HOLOGIC INC Q1 FY2024 earnings call

Key Sections - Strong financial performance: Total revenue for the quarter was $1.013 billion, exceeding guidance. Organic revenue excluding COVID grew 5.2% despite challenging comparable periods. - Market expansion and innovation: Hologic's growth is centered on innovation and market creation through new product lines. For example, product lines launched in 2019 like BV, CV/TV, Biotheranostics, and Fluent collectively generated over $300 million in revenue in 2023. - Women's health focus: Participated in the World Economic Forum in Davos, presenting the Hologic Global Women's Health Index. Also, the new Genius Digital Diagnostic system received FDA clearance, which can improve cervical cancer detection and patient care. - Customer relationships: Strong customer relationships are built through large installs of core products, industry-leading technologies, and a reputation in women's health, driving growth from new products in the channel.

In the first quarter, Diagnostics reported revenue of $447.8 million, a decline of 20.6%. Excluding COVID assay and related ancillary revenue, Diagnostics revenue decreased by 0.9%, but adjusted for selling days, it is estimated to have grown in the mid-single digits. Breast Health had total first quarter revenue of $377.7 million, an increase of 12.2%. Surgical's first quarter revenue was $162.2 million, a 4.6% increase (high single digits when adjusted for selling days). Skeletal's first quarter revenue was $25.4 million, a decline of 5.6% due to lower capital placement and upgrades. Diagnostics contributed a significant portion to total revenue, followed by Breast Health, Surgical, and Skeletal.

Guidance - Fiscal Q2 '24: Expected total revenue in the range of $990 million to $1.01 billion and EPS of $0.95 to $1. - Full year '24: Guidance assumes revenue of $3.99 billion to $4.065 billion and EPS of $3.97 to $4.12. Each business is expected to grow at least 5% to 7% excluding COVID impact. For Diagnostics, it is expected to return to normal growth in Q2 and beyond. Breast health expects strong demand but with Q2 having softer comps. Surgical anticipates high-end growth in the full year. Margins are expected to improve throughout fiscal '24.

Risks - Market competition: Facing strong competitors in various segments, which could impact market share and growth. - Foreign exchange fluctuations: Assumptions about foreign exchange tailwinds could be affected by actual currency movements. - Supply chain and chip-related issues: Ongoing impact of semiconductor chip supply challenges on gross margin, although expected to improve as inventory cycles.

Q: Tejas Savant with Morgan Stanley asked about the Molecular Diagnostics franchise, specifically regarding Aptima and co-testing.

A: Steve MacMillan responded that co-testing is well-entrenched, and the recent FDA clearance of the digital cytology business will improve workflow, with the system being a single collection device for Aptima HPV and cytology.

Q: Patrick Donnelly with Citi inquired about margins and the impact of gantry chips and network optimization.

A: Karleen Oberton explained that chips and network optimization create headwinds to gross margins, with a line of sight to improvement, and operating margins are expected to approach 30% in Q2 and exit around 31% in Q4 '24.

Q: Jack Meehan with Nephron Research asked about Biotheranostics and M&A strategy.

A: Steve MacMillan stated that Biotheranostics has strong long-term potential, and Hologic is looking at M&A opportunities in med tech and specialty labs, being disciplined in evaluating potential assets.

Q: John Sourbeer with UBS asked about Breast health backlog and Diagnostics Panther.

A: Karleen Oberton said Breast health has several quarters of elevated backlog going into early '25, and Panther utilization is growing with customers adding more assays.

Q: Vijay Kumar with Evercore ISI asked about revenue growth breakdown and Q2 guidance.

A: Steve MacMillan and Karleen Oberton discussed that Q2 has challenging comps, but the back half of the year is expected to have normalized comps and step up growth, with each business expected to be in the 5% to 7% growth range.