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Hologic Announces Financial Results for Third Quarter of Fiscal 2022

07/27/2022

– Revenue of $1.003 Billion, GAAP Diluted EPS of $0.90, and Non-GAAP Diluted EPS of $0.95 All Significantly Ahead of Expectations –

– Global Organic Molecular Diagnostics ex-COVID-19 Revenue Grows Over 20% in Constant Currency –

– Company Again Increases Full-Year Revenue and EPS Guidance –

Hologic, Inc. (Nasdaq: HOLX) announced today the Company’s financial results for the fiscal third quarter ended June 25, 2022.

“In our third quarter of fiscal 2022, Hologic delivered exceptionally strong growth in our base Diagnostics and Surgical franchises, powering financial results that meaningfully exceeded our guidance for both revenue and profitability,” said Steve MacMillan, the Company’s chairman, president and chief executive officer. “With strength in our base business, a natural hedge to COVID outbreaks, plus a fortified balance sheet and robust cash flow, we have high confidence in our business. In addition, with a presence advocating for women’s health at this year’s World Economic Forum Annual Meeting, Hologic continues to drive our message on the global stage to impact more women around the world.”

Recent Highlights

  • Revenue of $1.003 billion decreased (14.2%) for the quarter, or (12.2%) in constant currency, primarily driven by lower international sales of COVID-19 assays and supply chain challenges related to semiconductor chips in our Breast Health business compared to the prior year period. Revenue, however, was significantly higher than the Company’s guidance of $875 to $915 million provided last quarter.
  • Excluding revenue from COVID-19, organic revenue declined (1.4%) on a constant currency basis primarily due to persistent semiconductor chip shortages impacting the Breast Health business.
  • Global diagnostics revenue decreased (15.8%), or (13.6%) in constant currency, primarily driven by lower international sales of COVID-19 assays compared to the prior year period. Excluding COVID-19 revenues, global diagnostics revenue grew 15.0% on an organic, constant currency basis. Similarly, global molecular diagnostics revenue declined (18.9%), or (16.8%) in constant currency, yet grew 22.4% on an organic, constant currency basis excluding COVID-19 revenues.
  • Global revenue for the Company’s Breast Health business declined (19.0%), or (17.5%) in constant currency, as expected, primarily due to semiconductor chip shortages. However, gantry demand remains strong.
  • Global revenue for the Company’s Surgical business grew 8.0%, or 9.7% in constant currency, primarily driven by MyoSure, Fluent Fluid Management System sales, and Bolder.
  • Cash flow from operations remained very strong in the third quarter at $330.6 million.
  • Assay approvals in molecular diagnostics:
    • Received FDA approval for our Aptima CMV Quant assay to quantify the viral load of cytomegalovirus (CMV) in patients who have had solid organ or stem cell transplants.
    • Received European CE mark for our Panther Fusion EBV Quant assay and Panther Fusion BKV Quant assay, to further expand pathogen monitoring menu on the Panther Fusion system.
    • Received European CE mark for our Panther Fusion SARS-CoV-2/Flu A/B/RSV assay and Novodiag RESP-4 molecular diagnostic test. Both assays detect and differentiate four of the most prevalent respiratory viruses that can present with similar clinical symptoms: severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2), influenza A (Flu A), influenza B (Flu B) and respiratory syncytial virus (RSV).

Key financial results for the fiscal third quarter are shown in the table below.

 

GAAP

 

Non-GAAP

 

Q3’22

Q3’21

Change

Increase

(Decrease)

Q3’22

Q3’21

Change

Increase

(Decrease)

Revenues

$1,002.7

$1,168.3

(14.2%)

 

$1,002.7

$1,168.3

(14.2%)

Gross Margin

54.8%

60.1%

(530 bps)

 

63.3%

66.1%

(280 bps)

Operating Expenses

$285.9

$343.0

(16.6%)

 

$311.2

$310.1

0.4%

Operating Margin

26.3%

30.7%

(440 bps)

 

32.3%

39.5%

(720 bps)

Net Margin

22.8%

22.9%

(10 bps)

 

24.1%

29.5%

(540 bps)

Diluted EPS

$0.90

$1.04

(13.5%)

$0.95

$1.33

(28.6%)

Throughout this press release, all dollar figures are in millions, except EPS, unless otherwise noted. Some totals may not foot due to rounding. Unless otherwise noted, all results are compared to the corresponding prior year period. Non-GAAP results exclude certain cash and non-cash items as discussed under “Use of Non-GAAP Financial Measures.” Constant currency percentage changes show current period revenue results as if the foreign exchange rates were the same as those in the prior year period. Our fiscal third quarter organic revenue results exclude the divested Blood Screening business, as well as the acquired Mobidiag and Bolder businesses. Revenue from acquired businesses is generally included in organic revenue starting a year after the acquisition.

Revenue Detail

 

 

 

Increase (Decrease)

$ in millions

Q3’22

Q3’21

Global

Reported

Change

Global

Constant

Currency

Change

U.S.

