Hologic(HOLX) - 2026 Q1 - Quarterly Report

Acquisition and Mergers - The company entered into a definitive agreement to be acquired by Blackstone Inc. and TPG Capital for $76.00 per share in cash, with a potential total consideration of $79.00 per share including a contingent value right[116] - The acquisition of Gynesonics was completed for a purchase price of $340.7 million, with $146.1 million allocated to intangible assets and $192.2 million to goodwill[120] - The company faces risks related to regulatory approvals, market conditions, and potential disruptions from the merger process[116] Business Segments - The company operates in four segments: Diagnostics, Breast Health, GYN Surgical, and Skeletal Health, focusing on women's health and well-being[108] - The Diagnostics segment includes molecular diagnostic assays and systems, with a focus on detecting STDs and other infectious diseases[109] - The Breast Health segment offers advanced breast imaging solutions, including 3D digital mammography systems and AI-based image analysis software[112] - The GYN Surgical segment features products like the MyoSure and NovaSure systems for treating uterine conditions, enhancing surgical options[113] - The Skeletal Health segment includes the Horizon DXA system for bone density evaluation, although the sale of Fluoroscan Insight FD systems will be discontinued[114] Financial Performance - Product revenues increased by $13.5 million, or 1.7%, to $831.4 million in the current quarter compared to $817.9 million in the prior year, driven by increases in GYN Surgical and Skeletal Health revenues[122] - Diagnostics product revenues decreased by $3.7 million, or 0.8%, primarily due to lower sales of SARS-CoV-2 assays and a decrease in Aptima CT/NG and HPV assays[123] - Breast Health product revenues decreased by $4.7 million, or 2.2%, mainly due to lower sales of digital mammography systems and Brevera 9 Gauge Needles, which were subject to a stop-ship[124] - GYN Surgical product revenues increased by $13.2 million, or 8.0%, primarily due to the Gynesonics acquisition, contributing $9.1 million[125] - Skeletal Health product revenues surged by $8.7 million, or 124.3%, due to increased sales volume of Horizon DXA systems[126] - Service and other revenues increased by $12.5 million, or 6.1%, to $216.4 million, driven by higher Breast Health service contract revenue[128] Expenses and Costs - Cost of product revenues increased by $20.8 million, or 6.9%, to $362.9 million, with the cost as a percentage of product revenues rising to 43.6% from 42.4%[130] - Operating expenses totaled $349.4 million, a decrease of $1.3 million, with selling and marketing expenses down by 6.7%[137] - General and administrative expenses rose by 10.5% to $127.8 million, primarily due to increased acquisition transaction expenses and compensation[139] - Research and development expenses increased slightly by 0.4% to $60.5 million, influenced by consulting spend related to quality organization and Gynesonics acquisition expenses[137] Interest and Income - Interest income decreased by $4.5 million (18.6%) to $19.7 million for the three months ended December 27, 2025, compared to $24.2 million in the prior year, primarily due to lower interest rates[142] - Interest expense increased by $2.9 million (9.5%) to $30.5 million for the three months ended December 27, 2025, compared to $27.6 million in the prior year, mainly due to a lower principal balance under the 2025 Credit Agreement[143] - Other income decreased significantly by $23.4 million to $0.6 million for the three months ended December 27, 2025, compared to $24.0 million in the prior year, primarily due to a loss from a strategic investment[144] - Provision for income taxes increased by $4.1 million (8.8%) to $50.6 million for the three months ended December 27, 2025, with an effective tax rate of 22.0% compared to 18.8% in the prior year[145] Segment Revenues and Operating Income - Total revenues in the Diagnostics segment decreased by $6.2 million (1.3%) to $464.4 million for the three months ended December 27, 2025, while operating income increased by $2.0 million (1.3%) to $157.5 million[148] - Total revenues in the Breast Health segment increased by $6.8 million (1.8%) to $375.9 million for the three months ended December 27, 2025, with operating income rising by $13.1 million (14.6%) to $102.8 million[150] - Total revenues in the GYN Surgical segment increased by $14.5 million (8.7%) to $180.8 million for the three months ended December 27, 2025, but operating income decreased by $18.1 million (30.9%) to $40.5 million[152] - Total revenues in the Skeletal Health segment increased significantly by $10.9 million (69.0%) to $26.7 million for the three months ended December 27, 2025, while operating income improved by $5.9 million[154] Debt and Liquidity - As of December 27, 2025, the company had total recorded debt outstanding of $2.51 billion, including $1.167 billion under the 2025 Credit Agreement[161] - Cash and cash equivalents increased by $208.5 million to $2,168.0 million during the first three months of fiscal 2026, primarily due to cash generated from operating activities[156] - The total principal balance of the 2028 Senior Notes is $400.0 million, maturing on February 1, 2028, with an interest rate of 4.625% per year[166] - The total principal balance of the 2029 Senior Notes is $950.0 million, maturing on February 15, 2029, with an interest rate of 3.250% per year[168] - A new stock repurchase program was authorized for up to $1.5 billion, with $937.5 million remaining unused as of December 27, 2025[169] - As of December 27, 2025, the fair value of the 2028 Senior Notes is approximately $400.0 million and the 2029 Senior Notes is approximately $938.7 million[176] - The aggregate principal outstanding under the 2025 Credit Agreement is $1.169 billion, which is subject to variable interest rates[178] - A hypothetical 10% increase in the SOFR rate would increase annual interest expense by approximately $2.5 million[178] - A hypothetical 100 basis point change in market rates would change annual interest income by approximately $19.4 million based on current cash and investment balances[179] - Future liquidity is contingent upon operating performance and may require additional capital for acquisitions or strategic transactions[172] Risk Factors - Future performance may be impacted by macroeconomic factors such as inflation and interest rates, affecting customer and supplier relationships[116] - The company is focused on maintaining compliance with evolving regulations and quality standards in its product offerings[116] - The company has executed forward foreign currency contracts to hedge a portion of operating results against currency exchange rate fluctuations[180] - The company believes that a hypothetical 10% increase or decrease in foreign currencies would not have a material adverse impact on its financial condition or results of operations[181]