Women's health innovator, Hologic (HOLX) , reported third-quarter fiscal 2024 results on Jul 29 after market close. Revenues exceeded both the company's internal forecasts and the Zacks Consensus Estimate. The bottom line topped the consensus mark, although the extent of surprise lowered by nearly 37% than the previous quarter. Additionally, the ongoing supply headwinds in the company's Skeletal Health business factored into narrowed EPS guidance for the year. Following the earnings release, the stock rose ...

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This section presents Hologic, Inc.'s unaudited consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Consolidated Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20%28unaudited%29) This section presents Hologic, Inc.'s unaudited consolidated financial statements and comprehensive notes for the three and nine months ended June 29, 2024 [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Net income significantly increased for both three and nine months ended June 29, 2024, driven by higher gross profit and operating income **Consolidated Statements of Income (in millions, except per share data):** | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Total Revenues | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | | Gross Profit | $560.3 | $367.5 | $1,670.1 | $1,571.2 | | Income from Operations | $244.0 | $1.4 | $652.6 | $535.9 | | Net Income (Loss) | $194.5 | $(40.5) | $610.9 | $365.4 | | Basic EPS | $0.83 | $(0.16) | $2.58 | $1.48 | | Diluted EPS | $0.82 | $(0.16) | $2.57 | $1.47 | [Consolidated Statements of Comprehensive Income (Loss)](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29) Comprehensive income was positive for current three and nine-month periods, influenced by net income and foreign currency adjustments **Consolidated Statements of Comprehensive Income (Loss) (in millions):** | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Net Income (Loss) | $194.5 | $(40.5) | $610.9 | $365.4 | | Changes in foreign currency translation adjustment | $(2.8) | $1.1 | $17.4 | $130.2 | | Changes in value of hedged interest rate swaps, net of tax | $0.3 | $3.7 | $(9.3) | $(5.6) | | Other comprehensive income (loss) | $(2.5) | $4.8 | $8.1 | $124.6 | | Comprehensive income (loss) | $192.0 | $(35.7) | $619.0 | $490.0 | [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets and liabilities decreased from September 30, 2023, to June 29, 2024, with reduced cash and current long-term debt **Consolidated Balance Sheets (in millions):** | Asset/Liability | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Cash and cash equivalents | $2,439.1 | $2,722.5 | | Total current assets | $3,997.0 | $4,184.5 | | Total assets | $8,890.1 | $9,139.3 | | Current portion of long-term debt | $37.5 | $287.0 | | Total current liabilities | $1,002.4 | $1,207.3 | | Long-term debt, net of current portion | $2,505.6 | $2,531.2 | | Total liabilities and stockholders' equity | $8,890.1 | $9,139.3 | | Total stockholders' equity | $4,950.9 | $5,016.9 | [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity slightly decreased due to stock-based compensation, net income, and significant share repurchases, including an ASR agreement **Consolidated Statements of Stockholders' Equity (in millions, except shares in thousands):** | Metric | September 30, 2023 | June 29, 2024 | |:---|:---|:---| | Common Stock (shares issued) | 299,940 | 300,787 | | Additional Paid-in Capital | $6,141.2 | $6,213.1 | | Retained Earnings | $2,056.3 | $2,667.2 | | Treasury Stock (shares) | 58,231 | 68,731 | | Treasury Stock (amount) | $(3,036.0) | $(3,792.9) | | Total Stockholders' Equity | $5,016.9 | $4,950.9 | - The company repurchased **5.6 million** shares of common stock for **$500 million** under an accelerated share repurchase (ASR) agreement launched in November 2023, with an additional **1.4 million** shares received upon final settlement in February 2024[189](index=189&type=chunk) - Stock-based compensation expense for the nine months ended June 29, 2024, was **$69.1 million**, up from **$60.6 million** in the prior year[171](index=171&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash decreased for the nine months ended June 29, 2024, due to financing activities, despite strong operating cash flow **Consolidated Statements of Cash Flows (in millions):** | Activity | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Net cash provided by operating activities | $918.2 | $792.5 | | Net cash used in investing activities | $(185.3) | $(96.1) | | Net cash used in financing activities | $(1,051.8) | $(272.6) | | Net (decrease) increase in cash and cash equivalents | $(316.6) | $425.5 | | Cash and cash equivalents, end of period | $2,439.1 | $2,765.0 | - Cash used in financing activities increased significantly to **$1,051.8 million**, primarily due to **$776.8 million** for common stock repurchases (including a **$500 million** ASR program) and **$278.1 million** for debt principal payments (including a **$250 million** voluntary prepayment)[323](index=323&type=chunk) - Investing activities used **$185.3 million**, mainly for capital expenditures (**$99.9 million**), strategic investments (**$42.5 million**), and a net payment of **$31.3 million** for the sale of the SSI ultrasound business[295](index=295&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed disclosures on accounting policies, estimates, and financial statement line items provide context to the consolidated financial statements [(1) Basis of Presentation](index=10&type=section&id=%281%29%20Basis%20of%20Presentation) Unaudited consolidated financial statements include the Company and subsidiaries, prepared under SEC rules and GAAP, relying on management estimates - The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, with all intercompany transactions and balances eliminated[5](index=5&type=chunk) - Management makes significant estimates and assumptions in preparing financial statements, and actual results could differ[41](index=41&type=chunk) [Subsequent Events Consideration](index=10&type=section&id=Subsequent%20Events%20Consideration) The Company acquired Endomagnetics Ltd (Endomag) for approximately **$310.0 million** on July 25, 2024, following an April 26, 2024 agreement - On April 26, 2024, the Company executed an agreement to acquire Endomagnetics Ltd (Endomag) for approximately **$310.0 million**, which closed on July 25, 2024[6](index=6&type=chunk) [(2) Revenue](index=11&type=section&id=%282%29%20Revenue) Revenue is generated from product sales and services, disaggregated by segment, region, and type, with remaining obligations for support and maintenance **Revenue by Business Segment (in millions):** | Business | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Diagnostics | $440.8 | $439.7 | $1,338.7 | $1,463.6 | | Breast Health | $385.0 | $360.3 | $1,147.3 | $1,079.9 | | GYN Surgical | $166.6 | $157.3 | $484.8 | $456.2 | | Skeletal Health | $19.0 | $27.1 | $71.5 | $85.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | **Revenue by Geographic Region (in millions):** | Region | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | United States | $765.3 | $750.1 | $2,278.4 | $2,342.5 | | Europe | $127.9 | $128.5 | $407.7 | $427.3 | | Asia-Pacific | $65.0 | $62.9 | $193.2 | $191.9 | | Rest of World | $53.2 | $42.9 | $163.0 | $123.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | **Revenue by Type (in millions):** | Type | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Disposables | $623.2 | $609.0 | $1,871.0 | $1,963.3 | | Capital equipment, components and software | $188.0 | $190.1 | $596.2 | $559.6 | | Service | $196.8 | $180.4 | $560.6 | $546.7 | | Other | $3.4 | $4.9 | $14.5 | $15.5 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | [Practical Expedients](index=13&type=section&id=Practical%20Expedients) Costs to obtain customer contracts are expensed as incurred if the amortization period is one year or less, mainly sales commissions - The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred when the amortization period would have been one year or less, primarily sales commissions[9](index=9&type=chunk) [Variable Consideration](index=13&type=section&id=Variable%20Consideration) Variable consideration like discounts and returns are estimated as revenue reductions and recorded as current liabilities, generally immaterial - The Company estimates variable consideration (volume discounts, sales rebates, product returns) as a reduction to revenue, recorded as a current liability, and these estimates are generally not material[25](index=25&type=chunk) [Remaining Performance Obligations](index=13&type=section&id=Remaining%20Performance%20Obligations) Estimated future revenue from unsatisfied performance obligations