Reported

Change

International

Reported

Change

International

Constant

Currency

Change

Diagnostics

 

 

 

 

 

 

 

Cytology and Perinatal

$115.9

 

$115.9

 

0.0%

 

3.5%

 

0.6%

 

(1.0%)

 

8.5%

Molecular Diagnostics

$435.3

 

$536.4

 

(18.9%)

 

(16.8%)

 

12.6%

 

(50.7%)

 

(46.7%)

Blood Screening

$8.9

 

$13.2

 

(32.6%)

 

(32.6%)

 

(32.6%)

 

N/A

 

N/A

Total Diagnostics

$560.1

 

$665.5

 

(15.8%)

 

(13.6%)

 

8.4%

 

(44.0%)

 

(39.2%)

Organic Diagnostics ex. COVID-19

$333.5

 

$296.6

 

12.4%

 

15.0%

 

14.5%

 

7.0%

 

16.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Breast Health

 

 

 

 

 

 

 

 

 

 

 

 

 

Breast Imaging

$212.2

 

$280.3

 

(24.3%)

 

(22.9%)

 

(24.2%)

 

(24.5%)

 

(18.1%)

Interventional Breast Solutions

$70.6

 

$68.7

 

2.8%

 

4.2%

 

3.6%

 

(0.4%)

 

6.6%

Total Breast Health

$282.8

 

$349.0

 

(19.0%)

 

(17.5%)

 

(18.6%)

 

(20.1%)

 

(13.5%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GYN Surgical

$138.1

 

$127.9

 

8.0%

 

9.7%

 

8.0%

 

7.8%

 

16.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Skeletal Health

$21.7

 

$25.9

 

(16.1%)

 

(13.6%)

 

(18.2%)

 

(12.8%)

 

(6.6%)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$1,002.7

 

$1,168.3

 

(14.2%)

 

(12.2%)

 

(2.0%)

 

(35.9%)

 

(30.5%)

Organic (definition above)

$985.8

 

$1,153.9

 

(14.6%)

 

(12.6%)

 

(1.8%)

 

(37.1%)

 

(31.6%)

Organic ex. COVID-19

$773.0

 

$799.4

 

(3.3%)

 

(1.4%)

 

(2.8%)

 

(5.0%)

 

3.1%

Other Financial Highlights

  • U.S. revenue of $734.6 million decreased (2.0%). International revenue of $268.1 million decreased (35.9%), or (30.5%) in constant currency.
  • GAAP gross margin of 54.8% decreased (530) basis points. Non-GAAP gross margin of 63.3% decreased (280) basis points. The decrease in gross margin was primarily due to a decline in international COVID-19 assay sales compared to the prior year period and supply chain challenges related to semiconductor chips in our Breast Health business.
  • GAAP operating margin of 26.3% decreased (440) basis points. Non-GAAP operating margin of 32.3% decreased (720) basis points. The decrease in operating margin was primarily due to a decline in international COVID-19 assay sales compared to the prior year period and supply chain challenges related to semiconductor chips in our Breast Health business.
  • GAAP net income attributable to Hologic of $228.4 million decreased (14.9%). Non-GAAP net income attributable to Hologic of $241.5 million decreased (30.0%). Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) was $348.3 million, a decrease of (27.9%).
  • COVID-19 revenues, which consist of COVID-19 assay revenue of $172.9 million, and other COVID-19 related revenue and revenue from discontinued products of $39.9 million, decreased (40.0%), or (38.0%) in constant currency.
  • Total principal debt outstanding at the end of the third quarter was $2.85 billion. The Company ended the quarter with cash and equivalents of $2.4 billion, and a net leverage ratio (net debt over adjusted EBITDA) of 0.2.
  • On a trailing 12 months basis, adjusted Return on Invested Capital (ROIC) of 25.3% decreased (940) basis points compared to the prior year period.

Financial Guidance for the Fourth Quarter and Full-Year Fiscal 2022

“Our fiscal third quarter 2022 was financially very strong, with performance exceeding revenue and EPS expectations,” said Karleen Oberton, Hologic’s chief financial officer. “In our fiscal fourth quarter, we expect continued strength in our base Diagnostics and Surgical businesses to counterbalance supply chain headwinds in our Breast Health business.”

Hologic’s financial guidance for the fourth quarter and full year 2022 is shown in the table below. The guidance is based on a full year non-GAAP tax rate of approximately 21.0%, and diluted shares outstanding of 254 million for the full year. Constant currency guidance assumes that foreign exchange rates are the same in fiscal 2022 as in fiscal 2021. Organic revenue guidance is in constant currency and excludes the divested Blood Screening business. Revenue from acquired businesses is generally included in organic revenue guidance starting a year after the acquisition. Therefore, in fiscal 2022, Biotheranostics and Diagenode are part of organic revenue in the fiscal third quarter, Mobidiag is part of organic revenue in the fiscal fourth quarter, and Bolder is excluded from organic revenue for the full year.

