Q2 2024 Hologic Inc Earnings Call

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Operator: Good afternoon, and welcome to the Hologic second quarter fiscal 2024 earnings conference call. My name is Justin, and I am your operator for today. Today's conference is being recorded. All lines have been placed on mute. I would now like to introduce Ryan Simon, Vice President of Investor Relations, to begin the call.

Good afternoon, and welcome to the Hologic second quarter fiscal 2024 earnings Conference call. My name is Justin and I am your operator for today's call. Today's conference is being recorded all lines have been placed on mute.

Operator: I'd now like to introduce Ryan Simon <unk>, Vice President Investor Relations to begin the call.

Ryan M. Simon: Thank you, Justin. Good afternoon, and thank you for joining Hologic's second quarter fiscal 2024 earnings call. With me today are Steve MacMillan, the company's Chairman, President, and Chief Executive Officer, Karleen Oberton, our Chief Financial Officer, and Essex Mitchell, our Chief Operating Officer. Our second quarter press release is available now on the investor section of our website. We will also post our prepared remarks on our website shortly after we deliver them, as well as an updated corporate presentation. And a replay of this call will be available on our website for the next 30 days.

Ryan M. Simon: Thank you Justin good afternoon, and thank you for joining <unk> second quarter fiscal 2024 earnings call with me today are Steve Macmillan, The company's chairman, President and Chief Executive Officer, Carlino, Burton, our Chief Financial Officer, and Ethics Mitchell, our Chief operating officer.

Ryan M. Simon: Sure.

Ryan M. Simon: Our second quarter press release is available now on the investors section of our website. We will also post our prepared remarks to our website. Shortly after we deliver them as well as an updated corporate presentation and.

Ryan M. Simon: A replay of this call will be available on our website for the next 30 days.

Ryan M. Simon: Before we begin, we would like to inform you that certain statements we make today will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied. Such factors include those referenced in the Safe Harbor Statement included in our earnings release and SEC filings. Also, during this call, we will discuss certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release.

Ryan M. Simon: Before we begin we would like to inform you that certain statements. We make today will be forward looking these statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied.

Ryan M. Simon: Such factors include those referenced in the Safe Harbor statement included in our earnings release and SEC filings.

Ryan M. Simon: Also during this call we will discuss certain non-GAAP financial measures a reconciliation to GAAP can be found in our earnings release.

Ryan M. Simon: Two of these non-GAAP measures are one, organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than one year. And two, organic revenue excluding COVID-19, which further excludes COVID-19 assay revenue, revenue related to COVID-19, and sales from discontinued products in diagnostics. Finally, any percentage changes we discuss will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Now, I'd like to turn the call over to Steve MacMillan, Hologic's CEO.

Ryan M. Simon: Two of these non-GAAP measures are one organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned biologic for less than one year.

Stephen P. MacMillan: And two organic revenue, excluding COVID-19, which further exclude COVID-19 assay revenue revenue related to COVID-19, and sales from discontinued products and diagnostics.

Stephen P. MacMillan: Finally, any percentage changes, we discussed will be on a year over year basis and revenue growth rates will be in constant currency unless otherwise noted.

Stephen P. MacMillan: Now I'd like to turn the call over to Steve Macmillan Hologic CEO.

Stephen P. MacMillan: Thank you, Ryan, and good afternoon, everyone. We are pleased to discuss our financial results for the second quarter of fiscal 2024. For the quarter, total revenue was $1.02 billion, and non-GAAP earnings per share was $1.03. Both revenue and EPS came in above the high end of our guidance, reflecting another strong quarter. Similar to Q1, it is again important to view our Q2 performance in proper perspective. As we shared on our Q1 earnings call in February, throughout 2024, we face double-digit comps, massive comps in the first half, and still very strong comps in the second.

Stephen P. MacMillan: You Ryan and good afternoon, everyone. We are pleased to discuss our financial results for the second quarter of fiscal 2024.

Stephen P. MacMillan: For the quarter total revenue was one point or $2 billion and non-GAAP earnings per share was $1 three search.

Stephen P. MacMillan: With revenue and EPS came in above the high end of our guidance, reflecting another strong quarter.

Stephen P. MacMillan: Similar to Q1, it is again important to view, our Q2 performance in proper perspective.

Stephen P. MacMillan: As we shared on our Q1 earnings call in February throughout 2024, we faced double digit comps massive comps in the first half and still very strong comps in the second half.

Stephen P. MacMillan: As a reminder, in Q2 of last year, Organic Molecular Diagnostics, ex-COVID, posted growth of nearly 25%, and both surgical and breast health posted phenomenal growth of over 25%. This year, in Q2, on top of the high growth rates from a year ago, we grew our molecular diagnostics business, ex-COVID, 10.7%. Our surgical business achieved 7.4% and our breast health business achieved 1%, excluding the divested SSI business. A solid result given the elevated gantry placements in Q2 a year ago.

Stephen P. MacMillan: As a reminder, in Q2 of last year organic molecular diagnostics ex COVID-19 posted growth of nearly 25% and both surgical and breast health posted phenomenal growth of over 25%.

Stephen P. MacMillan: This year in Q2 on.

Stephen P. MacMillan: On top of the high growth rates from a year ago.

Stephen P. MacMillan: We grew our molecular diagnostics business ex Covid, 10.7%.

Stephen P. MacMillan: Our surgical business, seven 4% and our breast health business, 1%, excluding the divested Ssi business.

Stephen P. MacMillan: A solid result, given the elevated gantry placements in Q2 a year ago.

Stephen P. MacMillan: We also delivered operating margins of 34% in Q2, improving 190 basis points sequentially from Q1.

Stephen P. MacMillan: Setting us up nicely to approach, 31% for the full fiscal year.

Stephen P. MacMillan: Now I'll pass the halfway point of fiscal 'twenty four we believe we are in excellent position to achieve our full year goals.

Stephen P. MacMillan: We also delivered operating margins of 30.4% in Q2, improving 190 basis points sequentially from Q1, setting us up nicely to approach 31% for the full fiscal year. Now past the halfway point of fiscal 24, we believe we are in an excellent position to achieve our full year goal. Before moving on to our themes for today, our fiscal second quarter marks the fourth anniversary of when the COVID virus changed the world. When COVID initially surged, we had three goals.

Stephen P. MacMillan: Before moving on to our themes for today, our fiscal second quarter marks the fourth anniversary of when the Covid virus changed the world.

Stephen P. MacMillan: When Covid initially surged we had three goals.

Stephen P. MacMillan: One, ensure that we take care of our employees, make a huge difference in the world with our Panther system and COVID testing, and three, emerge as a bigger, stronger, faster growing company in a post-pandemic world. Fast forward to today, and as you can see from our results, we have delivered on these three goals, and we're aiming for more. Not only did we achieve our primary objective, but we also successfully managed to strengthen all of our brands, both in the U.S. and internationally, remain innovative and disciplined in executing our growth strategy, and build a fortress balance sheet to facilitate future growth.

Stephen P. MacMillan: One ensure that we take care of our employees.

Stephen P. MacMillan: To make a huge difference in the world with our Panther system and Covid testing.

Stephen P. MacMillan: And three emerge as a bigger stronger faster growing company in a post pandemic world.

Stephen P. MacMillan: Fast forward to today as you can see from our results. We have delivered against these three goals and we're aiming for more.

Stephen P. MacMillan: Not only did we achieve our primary objectives. We also successfully managed to strengthen all of our franchises both in the U S and internationally.

Stephen P. MacMillan: Remain innovative and discipline in executing our growth strategies.

Stephen P. MacMillan: And build a fortress balance sheet to facilitate future growth.

Stephen P. MacMillan: On top of these achievements, we continue to improve our already high employee engagement score, and all through complicated macro challenges. That said, we are never satisfied and firmly believe the best is still ahead. As we look further out beyond the horizon, we see significant potential to continue to innovate and unlock growth opportunities for years to come. Now, on to our three themes for today.

Stephen P. MacMillan: On top of these achievements, we continue to elevate our already high employee engagement scores and all through complicated macro challenges.

