Hologic, Inc. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Transformation: Over the past 10 years, Hologic has transformed through phases of steadying the business and adding growth drivers during COVID, with industry-leading platforms and strong commercial channels.
• M&A Strategy: Acquired Endomagnetics in July and signed a definitive agreement to acquire Gynesonics in October; both are tuck-in deals aligning with the M&A strategy.
• Financial Results: Fourth quarter total revenue was $987.9 million, with non-GAAP earnings per share of $1.01. Full year 2024 revenue was $4.03 billion, and non-GAAP EPS was $4.08.
• Margins: Q4 gross margin was 61.5%, up 110 basis points year-over-year. Operating margin was 30% and net margin was 24% in Q4, both modestly higher than the prior year.

Segment Performance

• Diagnostics: Fourth quarter global revenue was $443.3 million, growing 6.2% year-over-year and 9.2% organically excluding COVID. Molecular Diagnostics grew 9.1% year-over-year and 13.2% organically excluding COVID. Cytology/perinatal business had 0.7% growth in the fourth quarter.
• Breast Health: Total fourth quarter revenue was $375.5 million, increasing 6.2% year-over-year or 5.3% organically when excluding SSI and Endomagnetics.
• Surgical: Fourth quarter revenue was $156.5 million, increasing 5.4% compared to the prior year.
• Scalable: Fourth quarter revenue was $12.7 million, decreasing 54.9% due to the skeletal stop ship announced in the third quarter.

Guidance

• Q1 2025: Total revenue expected in the range of $1.025 billion to $1.035 billion, and EPS of $1 to $1.03.
• Full Year 2025: Revenue guidance of $4.15 billion to $4.20 billion, EPS of $4.25 to $4.35. Expect organic ex-COVID growth of approximately 4% at the midpoint. Announced a new $250 million accelerated share repurchase program.

Risks

• Transitory Headwinds: Q1 2025 may be impacted by skeletal stop ship, respiratory seasonality, and IV fluid shortages.
• Chip Shortage Impact: Continued impact on Breast Health gantry business from the global semiconductor chip shortage.
• COVID Transition: Residual impact from the transition of COVID revenue to other products.

Question and Answer

Q: On margins, Karleen, can you talk through how to think about the year?

A: Discussed transitory headwinds like skeletal stop ship, respiratory seasonality, and IV fluid shortages, and mentioned network optimization opportunities for margin expansion later in the year.

Q: On Breast Health outlook, Steve, can you talk about the new launch?

A: Mentioned the new gantry launch and its impact on growth, noting it might be slower before reacceleration in later years.

Q: On Biotheranostics sales, Karleen, can you give a ballpark?

A: Stated Biotheranostics is a solid double-digit grower, similar to fiscal 2024, with BV/CV/TV being a key growth driver in the double-digit range.

Q: On Gynesonics acquisition, Essex, can you talk about synergies?

A: Spoke about Gynesonics complementing the portfolio and aligning with the surgical team's work, particularly in hysteroscopic or trans cervical procedures.

Q: On IV fluid shortage, Steve, can you provide more color?

A: Discussed the transitory nature of the IV fluid shortage, noting it impacts elective surgical and breast procedures, but expects it to be a short-term headwind.

Q: On share repurchase program, Karleen, can you talk about timeline?

A: Stated the $250 million accelerated share repurchase will kick off in the next couple of weeks and finish within fiscal 2025's second quarter.

Q: On NovaSure decline, Essex, can you talk about stabilization?

A: Spoke about slow decline in the US due to alternatives like IUDs, but expected continued growth internationally with NovaSure.

Q: On Panthers utilization, Karleen, can you provide update?

A: Mentioned an installed base of over 3,300 Panthers worldwide, with continued strength in molecular diagnostics excluding COVID, as revenue comes from assay rentals not Panther sales.

Q: On facility integrations in Breast Health, Karleen, can you talk about timeline?

A: Mentioned migration to be completed over the year, with synergies from manufacturing and R&D integrations.

Q: On BioZorb impact, Karleen, can you quantify?

A: Stated BioZorb's financial impact was deminimis, less than $10 million in fiscal 2024.

Q: On gantry business and chip shortage, Karleen, can you talk about normalization?

A: Spoke about normalized growth rates in Breast Health gantry business post-chip issue, with software upgrades enabling backwards compatibility and ongoing replacement cycles.

Q: On margin swing factors, Karleen, can you talk about transitory items?

A: Discussed how transitory items like skeletal stop ship and respiratory seasonality contribute to lower margins early in the year but are expected to clear, leading to margin improvement later.