 

 

 

Current Guidance

Previous Guidance

 

Guidance $

Reported %

Increase

(Decrease)

Constant Currency

% Increase

(Decrease)

Organic % Increase

(Decrease)

Guidance $

Fiscal 2022

 

 

 

 

 

Revenue

$4,750 - $4,780

(15.7%) to (15.1%)

(14.4%) to (13.8%)

(15.4%) to (14.9%)

$4,600 - $4,700

GAAP EPS

$4.98 - $5.03

(30.9%) to (30.2%)

 

 

$4.36 - $4.56

Non-GAAP EPS

$5.79 - $5.84

(31.2%) to (30.6%)

 

 

$5.45 - $5.65

 

 

 

 

 

 

Q4 2022

 

 

 

 

Revenue

$840 - $870

(36.2%) to (33.9%)

(34.5%) to (32.2%)

(34.4%) to (32.1%)

 

GAAP EPS

$0.33 - $0.38

(74.2%) to (70.3%)

 

 

 

Non-GAAP EPS

$0.60 - $0.65

(62.7%) to (59.6%)

 

 

 

Use of Non-GAAP Financial Measures

The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; organic revenues; organic revenues excluding COVID-19, non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating margin; non-GAAP effective tax rate; non-GAAP net income; non-GAAP net margin; non-GAAP EPS; and adjusted EBITDA. Organic revenue excludes the divested Blood Screening business, as well as the acquired Mobidiag, and Bolder businesses as noted above. Revenue from acquired businesses is generally included in organic revenue starting a year after the acquisition. Organic revenue excluding COVID-19 is organic revenue less COVID assay revenue, COVID related sales of instruments, collection kits and ancillaries, as well as license revenue, and revenues from discontinued products. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets and impairment of goodwill, intangible assets and equipment; (ii) adjustments to record contingent consideration at fair value; (iii) additional expenses resulting from the purchase accounting adjustment to record inventory at fair value; (iv) restructuring and divestiture charges and facility closure and consolidation charges, including accelerated depreciation, and costs incurred to integrate acquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (v) expenses related to the divested Cynosure business incurred subsequent to the disposition date primarily related to indemnification provisions for legal and tax matters; (vi) transaction related expenses for divestitures and acquisitions; (vii) third-party expenses incurred related to implementing the European MDR/IVDR requirements and obtaining the appropriate approvals for its existing products; (viii) debt extinguishment losses and related transaction costs; (ix) the unrealized (gains) losses on the mark-to-market of foreign currency contracts for which the Company has not elected hedge accounting; (x) litigation settlement charges (benefits) and non-income tax related charges (benefits); (xi) other-than-temporary impairment losses on investments and realized gains and losses resulting from the sale of investments; (xii) the one-time discrete impacts related to internal restructurings and non-operational items; (xiii) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results; and (xiv) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income.

These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The Company's definition of these non-GAAP measures may differ from similarly titled measures used by others.

The non-GAAP financial measures used in this press release adjust for specified items that can be highly variable or difficult to predict. The Company generally uses these non-GAAP financial measures to facilitate management's financial and operational decision-making, including evaluation of Hologic's historical operating results, comparison to competitors' operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the Company's operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic's business.

Because non-GAAP financial measures exclude the effect of items that will increase or decrease the Company's reported results of operations, management strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this release.

Conference Call and Webcast

Hologic’s management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the third quarter of fiscal 2022. Interested participants may listen to the call by dialing 800-289-0720 (in the U.S. and Canada) or +1 323-701-0160 (for international callers) and referencing access code 6025981. Participants may also click here to join. Participants should dial in 5-10 minutes before the call begins. A replay will be available approximately two hours after the call ends through Friday, August 26, 2022. The replay numbers are 888-203-1112 (U.S.) or +1 719-457-0820 (international), access code 6025981, PIN 3270. The Company will also provide a live webcast of the call at investors.hologic.com.

About Hologic, Inc.

Hologic, Inc. is an innovative medical technology company primarily focused on improving women's health and well-being through early detection and treatment. For more information on Hologic, visit www.hologic.com.

Hologic and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.

Forward-Looking Statements

This news release contains forward-looking information that involves risks and uncertainties, including statements about the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company’s strategies, positioning, resources, capabilities, and expectations for future performance; and the Company's outlook and financial and other guidance. These forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.

Risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated, include without limitation: the severity and duration of the COVID-19 pandemic and its impact on the U.S. healthcare system, the U.S. economy and worldwide economy; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic; disruption of supply chains, including the availability of critical raw materials and components, including semiconductor chips, or more commonly referred to as chips, as well as cost inflation in materials, packaging and transportation; manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; continued demand for the Company’s COVID-19 TMA assay; the Company’s ability to manufacture, on a scale necessary to meet demand, its COVID-19 TMA assay as well as the Panther systems on which the assay runs; U.S., European and general worldwide economic conditions, including recession concerns, trade relations, and related uncertainties; the Company’s ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees and maintain engagement and efficiency in remote work environments; the Company’s reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; changes to applicable laws and regulations, including tax laws, global health care reform, and import/export trade laws; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company’s ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company’s international activities and businesses; the early stage of market development for certain of the Company’s products; the Company’s leverage risks, including the Company’s obligation to meet payment obligations and financial covenants associated with its debt; cybersecurity risks; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.

The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the filings made by the Company with the SEC, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.

SOURCE: Hologic, Inc.

HOLOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In millions, except number of shares, which are reflected in thousands, and per share data)

 

 

Three Months Ended

 

Nine Months Ended

 

June 25, 2022

 

June 26, 2021

 

June 25, 2022

 

June 26, 2021

 

 

 

 

 

 

 

 

Revenues:

 

 

 

 

 

 

 

Product

$

837.1

 

 

$

995.2

 

 

$

3,408.7

 

 

$

3,829.4

 

Service and other

 

165.6

 

 

 

173.1

 

 

 

500.9

 

 

 

486.3

 

Total revenues

 

1,002.7

 

 

 

1,168.3

 

 

 

3,909.6

 

 

 

4,315.7

 

 

 

 

 

 

 

 

 

Cost of revenues:

 

 

 

 

 

 

 

Product

 

266.3

 

 

 

303.9

 

 

 

907.0

 

 

 

889.1

 

Amortization of acquired intangible assets

 

75.9

 

 

 

68.1

 

 

 

223.1

 

 

 

194.2

 

Impairment of intangible assets

 

9.2

 

 

 

 

 

 

9.2

 

 

 

 

Service and other

 

101.5

 

 

 

94.7

 

 

 

287.6

 

 

 

264.7

 

 

 

 

 

 

 

 

 

Gross profit

 

549.8

 

 

 

701.6

 

 

 

2,482.7

 

 

 

2,967.7

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

Research and development

 

65.1

 

 

 

69.0

 

 

 

207.4

 

 

 

199.8

 

Selling and marketing

 

152.3

 

 

 

142.7

 

 

 

471.0

 

 

 

402.2

 

General and administrative

 

91.9

 

 

 

117.3

 

 

 

310.5

 

 

 

297.7

 

Amortization of acquired intangible assets

 

11.2

 

 

 

10.4

 

 

 

33.2

 

 

 

30.7

 

Contingent consideration fair value adjustments

 

(35.4

)

 

 

 

 

 

(39.5

)

 

 

(10.1

)

Restructuring and divestiture charges

 

0.8

 

 

 

3.6

 

 

 

0.8

 

 

 

6.6

 

Total operating expenses

 

285.9

 

 

 

343.0

 

 

 

983.4

 

 

 

926.9

 

 

 

 

 

 

 

 

 

Income from operations

 

263.9

 

 

 

358.6

 

 

 

1,499.3

 

 

 

2,040.8

 

Interest income

 

2.4

 

 

 

0.4

 

 

 

3.6

 

 

 

1.1

 

Interest expense

 

(22.7

)

 

 

(21.6

)

 

 

(71.0

)

 

 

(70.9

)

Debt extinguishment loss

 

 

 

 

 

 

 

(0.7

)

 

 

(21.6

)

Other income, net

 

4.8

 

 

 

0.1

 

 

 

13.6

 

 

 

1.1

 

 

 

 

 

 

 

 

 

Income before income taxes

 

248.4

 

 

 

337.5

 

 

 

1,444.8

 

 

 

1,950.5

 

Provision for income taxes

 

20.0

 

 

 

69.4

 

 

 

261.5

 

 

 

409.6

 

 

 

 

 

 

 

 

 

Net income

$

228.4

 

 

$

268.1

 

 

$

1,183.3

 

 

$

1,540.9

 

 

 

 

 

 

 

 

 

Net loss attributable to noncontrolling interest

 

 

 

 

(0.3

)

 

 

 

 

 

(1.8

)

Net income attributable to Hologic

$

228.4

 

 

$

268.4

 

 

$

1,183.3

 

 

$

1,542.7

 

 

 

 

 

 

 

 

 

Net income per common share attributable to Hologic:

 

 

 

 

 

 

 

Basic

$

0.91

 

 

$

1.05

 

 

$

4.70

 

 

$

5.98

 

Diluted

$

0.90

 

 

$

1.04

 

 

$

4.65

 

 

$

5.93

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding:

 

 

 

 

 

 

 

Basic

 

250,756

 

 

 

256,230

 

 

 

251,943

 

 

 

257,769

 

Diluted

 

253,093

 

 

 

258,581

 

 

 

254,273

 

 

 

260,371

 

 
HOLOGIC, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In millions)

 

 

June 25, 2022

 

September 25, 2021

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

2,375.3

 

$

1,170.3

Accounts receivable, net

 

702.9

 

 

 

942.7

 

Inventories

 

581.2

 

 

 

501.2

 

Other current assets

 

249.6

 

 

 

554.5

 

Total current assets

 

3,909.0

 

 

 

3,168.7

 

 

 

 

 

Property, plant and equipment, net

 

490.1

 

 

 

564.7

 

Goodwill and intangible assets, net

 

4,722.4

 

 

 

4,940.8

 

Other assets

 

235.9

 

 

 

245.7

 

Total assets

$

9,357.4

 

 

$

8,919.9

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

Current portion of long-term debt

$

7.5

 

 

$

313.0

 

Accounts payable and accrued liabilities

 

793.8

 

 

 

815.8

 

Deferred revenue

 

199.6

 

 

 

198.0

 

Total current liabilities

 

1,000.9

 

 

 

1,326.8

 

 

 

 

 

Long-term debt, net of current portion

 

2,814.6

 

 

 

2,712.2

 

Deferred income taxes

 

208.3

 

 

 

250.5

 

Other long-term liabilities

 

335.7

 

 

 

411.8

 

Total stockholders' equity

 

4,997.9

 

 

 

4,218.6

 

Total liabilities and stockholders’ equity

$

9,357.4

 

 

$

8,919.9

 

 
HOLOGIC, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In millions)

 

 

Nine Months Ended

 

June 25, 2022

 

June 26, 2021

OPERATING ACTIVITIES

 

 

 

Net income

$

1,183.3

 

 

$

1,540.9

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

Depreciation

 

67.2

 

 

 

64.2

 

Amortization of acquired intangibles

 