was approximately **$880.0 million** as of June 29, 2024, mainly for support and maintenance - As of June 29, 2024, estimated future revenue from unsatisfied performance obligations was approximately **$880.0 million**, primarily for support and maintenance in Breast Health and Skeletal Health[26](index=26&type=chunk) **Expected Revenue Recognition from Remaining Performance Obligations:** | Fiscal Year | Percentage of $880.0 million | |:---|:---| | 2024 | 14% | | 2025 | 42% | | 2026 | 25% | | 2027 | 12% | | Thereafter | 7% | [Contract Assets and Liabilities](index=13&type=section&id=Contract%20Assets%20and%20Liabilities) Contract assets were immaterial, while contract liabilities (deferred revenue) primarily relate to advance payments for support and maintenance - Contract assets were immaterial, while contract liabilities (deferred revenue) primarily relate to advance payments for support and maintenance contracts and extended warranties[27](index=27&type=chunk)[28](index=28&type=chunk) **Revenue Recognized from Contract Liability Balance (in millions):** | Period | Revenue Recognized from Sept 30, 2023 Balance | Revenue Recognized from Sept 24, 2022 Balance | |:---|:---|:---| | Three Months Ended June 29, 2024 | $22.8 | N/A | | Nine Months Ended June 29, 2024 | $124.4 | N/A | | Three Months Ended July 1, 2023 | N/A | $21.0 | | Nine Months Ended July 1, 2023 | N/A | $122.2 | [(3) Leases](index=14&type=section&id=%283%29%20Leases) The Company leases diagnostics instruments to customers, with lease revenue consistently representing less than **3%** of consolidated revenue - The Company leases diagnostics instruments to customers, with lease revenue representing less than **3%** of consolidated revenue for all periods presented[11](index=11&type=chunk) [(4) Fair Value Measurements](index=14&type=section&id=%284%29%20Fair%20Value%20Measurements) Assets and liabilities are measured at fair value (Level 1, 2, or 3), including recurring measurements for investments and derivatives, and nonrecurring for impairments - The Company's financial instruments include cash and cash equivalents, U.S. Treasury bills, commercial paper, accounts receivable, equity investments, interest rate swaps, forward foreign currency contracts, insurance contracts, accounts payable, and debt obligations[70](index=70&type=chunk) [Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis](index=14&type=section&id=Assets%2FLiabilities%20Measured%20and%20Recorded%20at%20Fair%20Value%20on%20a%20Recurring%20Basis) Recurring fair value measurements include Level 1 assets (money market funds, U.S. Treasury bills) and Level 2 derivatives, with Level 3 for contingent consideration - Investments in money market funds, U.S. Treasury bills, and commercial paper are classified as Level 1 fair value measurements[12](index=12&type=chunk) - Derivative instruments (interest rate swaps and forward foreign currency contracts) are valued using Level 2 inputs[13](index=13&type=chunk) - A contingent consideration liability is recorded at fair value based on Level 3 inputs[13](index=13&type=chunk) [Liabilities Measured and Recorded at Fair Value on a Recurring Basis](index=15&type=section&id=Liabilities%20Measured%20and%20Recorded%20at%20Fair%20Value%20on%20a%20Recurring%20Basis) Contingent consideration liabilities, measured using Level 3 inputs, decreased from **$2.0 million** to **$1.1 million** due to payments **Contingent Consideration (Level 3) Fair Value Changes (in millions):** | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Balance at beginning of period | $1.1 | $3.4 | $2.0 | $23.4 | | Fair value adjustments | — | — | $1.7 | $(12.4) | | Payments | — | — | $(2.6) | $(7.6) | | Balance at end of period | $1.1 | $4.5 | $1.1 | $4.5 | [Assets Measured and Recorded at Fair Value on a Nonrecurring Basis](index=15&type=section&id=Assets%20Measured%20and%20Recorded%20at%20Fair%20Value%20on%20a%20Nonrecurring%20Basis) Significant nonrecurring impairment charges were recorded for BioZorb intangible assets (**$13.3 million**, **$0.4 million**, **$25.9 million**, **$0.9 million**) and Mobidiag lease assets (**$12.5 million**) - During Q3 fiscal 2024, the Company recorded intangible asset impairment charges of **$13.3 million** and **$0.4 million** related to BioZorb developed technology and trade name intangible assets, reducing their carrying value to zero[32](index=32&type=chunk) - During Q2 fiscal 2024, intangible asset impairment charges of **$25.9 million** and **$0.9 million** were recorded for BioZorb developed technology and trade name intangible assets[32](index=32&type=chunk) - In Q1 fiscal 2024, a **$12.5 million** impairment charge was recorded for right-of-use lease assets due to the closure of Mobidiag facilities in Finland and France[32](index=32&type=chunk) [Disclosure of Fair Value of Financial Instruments](index=16&type=section&id=Disclosure%20of%20Fair%20Value%20of%20Financial%20Instruments) Carrying amounts of short-term financial instruments approximate fair value, while U.S. Treasury bills, commercial paper, and derivatives are recorded at fair value - The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate their fair value due to their short-term nature[70](index=70&type=chunk) - U.S. Treasury bills, commercial paper, interest rate swaps, and forward foreign currency contracts are recorded at fair value[70](index=70&type=chunk) **Cash and Cash Equivalents (in millions) as of June 29, 2024:** | Item | Cost/Fair Value | |:---|:---| | Cash | $1,620.3 | | Money market mutual funds | $371.2 | | U.S. Treasury bills | $398.1 | | Commercial paper | $49.5 | | Total | $2,439.1 | [(5) Business Combinations](index=17&type=section&id=%285%29%20Business%20Combinations) The Company acquired Endomagnetics Ltd for **$310.0 million** in July 2024, following fiscal 2023 acquisitions of JW Medical and Normedi Nordic [Fiscal 2024 Acquisitions](index=17&type=section&id=Fiscal%202024%20Acquisitions) Hologic agreed to acquire Endomagnetics Ltd (Endomag) for approximately **$310.0 million** on April 26, 2024, closing on July 25, 2024 - The Company executed an agreement on April 26, 2024, to acquire Endomagnetics Ltd (Endomag) for approximately **$310.0 million**, which closed on July 25, 2024[126](index=126&type=chunk) [Fiscal 2023 Acquisitions](index=17&type=section&id=Fiscal%202023%20Acquisitions) Fiscal 2023 acquisitions included JW Medical Corporation assets for **$6.7 million** and Normedi Nordic AS for **$7.7 million**, including contingent consideration - On July 3, 2023, the Company acquired assets from JW Medical Corporation for **$6.7 million**, primarily allocated to a customer relationship intangible asset[100](index=100&type=chunk) - On April 3, 2023, the Company acquired Normedi Nordic AS for **$7.7 million**, which included **$1.1 million** for contingent consideration based on incremental revenue growth[101](index=101&type=chunk) [Contingent Consideration](index=17&type=section&id=Contingent%20Consideration) Acessa Health contingent consideration resulted in a **$1.7 million** loss in Q1 fiscal 2024 and a final **$2.6 million** payment in Q2 fiscal 2024 - The primary contingent consideration liability was related to the Acessa Health, Inc. acquisition, with payments based on incremental revenue growth over a three-year period ending December 2023[102](index=102&type=chunk) - A **$1.7 million** loss was recorded in Q1 fiscal 2024 to increase the contingent consideration liability to fair value based on actual revenue results in the final earn-out period[102](index=102&type=chunk) - A final payment of **$2.6 million** was made during the second quarter of fiscal 2024 for the Acessa contingent consideration[102](index=102&type=chunk) [(6) Strategic Investment](index=18&type=section&id=%286%29%20Strategic%20Investment) The Company invested **$24.5 million** for a **45%** stake in Maverix Medical LLC in November 2023, accounted for under the equity method - On November 13, 2023, the Company invested **$24.5 million** for a **45%** ownership in Maverix Medical LLC, a new entity formed with KKR Comet, LLC, to develop lung cancer technologies[129](index=129&type=chunk) - The investment is accounted for under the equity method, and the Company's proportionate share of Maverix's net loss for the three and nine months ended June 29, 2024, was immaterial[129](index=129&type=chunk) [(7) Disposition](index=18&type=section&id=%287%29%20Disposition) The SSI ultrasound imaging business was sold for **$1.9 million** in October 2023, resulting in a **$51.7 million** charge in Q4 fiscal 2023 - On September 29, 2023, the Company agreed to sell its SSI ultrasound imaging business for **$1.9 million** in cash, with the sale completed on October 3, 2023[104](index=104&type=chunk) - A charge of **$51.7 