HOLOGIC INC Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Overall Performance: Total revenue for the quarter was $1.02 billion, with non-GAAP earnings per share of $1.03, both above guidance. Themes discussed included core franchises, international business growth, and strong balance sheet with capital allocation.
• Core Franchises: Diagnostics, Breast Health, and Surgical have diverse growth drivers. Molecular Diagnostics expanded installed base and menu; Breast Health expanded product offering to cover breast cancer care continuum; Surgical has new products like Fluent, Accesa, and Bolder with international growth.
• International Business: Over 40% larger than 2019, driving top-line growth by identifying underpenetrated markets and executing strategies like going direct.
• Capital Allocation: Strong balance sheet with over $2.2 billion in cash; focus on tuck-in M&A for core franchises; announced acquisition of Endo-Magnetics LTD for approximately $310 million to complement interventional breast business.

Segment Performance

• Diagnostics: Second quarter revenue was $450.1 million, declining 3.2%. Excluding COVID assay and related revenue, worldwide Diagnostics grew by 9.8%. Molecular Diagnostics grew 10.7% excluding COVID, with BV/CV/TV tracking to be the second largest assay globally. Non-COVID respiratory assay sales remained solid, and Biotheranostics was a strong growth pillar. Psychology and perinatal grew 7.9% globally.
• Breast Health: Total second quarter revenue was $384.6 million, decreasing 0.3%, but growing 1% when excluding SSI. Growth was driven primarily by international interventional mix.
• Surgical: Second quarter revenue was $156 million, increasing 7.4%, fueled by MyoSure in the related Fluent fluid management system.
• Skeletal: Second quarter revenue was $27.1 million, declining 14.3% from lower capital placements and upgrades.

Guidance

• Third Quarter 2024: Total revenue expected in the range of $992.5 million to $1007.5 million, and EPS of $0.98 to $1.05.
• Full Fiscal 2024: Revenue guidance of $4 billion to $4.05 billion, EPS of $4.02 to $4.12. FX headwind in Q3, slight tailwind for full year. Franchises expected to grow 5%-7% excluding COVID. Molecular Diagnostics to drive high single-digit growth; Breast Health on pace to grow within 5%-7%; Surgical to be at high end of 5%-7% long-term target.

Risks

• Uncertainties: Known and unknown risks that may cause actual results to differ from forward-looking statements, including factors referenced in safe harbor statements and SEC filings.

Question and Answer

Q: Patrick Donnelly on Diagnostics molecular DXP and market drivers A: Stephen MacMillan discussed Panther workflow automation, menu adoption, and how the business is seeing growth from more customers putting more menu on their Panthers, building on prior strong comps Q: Jack Meehan on Endomagnetics valuation and growth A: Karleen Oberton stated Endo-Mag fits nicely with existing interventional portfolio and is expected to be accretive to the division's growth rate Q: Yuko on USPSTF breast cancer screening guidelines A: Stephen MacMillan said USPSTF guidelines didn't change much and didn't see a big impact on Breast Health business Q: Kevin on organic revenue guide range and quarter performance A: Karleen Oberton said impact on full year guidance is primarily currency, and the quarter's performance tightened the range while delivering within it Q: Puneet Souda on Genius digital cytology system A: Karleen Oberton mentioned focus on integrating the system into lab workflows, early excitement about its potential in labor-constrained environments Q: Casey Woodring on fiscal '25 guidance and BV/CV/TV international growth A: Stephen MacMillan said not providing '25 guidance yet, and BV/CV/TV has minimal near-term international growth potential but strong momentum in US Q: Andrew Brackmann on international business margins and distributor acquisition A: Karleen Oberton discussed strategies like going direct to improve margins, investment in commercial capabilities, and surgical portfolio's accretive margin impact Q: Andrew Cooper on international growth and 'all other' region growth A: Stephen MacMillan talked about international growth being built over time through investments, with multiple products and geographies building momentum Q: Brad Davis on Endomag acquisition rationale and breast device life cycle A: Stephen MacMillan said it's part of building across the breast care continuum, and Karleen Oberton discussed smooth life cycle management with software upgrades and future developments