Hologic(HOLX) - 2024 Q2 - Quarterly Results

Q2 FY2024 Financial Highlights Hologic's Q2 FY2024 performance exceeded guidance, with strong organic growth in Diagnostics (ex-COVID) and Surgical divisions offsetting a slight overall revenue decline due to lower COVID-19 assay sales Overall Performance Summary Hologic reported Q2 fiscal 2024 revenue of $1,017.8 million and non-GAAP diluted EPS of $1.03, exceeding its guidance, driven by strong organic revenue growth of 4.9% (in constant currency) when excluding COVID-19 impacts - Revenue of $1,017.8 million and Non-GAAP Diluted EPS of $1.03 both exceeded the high-end of the company's guidance[1][2] Q2 FY2024 Key Financial Results (GAAP vs. Non-GAAP) | | Q2'24 | Q2'23 | Change | | :--- | :--- | :--- | :--- | | Revenues ($M) | $1,017.8 | $1,026.5 | (0.8%) | | GAAP Diluted EPS | $0.72 | $0.87 | (17.2%) | | Non-GAAP Diluted EPS | $1.03 | $1.06 | (2.8%) | | GAAP Gross Margin | 53.3% | 57.1% | (380 bps) | | Non-GAAP Gross Margin | 60.7% | 62.1% | (140 bps) | | GAAP Operating Margin | 20.7% | 26.5% | (580 bps) | | Non-GAAP Operating Margin | 30.4% | 31.3% | (90 bps) | - Excluding COVID-19 revenues, total organic revenue grew 5.0%, or 4.9% on a constant currency basis, against a high prior-year comparable of 21.9%[1][5] Business Segment Performance In Q2, the Diagnostics division (excluding COVID-19) grew 9.8% in constant currency, and the Surgical division grew 7.4%, while Breast Health saw a slight decline due to divestiture but grew 1.0% excluding this impact Q2 FY2024 Revenue by Business Segment (Constant Currency Change) | Segment | Q2'24 Revenue ($M) | YoY Change (Constant Currency) | | :--- | :--- | :--- | | Diagnostics (Total) | $450.1 | (3.2%) | | Diagnostics (ex-COVID, Organic) | $390.0 | 9.8% | | Breast Health (Total) | $384.6 | (0.3%) | | Breast Health (ex-SSI) | N/A | 1.0% | | GYN Surgical | $156.0 | 7.4% | | Skeletal Health | $27.1 | (14.3%) | - Surgical revenue growth was primarily driven by strong results from MyoSure and Fluent Fluid Management products[5] - Breast Health revenue was impacted by the SSI divestiture; excluding this, the segment grew 1.1% (1.0% in constant currency)[5] Other Financial & Operational Highlights The company maintained strong financial health with $292.4 million in cash flow from operations and a low net leverage ratio of 0.4x, while strategically announcing the acquisition of Endomagnetics Ltd - Announced an agreement to acquire Endomagnetics Ltd, a provider of breast cancer surgery technologies, for approximately $310 million[5] - Cash flow from operations remained strong at $292.4 million in the second quarter[5] - The company ended the quarter with cash and equivalents of $2.2 billion and a net leverage ratio (net debt over EBITDA) of 0.4 times[8] - GAAP and Non-GAAP gross and operating margins decreased primarily due to the decline in COVID-19 assay sales compared to the prior year period[8] Fiscal 2024 Financial Guidance Hologic raised its full-year fiscal 2024 guidance, increasing the midpoint of its constant currency revenue forecast and raising its non-GAAP EPS range to $4.02 - $4.12, reflecting confidence despite fewer selling days Updated Fiscal 2024 and Q3 2024 Guidance | Guidance | Fiscal 2024 (Full Year) | Q3 2024 | | :--- | :--- | :--- | | Revenue ($M) | $4,000 - $4,050 | $992.5 - $1,007.5 | | Organic ex-COVID Growth (CC) | 5.1% to 6.5% | 4.0% to 5.6% | | GAAP EPS | $3.45 - $3.55 | $0.80 - $0.87 | | Non-GAAP EPS | $4.02 - $4.12 | $0.98 - $1.05 | - The company raised its full-year Non-GAAP EPS guidance from a previous range of $3.97-$4.12 to a new range of $4.02-$4.12[10] - The guidance is based on a full-year non-GAAP tax rate of approximately 19.75% and approximately 238 million diluted shares outstanding[9] - Fiscal 2024 has four fewer selling days compared to fiscal 2023, creating a headwind of more than 100 bps for the full year[10] Consolidated Financial Statements (Unaudited) This section provides the unaudited consolidated financial statements, including income statements, balance sheets, and cash flow statements, offering a detailed view of the company's financial position and performance Condensed Consolidated Statements of Income For the three months ended March 30, 2024, Hologic recorded total revenues of $1,017.8 million, with net income decreasing to $169.9 million, or $0.72 per diluted share, compared to the prior year Q2 FY2024 Income Statement Highlights (in millions) | Metric | Three Months Ended Mar 