HOLX

Management Statement and Operational Highlights

• Progress: The company delivered revenue and non-GAAP earnings per share exceeding guidance. Progress was seen in Breast Health with better commercial execution, clinical and product innovation, and the Endomagnetics acquisition.
• Breast Health Improvements: Better commercial execution in imaging and interventional, with more 3D gantries shipped sequentially. Clinical and product innovation, such as the Genius AI Detection PRO software. The Endomagnetics acquisition expanded breast surgery products portfolio, contributing nearly $20 million in revenue in the quarter.
• Tariff Mitigation: The team mitigated roughly half of the previously estimated tariff impact, expecting $10 million to $12 million in tariffs per quarter in fiscal 2026, down from the initial $20 million to $25 million estimate.

Guidance

• Fourth Quarter: Expected total revenue of $1.03 billion to $1.04 billion and non-GAAP EPS of $1.09 to $1.12. Midpoint of ranges implies mid-single-digit revenue growth and high single-digit EPS growth. Weaker U.S. dollar to be a tailwind of ~$6 million, COVID assay sales ~$5 million, COVID-related items ~$25 million, blood screening revenue ~$5 million.
• Full Year: Revised to revenue of $4.081 billion to $4.091 billion and non-GAAP EPS of $4.23 to $4.26, driven by strong third quarter performance and lower tariff headwinds. Full year gross and operating margins expected in the low 60s and low 30s respectively remain unchanged.

Segment Performance

• Diagnostics: Third quarter revenue was $448.9 million, growing 0.9% or 2.9% organically excluding COVID-related sales. Molecular Diagnostics had global growth of 2.4% or 5.2% excluding COVID, with U.S. molecular growth at 7.3% excluding COVID. Worldwide Panther utilization continued to rise, and the Genius digital cytology platform was seeing positive rollout.
• Breast Health: Revenue was $365.2 million, declining 5.8% or 10.8% organically excluding Endomagnetics and SSI. Interventional sales grew 31.8%, with Endomagnetics contributing nearly $20 million in the quarter. Sequentially, revenue grew compared to the second quarter.
• Surgical: Third quarter revenue was $178.4 million, increasing 6.3% or 1.2% organically excluding Gynesonics. International Surgical grew 24.8% due to investments in commercial and market access capabilities outside the U.S.
• Skeletal: Third quarter revenue was $31.3 million, growing 62.1% as they resumed shipping the final DEXA model, meeting pent-up demand from prior shipping holds.

Risks

• Geopolitical Turmoil: Affects Diagnostics business, with funding cuts to U.S. aid in Africa and challenging operating environment in China impacting growth.
• Tariffs: While mitigated, still a headwind to gross margin, expected to be ~100 basis points compared to 2025 levels in 2026.
• Business Segment Challenges: Breast Health faced prior challenges, although showing signs of rebounding, there is ongoing monitoring needed for sustained growth.

Question and Answer

Q: Doug Schenkel with Wolfe Research asked about dynamics in models for fiscal 2026, including tailwinds or headwinds.

A: Karleen Oberton mentioned Fluoroscan discontinuation and residual headwinds from China and HIV in the first half of 2026.

Q: Jack Meehan with Nephron Energy inquired about M&A and capital allocation.

A: Steve MacMillan stated they've spent over $750 million on buybacks and will continue focusing on M&A and buybacks but no large deals imminent.

Q: Patrick Donnelly with Citi asked about visibility into 4Q Breast Health return to growth.

A: Steve MacMillan cited improved sales force rigor, discipline, and processes, with Endomag running ahead of plan and interventional sales showing growth.

Q: Vijay Kumar with Evercore asked about organic growth and Fluoroscan.

A: Karleen Oberton said organic growth excludes discontinued products like Fluoroscan, and Endomag is running well ahead of plan.

Q: Lu Li with UBS asked about Fusion test menu expansion timing.

A: Karleen Oberton said assays will come online later in 2026 and early 2027, with incremental contribution.