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    Hologic Inc (HOLX)

    Board Change

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    Hologic, Inc. is a medical technology company dedicated to advancing women's health through early detection and treatment solutions. The company operates in four main segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health, offering a range of products that contribute significantly to its revenue . Hologic's offerings include advanced diagnostic assays, breast cancer care solutions, gynecological surgical products, and bone health assessment tools . In fiscal year 2023, the company reported total revenue of $4.03 billion, with each division achieving double-digit organic growth, excluding the impact of COVID-19 .

    1. Diagnostics - Offers a wide range of diagnostic products, including molecular diagnostic assays on systems like Panther and Panther Fusion, detecting infectious microorganisms, high-risk HPV strains, and other viruses. Includes the ThinPrep cytology system for cervical cancer screening and the Rapid Fetal Fibronectin Test for pre-term birth risk assessment .
    2. Breast Health - Provides solutions for breast cancer care, including 3D digital mammography systems, image analysis software, and minimally invasive breast biopsy systems, with strong revenue growth driven by increased gantry shipments and robust service revenue .
    3. GYN Surgical - Includes products like the MyoSure hysteroscopic tissue removal system and the NovaSure endometrial ablation system, with significant growth driven by MyoSure and Fluent systems .
    4. Skeletal Health - Offers products for bone health assessment, being the smallest contributor to overall revenue compared to the other segments .
    Initial Price$74.32June 28, 2024
    Final Price$80.82September 28, 2024
    Price Change$6.50
    % Change+8.75%

    What went well

    • Hologic's acquisition of Gynasonix adds the Sonata system, which fills the gap between their Accesa and MyoSure products by targeting different types of fibroids, thus enhancing their GYN Surgical portfolio.
    • With over 3,300 Panther systems installed worldwide, significantly higher than before the pandemic, Hologic's molecular diagnostics revenue excluding COVID grew 9% in fiscal '24, driven by increased assay adoption despite slower Panther placements.
    • Key growth drivers such as the BV/CV/TV assays, now their second largest assay generating several hundred million dollars in revenue, and Biotheranostics with over $100 million in revenue, are expected to continue strong double-digit growth in fiscal '25.

    What went wrong

    • Anticipated Transitory Headwinds in Early Fiscal 2025: Hologic expects several temporary challenges in Q1 and potentially into Q2 of fiscal 2025, including issues with the skeletal business resuming shipments later in Q1, conservative expectations on respiratory products, and IV fluid shortages due to hurricanes impacting the surgical and breast businesses. These factors are expected to result in lower growth rates in the first half of the year.
    • Potential Cannibalization from Gynasonix Acquisition: Analysts have raised concerns that the acquisition of Gynasonix and its Sonata system might cannibalize sales of Hologic's existing MyoSure product. While the company asserts that Sonata targets different types of fibroids, there is a risk of overlap that could erode sales of existing products.
    • Slowing Growth Rates for Key Assays Due to Increasing Base: The BV/CV/TV assay, one of Hologic's largest assays generating several hundred million dollars in revenue, is expected to experience a lower growth rate in fiscal 2025 due to an increasing base, which may impact overall revenue growth.

    Q&A Summary

    1. Margin Outlook
      Q: How will margins trend this year amid headwinds?
      A: Management expects margins to face headwinds in the first half due to the IV fluid shortage impacting their most profitable surgical business and other transitory factors. However, they anticipate margin expansion in the back half of the year as these issues are resolved and benefits from network optimization initiatives materialize. They provided a full-year revenue guidance midpoint of 4% growth and anticipate accelerated growth in the latter half, which will help drive margin expansion. ,

    2. IV Fluid Shortage Impact
      Q: How will the IV fluid shortage affect your businesses?
      A: The IV fluid shortage, resulting from hurricane impacts, is expected to be a headwind in Q1 and possibly into Q2, particularly affecting the surgical and breast businesses that require these fluids. This shortage is considered transitory, and management believes it will be resolved over the course of the year, potentially turning from a headwind into a tailwind as procedures are rescheduled. , , ,

    3. Skeletal Health Headwinds
      Q: Is skeletal health still a headwind in fiscal '25?
      A: Yes, the skeletal health business is experiencing a stop ship situation, roughly impacting revenues by $5 million per month. Management expects shipments to resume in the latter half of Q1, making it a headwind in the first half. This transitory issue contributes to lower growth early in the year but is anticipated to improve as the year progresses. ,

    4. Guidance vs. Long-Range Plan
      Q: How does the guidance bridge to the 5–7% LRP target?
      A: The full-year guidance of 3.4% to 4.7% ex-COVID growth reflects transitory headwinds in the first half, including the skeletal health stop ship, IV fluid shortages, and conservative estimates for respiratory products. As these issues are resolved, management expects accelerated revenue growth in the back half, aligning with their long-range plan of 5–7% growth.

