The Hologic Fourth Quarter Fiscal 2023 Earnings Conference Call is being held and is being recorded. The call will be led by Ryan Simon, Vice President of Investor Relations, as Karleen Oberton, the Chief Financial Officer, is currently on bereavement and will not be joining. The company's fourth quarter press release is available on their website and a replay of the call will be available for the next 30 days. Certain statements made during the call will be forward-looking and may involve known and unknown risks and uncertainties. The company will also discuss non-GAAP financial measures, including organic revenue and organic revenue excluding COVID-19.

The CEO of Hologic, Stephen MacMillan, discusses the company's financial results for the fourth quarter of fiscal 2023. Revenue was $945.3 million and non-GAAP earnings per share was $0.89. The company exceeded their guidance and had a strong year with organic growth rates above their targets. Despite challenges, the company was able to raise their financial guidance throughout the year and maintain a strong balance sheet. For fiscal 2024, they are confident in their ability to meet their long-term organic growth target despite potential challenges.

In the fourth quarter, the company saw strong organic revenue growth, with double-digit growth in all divisions. Breast health grew 27.4%, driven by the recovery of the gantry business. Diagnostics grew 10.2%, with molecular diagnostics growing 15%. The company's diagnostics business is now 40% larger than in 2019, with the base molecular business growing by 80%. Surgical revenue is also up by 40%, driven by MyoSure and Fluent. This growth is attributed to the company's successful growth strategy, which includes expanding their Panther installed base, adding new menu, gaining new customers, and making acquisitions in adjacent markets.

The company's laparoscopic portfolio grew double digits, with international business also showing significant growth. Their capital allocation strategy remains the same, with a focus on M&A opportunities and share repurchases. They have recently deployed $238 million for share buybacks, and have announced an additional $500 million accelerated share repurchase program. They have also paid down $250 million of debt and have spent over $1.4 billion on M&A and $2.3 billion on share repurchases in the past four years. The company is confident in their position for the future and regularly evaluates their portfolio.

Hologic has recently divested its small SSI ultrasound business and has transformed its business to become a more competitive company with strong brands and industry-leading margins. The company is guided by its purpose, passion, and promise to enable healthier lives and champion women's health globally. Hologic is a leader in workflow automation and focuses on developing products that meet customers' needs and improve efficiency. Examples of this include the Panther instrument, Brevera breast biopsy, and Fluent systems.

The second factor contributing to Hologic's success is their large presence in the diagnostics and breast health industries, with thousands of instruments and systems installed worldwide. This allows them to be valuable partners to their customers and support them at every step of the breast care continuum. Additionally, Hologic's brand leadership in multiple product lines in each division leads to strong margins and steady cash flow, allowing for further investment and growth. Overall, Hologic is emerging as a premier growth company with a strong and differentiated position in the market.

The company expects 2024 to be another strong year of growth, with breast health and diagnostics driving the majority of the growth. The acquisition of Biotheranostics is expected to contribute to the growth of the molecular division, and the international market is also projected to be a strong driver. Overall, the company is confident in its future growth prospects and attributes its success to its leadership brands, diverse product portfolio, and strong financial position.

In the fourth quarter of fiscal 2023, the company saw strong growth and profitability, with total revenue of $945.3 million and double-digit organic revenue growth of 16.7%. The non-GAAP earnings per share were $0.89, an 8.5% increase from the previous year. For the full year, total revenue was $4.03 billion, with organic ex-COVID revenue growing 15.6% and non-GAAP earnings per share at $3.96. The diagnostics division saw a decline in revenue of 20.6%, but excluding COVID-related revenue, it grew 10.2%. Molecular diagnostics had strong growth of 18.9% ex-COVID. COVID assay revenue was $21 million and COVID-related revenue was $24 million in the fourth quarter, exceeding previous guidance.

In the fourth quarter, the cytology and perinatal business increased by 1.3%, breast health revenue increased by 27.4%, surgical revenue increased by 10.6%, and skeletal revenue increased by 15.9%. Gross margin was 60.4%, operating expenses decreased by 8%, and operating margin was 28.3%. There was a gain in other income and the tax rate was 19.75%. The company expects operating margin to improve in the future.

In the fourth quarter of 2023, the company reported strong non-GAAP net income and EPS, as well as a significant amount of operating cash flow. They also repurchased shares and ended the quarter with a healthy cash balance and low net leverage ratio. After the quarter ended, they completed a debt pay down and announced a $500 million ASR, demonstrating their confidence in the company's value. The company provided guidance for the first quarter and full fiscal year of 2024, taking into account factors such as four less selling days, the divestiture of a business, and the impact of foreign exchange.

In fiscal 2024, the company expects a headwind of 400 basis points in Q1 due to four less selling days, and over 100 basis points for the full year. The divestiture of the ultrasound business will also impact organic growth rates. The company anticipates a $3 million FX tailwind in Q1 and a $20 million headwind for the full year. Each division is expected to grow within 5-7% for the full year, but Q1 may be impacted by strong comps and conservative forecasting for respiratory menu items. Blood revenue is expected to be $8 million in Q1 and $30 million for the full year.

The company expects strong sales for COVID assays in the first quarter of fiscal 2024, with an estimated $15 million in revenue. They also anticipate a total of $40 million in COVID-related items for the full year. In the breast health division, they expect a strong demand for products as supply chain challenges improve. However, growth rates may decrease as comps normalize throughout the year. In the surgical division, they expect growth rates to be within their long-term target, but lower in the first quarter due to fewer selling days and lapping a pricing benefit from a product line extension. The company also expects improvement in gross and operating margins throughout the fiscal year, with operating expenses in line with the back half of fiscal 2023. Other income is expected to be neutral in the first quarter and an expense of $40 million to $60 million for the full year.

