Hologic Announces Financial Results for First Quarter of Fiscal 2020

– Revenue of $850.5 Million Grows 2.4%, 2.8% in Constant Currency –

– Excluding Acquisitions and Divestitures, Revenue Increases 4.1%, 4.6% in Constant Currency –

– Company Posts GAAP Diluted EPS of $1.43 Due to One-Time Tax Benefit, Non-GAAP Diluted EPS of $0.61 –

– Following Cynosure Divestiture, Company Expects Faster Revenue Growth, Higher EPS –

MARLBOROUGH, Mass.–(BUSINESS WIRE)–#earnings–Hologic, Inc. (Nasdaq: HOLX) announced today the Company’s financial results for the fiscal first quarter ended December 28, 2019.

“We posted strong financial results in our first fiscal quarter, led by our Surgical and Diagnostics divisions,” said Steve MacMillan, Hologic’s Chairman, President and Chief Executive Officer. “Excluding acquisitions and divestitures, our core businesses significantly outperformed expectations in the quarter, growing 4.1%, or 4.6% in constant currency, against our toughest comparable of the year. GAAP EPS significantly exceeded our guidance range due to a discrete tax benefit, while non-GAAP EPS hit the high end of our guidance range, even as we absorbed a worse-than-expected loss from our divested Medical Aesthetics business.”

Recent Highlights

• Completed the divestiture of the Cynosure Medical Aesthetics business to an affiliate of investment funds managed by Clayton, Dubilier & Rice.
• Global GYN Surgical revenue of $119.1 million increased 9.9%, or 10.2% in constant currency, the division’s highest growth rate in 11 quarters.
• Global Molecular Diagnostics revenue of $178.5 million increased 8.6%, or 9.0% in constant currency, continuing the division’s strong recent performance.
• Acquired a controlling interest in SuperSonic Imagine (SSI), a French innovator in cart-based ultrasound products. SSI contributed $6.1 million of revenue in the first quarter, which was not included in the Company’s most recent quarterly financial guidance.
• Recent U.S. regulatory clearances included the Unifi™ Workspace reading solution and 3DQuorum™ artificial intelligence imaging technology in Breast Health, and the Definity™ cervical dilator in GYN Surgical.
• Share repurchases:
  • Executed a $205 million Accelerated Share Repurchase agreement (ASR). Approximately 80% of the shares (3.3 million) were repurchased on November 25. The remaining share repurchases (which are subject to adjustment based on the market price of Hologic stock during the measurement period less a discount) will be completed by the end of the second quarter.
  • In addition to the ASR, repurchased approximately 1.5 million shares of stock for $80.9 million.
  • The Board authorized an additional $500 million share repurchase authorization to begin in the third quarter.

Key financial results for the fiscal first quarter are shown in the table below.

Throughout this press release, all dollar figures are in millions, except EPS. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Non-GAAP results exclude certain cash and non-cash items as discussed under “Use of Non-GAAP Financial Measures.”

Constant currency percentage changes show current period revenue results as if the foreign exchange rates were the same as those in the prior year period. Organic revenue is on a constant currency basis, and excludes the divested Blood Screening and Cynosure Medical Aesthetics businesses, as well as the acquired SSI business.

Revenue Detail

Other Financial Highlights

• Excluding the divested Blood Screening and Medical Aesthetics businesses, revenue of $773.2 million increased 5.0%, or 5.4% in constant currency.
• Excluding these divestitures and the acquired SSI business, organic revenue of $767.1 million increased 4.1%, or 4.6% in constant currency.
• U.S. revenue of $632.7 million increased 1.8%. International revenue of $217.8 million increased 4.3%, or 6.0% in constant currency. Organically, U.S. revenue of $588.6 million increased 3.2%, while international revenue of $178.5 million increased 7.3%, or 9.2% in constant currency.
• Gross margin was 51.0% on a GAAP basis and 61.6% on a non-GAAP basis. GAAP gross margin decreased 130 basis points. Non-GAAP gross margin decreased 60 basis points, primarily due to Cynosure’s weak performance, unfavorable product sales mix, and the stronger U.S. dollar.
• Operating margin was 14.7% on a GAAP basis, and 27.5% on a non-GAAP basis. GAAP operating margin decreased 220 basis points. Non-GAAP operating margin decreased 170 basis points, driven by lower gross margin and higher operating expenses as a percentage of revenue.
• The Company’s effective tax rate was a benefit of 296.1% on a GAAP basis, primarily due to a discrete $312.2 million tax benefit related to Cynosure’s outside basis difference recorded in connection with the divestiture. On a non-GAAP basis, the effective tax rate was 21.75%.
• GAAP net income attributable to Hologic of $386.1 million increased 291.6%, primarily due to the discrete tax benefit noted above, partially offset by a $30.2 million non-cash impairment charge related to Medical Aesthetics. Non-GAAP net income of $164.1 million increased 4.7%. Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) was $261.9 million, an increase of 0.5%.
• GAAP diluted EPS attributable to Hologic of $1.43 increased 297.2%. Non-GAAP diluted EPS attributable to Hologic of $0.61 increased 5.2%.
• Total debt outstanding at the end of the quarter was $3.1 billion. The Company ended the quarter with cash and equivalents of $381.5 million (including cash within assets held-for-sale), and a net leverage ratio (net debt over adjusted EBITDA) of 2.5 times.
• On a trailing 12 months basis, adjusted Return on Invested Capital (ROIC) of 12.3% increased 10 basis points compared to the prior year period.