    5. Breast Health Outlook
      Q: What's the outlook for Breast Health with the new gantry launch?
      A: The new gantry is expected to impact revenues more significantly in fiscal years '26 to '28. This year might see a slight slowdown in gantry sales prior to the launch. However, growth will be supported by the service business, interventional products, and acquisitions like Endomag. Management anticipates normalized growth rates in '25, with a steady replacement cycle rather than a significant surge of upgrades. , , ,

    6. Share Repurchase Program
      Q: Will the $250 million share repurchase occur in one quarter?
      A: The company plans to initiate the $250 million share repurchase program in the next couple of weeks and expects to complete it within the fiscal second quarter, providing a prorated benefit in fiscal 2025.

    7. Biotheranostics Growth
      Q: What's the growth outlook for Biotheranostics and key assays?
      A: BV/CV/TV assays, their second-largest assay generating several hundred million dollars in revenue, are expected to continue growing at double-digit rates in '25, though slightly lower due to an increasing base. Biotheranostics is closer to the $100 million-plus level, also achieving solid double-digit growth in '24 and expected to maintain similar growth in '25. Management believes Biotheranostics is still in the early stages with low market penetration, indicating significant growth potential ahead. ,

    8. Panther Placements and Utilization
      Q: How are Panther placements and assay utilization trending?
      A: The installed base has grown to over 3,300 Panthers worldwide, significantly higher than pre-pandemic levels. While placements have slowed, there's no negative impact on business growth. The focus is now on driving assay adoption and utilization without needing to place many new Panthers, which is beneficial for capital efficiency. Trends in customers running multiple assays continue to improve. ,

    9. Conservative Respiratory Outlook
      Q: What's your outlook for respiratory products?
      A: Management is taking a conservative stance due to the unpredictability of flu seasonality. The transition to the respiratory panel contributed several tens of millions of dollars in revenue in '24, but they don't expect another transition year, making it a headwind in the first half. This conservatism could represent a headwind of at least $10 to $20 million. , ,

    10. M&A and Capital Allocation
      Q: What are your capital allocation priorities in 2025?
      A: The company continues to pursue a balanced approach between M&A and share repurchases. M&A efforts are driven within each division, focusing on assets that complement their portfolios and where Hologic brings expertise, as seen with acquisitions like Endomagnetics and Gynasonix. There's no specific priority among divisions, and they expect similar capital allocation patterns in 2025 as seen in 2024.

    11. NovaSure Decline in U.S.
      Q: Can the decline of NovaSure in the U.S. be stabilized?
      A: NovaSure volumes in the U.S. are experiencing a slow decline due to alternatives like IUDs and hormonal treatments for abnormal uterine bleeding. While the company maintains market share, they expect this trend to continue. However, international sales are expanding with a strong growth rate, helping offset the U.S. decline and allowing the overall business to post market-leading results.

    12. Gynasonix Acquisition
      Q: How does Gynasonix fit into your portfolio?
      A: The Gynasonix acquisition complements their existing GYN Surgical portfolio, aligning with procedures their surgical team handles daily. The Sonata system addresses different types of fibroids than their current products, filling a gap between Accesa and MyoSure without cannibalizing existing products. This addition strengthens their offerings in treating fibroids across various types. ,

    13. Tax Rate Outlook
      Q: Is there upside to the 19.5% tax rate guidance for '25?
      A: The projected effective tax rate for fiscal '25 is 19.5%, down 25 basis points from fiscal '24, primarily due to limiting foreign losses that weren't deductible. While they are always exploring opportunities to drive the rate lower, management is not committing to a rate below 19.5% at this time.

    14. International Growth and Margins
      Q: How will international growth impact margins?
      A: International business is expected to grow at a faster rate than the domestic business. While international growth can be dilutive to margins, the company anticipates operating margin improvement, starting at 30% and expecting an increase of 50 to 100 basis points over the course of '25. They balance margin improvement initiatives with the understanding that international growth brings its own leverage opportunities. ,

    15. Chip Shortage Resolution
      Q: Have you moved past the higher cost of chips?
      A: The company is likely on the tail end of dealing with higher chip costs. There may still be a few components working through the system, but they expect to move past this issue as they progress through fiscal '25. This should favorably impact margins over time.