Stephen P. MacMillan: That said, we are never satisfied and firmly believe the best is still ahead as.

Stephen P. MacMillan: As we look further out beyond the horizon, we see significant potential to continue to innovate and unlock growth opportunities for years to come.

Stephen P. MacMillan: Now onto our three themes for today.

Stephen P. MacMillan: First, our core franchises, Diagnostics, Breast Health, and Surgery, continue to showcase the benefits of our diverse portfolio. As planned, we continue to yield robust growth and durability because we benefit from being both diagnostics and medtech. Second, our international business quietly continues to drive strong top-line growth, demonstrating our ability to capture potential growth opportunities and turn them into reality. And third, our strong balance sheet and disciplined approach to capital allocation empower us to fortify our foundation, as we did this week with the announcement of the endomagnetics acquisition. We have the ability to build on our strengths with significant operational flexibility, which allows us to use multiple levers to deliver top and bottom line performance. Turning to our first theme.

Stephen P. MacMillan: First our core franchises.

Stephen P. MacMillan: Diagnostics breast health and surgical continued to showcase the benefits of our diverse portfolio.

Stephen P. MacMillan: As planned we continued to yield robust growth and durability, because we benefit from being both diagnostics and med Tech.

Stephen P. MacMillan: Second our international business quietly continues to drive strong top line growth demonstrating.

Stephen P. MacMillan: Demonstrating our ability to capture potential growth opportunities and turn that into reality.

Stephen P. MacMillan: And third our strong balance sheet and disciplined approach to capital allocation empower us to fortify our foundation as we've done this week with the announcement of the Endo Magnetics acquisition.

Stephen P. MacMillan: We have the ability to build on our strengths with significant operational flexibility, which allows us multiple levers to deliver top and bottom line performance.

Stephen P. MacMillan: Turning to our first theme.

Stephen P. MacMillan: Sometimes overlooked and misunderstood, the strength of our business comes from the sum of our parts. We are a unique collection of diagnostics and medtech businesses with many more growth drivers than meet the eye. Each business has multiple growth drivers with tremendous runway ahead. On the outside, it may be unclear how we can keep driving growth with the strong market shares we have. In reality, our product and service diversity creates enduring strength as we advance forward and notch incremental wins. Over time, these wins collectively deliver meaningful and durable growth across multiple franchises and multiple geographies. While we know we don't fit neatly into either diagnostics or medical devices.

Stephen P. MacMillan: Sometimes overlooked and misunderstood the strength of our business comes from the sum of our parts.

Stephen P. MacMillan: We are a unique collection of diagnostics and med tech businesses with many more growth drivers than meets the eye.

Stephen P. MacMillan: Each business has multiple growth drivers with tremendous runway ahead.

Stephen P. MacMillan: To the outside it may be unclear, how we can keep driving growth with the strong market shares we have in.

Stephen P. MacMillan: In reality, our product and service diversity create enduring strength as we advance forward and not incremental wins.

Stephen P. MacMillan: Over time, these wins collectively deliver meaningful and durable growth across multiple franchises and multiple geographies.

Stephen P. MacMillan: While we know we don't fit neatly into either diagnostics or medical device.

Stephen P. MacMillan: We do fit neatly into the world of improving women's health. Our unique set of businesses equips us to deliver results and positively impact more and more women, regardless of external macro challenges. Our strong growth over the past four years reflects a combination of multiple durable growth drivers intentionally built into each of our businesses. The beauty here is that over time, and in any given quarter, our growth drivers can change and morph. What we've done is create multi-phase, extended, and stacked growth cycles. The net result is our ability to consistently deliver on a consolidated basis over time.

Stephen P. MacMillan: We do fit neatly into the world of improving women's health.

Stephen P. MacMillan: Our unique set of businesses equips us to deliver results and positively impact more and more women regardless of external macro challenges.

Stephen P. MacMillan: Our strong growth over the past four years reflects a combination of multiple durable growth drivers intentionally built into each of our businesses.

Stephen P. MacMillan: The beauty here is that over time and in any given quarter are growth drivers can change and morph.

Stephen P. MacMillan: What we've done is create multi phase extended and stacked growth cycles.

Stephen P. MacMillan: The net result is our ability to consistently deliver on a consolidated basis over time.

Stephen P. MacMillan: A few examples to highlight from across our business. In our second quarter, worldwide diagnostics growth, ex-COVID, of 9.8%, was again primarily driven by our molecular diagnostics business. In molecular diagnostics, over the last few years, we've dramatically expanded both our installed base and our menu, nearly doubling our installed base from 1,700 Panthers to over 3,200 during the pandemic, and going from four FDA-approved assays to over 20. Our next phase of growth is about menu adoption and driving more volume by focusing largely on existing customers while adding more geography.

Stephen P. MacMillan: A few examples to highlight from across our business.

Stephen P. MacMillan: In our second quarter worldwide diagnostics growth ex Covid of nine 8% was again, primarily driven by our molecular diagnostics business.

Stephen P. MacMillan: In molecular diagnostics over the last few years, we've dramatically expanded both our installed base and menu near.

Stephen P. MacMillan: Nearly doubling our installed base from 1700 Panthers to over 3200 during the pandemic and going from four FDA approved assays to over 20.

Stephen P. MacMillan: Our next phase of growth is about menu adoption.

Stephen P. MacMillan: And driving more volume by focusing largely on existing customers, while adding more geographies.

Stephen P. MacMillan: At the same time, we continue to broaden our menu. As a result, we have years of growth ahead as we extend our commercial reach and continue to add products to our portfolio. In the second quarter, U.S. Molecular Diagnostics delivered double-digit growth, led by ongoing adoption of BVCV-TV on the PEM and strong contributions from our respiratory suite of assays on the fusion, as well as continued growth from Biotheranostin.

Stephen P. MacMillan: At the same time, we continue to broaden our menu.

Stephen P. MacMillan: As a result, we create years of growth ahead, as we extend our commercial reach and continue to add products to our portfolio.

Stephen P. MacMillan: In the second quarter U S molecular diagnostics delivered double digit growth.

Stephen P. MacMillan: Led by ongoing adoption of <unk> on the Panther strong contributions from our respiratory suite of assays on the fusion.

Stephen P. MacMillan: As well as continued growth from buyout there in optics.

Stephen P. MacMillan: Each of these are newer products in our portfolio, underscoring the power of our extended reach. Layering on top of the strong U.S. molecular, international cytology was also accretive to worldwide diagnostics growth. Outside the U.S., diagnostics growth was driven primarily by multi-country adoption of our innovative, genius AI digital psychology in the quarters. As a reminder, Digital Psychology was only recently approved in the U.S. earlier this year, meaning the U.S. opportunity is still ahead.

Stephen P. MacMillan: Each of these are newer products to our portfolio.

Stephen P. MacMillan: Underscoring the power of our extended reach.

Stephen P. MacMillan: And on top of the strong U S molecular performance.

Stephen P. MacMillan: International Cytology was also accretive to worldwide diagnostics growth.

Stephen P. MacMillan: Outside the U S diagnostics growth was driven primarily by multi country adoption of our innovative genius AI digital cytology in the quarter.

Stephen P. MacMillan: As a reminder, digital cytology was only recently approved in the U S earlier this year, meaning the U S opportunity is still ahead.

Stephen P. MacMillan: In breast health, we've expanded our product offering from imaging to cover the continuum of breast cancer care, including biopsy and surgery. In the second quarter, on a worldwide basis, the gantry and service businesses performed well against very strong comps from the prior year period. Meanwhile, outside the U.S., our emerging interventional breast business grew double digits in Q2, accretive to worldwide growth, and finally, Insurgent. Once, essentially, only a U.S. two-product business with Novosur and Myosur.

Stephen P. MacMillan: In breast health, we've expanded our product offering from imaging to cover the continuum of breast cancer care, including biopsy and surgery.

Stephen P. MacMillan: In the second quarter on a worldwide basis, the gantry and service businesses performed well against very strong comps from the prior year period.

Stephen P. MacMillan: Meanwhile, outside the U S or emerging intervention breast business grew double digits in Q2 accretive to the worldwide growth rate.