256.3

 

 

 

224.9

 

Stock-based compensation expense

 

51.8

 

 

 

51.0

 

Deferred income taxes

 

(60.2

)

 

 

(44.3

)

Intangible asset impairment charge

 

9.2

 

 

 

 

Debt extinguishment loss

 

0.7

 

 

 

21.6

 

Contingent consideration fair value adjustments

 

(39.5

)

 

 

(10.1

)

Other adjustments and non-cash items

 

36.3

 

 

 

29.9

 

Changes in operating assets and liabilities, excluding the effect of acquisitions:

 

 

 

Accounts receivable

 

193.9

 

 

 

111.5

 

Inventories

 

(86.8

)

 

 

(82.4

)

Prepaid income taxes

 

(10.5

)

 

 

(24.3

)

Prepaid expenses and other assets

 

378.3

 

 

 

(22.3

)

Accounts payable

 

2.5

 

 

 

9.4

 

Accrued expenses and other liabilities

 

(23.0

)

 

 

(27.6

)

Deferred revenue

 

(2.4

)

 

 

22.6

 

Net cash provided by operating activities

 

1,957.1

 

 

 

1,865.0

 

INVESTING ACTIVITIES

 

 

 

Acquisition of businesses, net of cash acquired

 

(158.6

)

 

 

(1,163.3

)

Capital expenditures

 

(50.8

)

 

 

(90.6

)

Proceeds from the Department of Defense

 

75.0

 

 

 

19.4

 

Increase in equipment under customer usage agreements

 

(44.8

)

 

 

(43.4

)

Purchase of intellectual property

 

 

 

 

(6.5

)

Other activity

 

5.0

 

 

 

(2.1

)

Net cash used in investing activities

 

(174.2

)

 

 

(1,286.5

)

FINANCING ACTIVITIES

 

 

 

Proceeds from long-term debt, net of issuance costs

 

1,491.2

 

 

 

 

Repayments of long-term debt

 

(1,387.5

)

 

 

(56.3

)

Proceeds from senior notes, net of issuance costs

 

 

 

 

936.3

 

Repayment of senior notes

 

 

 

 

(970.8

)

Proceeds from accounts receivable securitization agreement

 

 

 

 

320.0

 

Repayment under accounts receivable securitization agreement

 

(248.5

)

 

 

 

Repayments under revolving credit line

 

 

 

 

(250.0

)

Payment of contingent consideration

 

(12.2

)

 

 

 

Purchase of non-controlling interest

 

 

 

 

(8.5

)

Payment of acquired long-term debt

 

(63.7

)

 

 

 

Repurchases of common stock

 

(367.0

)

 

 

(409.7

)

Proceeds from issuance of common stock pursuant to employee stock plans

 

26.9

 

 

 

39.6

 

Payment of minimum tax withholdings on net share settlements of equity awards

 

(22.6

)

 

 

(46.9

)

Payments under finance lease obligations

 

(2.8

)

 

 

(1.5

)

Net cash used in financing activities

 

(586.2

)

 

 

(447.8

)

Effect of exchange rate changes on cash and cash equivalents

 

8.3

 

 

 

(4.1

)

Net increase in cash and cash equivalents

 

1,205.0

 

 

 

126.6

 

Cash and cash equivalents, beginning of period

 

1,170.3

 

 

 

701.0

 

Cash and cash equivalents, end of period

$

2,375.3

 

 

$

827.6

 

 
HOLOGIC, INC.

RECONCILIATION OF GAAP TO NON-GAAP RESULTS

(Unaudited)

(In millions, except earnings per share and margin percentages)

 

Reconciliation of GAAP Revenue to Organic Revenue and Organic Revenue excluding COVID Revenue

 

 

Three Months Ended

 

June 25, 2022

 

June 26, 2021

Consolidated GAAP Revenue

$

1,002.7

 

 

$

1,168.3

 

Less: Blood Screening revenue

 

(8.9

)

 

 

(13.2

)

Less: Revenue from Mobidiag and Bolder

 

(8.0

)

 

 

(1.2

)

Organic Revenue

$

985.8

 

 

$

1,153.9

 

Less: COVID-19 Assays

 

(172.9

)

 

 

(291.2

)

Less: COVID-19 Related Revenue *

 

(38.8

)

 

 

(59.9

)

Less: Discontinued Product Revenue

 

(1.1

)

 

 

(3.4

)

Organic Revenue excluding COVID Revenue

$

773.0

 

 

$

799.4

 

*Revenues related to COVID assay sales for instruments, collection kits and ancillaries, as well as license revenue related to COVID assay sales.