30, 2024 | Three Months Ended Apr 1, 2023 | | :--- | :--- | :--- | | Total revenues | $1,017.8 | $1,026.5 | | Gross profit | $542.3 | $585.8 | | Income from operations | $210.4 | $272.1 | | Net income | $169.9 | $218.5 | | Diluted EPS | $0.72 | $0.87 | Condensed Consolidated Balance Sheets As of March 30, 2024, Hologic's total assets were $8.71 billion, with cash and cash equivalents at $2.18 billion, reflecting a solid financial structure with total liabilities of $3.87 billion Balance Sheet Highlights (in millions) | Metric | March 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,180.0 | $2,722.5 | | Total current assets | $3,788.7 | $4,184.5 | | Total assets | $8,714.4 | $9,139.3 | | Total current liabilities | $954.6 | $1,207.3 | | Total liabilities | $3,870.0 | $4,122.4 | | Total stockholders' equity | $4,844.4 | $5,016.9 | Condensed Consolidated Statements of Cash Flows For the first six months of fiscal 2024, net cash from operating activities was $512.4 million, with significant cash usage in financing activities primarily due to $676.8 million in common stock repurchases Cash Flow Highlights - Six Months Ended (in millions) | Metric | March 30, 2024 | April 1, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $512.4 | $459.7 | | Net cash used in investing activities | ($142.7) | ($57.4) | | Net cash used in financing activities | ($948.0) | ($163.0) | | Repurchases of common stock | ($676.8) | ($150.0) | | Net (decrease) increase in cash | ($575.7) | $242.7 | Reconciliation of GAAP to Non-GAAP Financial Measures This section provides a detailed reconciliation of GAAP to non-GAAP financial measures, highlighting adjustments for items such as amortization, impairment, and restructuring costs to present a clearer view of underlying operational performance Reconciliation of Revenue and Profitability Metrics GAAP revenue of $1,017.8 million for Q2 2024 is reconciled to organic revenue ex-COVID of $956.6 million, with non-GAAP gross margin at 60.7% and non-GAAP operating margin at 30.4% after adjustments Q2 FY2024 Revenue Reconciliation (in millions) | Metric | Amount | | :--- | :--- | | Consolidated GAAP Revenue | $1,017.8 | | Less: Divestitures (Blood Screening, SSI) | ($8.0) | | Organic Revenue | $1,009.8 | | Less: COVID-19 Related Revenue | ($53.2) | | Organic Revenue excluding COVID-19 | $956.6 | Q2 FY2024 Profitability Reconciliation (in millions) | Metric | GAAP | Adjustments | Non-GAAP | | :--- | :--- | :--- | :--- | | Gross Profit | $542.3 | $75.2 | $617.5 | | Gross Margin % | 53.3% | 7.4% | 60.7% | | Income from Operations | $210.4 | $99.5 | $309.9 | | Operating Margin % | 20.7% | 9.7% | 30.4% | Reconciliation of Net Income and EPS For Q2 2024, GAAP net income of $169.9 million was adjusted to a non-GAAP net income of $244.1 million, resulting in a non-GAAP diluted EPS of $1.03, reflecting key exclusions like amortization and impairment charges Q2 FY2024 Net Income and EPS Reconciliation | Metric | Amount ($M) | | :--- | :--- | | GAAP net income | $169.9 | | Amortization of acquired intangible assets | +$50.6 | | Impairment of intangible asset | +$26.8 | | Restructuring and integration costs | +$6.1 | | Other adjustments (net) | ($9.3) | | Non-GAAP net income | $244.1 | | GAAP diluted EPS | $0.72 | | Non-GAAP diluted EPS | $1.03 | Reconciliation of Other Financial Metrics Hologic's adjusted Return on Invested Capital (ROIC) was 13.4% for the trailing twelve months, with a strong adjusted net leverage ratio of 0.3x, indicating robust financial health - For the trailing twelve months ended March 30, 2024, the adjusted ROIC was 13.4%[34] Net Leverage Ratio as of March 30, 2024 | Metric | Value | | :--- | :--- | | Net Principal Debt ($M) | $386.3 | | EBITDA (last four quarters) ($M) | $872.8 | | Net Leverage Ratio | 0.4x | | Adjusted EBITDA (last four quarters) ($M) | $1,250.7 | | Adjusted Net Leverage Ratio | 0.3x | Supplemental Information This section provides additional financial details, including a breakdown of revenue by geographic region, offering insights into the company's market distribution Geographic Revenue The United States remained Hologic's largest market, contributing 74.6% of total revenue in Q2 2024, followed by Europe at 13.5%, with other international markets making up the remainder Geographic Revenue Breakdown (%) | Region | Q2 2024 | Q2 2023 | | :--- | :--- | :--- | | U.S. | 74.6% | 74.9% | | Europe | 13.5% | 14.8% | | Asia-Pacific | 6.3% | 6.4% | | All Others | 5.6% | 3.9% |