Stephen P. MacMillan: And finally in surgical once essentially only a U S. Two product business with no <unk> at <unk> <unk>.

Stephen P. MacMillan: We now have Fluent, Assessa, and Boulder. And internationally, we are just getting started with both the core business and new product. In Q2, worldwide growth of 7.4% was very strong against the high prior year. Our performance was driven in large part by very strong double-digit growth in our international search, which in Q2 is a reflection of continued market penetration, as well as our Go Direct strategy in the Nordics. All in all, we are a powerful women's health composite.

Stephen P. MacMillan: Now have fluent assessor and Boulder.

Stephen P. MacMillan: And internationally, we are just getting started with both the core business and new product lines.

Stephen P. MacMillan: In Q2 worldwide growth of seven 4% was very strong against the high prior year comp.

Stephen P. MacMillan: Our performance was driven in large part by very strong double digit growth in our international surgical business, which in Q2 is a reflection of continued market penetration as well as our go direct strategy in the Nordics.

Stephen P. MacMillan: All in we are a powerful women's health composite as we extend our reach globally, we expect to grow even in product categories and territories that may on their surface appear to be mature and well penetrated with that I'll turn the call over to Essex to discuss our final.

Stephen P. MacMillan: As we extend our reach globally, we expect to grow even in product categories and territories that may, on their surface, appear to be mature and well-penetrated. With that, I'll turn the call over to Essex to discuss our final two themes for today. Thank you.

Essex: Two themes for today.

Essex D. Mitchell: Steve, as previewed by Steve's discussion of our diverse and durable growth drivers. Our strong international growth is a direct result of identifying and capturing underpenetrated market opportunities with steady execution. As a reminder, our international business is over 40% larger than it was in 2019. We are in more territories and more direct than ever before. That said, big picture, we are still in the early days of our international opportunity. Our early success is driven largely by two approaches. 1. Going direct and 2.

Essex: Thank you Steve.

Essex: As previewed by Steve discussing a lot of our diverse and durable growth drivers are strong international growth is a direct result of identifying and capturing underpin underpenetrated market opportunity with steady execution.

Essex D. Mitchell: As a reminder, our international business is over 40% larger than it was in 2019, we earn more territory and more direct than ever before.

Essex D. Mitchell: That said.

Essex D. Mitchell: Big picture, we are still in the early days of our international opportunities.

Essex D. Mitchell: Our early success is driven largely by two approaches one going direct and to entering markets, where we elevate the standard of care.

Essex D. Mitchell: Entering markets where we elevate the standard of care. For example, on the latter, while the FinPREP-PAT test, 2D and even 3D-MAMO, and procedures like Novashore and Myoshore are widely accepted as standard of care in the U.S., Internationally, this is unfortunately not yet the case. Many parts of the world, even those considered developed and industrialized, still have the opportunity to elevate their screening, diagnosis, and treatment of women to gold standards. These women deserve it, and Hologic is poised to realize this potential.

Essex D. Mitchell: For example on the ladder, while the thin prep Pap test <unk>, and even <unk> memo and procedures like <unk> and <unk> are widely accepted as standard of care in the U S.

Essex D. Mitchell: Internationally. This is unfortunately, not yet the case.

Essex D. Mitchell: Many parts of the world, even those considered developed and industrialize.

Essex D. Mitchell: Still have the opportunity to elevate their screening diagnosis and treatment of women to gold standards. These women deserve it and Hologic is poised to realize this potential.

Essex D. Mitchell: Accessibility to women's health options around the world remains a priority and a great opportunity for Hologic. This is why I work with the Hologic Global Women's Health Industry. And our worldwide partnership with the Women's Tennis Association to elevate women's health, education, and access is critically important. Reinforcing our position, the index clearly shows that we are only scratching the surface of the Global Opportunity. And this holds true even in Europe, with other large market geographies like Asia-Pacific being further out on the time horizon. From our perspective, as leading champions for women's health, we believe there is still a significant market adoption opportunity ahead of us. And this adoption will not happen overnight.

Essex D. Mitchell: Accessibility to women's health options around the world remains a priority and a great opportunity for Hologic.

Essex D. Mitchell: This is why our work with the whole logic Global Womens Health Index, and our worldwide partnership with the Women's Tennis Association to elevate Womens health education and access are critically important.

Essex D. Mitchell: Reinforcing our position the index clearly shows that we are only scratching the surface.

Essex D. Mitchell: The global opportunity.

Essex D. Mitchell: And this holds true even in Europe with other large market geographies like Asia Pacific being further out on the time horizon.

Essex D. Mitchell: From our perspective as leading champion for women's health. We believe there is still significant market adoption opportunity ahead of us.

Essex D. Mitchell: And this adoption will not happen overnight.

Essex D. Mitchell: We expect adoption to grow over time at different paces around the world as more and more governments prioritize women's health. And for our final theme today, we'd like to underscore the importance of our strong balance sheet and recap our capital allocation priorities, with over $2 billion in cash. In times of strong cash flow, we have the capacity to fund key in-house expenditures and also deploy cash towards both M&A and share repurchasing. Regarding capital allocation, our strategy remains the same.

Essex D. Mitchell: We expect adoption to grow over time at different paces around the world as more and more governments prioritize women's health.

Essex D. Mitchell: And for our final theme today wed like to underscore the importance of our strong balance sheet and recap our capital allocation priorities.

Essex D. Mitchell: With over $2 billion in cash.

Essex D. Mitchell: And strong cash flow, we have the capacity to fund key and health initiatives and also deploy cash towards both M&A and share repurchases.

Essex D. Mitchell: Regarding capital allocation our strategy remains the same.

Essex D. Mitchell: We are focused on tucking opportunities for our three core franchises, and as we have stated in the past, we have a strong preference for any potential deal to have a clear line of sight to accretion on both top and bottom lines. If not immediately, the sooner, the better.

Essex D. Mitchell: We are focused on tuck in opportunities for our three core franchises and as we have stated in the past we have a strong preference for any potential deal to have a clear line of sight to accretion on both top and bottom lines.

Essex D. Mitchell: If not immediately the sooner the better.

Essex D. Mitchell: Our business development teams across each of our franchises are consistently building and reviewing opportunities in their respective pipelines, and they see our ability to shop across multiple aisles as a strength as we continue to grow into an even greater performing composite than we are today. The ability to shop in multiple aisles also creates the flexibility to maneuver potentially unfavorable valuations in one aisle versus another. Overall, a blend of adding in-house, developed, and external innovation across our strong-span franchises is an important part of our growth strategy.

Essex D. Mitchell: Our business development teams across each of our franchises are consistently building and reviewing opportunities and their respective pipelines.

Essex D. Mitchell: We view our ability to shop across multiple aisles as a strength as we continue to grow in an even greater performing composite than we are today.

Essex D. Mitchell: The ability to shop in multiple aisles also creates the flexibility to maneuver potentially unfavorable valuation and one aisle versus another.

Essex D. Mitchell: Overall, a blend of adding in house developed and external innovation across our strong franchises is an important part of our growth strategy.

Essex D. Mitchell: Leading into our strategy, on Monday, we announced our agreement to acquire Indomagnetics Ltd., a provider of breast cancer surgery technologies, for approximately $310 million. Indomag's portfolio of innovative breast surgery localization and lymphatic tracing products complements and diversifies our expanding interventional breast portfolio. We are excited for the potential to join forces, amplify growth, and better serve patients around the world.

Essex D. Mitchell: Leading into our strategy on Monday, we announced our agreement to acquire Indo Magnetics LTV.

Essex D. Mitchell: A provider or breast cancer surgery technologies for approximately $310 million.

Essex D. Mitchell: <unk> portfolio of innovative breast surgery localization and lymphatic tracing products complement and diversifies, our expanding interventional breast business.

Essex D. Mitchell: We are excited for the potential to joined forces amplify growth and better serve patients around the world.

