Hologic, Inc.

Good afternoon, and welcome to the Hologic's third quarter fiscal 2024 earnings conference call. My name is Cynthia, 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. Please go ahead.

Thank you, Cynthia. Good afternoon, and thank you for joining Hologic's third quarter fiscal 2024 earnings call. With me today are Steve McMillan, the company's chairman, president, and chief executive officer, Carlene Overton, our chief financial officer, and Essex Mitchell, our chief operating officer. Our third 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 filing. 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, other revenue related to COVID-19, and sales from discontinued products and 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 third quarter of fiscal 2024. Total revenue for Q3 was $1.01 billion, and non-GAAP earnings per share was $1.06 billion. both again above the high end of our guidance. Importantly, we are excited that with COVID now mostly in the rearview mirror, our reported revenue has returned to growth. Our strong performance goes beyond the top line and shines throughout the P&L. For the quarter, we delivered a solid 31.2% operating margin and deployed $100 million during the quarter to repurchase 1.4 million shares. All in, the $6 in EPS translates to 14% growth on the bottom line, a very strong result and also very encouraging as we flip the script now to reported revenue and EPS growth again. Looking back to the start of our fiscal year, we knew there were still certain questions on some investors' minds. about the true strength and durability of our underlying business. These were questions that surfaced as we exited a period of uncertainty created by the pandemic, followed by the global chip shortage. While we and many long-term investors understood the power and potential of our transformed, much stronger business, we acknowledge that these unanswered questions created barriers for some of those newer to Hologic. As usual, rather than rely on words, we knew it would be our performance that would emphatically answer these questions and clearly demonstrate that we are indeed a bigger, faster, stronger company than before the pandemic. Our third quarter performance should make this very clear. In Q3, we bent the top line curve to green after 11 quarters of COVID-driven declines. Our top line reported revenue returned to growth at 3.1% versus last year. Organic ex-COVID, we delivered healthy 5.8% growth. And we achieved these strong results on top of exceptionally strong 18.4% organic ex-COVID growth last year. Turning to our themes for today. First, we would like to recap our performance since the start of the fiscal year by answering five key questions which were on many investors' minds. Second, we'll pass the call over to Essex, who will highlight certain overlooked elements of our broad-based international growth, as well as provide an update on M&A activities. On to our first theme, the top five questions which have been out there. One, will Panther utilization continue to grow? Two, will breast health return to full strength and maintain market leadership? Three, will Hologic return to delivering industry-leading 30% plus operating margins? Four, With a $2.4 billion cash position, will Hologic be successful in deploying capital? And finally, five, can Hologic maintain its cervical cancer screening leadership if USPSTF issues an adverse cervical cancer screening guideline? The short answer to all five is, without a doubt, yes. We will continue to thrive. From here, we'll take each question in order. First, our molecular diagnostics business continues to deliver and is so much bigger and stronger than it was prior to the pandemic. Our global installed base of Panthers now exceeds 3,300 and is rock solid. More importantly, our customers continue to praise and utilize our platform. Panther's superior workflow, automation, ease of use, and constantly expanding menu continues to drive demand and differentiate us in a competitive environment. In quite simple terms, revenue per Panther and number of assays run per Panther continue to grow, with the simple metric being our molecular diagnostics growth rate. In Q3, our molecular business, excluding COVID, grew 10.5%, on top of 12.9% growth in the prior year period. We've now delivered high single- to double-digit performance in 13 of the last 15 quarters. Quarter after quarter, year over year, we continue to deliver by expanding utilizations, and our outlook remains bright. Second, our breast health results continue to demonstrate a profound strength in breast cancer screening. Our gantry business is well on pace to fully recover from the chip shortage, and we continue to maintain our leadership position. Our supply chain is much improved and now fortified from successfully navigating the chip shortage experience. Over a decade from the initial launch of our breakthrough 3D mammography, customers still view Hullogic as leaders in performance, including image quality and scan time, leaders in service, and leaders in customer satisfaction. Letting the numbers speak for themselves, in Q3, we delivered 7.1% growth in breast health on top of 27.5% growth in the prior year period. The business is more diverse than ever and continuing to add in even more recurring revenue with our endomagnetics acquisition. Third, operating margins. As Carlene will share in more detail later, we delivered a 31.2% operating margin in our third quarter, a 230 basis point improvement from the prior year period. and an 80 basis point improvement sequentially. At the highest level, we are now back to delivering pre-COVID margins, even with our international business being over 40% larger than it was in 2019. Consistent with our expectations, we recaptured our strong sector margin profile by maintaining focus on operational efficiency and moving past the amortization of higher priced chips purchased during the chip shortage. Fourth, on capital deployment, our balance sheet and cash flow remain incredibly robust. As announced last week, we recently closed the endomagnetics acquisition, a transaction that we view as straight down the fairway in terms of execution within our broader M&A strategy. Overall, The deal is a prudent investment of capital that we expect to add revenue, margin, and EPS accretion over time. Together, we have an incredible opportunity to improve interventional breast care for women. On top of closing the Endomag deal, we continue to demonstrate that we are willing to bet on ourselves and repurchase shares. As a baseline, we are looking to offset dilution from our internal share plans. And from there, with our strong cash position, we look to layer on additional share repurchases. Fiscal year to date, we have repurchased 10.5 million shares for $750 million. We plan to continue on our capital allocation path and fully intend for our deployment strategy to include both M&A and share repurchases. And finally, before turning the call over to Essex, USPSTF. As we've done for nearly 30 years in cervical cancer screening, no matter the direction the USPSTF may take for its cervical cancer guidelines, we will navigate the landscape and remain strong. Overall, we achieved our strong results by maintaining our long-term focus and commitment to women's health. As we shared on our Q2 call, the strength of Hologic lies in the sum of our parts. We expect our results to continue to answer the call and speak for themselves while we continue to demonstrate our durable strength quarter after quarter, year over year. With that, I'll turn the call over to Essex to share insight on international growth drivers and more on endomagnetics.