Release Date: July 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hologic Inc (HOLX, Financial) reported total revenue of $1.01 billion for Q3, exceeding the high end of their guidance.
- Non-GAAP earnings per share were $1.06, translating to a 14% growth on the bottom line.
- The company achieved a solid 31.2% operating margin, a 230 basis point improvement from the prior year.
- Hologic Inc (HOLX) repurchased 1.4 million shares for $100 million during the quarter, demonstrating strong capital deployment.
- The molecular diagnostics business excluding COVID grew 10.5%, showing consistent high-single to double-digit performance in 13 of the last 15 quarters.
Negative Points
- The skeletal business faced a 29.7% decline in revenue due to a temporary stop-ship related to a non-conformance issue.
- The cytology and perinatal segment declined 2.9% globally, with US declines partially offset by international growth.
- Non-COVID respiratory assay sales declined sequentially from Q2, in line with the flu season.
- The company lowered the midpoint of their prior revenue guidance by $5 million due to a $20 million headwind related to the skeletal health stop-ship.
- Operating expenses decreased by 3.5% primarily due to the elimination of expenses related to the divested SSI business, indicating potential cost-cutting measures.
Q & A Highlights
Q: Steve, probably the biggest inbound is just on the 4Q guide. Has anything changed relative to a few months ago?
A: You nailed it, Patrick. It's probably a little alarming because of the skeletal piece. But the three core businesses are all going great and it is completely a reflection of that. We just had a little hiccup with the supplier issue in our skeletal business. It is our non-core. But for diagnostics, breast health, surgical, we are feeling really, really good. (Stephen Macmillan, CEO)
Q: Can you talk about the margin profile as we work our way forward here? How do you think about the build going forward when you think about the algorithm, the keys to getting that margin continuing to expand as we go forward?
A: We'd like to ground people in the pre-pandemic operating margins of 31.5%. As we exit Q4, we'll be right in that range. We've added a lot of revenue growth drivers that have a lower operating margin profile than the legacy business. Feel really good about achieving that as we exit '24. (Karleen Oberton, CFO)
Q: Can you help frame up how the Panther is coexisting in the market now with some of these growing point-of-care platforms?
A: We continue to feel really, really good that most of the screening is asymptomatic. It's standard testing that the economics are still going to work very well for the labs. We love our position and there's always going to be people punching around on the edges that will help expand the market probably as well. (Stephen Macmillan, CEO)
Q: Could you provide some color on how adoption is trending for the Fusion sidecar recently?
A: We're seeing steady adoption of the Fusion sidecar, which is dynamite because it really opens up the menu. We're focusing on customer by customer. So what we're seeing is quarter over quarter more customers adopting the Fusion as we go along. (Stephen Macmillan, CEO)
Q: Can you provide the range of assays used in the post-pandemic systems?
A: On the Panther utilization, over 55% of new customers are running two or more assays. In the US, over a third of our customers are running four or more assays. That over a third at the end of '23 compares to just under 20% at the end of '19. (Karleen Oberton, CFO)
Q: Can you give any color on timing of the next-gen gantry?
A: I don't think we're going to give any specifics on timing. Likely as we look towards RSA would be a time that we would highlight that for certain of our customers and probably give a little more specifics on what we're expecting for 2025 and beyond. (Karleen Oberton, CFO)
Q: What are your expectations for where the Fusion attach rate can move longer term?
A: It doesn't necessarily mean every Panther needs a Fusion. It might end up being maybe even a third of our total Panthers. What it really comes down to is each customer having the capability. We're seeing good adoption and steady growth. (Stephen Macmillan, CEO)
Q: Has anything changed in terms of how quickly you're working through those higher-cost chips and when you expect to be at more normal levels in terms of the chip costs themselves?
A: We're substantially through them as we exit '24 and probably be a little bit into '25. As we increase production overall, we're getting more favorable absorption than what we had prior when manufacturing was really reduced because of the chip supply. (Karleen Oberton, CFO)
Q: Can you discuss the innovation, including the next-generation gantry system in breast health and AI?
A: We've talked about a next-generation gantry that really continues to focus on workflow, patient experience, and image quality. Those are the key drivers of innovation in that space. And certainly, layer on AI, how can we help the radiologist in assessing risk within those images? (Karleen Oberton, CFO)
Q: Can you provide specific numbers on gantry placements?
A: We haven't given specific numbers on gantries. We have real confidence that the total gantries are going to grow year over year. We're not quite back to pre-pandemic levels but we'll be at those levels in 2025. (Karleen Oberton, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