Essex D. Mitchell: In calendar 2023, EMAG generated approximately $35 million in revenue, and we believe our combined global reach and breadth of interventional options will accelerate growth in this exciting space. At this point, we are still early and do not have a definitive timeline for closing the transaction. Though we estimate to close in the second half of the calendar year. Before turning the call over to Karleen, let me conclude by saying we are proud of our strong Q2 results that build on our Q1 performance. All said, we are in a solid position to carry our success into Q3 and Q4.

Essex D. Mitchell: In calendar 2023, <unk> generated approximately $35 million of revenue and we believe our combined global reach and breadth of interventional options will accelerate growth in this exciting space.

Essex D. Mitchell: At this point, we are still early and do not have a definitive timeline on closing the transaction.

Essex D. Mitchell: We estimate to close in the second half of calendar the calendar year.

Essex D. Mitchell: Before turning the call over to <unk>, Let me conclude by saying we are proud of our strong Q2 results that build on our Q1 performance.

Essex D. Mitchell: All said, we are in a solid position to carry our success into Q3 and Q4.

Karleen M. Oberton: Thank you, Essex, and good afternoon, everyone. In my statements today, I will provide an overview of our revenue results. Walk down our income statement, showcasing strong performance. Touch on a few other key financial metrics, and finish with our guidance for the third quarter and full fiscal 2024. As highlighted, our second quarter financial results were very strong. We are exceeding our expectations on revenue and profitability. Q2 was a continuation of our momentum from Q1.

Karleen: Thank you Eric and good afternoon, everyone.

Karleen M. Oberton: In my statements today, I will provide an overview of our revenue results.

Karleen M. Oberton: Locked down our income statement showcasing strong performance.

Karleen M. Oberton: Touching on a few other key financial metrics.

Karleen M. Oberton: And finish with our guidance for the third quarter and full fiscal 2024.

Karleen M. Oberton: As highlighted our second quarter financial results were very strong.

Karleen M. Oberton: Hitting our expectations on revenue and profitability.

Karleen M. Oberton: Q2 was a continuation of our momentum from Q1.

Karleen M. Oberton: Total revenue came in at $1.018 billion, beating the midpoint of our guidance by $18 million. We delivered organic growth of 4.9% excluding COVID on top of a challenging double-digit comp from the prior year. In addition, non-GAAP earnings per share was $1.03, which exceeded the high end of our guidance by three cents. Before moving on to our franchise results,

Karleen M. Oberton: Total revenue came in at 1.018 billion.

Karleen M. Oberton: Beating the midpoint of our guidance by $18 million.

Karleen M. Oberton: We delivered organic growth of four 9%, excluding COVID-19 on top of a challenging double digit comp from the prior year.

Karleen M. Oberton: In addition, non-GAAP earnings per share was $1 <unk>.

Karleen M. Oberton: Which exceeded the high end of our guidance by <unk> <unk>.

Karleen M. Oberton: Before moving onto our franchise results. We wanted to highlight the continued strength of our balance sheet.

Karleen M. Oberton: We want to highlight the continued strength of our balance. In Q2, we generated over $290 million in cash from operating activities and ended the quarter with nearly $2.2 billion on the balance sheet. Our strong cash balance. Leverage ratio well below our target range and ability to consistently generate strong cash flow provide us the flexibility to fund innovation and execute our capital allocation strategy. We have significant firepower to continue to deploy capital as opportunities arise.

Karleen M. Oberton: In Q2, we generated over $290 million in cash from operating activities and ended the quarter with nearly $2 $2 billion on the balance sheet.

Karleen M. Oberton: Our strong cash balance.

Karleen M. Oberton: Leverage ratio well below our target range.

Karleen M. Oberton: And ability to consistently generate strong cash flow provide us the flexibility to fund innovation and execute our capital allocation strategy.

Karleen M. Oberton: Have significant firepower to continue to deploy capital as opportunities arise.

Karleen M. Oberton: Turning to our franchise results in Diagnostics, second quarter revenue of $450.1 million declined 3.2%. Excluding COVID assay and related revenue, worldwide diagnostics grew by 9.8%. Within diagnostics, molecular diagnostics continues to contribute significantly, growing 10.7% excluding COVID. We continue to see underlying strength in BVCV TV, which continues its outstanding growth trajectory. BVCB TV is tracking to become our second largest assay globally, with very little international revenue as we have focused primarily on the U.S. market.

Karleen M. Oberton: Turning to our franchise results in diagnostics second quarter revenue of $451 million declined three 2%.

Karleen M. Oberton: <unk> Covid assay and related revenue worldwide diagnostics grew by nine 8%.

Karleen M. Oberton: Within diagnostics molecular diagnostics continues to contribute significantly.

Karleen M. Oberton: Growing 10, 7% excluding COVID-19.

Karleen M. Oberton: We continue to see underlying strength in BBC television.

Karleen M. Oberton: Which continues its outstanding growth trajectory.

Karleen M. Oberton: <unk> TV is tracking to become our second largest assay globally.

Karleen M. Oberton: With very little International revenue as we have focused primarily on the U S market.

Karleen M. Oberton: Additionally, as expected, non-COVID respiratory assay sales remained solid as the flu season continued into our second quarter. Growth was a combination of more volume year over year across our respiratory menu, plus ASP lift from elevated contribution from our COVID, Flu A, Flu B, and RSV 4-Plex assay. Finally, biotheranostics remains a strong pillar of growth for our base molecular business, rounding out diagnostics

Karleen M. Oberton: Additionally, as expected.

Karleen M. Oberton: Non COVID-19 respiratory assay sales remain solid as the.

Karleen M. Oberton: The flu season continued into our second quarter.

Karleen M. Oberton: Growth was a combination of more volume year over year across our respiratory menu.

Karleen M. Oberton: Plus ASP lift from elevated contribution from our Covid flu, a flu b and RSV four plex assay.

Karleen M. Oberton: Finally, <unk> remains a strong pillar of growth for our base molecular business.

Karleen M. Oberton: Rounding out diagnostics.

Karleen M. Oberton: Psychology and perinatal grew 7.9% globally, primarily fueled by double-digit growth internationally, as well as impact from the prior year COPS. As a reminder, Q2 last year was adversely impacted by supply constraints issues related to a third-party logistics partner. However, leveled, growth in the second quarter is above our long-term expectations for this business. Moving on to Breast Health.

Karleen M. Oberton: Psychology, and perinatal grew seven 9% globally.

Karleen M. Oberton: Primarily fueled by double digit growth internationally as well as impacts from the prior year comp.

Karleen M. Oberton: As a reminder.

Karleen M. Oberton: Q2 last year was adversely impacted by supply constraint issues related to a third party logistics partner.

Karleen M. Oberton: The level set growth in the second quarter is above our long term expectations for this business.

Karleen M. Oberton: Moving on to breast health.

Karleen M. Oberton: Total second-quarter revenue of $384.6 million decreased 0.3%, but grew 1% when excluding SSI. As a reminder, Q1-24 resulted in an elevated growth rate assisted by lapping soft prior year performance due to supply constraints in Q1-23. The opposite is true for Q2 2014, where we face significant prior year costs. In Q2 of last year, we placed an elevated number of gantries as semiconductor chip supply and visibility improved. For the remainder of the year, we expect growth rates in the gantry business to normalize.

Karleen M. Oberton: Total second quarter revenue of $384 6 million decreased <unk>, 3%, but grew 1% when excluding ssi.

Karleen M. Oberton: As a reminder, Q1 'twenty four resulted in an elevated growth rate assisted by lapping soft prior year performance due to supply constraints in Q1 'twenty three.

Karleen M. Oberton: The opposite is true for Q2 'twenty four.

Karleen M. Oberton: Where we face significant prior year comp.

Karleen M. Oberton: In Q2 of last year, we placed an elevated number of gantries, a semiconductor chip supply and visibility improves.

Karleen M. Oberton: For the remainder of the year, we expect growth rates in the gantry business to normalize.

Karleen M. Oberton: Within breast health, growth was driven primarily by our international interventional mix. This highlights the diversity of growth drivers Steve and Essex commented on and the fact that growth drivers across our business and within our divisions can change and morph over time. Moving next to Surgical, second quarter revenue of $156 million increased 7.4%. Surgical growth continues to be fueled by MyoShore and the related Fluent Fluid Management System.

