Hologic, Inc.

My name is Rachel, and I'm 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 Mike Watts to begin the call.

Thank you, Rachel. Good afternoon, and thank you for joining Hologic's second quarter fiscal 2025 earnings call. With me today are Steve McMillan, the company's chairman, president, and chief executive officer, Essex Mitchell, our chief operating officer, and Carlene Overton, our chief financial 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, and a replay of this call will be available for 30 days. Before we begin, we'd like to inform you that certain statements we make today will be forward-looking. These statements include 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 that's 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 organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than one year. And also 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 that 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, Mike, and good afternoon, everyone. Thanks for joining us to discuss our financial results for the second quarter of fiscal 2025. As everyone knows all too well, it's been a tumultuous few months from a macroeconomic and policy perspective. But in this challenging environment, we took a step in the right direction this quarter by meeting our financial commitments, making good progress on our plans to reinvigorate growth, and demonstrating once again the reliability and adaptability of our business model. Specifically, Total revenue for the quarter was $1.005 billion, a decrease of 0.5% in constant currency, but toward the upper end of our guidance. Our diagnostics business continued to grow nicely, despite steep declines in our Africa business following funding cuts. And we also got a positive contribution from our skeletal franchise, as previous supply constraints began to lift. Non-GAAP earnings per share were $1.03 at the high end of our guidance range and flat compared to a year ago. This reflected solid gross margin expansion, as well as benefits from share buybacks and a slightly lower tax rate. With that overview, let me discuss how we are approaching today's macro environment from a position of strength and why we believe we can continue to deliver solid financial results across a range of unpredictable economic, and policy scenarios. First, our products deliver significant value to patients and customers. For example, our market-leading infectious disease and cancer tests are relatively inexpensive, and they help reduce overall health care costs by detecting disease early when it can be treated most effectively. Our breast health products are another good example of this. We need to accelerate growth here for sure, and this quarter we made good progress on our plans to do that, as Essex will discuss. We are confident in our efforts because we know that our foundation is incredibly strong. Our mammography products are best in class, and as a result, we command leading market shares. With our increasingly diverse portfolio, we can help women across the entire continuum of breast health care. and we have the best market position in this important category for women's health. In addition, our customer relationships are without peer, which translates into lots of recurring revenue. For example, strong growth in breast health service drove $212.6 million of overall non-product revenue for the company this quarter. This represented 21% of our total revenue and grew by a very healthy 12%. Second, we have a seasoned management team and a highly engaged workforce of more than 7,000 people who are deeply committed to women's health. In addition to our global leadership team, we are beefing up our organization in key areas like business development, R&D, and quality. Importantly, we are adding experienced professionals who bring deep understanding of their respective end markets And across the company, our level of employee engagement, which we have tracked every year since 2015, remains terrific. Most recently, we scored in the 98th percentile compared to similar companies, actually tipping up a point from recent years. And importantly, 99% of employees agree that Hologic's mission makes them feel their jobs are important, also up a point from last year. High employee engagement really shined through in our impressive response to the COVID-19 pandemic and gives us a competitive advantage in dynamic environments like the ones we're navigating today. Third, the strength of our balance sheet and cash flows give us tremendous strategic and financial flexibility. We generated $169.5 million in operating cash in the second quarter, largely due to our durable, market-leading brands. At quarter end, we had cash and equivalents of $1.43 billion, short-term investments of $192 million, and an adjusted net leverage ratio of only 0.8 times. With our Fortress balance sheet, we believe we are in a good position to capitalize on market dislocations from a business development perspective. We continue to search for acquisitions and investments similar to recent deals like Endomagnetics, Gynasonics, and Mavericks, which are performing well. At the same time, we can also return value to shareholders by repurchasing stock. We have repurchased more than $4.5 billion of stock since 2016, including $200 million in the second quarter. Before I turn the call over to Essex, let me conclude by saying that the financial execution we saw in the quarter reflects our strong positions in core US and European markets. But unfortunately, exogenous factors are affecting our growth in geographies like Africa, which we discussed in our last call, and China. Today, we are lowering sales expectations for China, which has become an increasingly challenging market due to geopolitical turbulence. with these areas now largely de-risked in our forecast. We look forward to faster growth beginning in the fourth quarter and into 2026. We expect this improvement to be generated by better commercial execution in breast health, easier comps in surgical, breast health, and skeletal, organic growth from endomagnetics and gynesonics, and new product introductions. Now I will turn the call over to Essex.