Hologic, Inc.

Good afternoon and welcome to the Hologic fourth quarter 2021 earnings conference call. My name is Sarah and I'm your operator for today's call. This conference 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. Please go ahead, sir.

Thank you, Sarah. Good afternoon and thanks for joining us for Hologic's fourth quarter fiscal 2021 earnings call. With me today are Steve McMillan, the company's chairman, president, and chief executive officer, Carlene Overton, our chief financial officer, and Ryan Simon, our new vice president of investor relations. 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 today. And a replay of this call will be archived through December 3rd. Before we begin, I'd like to inform you that certain statements we make today will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the Safe Harbor Statement included in our earnings release and in 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, which we define as constant currency revenue excluding the divested blood screening business and revenue from acquired businesses owned by Hologic for less than one year. Finally, any percentage changes we discuss will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Now I'd like to turn the call over to Steve McMillan, Hologic CEO.

Thank you, Mike, and good afternoon, everyone. We are pleased to discuss our strong financial results for the fourth quarter of fiscal 2021. Revenue was $1.32 billion and non-GAAP earnings per share was $1.61. Both figures significantly exceeded our guidance. Since this quarter marked the end of our fiscal year, we want to highlight some annual numbers and themes today. First, the numbers. For the year, total revenue was $5.63 billion, up 47% versus 2020. Non-GAAP EPS was $8.41, more than double the prior year. Some really big numbers and a truly impressive performance that was driven by our COVID test sales as well as the recovery of our core women's health businesses. Along these lines, If you back out COVID test sales, as well as revenue from COVID-related products, such as instruments and collection kits, we grew about 12% in the quarter, a very nice start versus the long-term guidance of 5% to 7% that we introduced in our last call. We believe we are well positioned for success, regardless of the future direction of the pandemic. If it drags on, we have shown that we can respond aggressively and generate financial upside. For example, since the beginning of the pandemic, we have provided more than 130 million highly accurate COVID tests to our customers in more than 50 countries. And when the pandemic subsides, we can rely on a base business that has never been stronger or more diversified than it is today. Now let's turn to those annual themes. We want to focus on the strengthening of our major businesses over the last 12 months, as well as two very important social initiatives that help improve health access and equality. We're so proud of everything that Hologic has done to help fight the COVID pandemic. And the resulting financial success has made us a significantly stronger company for the future. Our core businesses are more diverse with more growth drivers than ever before. Our R&D pipelines are producing innovative new products and our commercial organizations are fully engaged. And our international business has emerged as a consistent growth driver with passionate teams on the ground who are building relationships and market presence all around the world. On top of all this, we have used the strong cash flow we are generating from COVID test sales to acquire companies that we expect to generate more than $150 million of revenue in 2022. Although these acquisitions are slightly dilutive to near-term EPS, we expect them to accelerate our top-line growth rate. Now let's get into the specifics by division. First, in diagnostics, Our Panther footprint continues to grow as we respond to the pandemic. In our fourth quarter, we placed 167 Panther instruments worldwide and about 650 for the year, well ahead of what we originally forecast. Our Panther installed base currently stands at more than 1,500 in the United States and almost 2,900 worldwide. Remarkably, this represents a two-thirds increase in our total installed base since the end of fiscal 2019 when we had about 1,700 instruments in the field. And looking forward to 2022, we continue to see strong demand for additional placements globally. Utilization of this growing footprint and leveraging our robust portfolio of 19 assays will be key to driving the business forward in a post-COVID world. Toward this end, in 2021, we signed up more new assay business in the US than ever before. While our legacy women's health assays are leading the way, we also expect newer assays to make material contributions. For example, sales of our vaginosis panel almost doubled to nearly $30 million in 2021. We expect significant growth in 2022 as well, which would make this product our most successful diagnostics launch ever, aside from COVID. In addition, we completed the back-to-back-to-back acquisitions of Biotheranostics, Diagenode, and MobiDiag in 2021, our first diagnostic acquisitions in nearly a decade. These deals are broadening our product offering and customer base and strengthening our R&D capabilities around the world. While still in the early innings, biotheranostics continues to exceed expectations with sales of more than $16 million in our fourth quarter. In addition, the broad European launch of the NovoDiag system represents a meaningful early achievement in our integration process. and we have already secured some encouraging customer wins. We are excited about opportunities to invest in these businesses in the near term and expect them to accelerate our top line growth in the years to come. Second, in breast and skeletal health, we are well positioned for fiscal year 2022 and beyond. Our genius 3D mammography systems remain the core of our business, and our market share remains very high. Despite COVID pressures, we placed almost 950 3D units in the United States in 2021. We now have a domestic installed base of almost 8,700, which we can build on with new software and hardware upgrades. At the same time, our business is now more balanced than ever, as we operate across the entire continuum of breast health care, from screening and diagnosis through surgery and treatment. As a result, we are now less susceptible to the boom and bust cycle of years past and better able to capitalize on opportunities as demand continues