Karleen M. Oberton: Within breast health growth was driven primarily by our international intervention on mix.

Karleen M. Oberton: Highlights the diversity of growth driver, Steve and Essex commented on in.

Karleen M. Oberton: And the fact that growth drivers across our business and within our divisions can change and morph over time.

Karleen M. Oberton: Continuing next to surgical.

Karleen M. Oberton: Second quarter revenue of $156 million increased seven 4%.

Karleen M. Oberton: Surgical growth continues to be fueled by <unk> and the related fluent fluid management system.

Karleen M. Oberton: As anticipated, Nova Shore continues to be a headwind to growth as we lapped the prior year Nova Shore V5 ASP list. And finally, in our skeletal business, second quarter revenue of $27.1 million declined 14.3% from lower capital placements and upgrades. Now let's move on to the rest of the non-GAAP P&L for the second quarter. Growth margin was 60.7% for the quarter, which was in line with expectations. The decline of 160 basis points in the prior year was anticipated and primarily driven by lower COVID sales compared to the prior year period. As a reminder, we expect growth margin to improve as we work past the immunization of previously procured higher-priced semiconductor chips. Total operating expense of $307.6 million in the second quarter decreased by 3%.

Karleen M. Oberton: As anticipated <unk> continues to be a headwind to growth as we lapped the prior year <unk> ASP lift.

Karleen M. Oberton: And finally in our skeletal business second quarter revenue of $27 1 million declined 14, 3% from lower capital placements and upgrade.

Karleen M. Oberton: Now, let's move on to the rest of the non-GAAP P&L for the second quarter.

Karleen M. Oberton: Gross margin was 67% for the quarter and in line with expectations.

Karleen M. Oberton: The decline of 160 basis points from the prior year was anticipated and primarily driven by lower COVID-19 sales compared to the prior year period.

Karleen M. Oberton: As a reminder, we expect gross margin to improve as we work past the amortization of previously procured higher priced semiconductor chips.

Karleen M. Oberton: Total operating expense of 307 6 million in the second quarter decreased by 3%.

Karleen M. Oberton: This decrease was primarily driven by the elimination of expenses related to the divested SSI. As Steve mentioned, operating margin was 30.4% for the second quarter. The year over year decline of 90 basis points was driven primarily from lower COVID sales. Sequentially, as expected, operating margins expanded 190 basis points from Q1, largely from lower operating expenses in Q2. A strong result for the quarter. Below operating income, other income net, represented a loss of nearly $6 million in our fiscal second quarter. As expected, interest income is lower due to lower cash balances from the significant share repurchases completed earlier in the fiscal year.

Karleen M. Oberton: This decrease was primarily driven by elimination of expenses related to the divested <unk> business.

Karleen M. Oberton: As Steve mentioned, the operating margin was 34% for the second quarter.

Karleen M. Oberton: The year over year decline of 90 basis points was driven primarily from lower Covid sales.

Karleen M. Oberton: Sequentially as expected operating margins expanded 190 basis points from Q1.

Karleen M. Oberton: Largely from lower operating expenses in Q2.

Karleen M. Oberton: The strong results for the quarter.

Karleen M. Oberton: Yeah.

Karleen M. Oberton: Below operating income other income net represented a loss of nearly $6 million in our first in our fiscal second quarter.

Karleen M. Oberton: As expected interest income is lower due to lower cash balances from the significant share repurchases completed early in the fiscal year.

Karleen M. Oberton: Additionally, interest expense is up due to lower proceeds from our interest rate swaps.

Karleen M. Oberton: Finally, our tax rate in Q2 was $19 seven 5% as expected.

Karleen M. Oberton: Additionally, interest expense is up due to lower proceeds from our interest rate loans. Finally, our tax rate in Q2 was 19.75%, as expected. Now let's move on to our non-GAAP financial guidance for the third quarter and full year fiscal 2024. For Q3, 2024, we are expecting total revenue in the range of $992.5 to $1,007.5 million, and an EPS of $0.98 to $1.05. For the full year 2024, our guidance assumes revenue of $4 billion to $4.05 billion and an EPS of $4.02 to $4.12.

Karleen M. Oberton: Now, let's move onto our non-GAAP financial guidance for the third quarter and full year fiscal 2024.

Karleen M. Oberton: For Q3 2024, we are expecting total revenue in the range of 992, 5%.

Karleen M. Oberton: <unk> $1007 5 million and.

Karleen M. Oberton: And EPS of <unk> 98 to $1 <unk>.

Karleen M. Oberton: For the full year 2024, our guidance assumes revenue of $4 billion to $4 five.

Karleen M. Oberton: <unk> 5 billion.

Karleen M. Oberton: And EPS of $4 <unk> to $4 12.

Karleen M. Oberton: With respect to foreign exchange, we expect the recent strengthening of the U.S. dollar to create a significant headwind in the second half of the year. For Q3, we are assuming FX headwinds of about 3 million. For the full year, we now expect a slight tailwind of about 2 million. All in, this represents about a $10 million impact on our priority guidelines. And as a reminder, prior guidance assumed a $12 million tailwind for the full year. Now, turning to our franchise.

Karleen M. Oberton: With respect to foreign exchange, we expect the recent strengthening of the U S dollar to create a significant headwind in the second half of the year.

Karleen M. Oberton: For Q3, we are assuming an FX headwind of about $3 million.

Karleen M. Oberton: For the full year, we now expect a slight tailwind of about $2 million.

Karleen M. Oberton: All in this represents about a two at $10 million impact to our prior guidance.

Karleen M. Oberton: And as a reminder, prior guidance assumed a $12 million tailwind for the full year.

Karleen M. Oberton: Turning to our franchises, we want to reiterate that we expect each to grow at least 5% to 7% and our fiscal 2024, excluding the impact of Covid.

Karleen M. Oberton: We want to reiterate that we expect each to grow at least 5 to 7% in our fiscal 2024, excluding the impact of COVID. While we have navigated the most challenging comps from Fiscal 23, we still have strong double-digit comps across the board to close out Fiscal 24. Starting with diagnostics, we expect our molecular diagnostics business to drive high single-digit growth excluding COVID, as customers continue to adopt and drive utilization of our expanded menu. In psychology and perinatal, however, we expect minimal growth in Q3.

Karleen M. Oberton: While we have navigated the most challenging comps in fiscal 'twenty three we still have strong double digit comps across the board to close out fiscal 'twenty four.

Karleen M. Oberton: Starting with diagnostics, we expect our molecular diagnostics business to drive high single digit growth excluding COVID-19.

Karleen M. Oberton: As customers continue to adopt and drive utilization of our expanded menu.

Karleen M. Oberton: And cytology and perinatal, However, we expect minimal growth in Q3.

Karleen M. Oberton: In Q3 of last year, customers built inventory as a result of the third-party shipping constraints experienced in Q2 of 23, resulting in slightly elevated sales. We expect to see more normalized comps for our cytology and perinatal business in fiscal year 25. Closing out on non-COVID diagnostics, we expect blood revenue of approximately $7 million in Q3 and $28 million for the full year, in terms of COVID revenue. We expect COVID assay sales to be about $5 to $10 million in Q3-24, and about $60 to $65 million for the full year. COVID related items are expected to be about $25 million in the third quarter and approximately $105 million for the full year. Moving on, to Breast Health.

Karleen M. Oberton: In Q3 of last year customers built inventory as a result of the third party shipping constraints experienced in Q2 of 'twenty three.

Karleen M. Oberton: Resulting in slightly elevated sale.

Karleen M. Oberton: We expect to see more normalized comps for our cytology and perinatal business in fiscal year 'twenty five.

Karleen M. Oberton: Closing out on non Covid diagnostics, we expect blood revenue of approximately $7 million in Q3 and $28 million for the full year.

Karleen M. Oberton: In terms of Covid revenue <unk>.

Karleen M. Oberton: We expect Covid assay sales to be about $5 million to $10 million in Q3 'twenty four.

Karleen M. Oberton: About 60% to $65 million for the full year.

Karleen M. Oberton: Covered related items are expected to be about $25 million in the third quarter and approximately $105 million for the full year.