Financial Guidance for Fiscal 2020

“Hologic is off to a good start in fiscal 2020 based on strength in our core businesses and the divestiture of Cynosure,” said Karleen Oberton, Hologic’s Chief Financial Officer. “We expect revenue to decrease in 2020 based on the Cynosure divestiture. However, excluding acquisitions and divestitures, our updated guidance incorporates a faster organic revenue growth rate of between 4.0% and 5.0%. In addition, we are increasing our EPS guidance.”

Hologic’s financial guidance for the second quarter and fiscal year 2020 is shown in the table below. The guidance is based on a full year non-GAAP tax rate of approximately 21.75%, and diluted shares outstanding of approximately 268 to 269 million for the full year. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2020 as in fiscal 2019. Current guidance assumes that recent foreign exchange rates persist for all of fiscal 2020. Organic revenue guidance is on a constant currency basis, and excludes the divested Blood Screening and Cynosure Medical Aesthetics businesses, as well as the acquired SSI business.

Use of Non-GAAP Financial Measures

The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; organic revenues, non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating margin; non-GAAP effective tax rate; non-GAAP net income; non-GAAP net margin; non-GAAP EPS; and adjusted EBITDA. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets and impairment of goodwill, intangible assets and equipment; (ii) additional depreciation expense from acquired fixed assets and accelerated depreciation related to consolidation and closure of facilities; (iii) additional expenses resulting from the purchase accounting adjustment to record inventory at fair value and adjustments to contingent consideration; (iv) restructuring and divestiture charges and facility closure and consolidation charges and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (v) transaction related expenses for divestitures and acquisitions; (vi) debt extinguishment losses and related transaction costs; (vii) the unrealized (gains) losses on the mark-to-market of forward foreign currency contracts and foreign currency option contracts for which the Company has not elected hedge accounting; (viii) litigation settlement charges (benefits) and non-income tax related charges (benefits); (ix) other-than-temporary impairment losses on investments and realized gains and losses resulting from the sale of investments; (x) the one-time discrete impact of tax reform and other one-time impacts related to tax planning and non-operational items; (xi) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company’s core business results; and (xii) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income. The Company defines organic revenue to exclude the divested Blood Screening and Cynosure businesses, and the acquired SSI business.

These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The company’s definition of these non-GAAP measures may differ from similarly titled measures used by others.

The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The company generally uses these non-GAAP financial measures to facilitate management’s financial and operational decision-making, including evaluation of Hologic’s historical operating results, comparison to competitors’ operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic’s business.

Because non-GAAP financial measures exclude the effect of items that will increase or decrease the company’s reported results of operations, management strongly encourages investors to review the company’s consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.

Future Non-GAAP Adjustments:

Future GAAP EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, unusual or unanticipated charges, expenses or gains, which are excluded in the calculation of the Company’s non-GAAP EPS guidance as described in this press release.

Conference Call and Webcast

Hologic’s management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the first quarter of fiscal 2020. Approximately 10 minutes before the call, dial 800-458-4121 (in the U.S.) or +1 323-794-2093 (international) and enter access code 7777146. A replay will be available approximately two hours after the call ends through Friday, February 21, 2020. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 7777146, PIN 2745. The Company will also provide a live webcast of the call at http://investors.hologic.com.

About Hologic, Inc.

Hologic, Inc. is an innovative medical technology company primarily focused on improving women’s health and well-being through early detection and treatment. For more information on Hologic, visit www.hologic.com.

Hologic, Cynosure, and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.

Forward-Looking Statements

This news release contains forward-looking information that involves risks and uncertainties, including statements about the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company’s strategies, positioning, resources, capabilities, and expectations for future performance; and the Company’s outlook and financial and other guidance. These forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.

Risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated, include without limitation: the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees; U.S., European and general worldwide economic conditions, trade relations, and related uncertainties; the Company’s reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; changes to applicable laws and regulations, including tax laws, global health care reform, and import/export trade laws; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company’s ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company’s international activities and businesses; manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; the Company’s ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the early stage of market development for certain of the Company’s products; the Company’s leverage risks, including the Company’s obligation to meet payment obligations and financial covenants associated with its debt; cybersecurity risks; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.

The risks included above are not exhaustive. Other factors that could adversely affect the Company’s business and prospects are described in the filings made by the Company with the SEC. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.

SOURCE: Hologic, Inc.

Contacts

Michael Watts

Vice President, Investor Relations and Corporate Communications

(858) 410-8588

michael.watts@hologic.com

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