Hologic Announces Financial Results for Fourth Quarter of Fiscal 2023

– Revenue of $945.3 Million, GAAP Diluted EPS of $0.37, and Non-GAAP Diluted EPS of $0.89 –

– Total Company Organic Revenue Growth excluding COVID-19 of 16.7% in constant currency –

– Expect Broad Based Strong Performance in Fiscal 2024 –

Hologic, Inc. (NASDAQ:HOLX) announced today the Company's financial results for the fiscal fourth quarter ended September 30, 2023.

"Hologic delivered remarkable fiscal 2023 results extending our track record of strong performance with another solid quarter of growth in our fourth quarter," said Steve MacMillan, the Company's chairman, president and chief executive officer. "Each one of our divisions grew double digits organically in the quarter and for the full year excluding the impact of COVID. We are a new Hologic, with more growth drivers, a durable and industry leading margin profile, and an exceptional balance sheet. For fiscal 2024, we are excited to continue to showcase our standout performance, even against strong 2023 comps."

Recent Highlights

• Revenue of $945.3 million decreased (0.8%) for the quarter, or (1.5%) in constant currency, primarily driven by lower sales of COVID-19 assays compared to the prior year period, as expected.
  • Excluding COVID-19 revenues, total organic revenue grew 17.5%, or 16.7% on a constant currency basis.
• Diagnostics revenue decreased (20.1%), or (20.6%) in constant currency, primarily driven by lower sales of COVID-19 assays compared to the prior year period.
  • Excluding COVID-19 revenues, Diagnostics revenue grew 10.2% on an organic, constant currency basis.
  • Molecular Diagnostics revenue declined (27.1%), or (27.5%) in constant currency, primarily driven by lower sales of COVID-19 assays compared to the prior year period.
  • Excluding COVID-19 revenues, Molecular Diagnostics revenue grew 15.0% on an organic, constant currency basis.
• Breast Health revenue increased 28.2%, or 27.4% in constant currency, primarily due to higher capital equipment revenue compared to the prior year period as supply chain headwinds impacted fiscal Q4 2022.
• Surgical revenue grew 11.0%, or 10.6% in constant currency, primarily driven by strong results from MyoSure and Fluent Fluid Management.
• Cash flow from operations remained strong in the fourth quarter at $258.7 million.
• The Company intends to enter into an accelerated share repurchase (ASR) agreement for $500 million of the Company's common stock. The Company expects the ASR will become effective later in the month and the final settlement of the ASR is expected to be completed in the second quarter of fiscal 2024. The ASR will be completed pursuant to a new $500 million share repurchase authorization recently approved by Hologic's board of directors. The new authorization is in addition to the Company's prior share repurchase authorization, of which $499 million remained as of September 30, 2023.
• The Company repurchased 3.2 million shares of its stock for $238 million in the fourth quarter of fiscal 2023.
• On October 27, 2023, the Company paid down $250 million of outstanding floating rate debt under its Credit Agreement.

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

Throughout this press release, all dollar figures are in millions, except EPS, unless otherwise noted. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Fiscal 2023 was a 53-week fiscal period and the additional week was included in our fiscal first quarter results. 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. Our fiscal fourth quarter organic revenue results exclude the divested Blood Screening business. Revenue from acquired businesses is generally included in organic revenue starting a year after the acquisition.

Revenue Detail

Other Financial Highlights

• U.S. revenue of $715.5 million decreased (1.8%). International revenue of $229.8 million increased 2.3% and decreased (0.4%) in constant currency.
• GAAP gross margin of 52.9% decreased (110) basis points primarily due to the decline in COVID-19 assay sales compared to the prior year period. Non-GAAP gross margin of 60.4% decreased (210) basis points primarily due to the decline in COVID-19 assay sales compared to the prior year period.
• GAAP operating margin of 14.0% decreased (80) basis points primarily due to the decline in COVID-19 assay sales compared to the prior year period, as well as a loss of $51.7 million on assets held-for-sale as a result of the Company's agreement to sell its SSI ultrasound imaging business. Non-GAAP operating margin of 28.3% increased 40 basis points, primarily due to improved non-COVID base business performance and lower marketing expense, partially offset by lower COVID-19 assay sales compared to the prior year period.
• GAAP net income of $90.6 million decreased (23.7%) and Non-GAAP net income of $219.3 million increased 5.7%. GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) was $213.3 million, a decrease of (19.4%). Adjusted EBITDA was $288.3 million, a decrease of (3.7%).
• COVID-19 revenues, which consist of COVID-19 assay revenue of $21.4 million, and other COVID-19 related revenue plus revenue from discontinued products of $24.3 million, decreased (75.6%) on both a reported and constant currency basis.
• Total principal debt outstanding at the end of the fourth quarter was $2.84 billion. The Company ended the quarter with cash and equivalents of $2.72 billion, and a net leverage ratio (net debt over EBITDA) of 0.1 times.
• On a trailing 12-month basis, GAAP Return on Invested Capital (ROIC) was 8.6%. Adjusted ROIC was 14.4%, a decrease of (790) basis points compared to the prior year period.