 

Three Months Ended

 

Nine Months Ended

 

June 25, 2022

 

June 26, 2021

 

June 25, 2022

 

June 26, 2021

 

 

 

 

 

 

 

 

Gross Profit:

 

 

 

 

 

 

 

GAAP gross profit

$

549.8

 

 

$

701.6

 

 

$

2,482.7

 

 

$

2,967.7

 

Adjustments:

 

 

 

 

 

 

 

Amortization of acquired intangible assets (1)

 

75.9

 

 

 

68.1

 

 

 

223.1

 

 

 

194.2

 

Impairment of intangible assets (18)

 

9.2

 

 

 

 

 

 

9.2

 

 

 

 

Integration/consolidation costs (7)

 

0.1

 

 

 

 

 

 

0.1

 

 

 

1.0

 

Fair value write-up of acquired inventory sold (10)

 

 

 

 

2.1

 

 

 

 

 

 

5.3

 

Non-GAAP gross profit

$

635.0

 

 

$

771.8

 

 

$

2,715.1

 

 

$

3,168.2

 

 

 

 

 

 

 

 

 

Gross Margin Percentage:

 

 

 

 

 

 

 

GAAP gross margin percentage

 

54.8

%

 

 

60.1

%

 

 

63.5

%

 

 

68.8

%

Impact of adjustments above

 

8.5

%

 

 

6.0

%

 

 

5.9

%

 

 

4.6

%

Non-GAAP gross margin percentage

 

63.3

%

 

 

66.1

%

 

 

69.4

%

 

 

73.4

%

 

 

 

 

 

 

 

 

Operating Expenses:

 

 

 

 

 

 

 

GAAP operating expenses

$

285.9

 

 

$

343.0

 

 

$

983.4

 

 

$

926.9

 

Adjustments:

 

 

 

 

 

 

 

Amortization of acquired intangible assets (1)

 

(11.2

)

 

 

(10.4

)

 

 

(33.2

)

 

 

(30.7

)

Transaction expenses (2)

 

(0.4

)

 

 

(14.0

)

 

 

(1.3

)

 

 

(19.0

)

MDR expenses (8)

 

(1.8

)

 

 

(2.9

)

 

 

(5.6

)

 

 

(7.3

)

Contingent consideration adjustments (5)

 

35.4

 

 

 

 

 

 

39.5

 

 

 

10.1

 

Purchased research and development asset charge (14)

 

 

 

 

 

 

 

 

 

 

(7.0

)

Integration/consolidation costs (7)

 

(1.1

)

 

 

(2.0

)

 

 

(4.4

)

 

 

(7.3

)

Restructuring and divestiture charges (7)

 

(0.8

)

 

 

(3.6

)

 

 

(0.8

)

 

 

(6.6

)

Non-income tax benefits, net (6)

 

5.2

 

 

 

 

 

 

5.7

 

 

 

3.3

 

Non-GAAP operating expenses

$

311.2

 

 

$

310.1

 

 

$

983.3

 

 

$

862.4

 

 

 

 

 

 

 

 

 

Operating Margin:

 

 

 

 

 

 

 

GAAP income from operations

$

263.9

 

 

$

358.6

 

 

$

1,499.3

 

 

$

2,040.8

 

Adjustments to gross profit as detailed above

 

85.2

 

 

 

70.2

 

 

 

232.4

 

 

 

200.5

 

Adjustments to operating expenses as detailed above

 

(25.3

)

 

 

32.9

 

 

 

0.1

 

 

 

64.5

 

Non-GAAP income from operations

$

323.8

 

 

$

461.7

 

 

$

1,731.8

 

 

$

2,305.8

 

 

 

 

 

 

 

 

 

Operating Margin Percentage:

 

 

 

 

 

 

 

GAAP income from operations margin percentage

 

26.3

%

 

 

30.7

%

 

 

38.3

%

 

 

47.3

%

Impact of adjustments above

 

6.0

%

 

 

8.8

%

 

 

6.0

%

 

 

6.1

%

Non-GAAP operating margin percentage

 

32.3

%

 

 

39.5

%

 

 

44.3

%

 

 

53.4

%

Pre-Tax Income:

 

 

 

 

 

 

 

GAAP pre-tax income

$

248.4

 

 

$

337.5

 

 

$

1,444.8

 

 

$

1,950.5

 

Adjustments to pre-tax earnings as detailed above

 

59.9

 

 

 

103.1

 

 

 

232.5

 

 

 

265.0

 

Debt extinguishment losses (4)

 

 

 

 

 

 

 

0.7

 

 

 

21.6

 

Debt transaction costs (13)

 

 

 

 

 

 

 

1.8

 

 

 

5.8

 

Equity method investment write-off (3)

 

 

 

 

 

 

 

4.3

 

 

 

 

Gain on life insurance proceeds (15)

 

 

 

 

 

 

 

(2.3

)

 

 

 

Other (16)

 

(0.4

)

 

 

 

 

 

(0.4

)

 

 

 

Unrealized (gains) losses on foreign currency contracts (9)

 

(2.2

)

 

 

(1.6

)

 

 

(10.0

)

 

 

7.8

 

Non-GAAP pre-tax income

$

305.7

 

 

$

439.0

 

 

$

1,671.4

 

 

$

2,250.7

 

 

 

 

 

 

 

 

 

Net Income Attributable to Hologic:

 

 

 

 

 

 

 

GAAP net income

$

228.4

 

 

$

268.1

 

 

$

1,183.3

 

 

$

1,540.9

 

Adjustments:

 

 

 

 

 

 

 

Amortization of acquired intangible assets (1)

 

87.1

 

 

 

78.5

 

 

 

256.3

 

 

 

224.9

 

Restructuring and integration/consolidation costs (7)

 

2.0

 

 

 

5.6

 

 

 

5.3

 

 

 

14.9

 

MDR expenses (8)

 

1.8

 

 

 

2.9

 

 

 

5.6

 

 

 

7.3

 

Impairment of acquired intangible assets (18)

 

9.2

 

 

 

 