The guidance for Hologic is based on an annual effective tax rate of 19.75% and diluted shares outstanding of $239 million for the full year. The company remains focused on advancing women's health and delivering on promises to various stakeholders. The operator then opened the call for questions. The first question was about the USPSTF and its potential impact on co-testing versus primary testing. The company does not expect a significant impact and believes the focus on the USPSTF is overblown. The second question was about the FDA LDT regulation and its potential impact on the competitive landscape for the Panther and other approved diagnostic platforms. The company does not believe it will have a significant impact on their business.

The speaker expresses confidence in the business and its co-testing data, and believes that the LBT issue will not have a significant impact on the business for the next few years. They also mention their positioning with Panther and potential opportunities that may arise from the LBT issue. They thank the caller and mention that they have another call to attend to. The next caller asks about Panther and any updated utilization stats, as well as the recent slowdown in placements, to which the speaker responds that there was some pull forward during the pandemic and it may take some time before hospitals and labs start expanding their fleets again.

Stephen MacMillan and Ryan Simon discuss the growth of their molecular business, which saw an 18.9% increase last year due to increased utilization of their Panther machines. They expect this growth to continue as they focus on expanding their Fusion menu and placing more fusions on existing Panthers. They do not anticipate placing many more Panthers in the near future, but rather expanding their menu and increasing volumes of their assays. They also comment on the pricing environment and expect negative $40 million to $60 million in expenses for the year, with interest expenses to be determined by Ryan.

The company is expecting modest pricing and volume gains in the upcoming year. They have been able to maintain fiscal discipline and are launching new products to increase mix. The company is assuming $50 million in interest expense for the upcoming year. The full ASR is included in the current EPS guidance. The company is working to decrease their backlog in the breast health business and expects a double-digit increase in gantries. They are also focusing on maintaining margins despite the decrease in high margin COVID-related products.

The company expects to see significant growth in their breast health business during the first quarter, with the potential for even more growth as they continue to place gantries and gain new customers. They anticipate lower margins in the first fiscal quarter, but expect them to improve throughout the year as they work through higher costs and relocate manufacturing. The company also plans to increase operating margins in 2024, with potential tailwinds from the recovery of their breast business and the divestment of their SSI business. They also have an advantage in under-indexed markets such as China and the Middle East.

The speaker, Stephen MacMillan, states that the ongoing conflict in the Middle East and China's small presence in the region will not significantly impact demand. He also mentions that the company's international business has been a double-digit grower and is expected to continue growing this year. He clarifies that the 4% to 7% base organic guidance for the full year includes the impact of four selling days, resulting in a range of 5% to a little over 8%. The lower end of the range may be due to the impact of COVID.

Stephen MacMillan, CEO of the company, discussed the focus on M&A and the opportunistic share repurchasing program in the first fiscal quarter. He also mentioned that the attachment rate of Fusion to the Panther install base is currently at 20% and growing. The company has a healthy backlog and strong visibility for 2024, with all of the expected breast revenue already covered in the backlog.

The company's orders for the year are in good shape, with potential for more orders in the future. The first question is about the synergy between Biotheranostics and the breast health business, with the number of breast health users currently using Biotheranostics unknown. The second question is about the trajectory of margins for Ryan, with the potential for operating leverage or pricing to impact margins throughout the year.

The company expects the surgical business to continue growing within the LRP range in 2024, with international sales and pricing driving outperformance in 2023. The launch of NovaSure V5 and successful performance across all products contributed to strong growth in 2023. Inflationary headwinds are expected to be around 200-250 basis points in 2024.

The speaker believes that next year, MyoSure, Fluent, Boulder, and Acessa will see good growth, while NovaSure may see a slight decline. They also mention the surprise growth of MyoSure and the expansion of the market. The speaker then hands off a question about margins to Ryan, who clarifies that it is $50 million in income and $130 million in expense. The speaker reiterates that the company is expecting gross margin expansion due to the breast recovery and the decrease in high-priced chips.

The speaker, Stephen MacMillan, is answering a question about mergers and acquisitions (M&A) during a conference call. He mentions that Hologic is constantly looking for potential deals, but they are being patient and have a high standard for what they are looking for. He also mentions that many smaller companies that went public during COVID are in bad shape and do not fit their criteria. The speaker also addresses concerns about capital spending at hospitals, but remains optimistic about the ordering of their breast business.

The speaker expresses confidence in the company's current and future orders, particularly in the breast health business. They attribute the international growth to a combination of expanding into new countries, gaining new product approvals, and increasing market share. The company has diverse growth plans for different franchises in various countries, with a focus on expanding the surgical and diagnostics businesses. The speaker also mentions that the company is not heavily reliant on growth in China for their overall success.

The company is experiencing growth in all of its franchises, thanks to its effective and widespread strategies. The continuous additions of new customers in each franchise are leading to significant growth. The company has some exciting innovations in the works, particularly in the breast health business. However, the growth is expected to come from consistent and steady improvements rather than major upgrades. The company is seeing strong growth in its Acessa and Boulder products, and expects this trend to continue for the next five years. Overall, the company's diversified product lines are driving its growth and creating long-term sustainability.

The speaker thanks the participants for their questions and announces that there is time for one more question. The final question is about the visibility of the company's backlog for the upcoming year and the speaker explains that it is currently at a peak and will start to decrease. He also mentions that the company typically has good visibility and orders can still be placed for the next quarter. The call ends after the question is answered.

This summary was generated with AI and may contain some inaccuracies.