2.6
Slide 7: Proven track record of returning the majority of FCF to shareholders
Proven track record of returning the majority of FCF to shareholders through dividends and share repurchases % of FCF Returned to Shareholders: 280% 50% 62% 99% 77% 72% 76% 39% Share Buybacks Repurchased $3.4B of shares since 2013 $1,587 Existing authorization to $1,222 repurchase up to $1.9B $
Slide 8: We remain committed to our capital deployment strategy
We remain committed to our capital deployment strategy Return the majority Reinvest in the M&A delivers >2% Raise the dividend of free cash flow to business to capitalize revenue growth on consistently over time shareholders through on four key growth our base business while aiming for a dividends a
Slide 9: Current deployment strategy allows for ~$2B in capital available for M&A or buybacks
Current deployment strategy allows for ~$2B in capital available for M&A or additional buybacks in 2021 ~$1.8B ~$1.1B ~$2.0B AVAILABLE 1H21 CASH AVAILABLE IN 1H21 RETURNED TO FOR SHAREHOLDERS M&A/BUYBACKS Available 12/31/20 1H21 1H21 1H21 Available Credit Cash Balance FCF Outlook Buybacks Dividends
Slide 10: Setting a baseline for future growth beyond 2022
Setting a baseline for future growth beyond 2022 Long-term outlook from 2018 implied adj. EPS between approximately $7.40-$8.00 in 2022 Implied Revenue Implied Adjusted EPS ~$8.00 ~$9,150 6% 5% ~$8,475 ~$7.40 3% $7,531 4% $6.31 2018 2022 2018 2022
Slide 11: Assumptions in 2022 and beyond: Top Line
Assumptions in 2022 and beyond: Top Line • COVID-19 testing revenues step down meaningfully in 2022 – Assume that COVID-19 molecular reimbursement lower than current levels • Base business revenues fully recovered to 2019 levels by the end of 2021 – We expect a PAMA cut of slightly more than 1% of b
Slide 12: Assumptions in 2022 and beyond: Bottom Line
Assumptions in 2022 and beyond: Bottom Line • Base business operating margin at or above 2019 levels inclusive of 2022 PAMA cut • Contribution margin on base business and COVID-19 testing assumed at a similar level • Tax rate remains stable at ~25% • 2021 share buybacks benefit 2022 with a stable sh
Slide 13: Setting a baseline for future growth beyond 2022
Setting a baseline for future growth beyond 2022 Long-term outlook from 2018 implied adj. EPS between approximately $7.40-$8.00 in 2022 Implied Revenue Implied Adjusted EPS ~$8.00 ~$9,150 6% 5% ~$8,475 ~$7.40 3% $7,531 4% $6.31 2018 2022 2018 2022
Slide 14: Physician lab services market growth expected to accelerate beyond 2022
Physician lab services market growth expected to accelerate beyond 2022 as the most significant PAMA cuts are likely behind us $56.9 $55.0 $54.0 $52.1 Billion $50.8 $42.6 2019 2020 2021 2022 2023 2024 *Note: Excluding COVID-19 testing
Slide 15: 2022 as the new baseline: Long-term outlook 2022-24 CAGR
2022 as the new baseline: Long-term outlook 2022-24 CAGR • Total base business revenues 4-5% CAGR • Organic 2-3% CAGR • Acquisitions >2% CAGR • Total enterprise earnings 7-9% CAGR • Revenue growth moderated by declining contribution from COVID-19 testing, but revenue and earnings expected to grow fr
Slide 16: Key takeaways
Key takeaways We will continue to return a majority of FCF to shareholders through dividends and buybacks COVID-19 testing is enabling us to invest in growth priorities and increase share repurchases We expect to execute at least $900 million in share repurchases in the first half of 2021 We expect
Slide 17: Appendix: Non-GAAP Reconciliations
Appendix Non-GAAP Reconciliations
Slide 18: Note on Non-GAAP Financial Measures
Note on Non-GAAP Financial Measures The non-GAAP measures for (i) adjusted diluted EPS from continuing operations, (ii) free cash flow and (iii) contribution margin are presented because management believes those measures are useful adjuncts to measures under the accounting principles generally acce
Slide 19: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations The following table reconciles adjusted diluted earnings per share from continuing operations ("Diluted EPS") to reported results under GAAP.
Slide 20: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations a) For the twelve months ended December 31, 2020 and 2019, represents costs primarily associated with systems conversions and integration incurred in connection with further restructuring and integrating our business. For the twelve months ended Decemb
Slide 21: Free Cash Flow
Free Cash Flow The following table reconciles free cash flow to the corresponding measures determined under GAAP.