 

 

9.2

 

 

 

 

Purchased research and development asset charge (14)

 

 

 

 

 

 

 

 

 

 

7.0

 

Acquisition related expenses and adjustments (2) (10)

 

0.4

 

 

 

16.1

 

 

 

1.3

 

 

 

24.3

 

Contingent consideration adjustments (5)

 

(35.4

)

 

 

 

 

 

(39.5

)

 

 

(10.1

)

Debt extinguishment losses and transaction costs (4) (13)

 

 

 

 

 

 

 

2.5

 

 

 

27.4

 

Non-income tax benefits, net (6)

 

(5.2

)

 

 

 

 

 

(5.7

)

 

 

(3.3

)

Non-operating charges (benefit) (3) (9) (15) (16)

 

(2.6

)

 

 

(1.6

)

 

 

(8.4

)

 

 

7.8

 

Income tax reserve reversals* (17)

 

(15.8

)

 

 

 

 

 

(16.0

)

 

 

 

Income tax effect of reconciling items (11)

 

(28.4

)

 

 

(25.0

)

 

 

(73.5

)

 

 

(74.3

)

Non-GAAP net income

$

241.5

 

 

$

344.6

 

 

$

1,320.4

 

 

$

1,766.8

 

Net loss attributable to non-controlling interest

 

 

 

 

(0.2

)

 

 

 

 

 

(1.8

)

Net income attributable to Hologic

$

241.5

 

 

$

344.8

 

 

$

1,320.4

 

 

$

1,768.6

 

*Net of Federal benefit of state and interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income Percentage:

 

 

 

 

 

 

 

GAAP net income percentage

 

22.8

%

 

 

22.9

%

 

 

30.3

%

 

 

35.7

%

Impact of adjustments above

 

1.3

%

 

 

6.6

%

 

 

3.5

%

 

 

5.3

%

Non-GAAP net income attributable to Hologic percentage

 

24.1

%

 

 

29.5

%

 

 

33.8

%

 

 

41.0

%

 

 

 

 

 

 

 

 

Earnings Per Share Attributable to Hologic:

 

 

 

 

 

 

 

GAAP earnings per share - Diluted

$

0.90

 

 

$

1.04

 

 

$

4.65

 

 

$

5.93

 

Adjustment to net income (as detailed above)

 

0.05

 

 

 

0.29

 

 

 

0.54

 

 

 

0.86

 

Non-GAAP earnings per share – diluted (12)

$

0.95

 

 

$

1.33

 

 

$

5.19

 

 

$

6.79

 

 

 

 

 

 

 

 

 

Adjusted EBITDA:

 

 

 

 

 

 

 

Non-GAAP net income

$

241.5

 

 

$

344.8

 

 

$

1,320.4

 

 

$

1,768.6

 

Interest expense, net, not adjusted above

 

20.3

 

 

 

21.2

 

 

 

65.6

 

 

 

64.0

 

Provision for income taxes

 

64.2

 

 

 

94.4

 

 

 

351.0

 

 

 

483.9

 

Depreciation expense, not adjusted above

 

22.3

 

 

 

22.7

 

 

 

67.2

 

 

 

64.1

 

Adjusted EBITDA

$

348.3

 

 

$

483.1

 

 

$

1,804.2

 

 

$

2,380.6

 

Explanatory Notes to Reconciliations:

(1)

 

To reflect non-cash expenses attributable to the amortization of acquired intangible assets.

(2)

 

To reflect expenses with third parties related to acquisitions and divestitures prior to when such transactions are completed. These expenses primarily comprise broker fees, legal fees, and consulting and due diligence fees.

(3)

 

To write off an equity method investment acquired in the Mobidiag acquisition.

(4)

 

To reflect a debt extinguishment loss from refinancing the Credit Agreement in first quarter of fiscal 2022 and the refinancing of the 2025 Senior Notes during fiscal 2021.

(5)

 

To reflect adjustments to the estimated contingent consideration liabilities related to the Acessa Health acquisition, which is payable upon meeting defined revenue growth metrics.

(6)

 

To reflect the net impact of non-income tax matters primarily related to settling prior years' audit matters and from a statute of limitations expiration.

(7)

 

To reflect restructuring and divestiture charges, and certain costs associated with the Company’s integration and facility consolidation plans, which primarily include retention and transfer costs, as well as costs incurred to integrate acquisitions and dispose businesses, including consulting, legal, tax and accounting fees. In addition, this category includes additional expenses incurred related to the Cynosure disposition, settlements of litigation and indemnification provisions for legal and tax matters that existed as of the date of disposition.

(8)

 

To reflect the exclusion of third-party expenses incurred to obtain compliance with the European Medical Device Regulation requirement for the Company's existing products for which it already has FDA approval and/or CE mark.

(9)

 

To reflect non-cash unrealized gains and losses on the mark-to market on outstanding forward foreign currency contracts, which do not qualify for hedge accounting.

(10)

 

To reflect the fair value step up of inventory sold during the period related to the Somatex, Acessa Health, Diagenode, and Mobidiag acquisitions in fiscal 2021.

(11)

 

To reflect an estimated annual effective tax rate of 21.0% for fiscal 2022 and 21.5% for fiscal 2021.