Karleen M. Oberton: Moving on to breast health.

Karleen M. Oberton: Remain on pace to grow the business within the 5-7% range for the year. As a reminder, we closed out fiscal 23 with three straight quarters of 25% plus growth rates. We expect steady performance in breast health in the back half of the year as the business continues to improve sequentially. The demand for our portfolio of products and services remains strong, and we continue to have excellent visibility into gantry orders. In addition, our confidence in delivering more gantries than last year remains high.

Karleen M. Oberton: Gain on pace to grow the business within the 5% to 7% range for the year.

Karleen M. Oberton: As a reminder, we closed out fiscal 'twenty, three with three straight quarters of 25% plus growth rates.

Karleen M. Oberton: We expect steady performance in breast health in the back half of the year as the business continues to improve sequentially.

Karleen M. Oberton: The demand for our portfolio of products and services remained strong and we continue to have excellent visibility and began to order.

Karleen M. Oberton: Further our confidence in delivering more gantries and last year remains high.

Karleen M. Oberton: We continue to successfully manage resource availability among both our install teams and our customers as customers balance the need to meet elevated demand for screening and staffing constraints. Finally, in surgical, we anticipate our full year fiscal 2024 revenue growth to be at the high end of our 5 to 7% long-term target. The growth will continue to come from Myoshore, Fluent, as well as both Assessa and Boulder.

Karleen M. Oberton: We continue to successfully manage resource availability among both our install teams and our customers.

Karleen M. Oberton: As customers balance the need to meet elevated demand for screening and staffing constraints.

Karleen M. Oberton: Finally in surgical we anticipate our full year fiscal 2020 for revenue growth to be at the high end of our 5% to 7% long term target.

Karleen M. Oberton: The growth will continue to come from ISR affluent as well as both assessor in Boulder.

Karleen M. Oberton: Moving next to margins, we reiterate that our guidance assumes a cadence of improvement throughout Fiscal 24 for both gross margin and operating margin. For gross margin, we anticipate Q3 will improve sequentially from Q2 as we continue to work through our higher cost chips in breast health. Remain on pace to exit the fiscal year in the low. Our guidance also assumes Q3 operating margins in the low 30s, and we remain on pace to finish Fiscal 24 approaching 31% Below operating income, we estimate fiscal 24 other income net to be an expense of approximately $10 million in Q3 and an expense between $30 and $40 million for the full year.

Karleen M. Oberton: Moving next to margins, we reiterate that our guidance assumes the cadence of improvement throughout fiscal 'twenty four for both gross margin and operating margin.

Karleen M. Oberton: For gross margin, we anticipate Q3 will improve sequentially from Q2 as we continue to work through our higher cost chips in breast health.

Karleen M. Oberton: We remain on pace to exit the fiscal year in the low sixty's.

Karleen M. Oberton: Our guidance also assumes Q3 operating margins in the low thirties, and we remain on pace to finish fiscal 'twenty four approaching 31%.

Karleen M. Oberton: Below operating income we estimate fiscal 'twenty for other income net to be an expense of approximately $10 million in Q3, and an expense between 30 and $40 million for the full year.

Karleen M. Oberton: Our guidance is based on an annual effective tax rate of approximately 19.75%, and Duluth's shares outstanding are expected to be approximately $238 million for the whole year. To conclude, Q2 was another strong quarter and sets us up nicely for the second half of the year. As always, we remain focused on advancing women's health around the world while delivering on our promises and commitments to our shareholders, employees, customers, and patients. With that, we ask the operator to open the call for questions.

Karleen M. Oberton: Our guidance is based on an annual effective tax rate of approximately $19 seven 5%.

Karleen M. Oberton: And diluted shares outstanding are expected to be approximately $238 million for the full year.

Karleen M. Oberton: Yes.

Karleen M. Oberton: To conclude Q2 was another strong quarter and sets us up nicely for the second half of the year.

Karleen M. Oberton: As always we remain focused on advancing women's health around the world, while delivering on our promises and commitments to our shareholders employees customers and patients.

Karleen M. Oberton: With that we ask the operator to open the call for questions.

Operator: Thank you. If you would like to signal with questions, please press star 1 on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach us. Please limit yourself to one question and one follow-up question. Again, press star 1 if you would like to signal with questions. We'll take our first question from Patrick Donnelly.

Speaker Change: Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone if you join us today using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Please limit yourself to one question and one follow up question.

Operator: Star One if you would like to signal with a question Star One we'll take our first question from Patrick Donnelly with Citi.

Stephen P. MacMillan: Hey guys, thanks for taking the questions. Steve, many of those on the diagnosis, particularly the molecular DXP, continues to put up pretty good numbers in spite of some tough competition, a pretty competitive environment too. Can you just peel back that a little bit and just talk about what you're seeing in the market? You know, again, you called out obviously a few assays that are doing well. But just curious. You know, the key drivers look straight there and the durability as you look forward and how you think about that franchise over the next few quarters.

Patrick Bernard Donnelly: Hey, guys. Thanks for taking the questions.

Speaker Change: Steve maybe one on the diagnostics, particularly the molecular DXP.

Stephen P. MacMillan: Just to put up pretty good numbers in spite of sort of obviously, some tough comps pretty competitive environment too.

Stephen P. MacMillan: You go back that a little bit and just talk about what youre seeing in the market.

Stephen P. MacMillan: You know again, you called out obviously, a few assays that are doing well, but just curious.

Stephen P. MacMillan: The key drivers of the strength there and the durability as you look forward how do you think about that franchise over the next few quarters.

Stephen P. MacMillan: Yeah, Patrick. I really call it it's the dividend and reward for coming to the country and the world's rescue when they needed us during COVID, and as you well know, we placed a ton of Panthers, almost doubled our worldwide placements, and the big question all through that time and through those next few years was, "Yeah, but what's going to happen to those Panthers on the back end?" And what we said was just keep watching because I think what we feel great about is in a labor-constrained world.

Steve: Yes, Patrick I really call it it's the dividend and reward for coming to the country and the world's rescue when they needed us during COVID-19.

Stephen P. MacMillan: And as you well know we placed a ton of Panther has almost doubled our worldwide placements and the big question all through that time and through those next few years was yes, but what's going to happen to those Panthers on the backend.

Stephen P. MacMillan: And what we said is just keep watching because I think what we feel great about is in a labor constrained world.

Stephen P. MacMillan: Our Panther and the workflow automation combined with the incredible menu that we have, the tight footprint on Panther, and then we've added the Fusion sidecar are just incredible workhorses that really are getting adoption. And I think you start to, when you put a double-digit number on top of a 25% number from last year, what we're really just seeing is more customers putting more food on their Panthers, and I think it's the proof is what we've been saying for years, and hopefully, it's starting to become evident in the results.

Stephen P. MacMillan: Our Panther in the workflow automation combined with the incredible menu that we have the tight footprint on Panther and then we've added the fusion sidecar.

Stephen P. MacMillan: These things are just incredible workhorses that really are getting the adoption and I think you'll start to when you put a double digit number on top of a 25% number from last year. What we're really just seeing is more customers putting more menu.

Stephen P. MacMillan: The Panthers and I think it's the proof is what we've been saying for years and hopefully is starting to become evident in the results.

Unknown Speaker: That's helpful. I appreciate it.

Speaker Change: Okay. That's helpful. I appreciate it and then maybe just on capital allocation side remains in focus obviously, you guys announced the recent deal can you just talk about the priority of the other larger repo I think that last quarter.

Speaker Change: <unk> deal a little bit of dilution, how do you think about the priorities here.

Stephen P. MacMillan: And then maybe just the capital allocation side remains in focus. Obviously, you guys announced the recent deal. Can you just talk about the priorities? You have a larger repo, I think that was last quarter. Smaller deal, a little bit of dilution. How do you think about the priorities here in terms of the balance sheet and how active will you be on the M&A side post that deal? Just how large you're thinking would be helpful.

Stephen P. MacMillan: In terms of the balance sheet.

Stephen P. MacMillan: How active will you be on the M&A side post that deal just how large you think that would be helpful.

