Hologic Announces Financial Results for Third Quarter of Fiscal 2020

— Revenue of $822.9 Million Declines 3.5% due to Cynosure Divestiture, 3.1% in Constant Currency —

— Organic Revenue Increases 7.7%, 8.1% in Constant Currency, as Strong Sales of COVID Tests Offset Declines in Other Businesses —

— Company Posts GAAP Diluted EPS of $0.53, Non-GAAP Diluted EPS of $0.75 —

MARLBOROUGH, Mass.–(BUSINESS WIRE)–#earnings–Hologic, Inc. (Nasdaq: HOLX) announced today the Company’s financial results for the fiscal third quarter ended June 27, 2020.

“Our strong third quarter financial results reflect the incredible contributions the Hologic team is making in the fight against the COVID-19 pandemic, and demonstrate the value of our unique set of businesses in a time of great macroeconomic uncertainty,” said Steve MacMillan, Hologic’s Chairman, President and Chief Executive Officer. “I’m so proud of the incredible teamwork and work ethic that brought our two tests to market quickly, increased production capacity significantly, and installed an unprecedented number of new Panther® instruments to help our laboratory customers deliver test results when and where they are needed. Inspired by our purpose of enabling healthier lives, our team knocked down barriers by the day to deliver way beyond what we could even imagine.”

Recent Highlights

• Revenue declined 3.5% for the quarter, or 3.1% in constant currency, due to the inclusion of revenue from the divested Cynosure business in the prior year period. Excluding material acquisitions and divestitures, organic revenue growth in the third quarter was 7.7%, or 8.1% in constant currency.
• Molecular Diagnostics revenue of $460.3 million increased 169.3%, or 170.3% in constant currency, far exceeding internal expectations based on strong demand for the Company’s two SARS-CoV-2 assays that run on the Panther® and Panther Fusion® systems.
• The Breast Health division launched the SuperSonic™ MACH 40 ultrasound system in the United States, expanding its suite of ultrasound technologies with its first premium, cart-based system.
• Cash flow from operations was $223 million in the third quarter. Based on this strong cash flow, the Company repaid $250 million of debt under its revolving credit facility.

Key financial results for the fiscal third 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

* Hologic completed the divestiture of its Cynosure Medical Aesthetics business on December 30, 2019.

Other Financial Highlights

• U.S. revenue of $660.8 million increased 2.9%. International revenue of $162.1 million decreased 22.8%, or 21.2% in constant currency. Organically, U.S. revenue of $652.6 million increased 11.2%, while international revenue of $158.6 million decreased 4.7%, or 2.8% in constant currency.
• GAAP gross margin of 56.6% increased 440 basis points, and non-GAAP gross margin of 64.7% increased 310 basis points. The increases were due primarily to sales of SARS-CoV-2 tests and the divestiture of the lower-margin Cynosure business, partially offset by lower sales in Hologic’s other divisions as a result of the COVID-19 pandemic.
• GAAP operating margin of 23.2% increased 620 basis points, and non-GAAP operating margin of 33.0% increased 380 basis points, primarily due to sales of SARS-CoV-2 tests and the divestiture of Cynosure.
• The Company’s effective tax rate was 19.0% on a GAAP basis, and 22.75% on a non-GAAP basis.
• GAAP net income attributable to Hologic of $137.9 million increased 46.9%. Non-GAAP net income attributable to Hologic of $194.7 million increased 13.5%. Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) was $299.0 million, an increase of 8.2%.
• GAAP diluted EPS attributable to Hologic of $0.53 increased 51.4%. Non-GAAP diluted EPS attributable to Hologic of $0.75 increased 19.0%.
• Total debt outstanding at the end of the third quarter was $3.3 billion. The Company ended the quarter with cash and equivalents of $744.2 million, and a net leverage ratio (net debt over adjusted EBITDA) of 2.4 times.
• On a trailing 12 months basis, adjusted Return on Invested Capital (ROIC) of 12.8% increased 30 basis points compared to the prior year period.

Financial Guidance for the Fourth Quarter of Fiscal 2020

“Strong demand for our COVID tests and the ongoing recovery of our other divisions are enabling us to provide guidance for the fourth quarter of fiscal 2020,” said Karleen Oberton, Hologic’s Chief Financial Officer. “But because our business environment remains highly fluid and unpredictable, we are providing wider guidance ranges than usual.”

Hologic’s financial guidance for the fourth quarter of fiscal 2020 is shown in the table below. The guidance is based on a full year non-GAAP tax rate of approximately 22.75%, and diluted shares outstanding of approximately 265 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) expenses related to its divested Cynosure business incurred subsequent to the disposition date primarily related to indemnification provisions for legal and tax matters (vi) transaction related expenses for divestitures and acquisitions; (vii) third-party expenses incurred related to implementing the European MDR/IVDR requirements and obtaining the appropriate approvals for its existing products (viii) debt extinguishment losses and related transaction costs; (ix) 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; (x) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xi) other-than-temporary impairment losses on investments and realized gains and losses resulting from the sale of investments; (xii) the one-time discrete impact of tax reform and other one-time impacts related to tax planning and non-operational items; (xiii) 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 (xiv) 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.

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 third quarter of fiscal 2020. Approximately 10 minutes before the call, dial 800-263-0877 (in the U.S. and Canada) or +1 323-794-2094 (international) and enter access code 3113758. A replay will be available approximately two hours after the call ends through Friday, August 21, 2020. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 3113758, PIN 7018. The Company will also provide a live webcast of the call at 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 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 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 severity and duration of the COVID-19 pandemic and its impact on the U.S. healthcare system, the U.S. economy and worldwide economy; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic; continued demand for the Company’s COVID-19 TMA assay; the Company’s ability to manufacture, on a scale necessary to meet demand, its COVID-19 TMA assay as well as the Panther systems on which the assay runs; U.S., European and general worldwide economic conditions, trade relations, and related uncertainties; 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 ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees and maintain engagement and efficiency in remote work environments; 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; 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, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. 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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