(12)

 

Non-GAAP earnings per share was calculated based on 253,093 and 254,273 weighted average diluted shares outstanding for the three and nine months ended June 25, 2022, and 258,581 and 260,371 weighted average diluted shares outstanding for the three and nine months ended June 26, 2021, respectively.

(13)

 

To reflect the amount of debt issuance costs recorded directly to interest expense as a result of refinancing the Credit Agreement in first quarter of fiscal 2022 and the refinancing of the 2025 Senior Notes during fiscal 2021.

(14)

 

To reflect the purchase of intangible assets used in a research and development project that has no future alternative use.

(15)

 

To reflect a gain on life insurance proceeds received during the second quarter of fiscal 2022.

(16)

 

To reflect other non-operating gains in fiscal 2022.

(17)

 

To reflect the net impact of income tax reserve releases from statute of limitations expiration.

(18)

 

To reflect an impairment charge for developed technology assets acquired in the Faxitron acquisition.

 

Reconciliation of GAAP to non-GAAP EPS Guidance:

 

 

Guidance Range

Guidance Range

 

Quarter Ending
September 24, 2022

Quarter Ending
September 24, 2022

 

Low

High

Low

High

GAAP Net Income Per Share

$

0.33

 

$

0.38

 

$

4.98

 

$

5.03

 

Amortization of acquired intangible assets

 

0.33

 

 

0.33

 

 

1.34

 

 

1.34

 

Contingent Consideration Fair Value Adjustment

 

 

 

 

 

(0.16

)

 

(0.16

)

Intangible asset impairment charges

 

 

 

 

 

0.04

 

 

0.04

 

Restructuring, Integration and Other charges

 

0.02

 

 

0.02

 

 

0.02

 

 

0.02

 

Income tax reserve reversals

 

 

 

 

 

(0.06

)

 

(0.06

)

Tax Impact of Exclusions

 

(0.08

)

 

(0.08

)

 

(0.37

)

 

(0.37

)

Non-GAAP Net Income Per Share

$

0.60

 

$

0.65

 

$

5.79

 

$

5.84

 

 
 

Trailing Twelve

Months ended

J une 25, 2022

Return on Invested Capital:

 

 

 

Adjusted Net Operating Profit After Tax

 

Non-GAAP net income attributable to Hologic

$

1,736.0

 

Non-GAAP provision for income taxes

 

464.8

 

Non-GAAP interest expense

 

91.9

 

Non-GAAP other income

 

(0.9

)

Adjusted net operating profit before tax

$

2,291.8

 

Non-GAAP average effective tax rate (1)

 

21.1

%

Adjusted net operating profit after tax

$

1,807.8

 

 

 

Average Net Debt plus Average Stockholders’ Equity (2)

 

Average total debt

$

2,968.7

 

Less: Average cash and cash equivalents

 

(1,601.4

)

Average net debt

$

1,367.3

 

Average stockholders’ equity (3)

 

5,791.7

 

Average net debt plus average stockholders’ equity

$

7,159.0

 

 

 

Adjusted ROIC

 

Adjusted ROIC (adjusted net operating profit after tax above divided by average net debt plus average stockholders’ equity)

 

25.3

%

(1)

 

ROIC is presented on a TTM basis; non-GAAP effective tax rate for the three months ended September 25, 2021, was 21.5%, the three months ended December 25, 2021 was 21.5%, the three months ended March 26, 2022 was 20.46% and the three months ended June 25, 2022 was 21.0%.

(2)

 

Calculated using the average of the balances as of June 25, 2022, and June 26, 2021.

(3)

 

Adjusted (increased) to eliminate the effect of the impairment of intangible assets of $32.2 million in fiscal 2014, the impairment of goodwill of $685.7 million and an IPR&D asset of $46.0 million in fiscal 2018, the impairment of intangible assets and equipment of $685.4 million in fiscal 2019, the impairment of intangible assets and equipment of $30.2 million in fiscal 2020, and the impairment of intangible assets of $9.2 million in fiscal 2022. The impact of the intangible asset impairment charges is reflected net of tax.

 

 

As of

 

June 25, 2022

Net Leverage Ratio:

 

 

 

Total principal debt

$

2,850.0

 

Total cash

 

(2,375.3

)

Net principal debt, as adjusted

$

474.7

 

EBITDA for the last four quarters

$

2,380.0

 

Net Leverage Ratio

 

0.2

 

 
Other Supplemental Information:
 

 

 

Three Months Ended

 

Nine Months Ended

 

 

June 25, 2022

 

June 26, 2021

 

June 25, 2022

 

June 26, 2021

 

 

 

 

 

 

 

 

 

Geographic Revenues

 

 

 

 

 

 

 

 

U.S.

 

73.3

%

 

64.2

%

 

70.1

%

 

68.4

%

Europe

 

16.4

%

 

24.7

%

 

19.2

%

 

22.3

%

Asia-Pacific

 

7.1

%

 

7.7

%

 

7.7

%

 

6.2

%

Rest of World

 

3.2

%

 

3.4

%

 

3.0

%

 

3.1

%

Total Revenues

 

100.0

%

 

100.0

%

 

100.0

%

 

100.0

%

 

Ryan Simon
Vice President, Investor Relations
Ryan.Simon@hologic.com
(858) 410-8514

Francis Pruell
Director, Investor Relations
Francis.Pruell@hologic.com
(508) 263-8628

Source: Hologic, Inc.

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