million** was recorded in Q4 fiscal 2023 to record the asset group at its fair value less costs to sell[104](index=104&type=chunk) - The disposal did not qualify as a discontinued operation as it was not deemed a strategic shift with a major effect on operations and financial results[105](index=105&type=chunk) [Sale of SuperSonic Imagine Ultrasound Imaging Business](index=18&type=section&id=Sale%20of%20SuperSonic%20Imagine%20Ultrasound%20Imaging%20Business) The SSI ultrasound imaging business sale involved **$33.2 million** cash, **$4.5 million** receivables, **$16.2 million** inventory, and **$8.6 million** prepaid expenses **Assets and Liabilities Disposed of (in millions):** | Item | Amount | |:---|:---| | **Assets:** | | | Cash | $33.2 | | Accounts receivable | $4.5 | | Inventory | $16.2 | | Prepaid expenses and other assets | $8.6 | | Valuation allowance | $(50.6) | | Total assets disposed of | $11.9 | | **Liabilities:** | | | Accounts payable | $3.1 | | Accrued expenses | $5.1 | | Total liabilities disposed of | $8.2 | [(8) Restructuring](index=18&type=section&id=%288%29%20Restructuring) Restructuring activities include Mobidiag business strategy refinement, facility closures, asset impairments, and employee terminations, alongside the Danbury facility closure - The Company refined its Mobidiag business strategy, discontinuing certain products, closing facilities in Finland and France, and moving operations to San Diego[107](index=107&type=chunk) - This resulted in accelerated depreciation of **$7.2 million** and a lease asset impairment charge of **$12.5 million** in Q1 fiscal 2024[107](index=107&type=chunk) - Total estimated severance charges for Mobidiag employees are approximately **$13.1 million**, with **$3.9 million** and **$7.9 million** recorded in the three and nine months ended June 29, 2024, respectively[107](index=107&type=chunk) - The closure of the Danbury, Connecticut facility for Breast Health capital equipment manufacturing is expected to be completed by Q3 fiscal 2025, with severance charges of **$0.9 million** and **$2.7 million** recorded in the current three and nine months, respectively[134](index=134&type=chunk) [(9) Borrowings and Credit Arrangements](index=19&type=section&id=%289%29%20Borrowings%20and%20Credit%20Arrangements) Total debt obligations were **$2,543.1 million** at June 29, 2024, including a **$1.2 billion** Term Loan and **$1.35 billion** in Senior Notes **Debt Obligations (in millions):** | Debt Type | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Current debt obligations (Term Loan) | $37.5 | $287.0 | | Long-term debt (Term Loan) | $1,168.0 | $1,195.6 | | Long-term debt (2028 Senior Notes) | $397.3 | $396.8 | | Long-term debt (2029 Senior Notes) | $940.3 | $938.8 | | Total debt obligations | $2,543.1 | $2,818.2 | [2021 Credit Agreement](index=20&type=section&id=2021%20Credit%20Agreement) The **$1.5 billion** Term Loan under the 2021 Credit Agreement had **$1.2 billion** outstanding at **6.44%** interest, with a **$250.0 million** prepayment in Q1 fiscal 2024 - The 2021 Credit Agreement includes a **$1.5 billion** secured term loan and a **$2.0 billion** revolving credit facility[137](index=137&type=chunk) - As of June 29, 2024, **$1.2 billion** was outstanding on the Term Loan at a **6.44%** interest rate, and no amounts were outstanding on the Revolver[137](index=137&type=chunk) - The Company made a **$250.0 million** voluntary prepayment on the 2021 Term Loan during Q1 fiscal 2024 and was in compliance with financial covenants[137](index=137&type=chunk)[110](index=110&type=chunk) [2028 Senior Notes](index=20&type=section&id=2028%20Senior%20Notes) The Company holds **$400 million** of **4.625%** Senior Notes due 2028, with interest expense of **$4.8 million** for the three months - The Company has **$400 million** aggregate principal of **4.625%** Senior Notes due 2028, maturing on February 1, 2028[139](index=139&type=chunk) **2028 Senior Notes Interest Expense (in millions):** | Period | Interest Expense | |:---|:---| | Three Months Ended June 29, 2024 | $4.8 | | Three Months Ended July 1, 2023 | $4.8 | | Nine Months Ended June 29, 2024 | $14.4 | | Nine Months Ended July 1, 2023 | $14.8 | [2029 Senior Notes](index=20&type=section&id=2029%20Senior%20Notes) The Company holds **$950 million** of **3.250%** Senior Notes due 2029, with interest expense of **$8.2 million** for the three months - The Company has **$950 million** aggregate principal of **3.250%** Senior Notes due 2029, maturing on February 15, 2029[161](index=161&type=chunk) **2029 Senior Notes Interest Expense (in millions):** | Period | Interest Expense | |:---|:---| | Three Months Ended June 29, 2024 | $8.2 | | Three Months Ended July 1, 2023 | $8.2 | | Nine Months Ended June 29, 2024 | $24.7 | | Nine Months Ended July 1, 2023 | $25.3 | [(10) Trade Receivables and Allowance for Credit Losses](index=21&type=section&id=%2810%29%20Trade%20Receivables%20and%20Allowance%20for%20Credit%20Losses) Allowance for credit losses increased to **$41.4 million** at June 29, 2024, from **$38.5 million**, applying ASU No. 2016-13 - The Company applies ASU No. 2016-13 for trade receivables, using an estimated loss rate method based on historical experience, current conditions, and forecasts[162](index=162&type=chunk) **Allowance for Credit Losses (in millions):** | Metric | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Balance at Beginning of Period | $38.5 | $37.7 | | Credit Loss Provisions | $5.8 | $2.2 | | Settlements/Adjustments/Write-offs, and Foreign Exchange | $(2.9) | $(0.8) | | Balance at End of Period | $41.4 | $39.1 | [(11) Derivatives](index=21&type=section&id=%2811%29%20Derivatives) The Company uses interest rate swaps as cash flow hedges and non-hedge forward foreign currency contracts to manage market risks [Interest Rate Swaps - Cash Flow Hedge](index=21&type=section&id=Interest%20Rate%20Swaps%20-%20Cash%20Flow%20Hedge) A **$1.0 billion** notional interest rate swap expired in Q1 fiscal 2024, replaced by a new **$500 million** swap fixing SOFR at **3.46%** - A **$1.0 billion** notional interest rate swap, hedging variable rate debt, expired during Q1 fiscal 2024[141](index=141&type=chunk)[165](index=165&type=chunk) - A new **$500 million** notional interest rate swap fixes the SOFR component of the variable interest rate at **3.46%** from December 2023 to December 2024[142](index=142&type=chunk) - The fair value of these swaps was an asset position of **$14.7 million** as of June 29, 2024[142](index=142&type=chunk) [Forward Foreign Currency Exchange Contracts and Foreign Currency Option Contracts](index=22&type=section&id=Forward%20Foreign%20Currency%20Exchange%20Contracts%20and%20Foreign%20Currency%20Option%20Contracts) Forward foreign currency contracts and options mitigate operational exposures but are not hedge-designated, causing fair value changes to impact earnings - The Company uses forward foreign currency exchange contracts and foreign currency option contracts to mitigate operational exposures from foreign currency exchange rates[143](index=143&type=chunk)[166](index=166&type=chunk) - These contracts are not designated for hedge accounting, and changes in their fair value are recognized directly in earnings as a component of other income (expense), net[143](index=143&type=chunk)[167](index=167&type=chunk) **Realized and Unrealized Gains/Losses from Foreign Currency Contracts (in millions):** | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Realized gain (loss) | $1.7 | $0.2 | $3.5 | $(4.0) | | Unrealized gain (loss) | $(0.5) | $1.0 | $(6.2) | $(20.6) | | Total gain (loss) recognized in income | $1.2 | $1.2 | $(2.7) | $(24.6) | [Financial Instrument Presentation](index=23&type=section&id=Financial%20Instrument%20Presentation) Derivative financial instruments are presented on the balance sheet, with interest rate swaps at **$14.7 million** and forward foreign currency contracts at **$2.2 million** net asset **Fair Value of Derivative Financial Instruments (in millions):** | Instrument | Balance Sheet Location | June 29, 2024 | September 30, 2023 | |:---|:---|:---|:---| | **Assets:** | | | | | Interest rate swap contracts (cash flow hedge) | Prepaid expenses and other current assets | $8.5 | $16.2 | | Interest rate swap contracts (cash flow hedge) | Other assets | $6.2 | $10.7 | | Forward foreign currency contracts (non-hedge) | Prepaid expenses and other current assets | $2.6 | $8.4 | | **Liabilities:** | | | | | Forward foreign currency contracts (non-hedge) | Accrued expenses | $0.4 | $0.0 | **Gain (Loss) Recognized in Other Comprehensive Income (AOCI) for Interest Rate Swaps (net of taxes, in millions):** | Period | Amount | |:---|:---| | Three Months Ended June 29, 2024 | $0.3 | | Three Months Ended July 1, 2023 | $3.7 | | Nine Months Ended June 29, 2024 | $(9.3) | | Nine Months Ended July 1, 2023 | $(5.6) | [(12) Commitments and Contingencies](index=23&type=section&id=%2812%29%20Commitments%20and%20Contingencies) The Company faces legal proceedings, including BioZorb product liability complaints, with outcomes currently unassessable and legal costs expensed as incurred - The Company faces product liability complaints regarding the BioZorb 3D Bioabsorbable Marker, alleging undisclosed side effects[145](index=145&type=chunk) - Complaints have been filed on behalf of **88** plaintiffs in Massachusetts state court and U.S. District Court[145](index=145&type=chunk) - The Company believes it has valid defenses but cannot reasonably assess the outcome at this early stage[145](index=145&type=chunk) [Litigation and Related Matters](index=24&type=section&id=Litigation%20and%20Related%20Matters) The Company evaluates legal proceedings under ASC 450, expensing costs, and believes only the BioZorb matter could materially impact financials - The Company is involved in various legal proceedings, claims, and investigations arising from ordinary business operations[169](index=169&type=chunk) - Loss contingencies are accrued if an adverse outcome is probable and reasonably estimable under ASC 450[147](index=147&type=chunk) - Management believes no other proceedings, apart from those described, are reasonably likely to have a material adverse effect on financial condition or results of operations[169](index=169&type=chunk) [(13) Net Income (Loss) Per Share](index=24&type=section&id=%2813%29%20Net%20Income%20%28Loss%29%20Per%20Share) Basic and diluted net income per share are calculated using weighted average common shares and equivalents, with dilutive securities considered for net income periods **Net Income (Loss) Per Share (shares in thousands):** | Metric | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Basic weighted average common shares outstanding | 234,604 | 246,908 | 236,373 | 247,319 | | Weighted average common stock equivalents | 1,862 | — | 1,708 | 2,074 | | Diluted weighted average common shares outstanding | 236,466 | 246,908 | 238,081 | 249,393 | | Weighted-average anti-dilutive shares | 933 | 2,936 | 1,372 | 1,786 | [(14) Stock-Based Compensation](index=24&type=section&id=%2814%29%20Stock-Based%20Compensation) Stock-based compensation expense was **$69.1 million** for the nine months ended June 29, 2024, with various equity awards granted and unrecognized expense remaining **Stock-Based Compensation Expense (in millions):** | Category | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Cost of revenues | $2.6 | $2.1 | $8.5 | $7.7 | | Research and development | $2.2 | $2.1 | $8.4 | $8.6 | | Selling and marketing | $3.5 | $2.9 | $10.4 | $9.2 | | General and administrative | $6.3 | $9.8 | $41.8 | $35.1 | | Total | $14.6 | $16.9 | $69.1 | $60.6 | - The Company granted **0.6 million** stock options (weighted-average exercise price **$72.32**) and **0.7 million** RSUs (weighted-average grant date fair value **$72.03**) during the nine months ended June 29, 2024[149](index=149&type=chunk)[203](index=203&type=chunk) - Unrecognized compensation expense totaled **$12.4 million** for stock options and **$55.5 million** for stock units (RSUs, PSUs, FCF PSUs, MSUs) as of June 29, 2024, to be recognized over weighted-average periods of **2.3** and **1.8** years, respectively[173](index=173&type=chunk) [(15) Inventories and Property, Plant and Equipment](index=26&type=section&id=%2815%29%20Inventories%20and%20Property%2C%20Plant%20and%20Equipment) Inventories increased to **$665.5 million** and net property, plant, and equipment to **$528.8 million** at June 29, 2024 **Inventories (in millions):** | Category | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Raw materials | $263.2 | $238.6 | | Work-in-process | $58.4 | $66.3 | | Finished goods | $343.9 | $312.7 | | Total Inventories | $665.5 | $617.6 | **Property, Plant and Equipment, Net (in millions):** | Category | June 29, 2024 | September 30, 2023 | |:---|:---|:---| | Equipment | $388.4 | $380.0 | | Equipment under customer usage agreements | $507.7 | $508.1 | | Building and improvements | $243.7 | $230.0 | | Leasehold improvements | $42.0 | $44.4 | | Land | $40.8 | $41.1 | | Furniture and fixtures | $23.6 | $19.2 | | Finance lease right-of-use asset | $8.4 | $8.2 | | Total Gross PP&E | $1,254.6 | $1,231.0 | | Less – accumulated depreciation and amortization | $(725.8) | $(714.0) | | Net Property, Plant and Equipment | $528.8 | $517.0 | [(16) Business Segments and Geographic Information](index=26&type=section&id=%2816%29%20Business%20Segments%20and%20Geographic%20Information) The Company operates in four segments, with performance evaluated by revenues and operating income, and the U.S. remains the largest market - The Company operates in four reportable segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health[175](index=175&type=chunk) **Total Revenues by Segment (in millions):** | Segment | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | Diagnostics | $440.8 | $439.7 | $1,338.7 | $1,463.6 | | Breast Health | $385.0 | $360.3 | $1,147.3 | $1,079.9 | | GYN Surgical | $166.6 | $157.3 | $484.8 | $456.2 | | Skeletal Health | $19.0 | $27.1 | $71.5 | $85.4 | | Total | $1,011.4 | $984.4 | $3,042.3 | $3,085.1 | **Revenues by Geography as a Percentage of Total Revenues:** | Region | Three Months Ended June 29, 2024 | Three Months Ended July 1, 2023 | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---|:---|:---| | United States | 75.7% | 76.2% | 74.9% | 75.9% | | Europe | 12.6% | 13.1% | 13.4% | 13.9% | | Asia-Pacific | 6.4% | 6.4% | 6.4% | 6.2% | | Rest of World | 5.3% | 4.3% | 5.3% | 4.0% | | Total | 100.0% | 100.0% | 100.0% | 100.0% | [(17) Income Taxes](index=28&type=section&id=%2817%29%20Income%20Taxes) Effective tax rates were **19.2%** (three months) and **5.1%** (nine months), lower due to deductions, geographic mix, and a **$107.2 million** tax benefit - The effective tax rate for the three months ended June 29, 2024, was **19.2%**, and for the nine months, it was **5.1%**[208](index=208&type=chunk) - The lower effective tax rates are primarily due to the U.S. deduction for foreign derived intangible income, geographic mix of international income, and federal and state tax credits[178](index=178&type=chunk) - The nine-month effective tax rate also benefited from a **$107.2 million** discrete tax benefit related to a worthless stock deduction on an investment in an international subsidiary[178](index=178&type=chunk) [Non-Income Tax Matters](index=28&type=section&id=Non-Income%20Tax%20Matters) The Company faces ongoing non-income tax examinations in multiple jurisdictions, with potential for additional charges beyond current estimates - The Company is subject to tax examinations for value added, sales-based, payroll, and other non-income tax items in various jurisdictions[210](index=210&type=chunk) - Loss contingencies are recorded pursuant to ASC 450, and while current estimates are reasonable, additional charges could be recorded in the future[210](index=210&type=chunk) [(18) Intangible Assets](index=29&type=section&id=%2818%29%20Intangible%20Assets) Net intangible assets totaled **$687.6 million** at June 29, 2024, with significant impairment charges for BioZorb and Mobidiag assets **Intangible Assets (in millions):** | Description | Gross Carrying Value (June 29, 2024) | Accumulated Amortization (June 29, 2024) | Gross Carrying Value (Sept 30, 2023) | Accumulated Amortization (Sept 30, 2023) | |:---|:---|:---|:---|:---| | Developed technology | $4,375.4 | $3,786.6 | $4,411.0 | $3,649.5 | | In-process research and development | $21.9 | — | $25.7 | — | | Customer relationships | $600.6 | $564.4 | $600.0 | $550.6 | | Trade names | $252.5 | $222.9 | $253.6 | $212.8 | | Total acquired intangible assets | $5,250.4 | $4,573.9 | $5,290.3 | $4,412.9 | | Internal-use software | $25.5 | $20.0 | $24.0 | $17.8 | | Capitalized software embedded in products | $29.7 | $24.1 | $27.7 | $22.7 | | Total intangible assets | $5,305.6 | $4,618.0 | $5,342.0 | $4,453.4 | - During Q3 fiscal 2024, the Company recorded impairment charges of **$13.3 million** and **$0.4 million** for BioZorb developed technology and trade names, fully writing off the assets, following a Class I recall classification by the FDA[181](index=181&type=chunk) - During Q1 fiscal 2024, a **$4.3 million** impairment charge was recorded for the Mobidiag in-process research and development intangible asset, reducing its fair value to **$22.4 million**[212](index=212&type=chunk) [(19) Product Warranties](index=30&type=section&id=%2819%29%20Product%20Warranties) Product warranty balance increased to **$9.2 million** at June 29, 2024, with **$7.2 million** in