Unknown Executive: Yeah, Pat, let's try to put this into context. We were talking as a team about this the other day and said, if we could line up the perfect world, we'd love to do like one endomag every quarter. Right, you know, $300 million deal, bring in some additional revenue, products that drop in that we know what to do, and just kind of keep phasing those along. And then maybe a little bit of a buyback here or there.

Speaker Change: Yes, let's try to put this into context, we were talking to the team about this the other day.

Unknown Executive: If we can line up the perfect World, We'd love to do like <unk> every quarter.

Unknown Executive: The real world doesn't work nearly as linearly, but that's what we would like to be doing, those size deals on a fairly regular basis because they don't always pop up from time to time. It is where we'll jump in and do some buybacks, and we're comfortable Yeah, I would just emphasize, Patrick, you know, that the strength of our balance sheet as well as our ongoing cash flow generation allows us significant flexibility to do things like endomag and the share repurchase on an ongoing and regular basis. So, you know, for years to come, as we look at our financial projections over the coming years, we have a lot of That gives some good context. Thanks, Patrick.

Unknown Executive: Right $300 million deal bring in some additional revenue products that drop in that we know what to do and just kind of keep phasing those along and then maybe a little bit of a buyback here or there.

Unknown Executive: Real World doesn't work nearly as linear but that's what we would like to be doing is those size deals on a fairly regular basis.

Unknown Executive: Because they don't always pop up from time to time.

Unknown Executive: It is where it will jump in and do some buybacks in and we're comfortable.

Unknown Executive: Matching the cash because there might be a year, where we can do a number of these like we did one point during COVID-19 picked up by out there in Austin exposed or assess at the edge node.

Unknown Executive: These things that have all been been very good for us So no.

Unknown Executive: No real change, we think the Endo magnetics deal is right down the fairway hopefully exactly what anybody would expect from us and what we've been signaling and if we can find more of those that would be correct with that I'll kick it to carlene, Yeah, I would just emphasize patrick that the strength of our balance sheet as well as our ongoing cash flow generation allows us.

Unknown Executive: Significant flexibility to do things like Endo Mag in the share repurchase on an ongoing and regular basis. So.

Speaker Change: Yes to come as we look at.

Unknown Executive: Our financial projections for the coming years, we have a lot of flexibility and strength.

Unknown Executive: But give some good context, thanks Patrick.

Unknown Speaker: And our next question will come from Jack Meehan with Nefron Research.

Unknown Executive: And our next question will come from Jack Meehan with Nephron research.

Unknown Speaker: Hey, Jack. Thank you. Good afternoon.

Jack Meehan: Hey, Jack Thank you good afternoon.

Unknown Executive: I can take the Eagles questions offline. For now, I wanted to focus on the breast health business pickup where we just left off. I was wondering, you know, Essex talked a little bit about the timeline to close endomagnetics. You know, is there any commentary you can share just around the valuation for the deal in context of, like, what your expectations are in terms of the growth rate of this business? Maybe more broadly, just how it fits with the existing portfolio.

Unknown Speaker: Hello.

Unknown Executive: Can take vehicles.

Speaker Change: <unk> is offline.

Unknown Executive: Now I wanted to focus on the breast health business pick up where we just left off I was wondering.

Unknown Executive: No.

Unknown Executive: Talk a little bit about the timeline to close Endo magnetics.

Unknown Executive: Is there any commentary you can share just around the valuation for the deal in context of like what your expectations are in terms of the growth rate of this business.

Unknown Executive: Maybe more broadly just how it fits with the existing portfolio.

Unknown Executive: Yeah, well, I think we think it fits really nicely with our existing interventional portfolio. And I think that's one of the values that we'll bring is that currently, Endomeg uses a mix of direct and distributors. And we obviously have a significant direct sales force here in the U.S. that I think will be a differentiator for us with that asset in our hands.

Unknown Executive: Yes, well I think we think it fits really nicely with our existing interventional portfolio and I think thats one of the values that will bring us that are currently under Meg eases, a mix of direct and distributors.

Unknown Executive: And we obviously have a significant direct sales force in the U S. I think will be a differentiator for us with that asset in our hands.

Unknown Executive: Okay.

Unknown Executive: And then any comments you can share around, like the growth rate you're expecting for this business? Yeah, I would just say Jack.

Unknown Executive: Then any comments you can share around like the growth rate you're expecting for this business.

Unknown Executive: Yeah, I would just say, Jack, we would expect it to be accretive, certainly to the division's growth rate.

Speaker Change: Yeah, I would just say Jack we would expect it to be accretive certainly to the divisions growth rate.

Unknown Executive: Yes.

Unknown Executive: With most of the industry.

Unknown Speaker: Unknown Speaker. Unknown Speaker. Unknown Speaker. Yep, go ahead. Sorry. I'm sorry. Go ahead, Justin.

Unknown Executive: Okay.

Unknown Executive: <unk>.

Unknown Speaker: Yes go ahead, sorry, I am sorry go ahead Justin.

Unknown Speaker: Oh, I'm sorry. I was just going to say our next question is from Tejas Savant with Morgan Stanley.

Speaker Change: Oh I'm, sorry, I was just going to say our next question is from des Hautes Savant with Morgan Stanley.

Unknown Speaker: Hello, this is Yuko on the call for Tejas. Thank you for taking our questions. I have one question on the recent breast cancer screening update. If USPSTF recommends annual mammal screening, then what does that do from a physician adoption standpoint, given ACS is already there? And then from a quantitative standpoint, how much of an uplift would annual testing represent to your breast health business?

Tejas Rajeev Savant: Hello. This is Hugo on the call for today, Thank you for taking our questions.

Unknown Speaker: I have one question on the recent breast cancer screening update.

Unknown Speaker: USPS TF regimens annual mammal screening them, what does that do from a physician adoption standpoint, Kevin Acs is already there and then from a quantitative standpoint, how much of an uplift with annual testing represents your breast health business.

Unknown Executive: Yeah, you know, as you saw, we're still in the biannual world, and we don't think the USPSTF guidelines change much. Recall that our breast health is really a screening business where it's a capital sale, and less volume dependent. But, you know, we don't really don't see much of an impact either way, just as when the guidelines shifted, quote unquote, negatively a few years back, we didn't see a downturn there and don't see a big shift. Now, we do think the guidelines are a step forward for women, unless you're a woman over 74, where they still haven't gone far enough.

Unknown Speaker: Yes.

Speaker Change: As you saw there really kind of still in the biannual world and we don't think the USPS TF guidelines changed much recall that our breast health is really a screening business, where its a capital sale.

Unknown Executive: And less volume dependent but we.

Unknown Executive: We don't really don't see much of an impact either way just as when the guidelines shifted quote unquote negatively a few years back didnt see a downturn there and don't see a big shift now we do think the guidelines are a step forward for women unless you're a woman over 74, where they still haven't gone far enough.

Unknown Executive: Got it, that was helpful. And then another question on USPSTS. If they were to move to an HPV primary, what would a potential trial design look like to establish a primary HPV claim on your existing Aptima test? And what would the timelines be to run such a trial? Is there a possibility of using real-world data, or would you need a prospective trial?

Speaker Change: Got it that was helpful.

Unknown Executive: And then another question on USB Sts.

Unknown Executive: If they were to move to an HPV primary what would a potential trial design look like to establish primary HBV till late claim on your existing optimal test and what would the timeline speed to run such trial is there a possibility of using real world data or would you need a prospective trial.

Unknown Executive: We are very focused on maintaining co-testing as the gold standard. If anything, what we're seeing is a modest uptick in cervical cancer in women in the United States that really started when the intervals went from three to five years back almost ten years ago. And we believe absolutely that co-testing is the right way to go.

Unknown Executive: We are very focused.

Unknown Executive: We are very focused on maintaining co testing as the gold standard if anything what we're seeing is a modest uptick in cervical cancer in women in the United States that really started when the intervals went from to three to five years back almost 10 years ago.

Unknown Executive: And believe absolutely that co testing is the right way to go so that continues to be our basis based on the scientific facts.

