Slide 1: Long Term Financial Outlook
Long Term Financial Outlook Sam Samad Executive Vice President, Chief Financial Officer
Slide 2: 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 3: Key highlights
Consistent execution throughout the pandemic Key highlights Operating margin expansion beyond 2023 Balanced capital deployment priorities Long term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 3
Slide 4: Consistent execution and strong growth through the pandemic
Consistent execution and strong growth through the pandemic We delivered a 9% revenue CAGR and 15% adjusted EPS CAGR since 2019 REVENUES ADJUSTED EPS 3-year CAGR ~9% 3-year CAGR ~15% $ Millions $10,788 $9,883 $9,437 $1,454 $14.24 $2,770 $7,726 $2,723 $11.18 $9.95 $6.56 $8,018 $8,429 $6,714 2019 2020
Slide 5: 2023 represents a more normalized baseline for future growth
2023 represents a more normalized baseline for future growth Recap of full year 2023 guidance and assumptions 2023 REVENUE GUIDANCE 2023 ADJUSTED EPS 2023 GUIDANCE ASSUMPTIONS GUIDANCE • Base business margin expansion year-over-year BASE • More favorable unit price outlook $8,650M - $8,750M $8.40 -
Slide 6: COVID-19 testing is part of the base business beyond 2023
COVID-19 testing is part of the base business beyond 2023 COVID-19 REVENUES IN MILLIONS $2,723 $2,770 $1,454 $225 2020 2021 2022 2023E* Note: Midpoint of revenue guidance 6
Slide 7: Our 2023 operating margin is close to pre-pandemic levels
Our 2023 operating margin is close to pre-pandemic levels We are setting a new baseline for operating margin expansion beyond 2023 OPERATING MARGIN 23.8% 23.4% 17.6% 17.0% ~17% 2019 2020 2021 2022 2023E 7
Slide 8: Unless Congress acts, PAMA cuts will return in 2024
Unless Congress acts, PAMA cuts will return in 2024 Medicare reimbursement cuts under PAMA expected to be ~$85M in 2024 2023 2024 2025 2026 CURRENT LAW UNDER PAMA 15% rate cut cap 15% rate cut cap No cuts 15% rate cut cap Data submission New fee schedule ~$85M in cuts expected IF SALSA IS ENACTED IN
Slide 9: We expect operating margin expansion beyond 2023
We expect operating margin expansion beyond 2023 Targeting ~75-150 bps of operating margin expansion by 2026 OPERATING MARGIN LOW END ASSUMES: PAMA cuts return in 2024 +150 bps HIGH END ASSUMES: SALSA is passed in 2023 DRIVERS OF OPERATING +75 bps MARGIN EXPANSION: ~17% • Revenue growth • More favor
Slide 10: Balanced capital deployment priorities
Balanced capital deployment priorities Execute on our Execute M&A strategy with Reinvest more share Consistently raise a goal to deliver in the repurchases the dividend 1-2% revenue business in the absence over time growth from of M&A acquisitions Committed to returning majority of free cash to shar
Slide 11: Consistently returning cash to shareholders while investing for growth
Consistently returning cash to shareholders while investing for growth Majority of free cash flow returned to shareholders since 2012 $ ~ 16.4B CASH GENERATED FROM OPERATIONS AND DIVESTITURES ~$3.5B ~$3.1B ~$7.3B ~$2.6B CAPEX M&A SHARE REPURCHASES DIVIDENDS INVESTED RETURNED TO SHAREHOLDERS 11
Slide 12: M&A priorities: Continued focus on three key areas
M&A priorities: Continued focus on three key areas Targeting hospital outreach, regional independent labs and capability building assets HOSPITAL OUTREACH REGIONAL CAPABILITY INDEPENDENT LABS BUILDING ASSETS 12
Slide 13: Positioned for long term profitable growth: 2023-26
Positioned for long term profitable growth: 2023-26 Establishing 2023 as the new endemic baseline Total revenues Mid single-digit CAGR Organic ~3% Acquisitions 1-2% Adjusted EPS* High single-digit CAGR Adjusted EPS* + dividend yield High single-digit to low double-digit CAGR Free cash flow growth co
Slide 14: Key takeaways
Consistent execution throughout the pandemic Key takeaways Operating margin expansion beyond 2023 Balanced capital deployment priorities Long term outlook 2023-26: Mid single-digit revenue CAGR; and high single-digit adjusted EPS CAGR 14
Slide 15: Appendix
Appendix Non-GAAP Reconciliations
Slide 16: Note on Non-GAAP Financial Measures
Note on Non-GAAP Financial Measures 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 restructurin
Slide 17: 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. Twelve months ended Twelve months ended December 31, December 31, 2023 2019 2020 2021 2022 Low High Diluted EP
Slide 18: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations (a) Income tax impacts were primarily calculated using combined statutory tax rates of 25.5%. (b) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and
Slide 19: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations (e) For the twelve months ended December 31, 2022, primarily represents a $14 million impairment charge on certain property, plant and equipment and a $5 million loss associated with the increase in the fair value of the contingent consideration accrua
Slide 20: Adjusted Diluted EPS from Continuing Operations
Adjusted Diluted EPS from Continuing Operations (g) Represents the 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). Income tax imp
Slide 21: Adjusted Operating Income as a Percentage of Net Revenues
Adjusted Operating Income as a Percentage of Net Revenues The following table reconciles adjusted operating income as a percentage of net revenues to reported results under GAAP. Twelve months ended December 31, 2019 2020 2021 2022 2023 Operating income - as reported - as a percentage of net revenue
Slide 22: Adjusted Operating Income as a Percentage of Net Revenues
Adjusted Operating Income as a Percentage of Net Revenues (a) Represents costs primarily associated with workforce reductions, systems conversions and integration incurred in connection with further restructuring and integrating our business. (b) Principally includes expense associated with payments