    16. Skeletal Health Recovery
      Q: Will you recoup lost Skeletal Health sales in fiscal '25?
      A: While focused on resuming shipments and meeting customer demand, management is not projecting a significant recoupment of the $15 million per quarter lost during the stop ship period. The priority is restoring the business rather than expecting immediate sales recovery on top of base expectations.

    17. Facility Integration Benefits
      Q: How will facility integrations impact margins?
      A: The integration within the Breast Health business is expected to be completed over the course of the year, bringing manufacturing and R&D together for synergies. Management anticipates this will contribute to margin improvements as they progress through fiscal '25, though they haven't provided specific figures.

    NamePositionStart DateShort Bio
    Stephen P. MacMillanChairman, President, and CEODecember 2013Stephen P. MacMillan has been serving as the Chairman, President, and Chief Executive Officer of Hologic, Inc. since December 2013. He was elected Chairman of the Board in June 2015. Prior to Hologic, he held leadership roles at sBioMed, Stryker Corporation, Pharmacia Corporation, and Johnson & Johnson .
    Karleen M. ObertonChief Financial OfficerAugust 2018Karleen M. Oberton became the Chief Financial Officer in August 2018. She joined Hologic in 2006 as a corporate controller and was promoted to Chief Accounting Officer in 2015. Before Hologic, she worked at Immunogen and Ernst & Young .
    Essex D. MitchellChief Operating OfficerJanuary 1, 2024Essex D. Mitchell is the Chief Operating Officer at Hologic, Inc., a position he will assume on January 1, 2024. He joined Hologic in September 2017 and has held various roles, including Division President, GYN Surgical Solutions .
    Erik S. AndersonDivision President, Breast and Skeletal Health SolutionsSeptember 2022Erik S. Anderson was promoted to Division President, Breast and Skeletal Health Solutions in September 2022. He joined Hologic in 2014 and has held various roles, including Vice President of Sales for Hologic's Medical Aesthetics business .
    Peter P. DunneSenior Vice President, Human ResourcesNovember 2023Peter P. Dunne was promoted to Senior Vice President, Human Resources in November 2023. He joined Hologic in August 2014 as Vice President, Finance and Accounting for the Diagnostics Division .
    John M. GriffinGeneral CounselFebruary 2015John M. Griffin joined Hologic, Inc. as General Counsel in February 2015. He has nearly 30 years of legal experience and previously worked at Covidien and as an Assistant United States Attorney in Boston .
    Jennifer M. SchneidersPresident, Diagnostic SolutionsApril 2023Jennifer M. Schneiders, Ph.D., was promoted to President, Diagnostic Solutions in April 2023. She joined Hologic in 2008 and has held various roles, including Vice President, Diagnostic Laboratory Solutions .
    Brandon SchnittkerDivision President, GYN Surgical SolutionsJanuary 1, 2024Brandon Schnittker was promoted to Division President, GYN Surgical Solutions effective January 1, 2024. He joined Hologic in May 2022 and previously worked at Stryker .
    Jan VerstrekenGroup President, InternationalOctober 2020Jan Verstreken has been serving as the Group President, International since October 2020. He joined Hologic in January 2017 and has over 25 years of experience, primarily at Teleflex .
    1. With the slowing of Panther placements after the pandemic , how do you plan to sustain growth in molecular diagnostics revenue, and can you provide more details on strategies to drive assay adoption without new instrument placements?

    2. Given the upcoming launch of the new gantry in Breast Health and the potential impact on revenue in fiscal '25 , how are you addressing the risk of customers delaying purchases, and what steps are you taking to ensure revenue stability in this segment?

    3. Regarding your recent acquisition of Gynasonix , can you elaborate on how the Sonata system complements your existing GYN Surgical portfolio without cannibalizing products like MyoSure, and what specific synergies do you expect to achieve?

    4. With the reported transitory headwinds such as supply chain shortages and IV fluid issues , can you quantify the expected financial impact on fiscal '25, and what strategies are you implementing to mitigate these challenges?

    5. In terms of capital allocation, given your recent M&A activities and share repurchase programs , how are you balancing investments in organic growth versus returning capital to shareholders, and what should investors expect in terms of future capital deployment?