Financial Guidance for the First Quarter and Full-Year Fiscal 2024

"Hologic delivered strong financial performance in our fiscal fourth quarter of 2023, growing Non-GAAP earnings despite significantly lower COVID testing revenue compared to the prior year," said Karleen Oberton, Hologic's chief financial officer. "We are operating from a position of strength as we enter our next fiscal year and expect total organic constant currency revenue excluding COVID to be within our long-term 5% to 7% growth framework at the mid-point for the full year 2024."

Hologic's financial guidance for the first quarter and full year 2024 is shown in the table below. The guidance is based on a full year non-GAAP tax rate of approximately 19.75%, and diluted shares outstanding of approximately 239 million for the full year. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2024 as in fiscal 2023. Organic revenue guidance for fiscal 2024 is in constant currency and excludes the divested Blood Screening and SSI ultrasound imaging businesses. Revenue from acquired businesses is generally included in organic revenue guidance starting a year after the acquisition. In fiscal 2024, all recent transactions are part of Hologic's organic revenue base. Organic revenue excluding COVID-19 is in constant currency and is organic revenue excluding COVID-19 assay revenue, COVID-19 related revenue, and discontinued product sales in Diagnostics.

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; organic revenues excluding COVID-19, 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; adjusted EBITDA; and adjusted ROIC. Organic revenue for the fiscal fourth quarter of 2023 excludes the divested Blood Screening business. Revenue from acquired businesses is generally included in organic revenue starting a year after the acquisition. Organic revenue excluding COVID-19 revenues is organic revenue less COVID-19 assay revenue, COVID-19 related sales of instruments, collection kits and ancillaries, COVID-19 related revenue from Diagenode and Mobidiag, as well as COVID-19 related license revenue, and revenues from discontinued products. 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; (ii) the impairment of goodwill and intangible assets and equipment and the loss to record assets held-for-sale to fair value less costs to sell; (iii) adjustments to record contingent consideration at fair value; (iv) charges to write-off inventory for a product line discontinuance; (v) restructuring charges, facility closure and consolidation charges (including accelerated depreciation), and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services); (vi) expenses related to the divested Cynosure business incurred subsequent to the disposition date primarily related to indemnification provisions for legal and tax matters; (vii) transaction related expenses for acquisitions; (viii) third-party expenses incurred related to implementing the European MDR/IVDR requirements and obtaining the appropriate approvals for its existing products; (ix) debt extinguishment losses and related transaction costs; (x) the unrealized (gains) losses on the mark-to-market of foreign currency contracts to hedge revenue and operating results for which the Company has not elected hedge accounting; (xi) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xii) other-than-temporary impairment losses on investments and realized gains and losses resulting from the sale of investments; (xiii) the one-time discrete impacts related to internal restructurings and non-operational items; (xiv) 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 (xv) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest income/expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income. The Company defines its adjusted ROIC as its non-GAAP operating income tax effected by its non-GAAP effective tax rate divided by the sum of its average net debt and stockholders' equity, which is adjusted to exclude the effects of goodwill and intangible assets and equipment impairment charges.

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 fourth quarter of fiscal 2023. Interested participants may listen to the call by dialing 866-400-0049 (in the U.S. and Canada) or +1 773-305-6867 (for international callers) and referencing access code 1937661. Participants may also click to join. Participants should dial in 5-10 minutes before the call begins. The Company will also provide a live and replay webcast of the call at hologic.com/investors. The replay of the call will be available approximately two hours after the call ends through Friday, December 8, 2023.

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; the ASR program, which is subject to the finalization and execution of a definitive agreement on terms and conditions satisfactory to Hologic; 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 ongoing and possible future effects of global challenges, including macroeconomic uncertainties, geopolitical conflicts, other economic disruptions and U.S. and global recession concerns, on the Company's customers and suppliers and on the Company's business, financial condition, results of operations and cash flows and the Company's ability to draw down its revolver; the effect of the worldwide political and social uncertainty and divisions, including the impact on trade regulation and tariffs, that may adversely impact the cost and sale of the Company's products in certain countries, or increase the costs the Company may incur to purchase materials, parts and equipment from its suppliers; the ongoing and possible future effects of supply chain constraints, including the availability of critical raw materials and components, including semiconductor chips, as well as cost inflation in materials, packaging and transportation; the possibility of interruptions or delays at the Company's manufacturing facilities, or the failure to secure alternative suppliers if any of the Company's sole source third-party manufacturers fail to supply the Company; the development of new competitive technologies and products and competition; the Company's ability to predict accurately the demand for its products, and products under development and to develop strategies to address markets successfully; continued demand for the Company's COVID-19 assays; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic and any future public health crises; potential cybersecurity threats and targeted computer crime; the ability to execute acquisitions and the impact and anticipated benefits of completed acquisitions and acquisitions the Company may complete in the future; the ability to consolidate certain of the Company's manufacturing and other operations on a timely basis and within budget, without disrupting its business and to achieve anticipated cost synergies related to such actions; 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 ability to obtain regulatory approvals and clearances for the Company's products, including the implementation of the European Union Medical Device Regulations, and to maintain compliance with complex and evolving regulations; 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; 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; 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; and technical innovations that could render products marketed or under development by the Company obsolete.

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.

HOLOGIC, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(Unaudited)

(In millions, except earnings per share)

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