Hologic, Inc.

Good afternoon, everyone, and welcome to the Hologic's fourth quarter fiscal 2020 earnings conference call. My name is Christy, and I'm your operator for today's call. Today's conference call is being recorded. All lines have been placed on mute. I would now like to introduce Mike Watts, Vice President, Investor Relations and Corporate Communications, to begin the call.

Thank you, Christy. Good afternoon, and thanks for joining us for Hologic's fourth quarter fiscal 2020 earnings call. With me today is Steve MacMillan, the company's chairman, president, and chief executive officer. Karleen Oberton, our chief financial officer, had an accident last week that required surgery, so she's not joining us today. She's resting at home and doing well, but I'll be covering for her in our call today. Please join me in wishing Karleen a speedy recovery. Our fourth quarter press release is available now on the investor section of our website. We also will post our prepared remarks to our website shortly after we deliver them. Finally, a replay of this call will be archived through November 27th. Before we begin, I'd like to inform you that certain statements we make during this call will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results that differ materially from those expressed or implied. Such factors include those referenced in the safe harbor statement that's in our earnings release and our filings with the SEC. Also during this call, we will be discussing certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. One of these non-GAAP measures is organic revenue. We define organic revenue as constant currency revenue, less the divested blood screening and signature businesses, as well as the acquired supersonic imagine and assessa businesses. Finally, any percentage changes that we discuss will be on a year-over-year basis, and revenue growth rates will be expressed in constant currency and less otherwise noted. Now I'd like to turn the call over to Steve MacMillan, Hologic CEO.

Thank you, Mike, and good afternoon, everyone. We're pleased to discuss our financial results for the fourth quarter of fiscal 2020. We capped off a truly unprecedented fiscal year, a year in which we made an enormous impact on public health with remarkable performance on both the top and bottom lines. Since we're marking the end of fiscal 2020, we'll reflect on the full year today. We also want to remind everyone of the steps we took in previous years that enabled us to post such terrific performance and discuss how our current successes will make us an even stronger company going forward. Before we do that, let's provide a quick overview of our financial results for the fourth quarter. Total revenue was $1.347 billion. and non-GAAP earnings per share was $2.07. Revenue grew 70.9% organically and EPS more than tripled as higher production volumes and diagnostics enabled us to leverage our fixed cost base. Both revenue and EPS came in well ahead of our expectations at the beginning of the quarter, as well as the updated guidance we provided in September. The outperformance was driven by unprecedented global demand for our COVID tests on the Panther system and the continued recovery of our other product lines. How did we achieve these results? Five strategies that we pursued before 2020 put us in a position to seize the opportunities that COVID presented, as well as mitigate the risks. While we certainly did not predict the COVID pandemic, we did put in place people, processes and capabilities that enabled us to adapt quickly, make a massive contribution to human health and drive value for customers, employees and shareholders. First, over the last few years, we spent a significant amount of time defining Our purpose, passion, and promise. As a reminder, our purpose is to enable healthier lives everywhere, every day. Our passion is to become global champions of women's health. And our promise is the science of sure, which is all about providing clinically differentiated high performance products that customers and patients can rely on. These principles have inspired our team's incredible efforts over the last several months, especially our many frontline employees who have shown up to work every day since the pandemic began. When the world needs us most, our team rises to the occasion. Second, in diagnostics, We fueled our Razor razor blade business model by placing hundreds of Panthers and strengthening our assay development capabilities to add more tests to our menu. At the end of 2014, we had about 600 Panthers installed worldwide. Over the next five years, we tripled that installed base to more than 1,700 at the end of 2019. Similarly, in 2014, we had a grand total of four assays approved on the Panther in the United States. But by the end of 2019, we had quadrupled that with 16 tests cleared. As a result, our molecular diagnostics business was thriving even before COVID, with growth of 11% globally last year. Clearly, we were well poised to make a difference when COVID emerged. Third, in breast health, we diversified our business under the leadership of Pete Valenti. We recently announced that Pete will be retiring in December, and we want to thank him for more than six great years of service. Pete was the first division president I hired at Hologic. and he was the mastermind behind our genius 3D mammography strategy. Pete leveraged our leadership position into a more diverse, consistent business that tracks the clinical continuum for breast health care. We acquired Faxotron, Focal and Supersonic Imagine, grew our service business to be even bigger than our capital franchise and developed innovative new products such as Bravera and artificial intelligence tools. As a result, our breast health division has been more insulated during the pandemic than many other businesses that are highly dependent on capital. Fourth, in surgical, we brought in a new leadership team that quickly transformed the commercial organization with their focus on talent and engagement. This began with Sean Doherty, who was recently promoted to group president, overseeing surgical as well as breast health. Sean's team also revitalized the division's R&D pipeline, bringing to market new products, including Fluent and the Omni Hysteroscope. As a result, surgical was growing strongly pre-COVID and is recovering faster than expected now. Fifth, In international, we hired experienced senior leaders who pursued an ambitious goal to double revenue over five years. In Europe especially, we moved away from the distributors and strengthened our direct commercial capabilities under the leadership of Jan Verstreken, who was recently promoted to group president for all our international franchises. Our international business grew 11% on average from 2016 to 2019. And when the pandemic hit, we were in an excellent position to contribute with our testing solutions. Now, let's spend a few minutes on the highlights of fiscal 2020.