to recover from the headwinds created by the pandemic. Third, in our surgical division, we are executing on our plan to broaden the division from a two-product hysteroscopy business to a more diverse provider focused on the OB guide. In fiscal 2021, we broadened our portfolio by adding Assessa, a laparoscopic fibroid removal system used to treat larger, more complicated fibroids that MyoSure cannot reach. We are pleased that insurance coverage for the Assessa procedure has steadily expanded. And with this tailwind, we expect to grow Assessa into a third important surgical brand alongside MyoSure and NovaSure. Taking another step forward, we are also very excited about the recent signing of an agreement to purchase Boulder Surgical, which offers additional laparoscopic devices. We expect this deal to close later this calendar year. Boulder offers a portfolio of advanced energy vessel-sealing surgical devices currently marketed primarily in the pediatric space. Once the deal is closed, we expect to again leverage our strong customer relationships to grow Boulder sales in the OB-GYN market, which we estimate to be five times the size of the pediatric market. Boulder and Assessa represent solid examples of executing against our tuck-in acquisition strategy, using our strong cash flow to add products that leverage our existing channel strength and accelerate our growth. Fourth, let's discuss our international business, which was growing nicely before COVID, but has become even stronger thanks to our pandemic contributions. Even excluding COVID, our international revenue has nearly doubled in just five years, and the business is positioned to continue its impressive strength of double-digit core growth. I recently had the pleasure of being with Jan Verstrecken's leadership team in Dubai as they made plans to kick off fiscal 2022. It was inspiring to see the deep talent that Jan has assembled and the passion for women's health that helps them build and strengthen commercial relationships. I saw business benefiting from tremendous leadership and from years of dedication transitioning from a distribution model to direct on-the-ground commercial expertise. Further, the acquisitions of Diagenote, based in Belgium, Moby Diag, based in Finland, and Somatex, based in Germany, provide tailwinds to our international business going forward. Since the close of each deal, dozens of team members, including technical experts and leadership, have made numerous trips across Europe and across the Atlantic to ensure successful integration of these companies, all while dealing with strict COVID protocols. Truly a global collaborative effort that we expect to accelerate growth for years to come. Now let's shift gears and discuss two groundbreaking social initiatives that we launched this year and that were made possible by our financial success. These efforts represent unique ways that we can extend our purpose, passion, and promise even further for the benefit of women's health. First, in May of this year, we launched Project Health Equality, a $20 million initiative to address the structural and cultural barriers that prevent black and Hispanic women in the United States from receiving the same quality healthcare as white women. By teaming up with leading nonprofit groups focused on minority health, our goals are to drive culturally competent care, improve public health policy, increase access, and ultimately decrease disparities that lead to disproportionate mortality rates for black and Hispanic women. Second, in September, we released the findings of our inaugural Hologic Global Women's Health Index. As leaders in diagnostics, we understand the importance of data and know that what we can measure, we can improve. We also know that women's health has been overlooked for centuries. That's why we created the index, the first to statistically represent the health of 2.5 billion women and girls worldwide. Developed in partnership with Gallup, the Hologic Global Women's Health Index is an unprecedented in-depth examination of critical markers for women's health by country and territory and over time. Notably, 60% of those surveyed equating to about 1.5 billion women and girls had not been tested in the last year for four common diseases that affect women's health, cancer, diabetes, high blood pressure, and sexually transmitted infections. As we share this kind of data with international leaders and health organizations, our goal is to provide an actionable, science-backed data roadmap for improving life expectancy and quality of life for women around the world. While we have made a tremendous impact around the world with our innovative products, the Hologic Global Women's Health Index may ultimately prove to be our most important accomplishment for women's health. We hope that sharing a little about these initiatives is helpful to all our investors, but especially those who are focused on ESG issues. We also are pleased to share that we recently received some recognition for our efforts as Investors Business Daily just named us one of their top 100 ESG stocks. Before I turn the call over to Carlene, let me wrap up by saying that based on the stabilization, growth, and diversification of our core businesses, we expect to grow revenue at least in line with our 5% to 7% long-term guidance in 2022. And on top of this, we have the potential for significant financial upside based on our sales of COVID tests. To state the obvious, our success in 2021 and our optimism for 2022 would not be possible without our 6,000 plus employees. I am incredibly proud of them for their continued dedication and resilience. In a year marked by day to day, hour-by-hour management of highly variable pandemic demands, Hologic continues to make an enormous impact on humanity. As I visit Hologic sites and talk to employees, the sense of pride, morale, and engagement is palpable. The belief in our mission to enable healthier lives everywhere, every day is real. I personally have never been more proud or excited for our organization. As a reflection of our global leadership team's gratitude, in the fourth quarter, we provided all our employees a special one-time cash bonus, regardless of function and level. In an environment where finding and developing talent is increasingly challenging, we've strengthened our talent across all levels of the organization with individuals who embody our purpose, passion, and promise. To all of you around the world, Thank you. Now let me hand our call over to Carlene.