provisions and **$6.3 million** in settlements **Product Warranty Activity (in millions):** | Metric | Nine Months Ended June 29, 2024 | Nine Months Ended July 1, 2023 | |:---|:---|:---| | Balance at Beginning of Period | $8.3 | $8.0 | | Provisions | $7.2 | $4.9 | | Settlements/Adjustments | $(6.3) | $(5.4) | | Balance at End of Period | $9.2 | $7.5 | [(20) Accumulated Other Comprehensive Income (Loss)](index=31&type=section&id=%2820%29%20Accumulated%20Other%20Comprehensive%20Income%20%28Loss%29) AOCI was **$(139.5) million** at June 29, 2024, primarily due to foreign currency translation and hedged interest rate swaps **Accumulated Other Comprehensive Income (Loss) (in millions):** | Component | Beginning Balance (Sept 30, 2023) | OCI (Loss) before Reclassifications (9 months) | Ending Balance (June 29, 2024) | |:---|:---|:---|:---| | Foreign Currency Translation | $(147.8) | $(2.8) | $(150.6) | | Pension Plans | $0.3 | — | $0.3 | | Hedged Interest Rate Swaps | $10.5 | $0.3 | $10.8 | | Total | $(137.0) | $(2.5) | $(139.5) | [(21) Share Repurchase](index=31&type=section&id=%2821%29%20Share%20Repurchase) A **$1.0 billion** stock repurchase program had **$248.6 million** remaining, with **1.4 million** and **3.5 million** shares repurchased for **$100.0 million** and **$250.0 million** - A **$1.0 billion** stock repurchase program was authorized in September 2022, with **$248.6 million** remaining available as of June 29, 2024[218](index=218&type=chunk) - During the three and nine months ended June 29, 2024, the Company repurchased **1.4 million** and **3.5 million** shares, respectively, for **$100.0 million** and **$250.0 million**, excluding ASR shares[218](index=218&type=chunk) - An accelerated share repurchase (ASR) agreement for **$500 million** was completed in February 2024, resulting in the repurchase of approximately **7.0 million** shares[189](index=189&type=chunk) [(22) New Accounting Pronouncements](index=31&type=section&id=%2822%29%20New%20Accounting%20Pronouncements) The Company is evaluating new FASB ASUs on Segment Reporting and Income Taxes, while the SEC's climate disclosure rule is stayed - FASB ASU No. 2023-07 (Segment Reporting) and ASU No. 2023-09 (Income Taxes) are effective for the Company in fiscal 2025, with early adoption permitted[190](index=190&type=chunk)[219](index=219&type=chunk) - The SEC's final climate disclosure rule, requiring Scope 1 and Scope 2 greenhouse gas emissions disclosure, is currently stayed pending judicial review[220](index=220&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition, results of operations, liquidity, capital resources, and critical accounting estimates, including forward-looking statements [CAUTIONARY STATEMENT](index=33&type=section&id=CAUTIONARY%20STATEMENT) Forward-looking statements involve known and unknown risks and uncertainties that could cause actual results to differ materially, requiring careful consideration - Forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[62](index=62&type=chunk)[221](index=221&type=chunk) - Factors that could cause differences include macroeconomic uncertainties, acquisitions, new competitive technologies, demand for products, cybersecurity threats, supply chain constraints, regulatory approvals, and legal proceedings[194](index=194&type=chunk)[252](index=252&type=chunk) [OVERVIEW](index=34&type=section&id=OVERVIEW) Hologic, a women's health product supplier across four segments, recently acquired Endomagnetics Ltd and divested its SSI ultrasound business - Hologic is a developer, manufacturer, and supplier of premium diagnostics products, medical imaging systems, and surgical products focused on women's health[196](index=196&type=chunk) - The Company operates in four segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health[196](index=196&type=chunk) [ACQUISITION](index=35&type=section&id=ACQUISITION) Hologic acquired Endomagnetics Ltd (Endomag) for approximately **$310.0 million** on July 25, 2024, specializing in breast surgery technologies - On April 26, 2024, Hologic agreed to acquire Endomagnetics Ltd (Endomag) for approximately **$310.0 million**, with the transaction closing on July 25, 2024[200](index=200&type=chunk) [DISPOSITION](index=35&type=section&id=DISPOSITION) Hologic sold its SSI ultrasound imaging business for **$1.9 million** in October 2023, incurring a **$51.7 million** charge in Q4 fiscal 2023 - On September 29, 2023, Hologic agreed to sell its SSI ultrasound imaging business for **$1.9 million** in cash, with the sale completed on October 3, 2023[227](index=227&type=chunk) - A charge of **$51.7 million** was recorded in Q4 fiscal 2023 to record the SSI ultrasound imaging asset group at its fair value less costs to sell[227](index=227&type=chunk) [RESULTS OF OPERATIONS](index=36&type=section&id=RESULTS%20OF%20OPERATIONS) Results show mixed segment performance, with product revenues impacted by COVID-19 assay sales, while service revenues increased, and operating expenses varied [Product Revenues](index=36&type=section&id=Product%20Revenues) Product revenues increased **1.5%** (three months) but decreased **2.2%** (nine months), driven by lower SARS-CoV-2 assay sales and Skeletal Health stop-ship **Product Revenues by Segment (in millions):** | Segment | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Diagnostics | $406.9 | (0.7)% | $1,246.8 | (9.6)% | | Breast Health | $228.9 | 6.7% | $696.7 | 10.3% | | GYN Surgical | $165.4 | 5.8% | $479.6 | 5.9% | | Skeletal Health | $10.0 | (46.2)% | $44.1 | (26.0)% | | Total Product Revenues | $811.2 | 1.5% | $2,467.2 | (2.2)% | - Diagnostics product revenues decreased primarily due to a **$163.4 million** decline in SARS-CoV-2 assay sales in the nine-month period, offset by increases in BV/CV and Fusion respiratory products[91](index=91&type=chunk) - Skeletal Health product revenues decreased significantly due to a temporary stop-ship of Horizon DXA systems caused by a non-conformance pertaining to electromagnetic compatibility requirements[64](index=64&type=chunk) [Service and Other Revenues](index=37&type=section&id=Service%20and%20Other%20Revenues) Service and other revenues increased **8.0%** (three months) and **2.3%** (nine months), driven by Breast Health and Biotheranostics growth **Service and Other Revenues (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Service and Other Revenues | $200.2 | 8.0% | $575.1 | 2.3% | - The increase in service and other revenue was primarily due to an increase in Breast Health service contract revenue and higher lab testing volumes from the Biotheranostics business, attributed to greater adoption of the Breast Cancer Index test[232](index=232&type=chunk) [Cost of Product Revenues](index=38&type=section&id=Cost%20of%20Product%20Revenues) Cost of product revenues as a percentage increased to **37.0%** due to lower SARS-CoV-2 assay sales and inventory reserves, with Skeletal Health impacted by **$5.0 million** repair charges **Cost of Product Revenues (in millions):** | Metric | Three Months Ended June 29, 2024 | % of Product Revenue | Nine Months Ended June 29, 2024 | % of Product Revenue | |:---|:---|:---|:---|:---| | Cost of Product Revenues | $298.2 | 36.8% | $913.9 | 37.0% | | Amortization of Acquired Intangible Assets | $44.4 | 5.5% | $134.9 | 5.5% | | Impairment of Intangible Assets and Equipment | $13.3 | 1.6% | $39.2 | 1.6% | | Total | $355.9 | 43.9% | $1,088.0 | 44.1% | - Cost of product revenues as a percentage of revenue was higher in the current nine-month period primarily due to a decrease in sales of higher-margin SARS-CoV-2 assays[265](index=265&type=chunk) - Skeletal Health's product costs as a percentage of revenue increased due to a **$5.0 million** charge to repair Horizon DXA units for electromagnetic compatibility non-conformance[235](index=235&type=chunk) [Cost of Service and Other Revenues](index=40&type=section&id=Cost%20of%20Service%20and%20Other%20Revenues) Service and other revenues gross margin increased to **52.4%** (three months) and **50.6%** (nine months), driven by higher-margin lab testing **Cost of Service and Other Revenues (in millions):** | Metric | Three Months Ended June 29, 2024 | % of Service Revenue | Nine Months Ended June 29, 2024 | % of Service Revenue | |:---|:---|:---|:---|:---| | Cost of Service and Other Revenue | $95.2 | 47.5% | $284.2 | 49.4% | - Gross margin for service and other revenues increased due to higher lab testing revenue from Biotheranostics, which has higher margins, and a decrease in service department costs[271](index=271&type=chunk) [Operating Expenses](index=40&type=section&id=Operating%20Expenses) Operating expenses decreased **13.6%** (three months) and **1.7%** (nine months) due to lower R&D and selling & marketing, despite increased G&A **Operating Expenses (in millions):** | Expense Category | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Research and development | $64.1 | (11.7)% | $205.5 | (7.2)% | | Selling and marketing | $146.3 | (2.3)% | $439.4 | (3.6)% | | General and administrative | $94.0 | 4.2% | $306.2 | 2.2% | | Amortization of intangible assets | $5.3 | (25.4)% | $24.3 | 11.0% | | Impairment of intangible assets and Equipment | $0.4 | ** | $5.6 | (87.4)% | | Contingent consideration - fair value adjustment | — | ** | $1.7 | 113.7% | | Restructuring charges | $6.2 | ** | $34.8 | ** | | Total Operating Expenses | $316.3 | (13.6)% | $1,017.5 | (1.7)% | [Research and Development Expenses](index=40&type=section&id=Research%20and%20Development%20Expenses) R&D expenses decreased **11.7%** (three months) and **7.2%** (nine months) due to lower compensation and SSI divestiture, partially offset by IP purchase - R&D expenses decreased due to lower compensation and benefits, reduced project spend, and the elimination of expenses from the SSI ultrasound business (**$2.7 million** and **$8.7 million** for three and nine months, respectively)[117](index=117&type=chunk) - Decreases were partially offset by lower credits from the BARDA grant (**$3.2 million** and **$5.5 million** for three and nine months, respectively) and a **$10.0 million** charge for intellectual property purchase in Diagnostics (nine-month period)[117](index=117&type=chunk) [Selling and Marketing Expenses](index=40&type=section&id=Selling%20and%20Marketing%20Expenses) Selling and marketing expenses decreased **2.3%** (three months) and **3.6%** (nine months) due to reduced advertising, SSI divestiture, and lower travel - Selling and marketing expenses decreased due to lower spending on advertising and marketing initiatives, elimination of SSI ultrasound business expenses (**$1.5 million** and **$5.2 million** for three and nine months, respectively), and lower travel expenses[241](index=241&type=chunk)[274](index=274&type=chunk) [General and Administrative Expenses](index=41&type=section&id=General%20and%20Administrative%20Expenses) G&A expenses increased **4.2%** (three months) and **2.2%** (nine months) due to higher legal expenses, compensation, and bad debt, partially offset by other factors - Three-month increase in G&A expenses was due to higher legal expenses, compensation and benefits from higher headcount, and acquisition transaction costs[94](index=94&type=chunk) - Nine-month increase was due to higher compensation and benefits (stock compensation, deferred compensation plan), increased legal expenses (offsetting a **$7.4 million** prior year settlement benefit), and a **$3.6 million** increase in bad debt expense[94](index=94&type=chunk) - Partially offsetting the nine-month increase were a **$10.0 million** decrease in charitable contributions and an **$8.9 million** charge for a business dispute in the prior year[94](index=94&type=chunk) [Amortization of Intangible Assets](index=41&type=section&id=Amortization%20of%20Intangible%20Assets) Amortization of intangible assets decreased in the three-month period but increased in the nine-month period due to accelerated Mobidiag asset amortization - Amortization expense decreased in the current three-month period due to lower Mobidiag intangible asset values from prior impairment charges and accelerated amortization[243](index=243&type=chunk) - Amortization expense increased in the current nine-month period primarily due to accelerated amortization of customer relationship and trade name intangible assets from the Mobidiag acquisition[243](index=243&type=chunk) [Impairment of Intangible Assets and Equipment](index=41&type=section&id=Impairment%20of%20Intangible%20Assets%20and%20Equipment) Impairment charges of **$26.8 million** and **$13.7 million** were recorded for BioZorb, and **$4.3 million** for Mobidiag IPR&D asset - Impairment charges of **$26.8 million** and **$13.7 million** were recorded for the BioZorb product line in Q2 and Q3 fiscal 2024, respectively, primarily allocated to developed technology and trade names[275](index=275&type=chunk) - A **$4.3 million** impairment charge was recorded for the Mobidiag IPR&D asset in Q1 fiscal 2024 due to reduced forecasted revenues and project timing delays[275](index=275&type=chunk) [Contingent Consideration Fair Value Adjustments](index=41&type=section&id=Contingent%20Consideration%20Fair%20Value%20Adjustments) A **$1.7 million** loss was recorded in Q1 fiscal 2024 for Acessa contingent consideration, contrasting with a **$12.4 million** gain in Q2 fiscal 2023 - A **$1.7 million** loss was recorded in Q1 fiscal 2024 to increase the Acessa contingent consideration liability to fair value based on actual revenue results[244](index=244&type=chunk) - In Q2 fiscal 2023, a **$12.4 million** gain was recorded to reduce the liability's fair value due to decreased forecasted revenues[244](index=244&type=chunk) [Restructuring Charges](index=42&type=section&id=Restructuring%20Charges) Restructuring charges significantly increased to **$6.2 million** (three months) and **$34.8 million** (nine months), including Mobidiag and Danbury severance - Restructuring charges were **$6.2 million** for the three months and **$34.8 million** for the nine months ended June 29, 2024[272](index=272&type=chunk) - Severance charges related to Mobidiag facility closures totaled **$7.9 million** for the nine months ended June 29, 2024[107](index=107&type=chunk) - Severance charges for the Danbury, Connecticut facility closure were **$2.7 million** for the nine months ended June 29, 2024[134](index=134&type=chunk) [Interest Income](index=42&type=section&id=Interest%20Income) Interest income decreased **12.6%** (three months) and **5.1%** (nine months) due to lower average cash balances, despite higher interest rates **Interest Income (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Interest Income | $28.4 | (12.6)% | $80.3 | (5.1)% | - Interest income decreased due to lower average cash balances, partially offset by higher interest rates[246](index=246&type=chunk) [Interest Expense](index=42&type=section&id=Interest%20Expense) Interest expense increased **15.2%** (three months) and **8.7%** (nine months) due to higher variable rates and lower swap benefits, partially offset by debt prepayment **Interest Expense (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Interest Expense | $(31.9) | 15.2% | $(90.2) | 8.7% | - Interest expense increased due to higher variable interest rates under the 2021 Credit Agreement and lower amounts received from interest rate swap agreements[247](index=247&type=chunk) - The increase was partially offset by a lower principal balance outstanding due to a **$250.0 million** voluntary prepayment on the 2021 Credit Agreement[247](index=247&type=chunk) [Other Income (Expense), net](index=43&type=section&id=Other%20Income%20%28Expense%29%2C%20net) Other income (expense), net, decreased to **$0.2 million** (three months) but increased to **$0.8 million** (nine months), influenced by life insurance gains and foreign currency losses **Other Income (Expense), net (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Other Income (Expense), net | $0.2 | (96.6)% | $0.8 | ** | - For the nine-month period, this account primarily consisted of a **$10.9 million** gain from the change in cash surrender value of life insurance contracts, partially offset by **$7.2 million** in net foreign currency exchange losses and a **$2.3 million** ownership share loss from the Maverix Medical investment[248](index=248&type=chunk) [Provision for Income Taxes](index=43&type=section&id=Provision%20for%20Income%20Taxes) Provision for income taxes decreased **12.2%** (three months) and **80.3%** (nine months), with effective rates of **19.2%** and **5.1%** due to a **$107.2 million** tax benefit **Provision for Income Taxes (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Provision for Income Taxes | $46.2 | (12.2)% | $32.6 | (80.3)% | - Effective tax rates for the three and nine months ended June 29, 2024, were **19.2%** and **5.1%**, respectively, compared to **434.7%** and **31.1%** in the prior year[281](index=281&type=chunk) - The lower nine-month effective tax rate was primarily due to a **$107.2 million** discrete tax benefit from a worthless stock deduction on an investment in an international subsidiary[250](index=250&type=chunk) [Segment Results of Operations](index=43&type=section&id=Segment%20Results%20of%20Operations) Segment performance, measured by revenues and operating income, shows Diagnostics and Breast Health improvements, while GYN Surgical and Skeletal Health had mixed or declining results - Segment performance is measured based on total revenues and operating income[282](index=282&type=chunk) [Diagnostics](index=43&type=section&id=Diagnostics) Diagnostics