Hologic, Inc.

Ladies and gentlemen, good afternoon, and welcome to Hologic's third quarter fiscal 2025 earnings conference call. My name is Lisa, and I'll be 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, Corporate Vice President, Investor Relations, to begin our call.

Thank you, Lisa. Good afternoon, and thank you for joining Hologic's third 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 Oberton, our chief financial officer. Our third quarter press release is available now on the investors 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 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 organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than one year. Also, organic revenue excluding COVID-19, which further excludes COVID-19 assay revenue and other revenue related to COVID-19. 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 CEO.

Thank you, Mike, and good afternoon, everyone. Thanks for joining us to discuss our financial results for the third quarter of fiscal 2025. We're pleased with our performance in the quarter as we delivered both revenue and non-GAAP earnings per share that exceeded our guidance. We've admittedly hit a few speed bumps the last couple of quarters, but we view our results as clear evidence of the significant progress we have made in putting these bumps behind us as we return to higher growth while improving women's health. We have more work to do, but we believe our performance in the third quarter has us very well positioned for better results as we close out fiscal 2025 and move into next year. Specifically, total revenue for the third quarter was $1.024 billion. This represented slight growth of 0.4%, and exceeded the high end of our guidance range by about $14 million. Our diagnostics business continued to grow nicely compared to the prior year, and our breast health business improved sequentially as planned. Surgical met expectations, and we got a positive contribution from our skeletal franchise as previous supply constraints lifted. These solid revenue results helped non-GAAP earnings per share reached $1.08 in the third quarter. This was a slight increase of 1.9% compared to a year ago and a penny above the high end of our guidance range. We maintained a very strong non-GAAP operating margin just above 30% as we controlled expenses across the organization and mitigated some tariff impacts. Importantly, our third quarter financial results have us squarely on the path toward accelerating growth that we described in our last call. In fact, we completed our annual strategic planning process earlier this summer and are optimistic that we will return to solid mid-single-digit organic revenue growth next year and over our strat plan horizon. A key reason we are confident in this outlook is the strengthening of our breast health business. I want to spend a little time on this today since it has understandably been a focus for investors. Although breast health revenues declined in the third quarter versus the prior year, this was expected. In fact, quarterly sales finished slightly ahead of our internal expectations. I want to highlight three areas that underpin this performance. and excite us about our future. First, better commercial execution, both in imaging and interventional. In the third quarter, we shipped more 3D gantries than in the prior quarter, validating the sequential improvement we had forecast. In the United States especially, our new commercial leadership team began to build on the bifurcated sales structure and tighter processes they established earlier in the year. Based on this foundation, we rolled out a new strategy to upgrade older, end-of-life gantries, which we expect to bear more fruit in the fourth quarter and into 2026. As we have previously discussed, gantry replacement cycles have become longer, but we remain encouraged that our leading market share remains intact, and we believe this has been validated by competitive gantry wins in recent quarters. And while all this was happening in mammography, interventional sales increased 6% organically, reflecting an easier comparable, but also the early benefits of our more focused domestic sales force. The second reason we are excited about Breast Health, and a major reason we continue to win competitively, is our consistent delivery of both clinical and product innovation. For example, a retrospective study we published recently with physicians from Sanford Health in South Dakota evaluated more than 180,000 mammograms conducted over 10 years. This real-world study found that high-resolution 3D mammography conducted with our Clarity HD software was associated with higher cancer detection rates than our standard resolution 3D. This is one of scores of clinical studies published by our radiology customers that demonstrate the value of our technologies, creating by far the deepest body of evidence in our category. In terms of product innovation, this quarter we are launching our latest artificial intelligence solution, Genius AI Detection Pro, which will extend our leadership and breast-focused software. This cloud-based solution, developed with our partner TheraPixel, is essentially an all-in-one AI assistant for the radiologist. It analyzes prior and current mammograms through a 2D and 3D deep learning algorithm for increased accuracy and faster throughput. A single streamlined interface boosts efficiency, up to a 24% reduction in reading time. by capturing all key information in one place. This includes breast density scores, patient history, and lesion and case scores. The software will even check image quality and automatically pre-populate the radiologist's report with key findings. It is being sold as an upgrade on our three-dimension system now and will be available on our next generation instrument Envision when it launches next year. Third, we're really excited about endomagnetics, which we acquired last summer. Endomag expands our portfolio of breast surgery products as we offer additional value across the entire breast cancer continuum of care. As a reminder, Endomag markets two primary disposable products, MagSeed, a tiny wireless seed that enables breast surgeons to quickly find and remove a tumor, and MagTrace, a radiation-free tracer that finds and maps target lymph nodes to be removed or biopsied during surgery. Both products operate with a small piece of capital called the Centimag system. In the third quarter, Endomag contributed nearly $20 million of revenue at a very healthy gross margin. The business has been exceeding our deal model and will begin adding to organic growth rates in August. Before I turn the call over to Essex, let me conclude by saying that the operative word for Hologic in the third quarter was progress. Progress in exceeding our near-term financial commitments, progress in strengthening our breast health business, and progress toward accelerating overall company growth in the fourth quarter, as well as 26 and beyond. All in all, we are confident in our path and optimistic about our future. Now I will turn the call over to Essex.