    Program DetailsProgram 1Program 2
    Approval DateSeptember 22, 2022 September 12, 2024
    End Date/DurationFive-year term Five-year term
    Total additional amount$1.0 billion $1.5 billion
    Remaining authorization$190.3 million $1.5 billion
    DetailsN/AEntire authorization unused

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: Q1 2025 and FY 2025

    Guidance:

    1. Revenue Guidance:
      • Q1 2025: $1.025 billion to $1.035 billion
      • FY 2025: $4.15 billion to $4.20 billion
    2. Earnings Per Share (EPS):
      • Q1 2025: $1.00 to $1.03
      • FY 2025: $4.25 to $4.35
    3. Foreign Exchange Impact:
      • Q1: Tailwind of slightly less than $10 million
      • FY: Tailwind of $30 million
    4. Revenue Growth:
      • Organic ex-COVID growth of approximately 4% at the midpoint for FY
    5. COVID-19 Related Revenue:
      • COVID assay sales: $10 million in Q1, $25 million for FY
      • COVID-related items: $24 million in Q1, $95 million for FY
    6. Blood Screening Revenue:
      • $5 million in Q1, $20 million for FY
    7. Gross Margin and Operating Margin:
      • Q1 2025: Gross margin around 60%, operating margin around 30%
      • Improvement of 50 basis points in gross margin and 50 to 100 basis points in operating margin over the year
    8. Operating Expenses:
      • Q1 expected to have the highest operating expenses due to seasonal factors
    9. Other Income/Expense:
      • Q1 2025: Expense of $10 million to $15 million
      • FY 2025: Expense of $50 million to $60 million
    10. Tax Rate:
      • Annual effective tax rate of approximately 19.5%
    11. Diluted Shares Outstanding:
      • Approximately 235 million for FY .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024 and FY 2024

    Guidance:

    1. Total Revenue:
      • Q4 2024: $970 million to $985 million
      • FY 2024: $4.012 billion to $4.027 billion
    2. Earnings Per Share (EPS):
      • Q4 2024: $0.97 to $1.04
      • FY 2024: $4.04 to $4.11
    3. Foreign Exchange Impact:
      • Q4: Headwind of $3 million
      • FY: Tailwind of $3 million
    4. Diagnostics, Breast Health, and Surgical Growth:
      • Mid-single digits growth in Q4 and FY, excluding COVID impact
    5. COVID Revenue:
      • COVID assay sales: $7 million in Q4, $70 million for FY
      • COVID-related items: $25 million in Q4, $105 million for FY
    6. Gross Margin:
      • Expected to exit FY in the low 60s
    7. Operating Margin:
      • Low 30s for Q4, 30% to 31% for FY
    8. Other Income Net:
      • Expense of $8 million in Q4, $11 million for FY
    9. Effective Tax Rate:
      • Approximately 19.75%
    10. Diluted Shares Outstanding:
      • Approximately 238 million for FY .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024 and FY 2024

    Guidance:

    1. Total Revenue:
      • Q3 2024: $992.5 million to $1,007.5 million
      • FY 2024: $4 billion to $4.05 billion
    2. Earnings Per Share (EPS):
      • Q3 2024: $0.98 to $1.05
      • FY 2024: $4.02 to $4.12
    3. FX Headwind:
      • $3 million for Q3
    4. Gross Margin:
      • Expected to improve sequentially from Q2
    5. Operating Margin:
      • Low 30s for Q3, approaching 31% by FY end
    6. Other Income Net:
      • Expense of $10 million for Q3, $30 million to $40 million for FY
    7. Tax Rate:
      • Annual effective tax rate of approximately 19.75%
    8. Diluted Shares Outstanding:
      • Approximately 238 million for FY
    9. Franchise Growth Expectations:
      • Each franchise to grow 5% to 7% in FY, excluding COVID
      • Molecular Diagnostics to drive high single-digit growth, excluding COVID
      • Surgical revenue growth at high end of 5% to 7% target
    10. COVID-Related Revenue:
      • COVID assay sales: $5 million to $10 million in Q3, $60 million to $65 million for FY
      • COVID-related items: $25 million in Q3, $105 million for FY .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024 and FY 2024

    Guidance:

    1. Revenue Guidance:
      • Q2 2024: $990 million to $1.01 billion
      • FY 2024: $3.99 billion to $4.065 billion
    2. Earnings Per Share (EPS):
      • Q2 2024: $0.95 to $1.00
      • FY 2024: $3.97 to $4.12
    3. Foreign Exchange Impact:
      • Q2: Tailwind of $2 million
      • FY: Tailwind of $12 million
    4. Operating Margins:
      • Q2 2024: Approaching 30%
      • Q4 2024 Exit Rate: Around 31%
    5. Gross Margins:
      • Similar to Q1, exiting FY in the low 60s
    6. Operating Expenses:
      • Q2: $300 million to $310 million for the remainder of the year
    7. Other Income/Expense:
      • Q2 2024: Expense of $10 million
      • FY 2024: Expense of $30 million to $50 million
    8. Tax Rate:
      • Annual effective tax rate of approximately 19.75%
    9. Diluted Shares Outstanding:
      • Approximately 239 million for FY
    10. COVID Revenue:
      • Q2 2024: COVID assay sales of $20 million
      • FY 2024: COVID assay sales of $60 million
      • COVID-related items: Slightly less than $30 million in Q2, $105 million for FY .

    Competitors mentioned in the company's latest 10K filing.

    • Roche Diagnostics: Primary competitor in the Diagnostics business .
    • Becton Dickinson: Primary competitor in the Diagnostics business .
    • Siemens Healthineers: Primary competitor in the Breast & Skeletal Health business .
    • GE Healthcare: Primary competitor in the Breast & Skeletal Health business .
    • Johnson & Johnson: Primary competitor in the GYN Surgical business .
    • Medtronic: Primary competitor in the GYN Surgical business .
    • F. Hoffmann-LaRoche Ltd: Parent company of Roche, a supplier and competitor in the Diagnostics business .
    • GE Healthcare Bio-Sciences Corp.: Supplies membranes for ThinPrep product line and is a competitor in the Breast Health and Skeletal Health businesses .

    Recent developments and announcements about HOLX.

    Financial Reporting

      Earnings Report

      ·
      Jan 13, 2025, 2:45 PM

      Hologic, Inc. (HOLX) Preliminary Earnings Results for Q1 Fiscal 2025

      Hologic, Inc. has announced its preliminary revenue results for the first quarter of fiscal 2025, which ended on December 28, 2024. Below are the key highlights:

      • Total Revenue: $1,021.8 million, representing a 0.9% increase compared to the prior year period. On a constant currency basis, revenue grew by 1.0%, aligning with the company's guidance.

      • Divisional Performance:

        • Diagnostics: Revenue of $470.6 million, up 5.1% (5.2% on a constant currency basis).
        • Breast Health: Revenue of $369.1 million, down 2.3% (-2.1% on a constant currency basis).
        • GYN Surgical: Revenue of $166.3 million, up 2.5%.
        • Skeletal Health: Revenue of $15.8 million, down 37.8% (-37.4% on a constant currency basis).
      • Earnings Per Share (EPS): Both GAAP and non-GAAP EPS are expected to be near the high end of the guidance ranges provided in November 2024.

      • Currency Impact: The strengthening of the U.S. dollar reduced revenue by approximately $9 million compared to earlier guidance.

      • Upcoming Full Results: Hologic plans to release its finalized Q1 fiscal 2025 results on February 5, 2025, along with updated financial guidance for Q2 and the full fiscal year.

      These results reflect Hologic's resilience despite currency headwinds and a challenging macroeconomic environment. The company will also present at the 43rd Annual J.P. Morgan Healthcare Conference on January 14, 2025, where further insights may be shared.

    Corporate Leadership

      Leadership Change

      ·
      Jan 10, 2025, 9:43 PM

      Who is leaving:

      • Sally W. Crawford: Retiring from the Board after 17 years of service. Her decision is unrelated to any disagreements with management or the Board.
      • Scott T. Garrett: Reaching the retirement age as per the company's Corporate Governance Guidelines and will not be re-nominated.

      Why:

      • Sally W. Crawford is retiring voluntarily after long service.
      • Scott T. Garrett is stepping down due to reaching the mandatory retirement age.

      Who is stepping up:

      • The Board size will be reduced to eight directors following these departures.

      Board Change

      ·
      Dec 9, 2024, 9:29 PM

      Martin Madaus has been appointed to the Board of Directors of Hologic, Inc., effective December 6, 2024. He will also serve on the Compensation Committee and the Nominating and Corporate Governance Committee .