revenues slightly increased (three months) but decreased (nine months), while operating income significantly increased due to higher gross profit and lower expenses **Diagnostics Segment Performance (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $440.8 | 0.3% | $1,338.7 | (8.5)% | | Operating Income | $89.7 | (179.0)% | $210.1 | 47.1% | | Operating Income as a % of Segment Revenue | 20.3% | | 15.7% | | - Operating income increased due to a **$162.8 million** Mobidiag impairment charge in the prior year, lower intangible asset amortization, reduced manufacturing costs, and increased sales of Women's Health Aptima and Fusion assays[315](index=315&type=chunk) [Breast Health](index=44&type=section&id=Breast%20Health) Breast Health revenues increased **6.9%** (three months) and **6.2%** (nine months), with operating income also rising due to higher product sales and service revenue **Breast Health Segment Performance (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $385.0 | 6.9% | $1,147.3 | 6.2% | | Operating Income | $102.4 | 61.8% | $296.2 | 26.7% | | Operating Income as a % of Segment Revenue | 26.6% | | 25.8% | | - Gross margin was **54.3%** for both the three and nine months, driven by increased sales of 3Dimensions systems, lower intangible asset amortization, and slight increases in biopsy disposable prices and European product prices[316](index=316&type=chunk) [GYN Surgical](index=44&type=section&id=GYN%20Surgical) GYN Surgical revenues increased **5.9%** (three months) and **6.3%** (nine months), with operating income up in three months but down in nine months **GYN Surgical Segment Performance (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $166.6 | 5.9% | $484.8 | 6.3% | | Operating Income | $56.7 | 16.9% | $144.3 | (3.5)% | | Operating Income as a % of Segment Revenue | 34.0% | | 29.8% | | - Gross margin was **69.6%** for the three months (up from **68.7%**) due to improved margins on CoolSeal disposable products from manufacturing efficiencies[318](index=318&type=chunk) - Nine-month operating income decreased due to increased operating expenses, including a prior year gain from Acessa contingent consideration and a Minerva litigation settlement[290](index=290&type=chunk) [Skeletal Health](index=45&type=section&id=Skeletal%20Health) Skeletal Health revenues decreased **29.9%** (three months) and **16.3%** (nine months) due to a Horizon DXA stop-ship, leading to an operating loss **Skeletal Health Segment Performance (in millions):** | Metric | Three Months Ended June 29, 2024 | Change % | Nine Months Ended June 29, 2024 | Change % | |:---|:---|:---|:---|:---| | Total Revenues | $19.0 | (29.9)% | $71.5 | (16.3)% | | Operating Income | $(4.8) | (254.8)% | $2.0 | (79.6)% | | Operating Income as a % of Segment Revenue | (25.2)% | | 2.8% | | - Operating income decreased primarily due to a decrease in gross profit and an increase in operating expenses, with gross margin at **4.9%** and **27.9%** for the three and nine months, respectively[121](index=121&type=chunk) - The decrease in gross margin was primarily due to a **$5.0 million** charge to repair Horizon DXA units and a decrease in sales volume due to a temporary stop-ship[121](index=121&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Liquidity is supported by **$2,994.6 million** working capital and **$2,439.1 million** cash, with **$918.2 million** from operations and **$1,051.8 million** used in financing - Working capital was **$2,994.6 million** and cash and cash equivalents totaled **$2,439.1 million** at June 29, 2024[293](index=293&type=chunk) - Operating activities provided **$918.2 million** in cash for the first nine months of fiscal 2024[321](index=321&type=chunk) - Financing activities used **$1,051.8 million**, primarily for **$776.8 million** in common stock repurchases and **$278.1 million** in debt principal payments[323](index=323&type=chunk) - Total recorded debt outstanding was **$2.54 billion** at June 29, 2024[324](index=324&type=chunk) [Debt](index=46&type=section&id=Debt) Total debt includes a **$1.2 billion** Term Loan and **$1.35 billion** in Senior Notes, with the Company in compliance with all debt covenants - Total recorded debt outstanding was **$2.54 billion** at June 29, 2024, comprising the 2021 Term Loan (**$1.21 billion**), 2029 Senior Notes (**$940.3 million**), and 2028 Senior Notes (**$397.3 million**)[324](index=324&type=chunk) [2021 Credit Agreement](index=46&type=section&id=2021%20Credit%20Agreement) The **$1.5 billion** Term Loan had **$1.2 billion** outstanding at **6.44%** interest, with a **$250.0 million** prepayment in Q1 fiscal 2024, and no Revolver borrowings - The 2021 Credit Agreement includes a **$1.5 billion** secured term loan and a **$2.0 billion** secured revolving credit facility[325](index=325&type=chunk) - As of June 29, 2024, the outstanding principal balance of the 2021 Term Loan was **$1.2 billion**, with an interest rate of **6.44%** per annum[327](index=327&type=chunk)[297](index=297&type=chunk) - The Company was in compliance with the total net leverage ratio and interest coverage ratio covenants as of June 29, 2024[299](index=299&type=chunk) [2028 Senior Notes](index=47&type=section&id=2028%20Senior%20Notes) The Company holds **$400.0 million** in **4.625%** Senior Notes due 2028, which are redeemable at specified premiums - The total aggregate principal balance of the 2028 Senior Notes is **$400.0 million**, bearing interest at **4.625%** per year, payable semi-annually[328](index=328&type=chunk) - The 2028 Senior Notes mature on February 1, 2028, and are redeemable at various premiums depending on the redemption date[328](index=328&type=chunk) [2029 Senior Notes](index=47&type=section&id=2029%20Senior%20Notes) The Company holds **$950.0 million** in **3.250%** Senior Notes due 2029, which are redeemable at specified premiums - The total aggregate principal balance of the 2029 Senior Notes is **$950.0 million**, bearing interest at **3.250%** per year, payable semi-annually[351](index=351&type=chunk) - The 2029 Senior Notes mature on February 15, 2029, and are redeemable at various premiums depending on the redemption date[351](index=351&type=chunk) [Stock Repurchase Program](index=47&type=section&id=Stock%20Repurchase%20Program) A **$1.0 billion** stock repurchase program, authorized in September 2022, had **$248.6 million** remaining as of June 29, 2024 - A **$1.0 billion** stock repurchase program was authorized in September 2022, replacing a previous authorization[301](index=301&type=chunk) - As of June 29, 2024, **$248.6 million** remained available under this authorization[301](index=301&type=chunk) - Repurchases may be made through open market purchases, privately negotiated transactions, accelerated share repurchase agreements, or Rule 10b5-1 plans[352](index=352&type=chunk) [Acquisition](index=47&type=section&id=Acquisition) The Company acquired Endomagnetics Ltd (Endomag) for approximately **$310.0 million** on July 25, 2024 - On April 26, 2024, the Company agreed to acquire Endomagnetics Ltd (Endomag) for approximately **$310.0 million**, which closed on July 25, 2024[302](index=302&type=chunk) [Legal Contingencies](index=48&type=section&id=Legal%20Contingencies) The Company is involved in legal proceedings, with loss contingencies accrued if probable and estimable, as detailed in Note 12 - The Company is involved in several legal proceedings, claims, and governmental/regulatory inspections arising from ordinary business[303](index=303&type=chunk) - Management reviews estimates of potential costs, and loss contingencies are accrued if an adverse outcome is probable and reasonably estimable[303](index=303&type=chunk) [Future Liquidity Considerations](index=48&type=section&id=Future%20Liquidity%20Considerations) Current liquidity sources are expected to fund operations and debt for the next twelve months, with longer-term liquidity dependent on future performance - The Company believes its current liquidity sources will be sufficient to fund normal operations and debt payments over the next twelve months[332](index=332&type=chunk) - Longer-term liquidity is contingent upon future operating performance, and additional capital may be required for future capital expenditures, debt repayment, acquisitions, or strategic transactions[332](index=332&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=48&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Financial statements rely on critical accounting estimates for revenue, allowances, valuations, and tax reserves, with no material changes since September 30, 2023 - The preparation of consolidated financial statements requires estimates and judgments affecting reported amounts of assets, liabilities, revenues, and expenses[355](index=355&type=chunk) - Critical accoun

