Hologic, Inc.

Good afternoon, and welcome to the Hologic Second Quarter Fiscal 2024 Earnings Conference Call. My name is Justin, and I am your operator for today's call. Today's conference is being recorded. All lines have been placed on mute. I would now like to introduce Ryan Simon, Vice President, Investor Relations, to begin the call.

Thank you, Justin. Good afternoon, and thank you for joining Hologic's second quarter fiscal 2024 earnings call. With me today are Steve McMillan, the company's chairman, president, and chief executive officer. Carlene Oberton, our chief financial officer, and Essex Mitchell, our chief operating officer. Our second quarter press release is available now on the investor section of our website. We will also post our prepared remarks to our website shortly after we deliver them. as well as an updated corporate presentation. And a replay of this call will be available on our website for the next 30 days. Before we begin, we would 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 SEC filings. Also during this call, we will discuss certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. Two of these non-GAAP measures are one, organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than one year. And two, organic revenue excluding COVID-19, which further excludes COVID-19 assay revenue revenue related to COVID-19, and sales from discontinued products in diagnostics. 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's CEO.

Thank you, Ryan, and good afternoon, everyone. We are pleased to discuss our financial results for the second quarter of fiscal 2024. For the quarter, total revenue was $1.02 billion, and non-GAAP earnings per share was $1.03. Both revenue and EPS came in above the high end of our guidance, reflecting another strong quarter. Similar to Q1, it is again important to view our Q2 performance in proper perspective. As we shared on our Q1 earnings call in February, Throughout 2024, we faced double-digit comps, massive comps in the first half and still very strong comps in the second. As a reminder, in Q2 of last year, organic molecular diagnostics, ex-COVID, posted growth of nearly 25%, and both surgical and breast health posted phenomenal growth of over 25%. This year, in Q2, on top of the high growth rates from a year ago, we grew our molecular diagnostics business, ex-COVID, 10.7%, our surgical business, 7.4%, and our breast health business, 1%, excluding the divested SSI business, a solid result given the elevated gantry placements in Q2 a year ago. We also delivered operating margins of 30.4% in Q2, improving 190 basis points sequentially from Q1, setting us up nicely to approach 31% for the full fiscal year. Now past the halfway point of fiscal 24, we believe we are in excellent position to achieve our full year goals. Before moving on to our themes for today, our fiscal second quarter marks the fourth anniversary of when the COVID virus changed the world. When COVID initially surged, we had three goals. One, ensure that we take care of our employees. Two, make a huge difference in the world with our Panther system and COVID testing. And three, emerge as a bigger, stronger, faster growing company in a post-pandemic world. Fast forward to today, as you can see from our results, we have delivered against these three goals and we're aiming for more. Not only did we achieve our primary objectives, we also successfully managed to strengthen all of our franchises, both in the U.S. and internationally, remain innovative and disciplined in executing our growth strategies, and build a fortress balance sheet to facilitate future growth. On top of these achievements, we continue to elevate our already high employee engagement scores. and all through complicated macro challenges. That said, we are never satisfied and firmly believe the best is still ahead. As we look further out beyond the horizon, we see significant potential to continue to innovate and unlock growth opportunities for years to come. Now, on to our three themes for today. First, our core franchises. diagnostics, breast health, and surgical, continue to showcase the benefits of our diverse portfolio. As planned, we continue to yield robust growth and durability because we benefit from being both diagnostics and med tech. Second, our international business quietly continues to drive strong top-line growth. demonstrating our ability to capture potential growth opportunities and turn them into reality. And third, our strong balance sheet and disciplined approach to capital allocation empower us to fortify our foundation, as we've done this week with the announcement of the endomagnetics acquisition. We have the ability to build on our strengths with significant operational flexibility, which allows us multiple levers to deliver top and bottom line performance. Turning to our first theme. Sometimes overlooked and misunderstood, the strength of our business comes from the sum of our parts. We are a unique collection of diagnostics and med tech businesses with many more growth drivers than meets the eye. Each business has multiple growth drivers with tremendous runway ahead. To the outside, it may be unclear how we can keep driving growth with the strong market shares we have. In reality, our product and service diversity creates enduring strength as we advance forward and notch incremental wins. Over time, these wins collectively deliver meaningful and durable growth across multiple franchises and multiple geographies. While we know we don't fit neatly into either diagnostics or medical device, we do fit neatly into the world of improving women's health. Our unique set of businesses equips us to deliver results and positively impact more and more women, regardless of external macro challenges. Our strong growth over the past four years reflects a combination of multiple durable growth drivers intentionally built into each of our businesses. The beauty here is that over time and in any given quarter, our growth drivers can change and morph. What we've done is create multi-phase extended and stacked growth cycles. The net result is our ability to consistently deliver on a consolidated basis over time. A few examples to highlight from across our business. In our second quarter, worldwide diagnostics growth ex-COVID of 9.8% was again primarily driven by our molecular diagnostics business. In molecular diagnostics, over the last few years, we've dramatically expanded both our installed base and menu, nearly doubling our installed base from 1,700 Panthers to over 3,200 during the pandemic. and going from four FDA-approved assays to over 20. Our next phase of growth is about menu adoption and driving more volume by focusing largely on existing customers while adding more geographies. At the same time, we continue to broaden our menu. As a result, we create years of growth ahead as we extend our commercial reach and continue to add products to our portfolio. In the second quarter, U.S. Molecular Diagnostics delivered double-digit growth, led by ongoing adoption of BVCVTV on the Panther, strong contributions from our respiratory suite of assays on the fusion, as well as continued growth from biotheranostics. Each of these are newer products to our portfolio. Underscoring the power of our extended reach, layering on top of the strong U.S. molecular performance, international cytology was also accretive to worldwide diagnostics growth. Outside the U.S., diagnostics growth was driven primarily by multi-country adoption of our innovative Genius AI digital cytology in the quarter. As a reminder, Digital cytology was only recently approved in the U.S. earlier this year, meaning the U.S. opportunity is still ahead. In breast health, we've expanded our product offering from imaging to cover the continuum of breast cancer care, including biopsy and surgery. In the second quarter, on a worldwide basis, the gantry and service businesses performed well against very strong comps from the prior year period. Meanwhile, outside the U.S., our emerging interventional breast business grew double digits in Q2, accretive to the worldwide growth rate. And finally, in surgical, once essentially only a U.S. two-product business with NovoSure and MyoSure, we now have Fluent, Assessa, and Boulder. And internationally, we are just getting started with both the core business and new product lines. In Q2, worldwide growth of 7.4% was very strong against the high prior year comp. Our performance was driven in large part by very strong double-digit growth in our international surgical business, which in Q2 is a reflection of continued market penetration, as well as our go-direct strategy in the Nordics. All in, we are a powerful women's health composite. As we extend our reach globally, we expect to grow even in product categories and territories that may, on their surface, appear to be mature and well-penetrated. With that, I'll turn the call over to Essex to discuss our final two themes for today.