Core Viewpoint - Hologic, Inc. reported strong financial results for the third quarter of fiscal 2024, with adjusted EPS of $1.06, reflecting a 14% year-over-year increase, and revenues of $1.01 billion, up 2.7% year over year, both surpassing consensus estimates [1][2][14] Financial Performance - Adjusted EPS for the quarter was $1.06, exceeding the Zacks Consensus Estimate by 3.9% [1] - GAAP EPS was 82 cents, compared to a loss of 16 cents in the same quarter last year [1] - Revenues totaled $1.01 billion, surpassing the Zacks Consensus Estimate by 1.1% [2] Geographical Revenue Analysis - U.S. revenues reached $765.3 million, a 2% increase year over year, exceeding projections [3] - International revenues were $246.1 million, up 5.1% year over year, slightly below expectations [3] Segment Performance - Diagnostics segment revenues increased 0.3% year over year to $440.8 million, with a 5.5% increase excluding COVID-19 revenues [4] - Molecular Diagnostics revenues were $310.7 million, up 3.1% at constant exchange rates [5] - Breast Health segment revenues rose 6.9% to $385 million, driven by strong Breast Imaging results [6] - GYN Surgical revenues increased 5.9% to $166.6 million, supported by sales of MyoSure and Fluent Fluid Management [7] - Skeletal Health revenues declined 29.9% to $19 million due to lower shipments [7] Operational Metrics - Adjusted gross margin increased by 30 basis points to 61.1% [8] - Adjusted operating margin expanded by 230 basis points to 31.2% [8] Financial Position - Cash and cash equivalents at the end of the quarter were $2.44 billion, up from $2.18 billion in the previous quarter [8] - Total long-term debt was $2.54 billion, slightly down from $2.55 billion [9] - Net cash provided by operating activities was $918.2 million, compared to $792.5 million a year ago [9] Guidance - For fiscal 2024, Hologic projects revenues between $4.012 billion and $4.027 billion, indicating slight year-over-year growth [10] - Adjusted EPS for fiscal 2024 is estimated between $4.04 and $4.11, reflecting a growth of 2%-3.8% year over year [11] - For the fourth quarter, projected revenues are between $970 million and $985 million, suggesting year-over-year growth of 2.6%-4.2% [12] - Adjusted EPS for the fourth quarter is estimated between 97 cents and $1.04, indicating an increase of 9%-16.9% year over year [13] Overall Assessment - Hologic's performance in the third quarter highlights the strength across its diverse portfolio, particularly in Diagnostics (excluding COVID-19), Breast Health, and Surgical segments [14] - The company experienced significant growth in its Breast Health and Surgical franchises, while the Skeletal business faced challenges due to shipment issues [15]

Core Insights - Hologic reported revenue of $1.01 billion for the quarter ended June 2024, reflecting a year-over-year increase of 2.7% and an EPS of $1.06 compared to $0.93 in the same quarter last year [5] Revenue Performance - GYN Surgical revenue was $166.60 million, slightly below the estimated $166.70 million, marking a year-over-year increase of +5.9% [3] - Total Diagnostics revenue reached $440.80 million, exceeding the average estimate of $433.13 million, with a year-over-year change of +0.3% [3] - Total Breast Health revenue was $385 million, surpassing the estimated $375.60 million, representing a +6.9% change year over year [3] - Skeletal Health revenue was $19 million, significantly below the estimated $25.26 million, showing a -29.9% change compared to the previous year [3] - Breast Imaging revenue was $309.20 million, exceeding the estimate of $296.11 million, with an +8.1% year-over-year change [3] - Blood Screening revenue was $7.90 million, above the estimate of $7.08 million, but down -26.2% year over year [3] - Molecular Diagnostics revenue was $310.70 million, slightly above the estimate of $308.09 million, with a +2.8% year-over-year change [3] - Cytology and Perinatal revenue was $122.20 million, exceeding the estimate of $119.54 million, but down -3.6% year over year [3] - Interventional Breast Solutions revenue was $75.80 million, below the estimate of $77.53 million, with a +2.2% year-over-year change [3] Stock Performance - Hologic shares have returned +5.9% over the past month, outperforming the Zacks S&P 500 composite, which saw a -0.2% change [4] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [4]

Hologic (HOLX) came out with quarterly earnings of $1.06 per share, beating the Zacks Consensus Estimate of $1.02 per share. This compares to earnings of $0.93 per share a year ago. These figures are adjusted for nonrecurring items. Over the last four quarters, the company has surpassed consensus EPS estimates four times. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earn ...

Hologic Announces Financial Results for Third Quarter of Fiscal 2024 "In our third quarter of fiscal 2024, Hologic returns to top-line reported growth and once again exceeded the high-end of our guidance for both the top and bottom-line," said Stephen P. MacMillan, the Company's Chairman, President and Chief Executive Officer. "Our strong fiscal quarter and year-to-date results continue to highlight the durable strength across our broad portfolio, with our Diagnostics (ex-COVID), Breast Health, and Surgical ...

While investors usually depend on consensus earnings and revenue estimates to assess the business performance for the quarter, delving into analysts' forecasts for certain key metrics often provides a more comprehensive understanding. Given this perspective, it's time to examine the average forecasts of specific Hologic metrics that are routinely monitored and predicted by Wall Street analysts. Analysts' assessment points toward 'Revenue- GYN Surgical' reaching $166.70 million. The estimate points to a chan ...

In the latest market close, Hologic (HOLX) reached $78.38, with a +0.35% movement compared to the previous day. This change lagged the S&P 500's 1.08% gain on the day. Meanwhile, the Dow experienced a rise of 0.32%, and the technology-dominated Nasdaq saw an increase of 1.58%. For the full year, the Zacks Consensus Estimates project earnings of $4.08 per share and a revenue of $4.04 billion, demonstrating changes of +3.03% and +0.13%, respectively, from the preceding year. Based on our research, we believe ...

Also, in April 2024, Hologic secured an Innovative Technology contract from Vizient for its CoolSeal advanced energy portfolio and JustRight 5 mm stapler. The recognition by Vizient's team of experts underscores the potential of these technologies to enhance clinical care, patient safety and healthcare worker safety and improve the business operations of healthcare organizations. We expect this development to have a positive impact on Hologic's revenues in the fiscal third quarter. Hologic, Inc.'s (HOLX) GY ...

Investment Thesis - Hologic's future growth prospects are supported by a strong product portfolio, particularly in Molecular Diagnostics, with significant contributions from BV and CV/TV assays and the Biotheranostics business [4] - Key GYN Surgical products, including Myosure, Fluent, and NovaSure, are driving growth, with the Breast Health segment showing over 25% growth in fiscal 2023, bolstered by a $310 million deal with Endomagnetics Ltd [5] - The company's financial strength enables regular share repurchases and growth-focused investments, leading to increased brand awareness and market share gains [6] Conclusion - Hologic is positioned for long-term growth through its diverse core businesses and strong financial flexibility, which supports acquisitions and share buybacks [7] - The company has a consistent track record of exceeding earnings forecasts, with an average surprise of 4.94% over the last four quarters [11] Upcoming Earnings - Hologic is set to release its fiscal 2024 third-quarter results on July 29, with expected earnings growth of 9.7% to $1.02 per share and a revenue increase of 1.7% to $1 billion [10] - The broad menu of molecular diagnostics tests is anticipated to drive top-line performance, with a projected 6.4% year-over-year growth in Molecular Diagnostics revenues [13] Segment Performance - The Breast Health franchise is expected to see a 3.4% year-over-year improvement in revenues, driven by strong performance in gantry and service businesses [16] - The GYN Surgical segment may experience a 7.1% revenue increase, supported by robust sales of MyoSure devices and Fluent products [17] Financial Metrics - Hologic's stock is currently trading at a P/E ratio of 17.99X forward 12 months earnings, significantly lower than the industry average of 32.42X [22] - Year-to-date, Hologic shares have increased by 9.8%, outperforming the industry growth of 4.3% [20]