Unknown Speaker: So that continues to be our basis based on scientific facts. Thank you. And our next question comes from Vijay Kumar with Evergreen. Hi, this is Kevin LaFleur, D.J.

Vijay Muniyappa Kumar: Thank you.

Unknown Speaker: And our next question comes from Vijay Kumar with Evercore.

Unknown Speaker: And our next question comes from Vijay Kumar with Evercore.

Vijay Muniyappa Kumar: Hi, This is Kevin <unk> D J.

Vijay Muniyappa Kumar: Congrats on the quarter, 5% on top of a tough comp last year is impressive.

Vijay Muniyappa Kumar: Just on your organic revenue guide range it looks like it's tightening versus being raised given performance in the quarter.

Vijay Muniyappa Kumar: Why not raise guidance.

Vijay Muniyappa Kumar: Once this quarter performance above your internal expectations. Thank you.

Unknown Executive: Yeah, I would just say the impact on the four-year guidance is primarily related to currency. If you actually look at the midpoint of this guide versus our prior guide on a constant currency basis, it's up slightly. And so we really view the performance in this quarter as allowing us to tighten the range, as you indicated, and really honing and delivering within that. We don't need to get too far ahead of ourselves.

Vijay Muniyappa Kumar: Yes, I would just say the impact on our full year guidance is primarily related to currency. If you actually look at the midpoint of this guide versus our prior guide on a constant currency basis, it's up slightly until we really view the performance in this quarter allowed us to tighten the range as you indicated you're really honing in delivering.

Unknown Executive: Within that range.

Unknown Executive: No need to get too far ahead of ourselves.

Speaker Change: Thank you.

Speaker Change: Great. Thank you.

Unknown Speaker: And we'll take a question from Puneet Souda, from Learinc Partners.

Unknown Executive: And we'll take a question from Puneet <unk> with Leerink partners.

Unknown Speaker: Yeah, I see. Thanks for taking the question. So, first one, I would like to touch on the Genius Digital Cytology System.

Unknown Speaker: Yes.

Puneet Souda: For taking the question so.

Puneet Souda: First one if I could touch on the genius digital cytology system.

Puneet Souda: You've had that in the U S market for correct me for a quarter or so.

Puneet Souda: So can.

Unknown Executive: I mean, you've had that in the U.S. market for, correct me, for a quarter or so. Can you provide feedback on sort of what are you hearing from the early folks in the field? And, you know, do you expect the international adoption of this sort to play out similarly within the U.S.? And are you hearing anything in terms of the pushback in terms of the overall throughput of the system?

Puneet Souda: Can you provide a feedback on sort of what are you hearing from the early folks in the field and you.

Unknown Executive: Do you expect.

Unknown Executive: International adoption of this sort of playing out similarly within the U S.

Unknown Executive: <unk>.

Unknown Executive: Are you hearing anything in terms of the pushback in terms of the overall throughput of the system.

Karleen M. Oberton: Let me kick off on that. Yes, it was just recently approved in the U.S., and I would say that we're really partnering with our lab customers on implementing and integrating it into the workflow. So that's what we're focused on, really more of a successful integration into the lab workflow at this point. So minimal contribution in 24 from the U.S. approval But I think the feedback here in the early days is there's a lot of excitement about what this can do for what we've talked about in a labor-constrained environment. And we think this will be really well received.

Speaker Change: Yes, let me kick off and that yes. It was just recently approved in the U S and I would say that we're really partnering with our lab customers on implementing and integrating into the workflow.

Karleen M. Oberton: So that's what we're focused on really it's more of a successful integration into the lab workflow at this point to minimal contribution in 'twenty four from the U S approval, but I think the feedback here early days is there is a lot of excitement of what this can do in what we've talked about in a labor constrained environment.

Karleen M. Oberton: Yeah, We think this will be really well received.

Unknown Speaker: Thanks, Karleen. And a broader question, maybe for Steve. I mean, when you look at the overall competitive landscape, Steve, there is another larger peer who's on the point of care testing side, but they pointed out 40% growth in strep A and women's health. And I know sort of their positioning in the market is different, but just wondering sort of how you're seeing the share shift. We're also seeing that one of the larger peers that's in the reference lab side, they still don't have RSV in the market for their product.

Speaker Change: Got it thanks, Charlie and.

Unknown Speaker: Broader question maybe for Steve.

Unknown Speaker: When you look at the overall.

Steve: Competitive landscape Steve.

Unknown Speaker: There is another larger peer peer who is in the <unk>.

Unknown Speaker: Point of care testing site pointed out 40% growth and strep a in women's health.

Unknown Speaker: And I know sort of what their positioning is different in the market, but just wondering sort of how youre seeing the share shift. We're also seeing that one of the larger peers thats in the reference lab side.

Steve: They still don't have RSV and the market for their product. So just trying to understand sort of where the opportunity set for corelogic continues to be the most strongest and where you think the share opportunities will be will continue to be the sort of the strongest going forward.

Unknown Speaker: So, just trying to understand sort of where the opportunity set for Hologic continues to be the strongest and where you think the share opportunities will continue to be the strongest going forward.

Stephen P. MacMillan: Yeah, it's funny, in so many ways, we don't always focus on share as much as we do on just building our business for our customers and growing the categories. So, you know, I think what we continue to feel great about is, we've got, as you know, more respiratory menus than we've ever had. We've got the fusion sidecar.

Steve: Yes, it's funny in so many ways. We don't focus always is much probably on share as we do on just building our.

Stephen P. MacMillan: Business for our customers and growing the categories.

Stephen P. MacMillan: So I think what we continue to feel great about is we've got as you know.

Stephen P. MacMillan: More respiratory menu than we've ever had we've got the fusion sidecar. So we're building a respiratory business.

Stephen P. MacMillan: We're not competing in the point of care business. We are very strong in our reference labs in the hospital systems.

Stephen P. MacMillan: So we're building a respiratory business. You know, we're not competing in the point of care business. We are very strong in our reference laboratories in the hospital systems, the public health labs, and just really focused on delivering for those customers. And we believe we've got both an economic and workflow advantage, as well as, frankly, the sensitivity and specificity of a lot of our assays. So, continue to feel very good about the growth rates there. And, you know, at the end of the day, these are big markets, and there will be, you know, I think several companies going up, and others that will be shared donors in the equation.

Stephen P. MacMillan: <unk> labs, and just really focused on delivering for those customers and we believe we've got both an economic and.

Unknown Speaker: Thank you.

Unknown Speaker: And moving on to Casey Woodring with J.P. Morgan.

Unknown Speaker: Great Thank you for taking my questions. So just, you know, now that we're halfway through the fiscal year, looking at the top line guidance above the LRP range on an ex-COVID and ex-selling day basis, after the strong quarter, particularly in diagnostics and surgical, you know, I'm curious how you guys are thinking about your fiscal 25. And if growth could fall essentially at the higher end of the LRP range or even above the range, you know, how should we think about the different moving parts there, given the outperformance here so far?

Stephen P. MacMillan: Yeah, Casey, I love it. We're not going anywhere near 25 guidance at this point in time. So we've given the long range where we're delivering for now and investing for the future. But stay tuned for the November call and we'll, we'll get into that. But thank you.

Unknown Speaker: All right, and then maybe if I could just follow up here, how do you assess the international opportunity for BDCV-TV? You mentioned in the preparedness that the strong growth you've seen in that assay really hasn't included any international contribution. So maybe help us frame how much growth runway you have on that assay just based on, you know, phasing in the international piece. Thank you.

Unknown Executive: Yeah, we're in the early stages are really looking at the opportunity there. There are some other things on the market, and frankly, the indications are not necessarily developed. So it's probably a little more of a market development, longer-term opportunity for us internationally, as frankly, many of our products have been very minimal expectations in the near term internationally. I will tell you though, we love the momentum we have certainly in the United States.

Unknown Speaker: And we have a question from Andrew Brackmann with William.

Unknown Speaker: Hi guys, good afternoon.

Unknown Executive: Yeah, certainly, that is one of the strategies to improve margins as we go direct, and we find that as we go direct, we have better outcomes in those markets with our market development and market access capabilities, which, you know, that is something we have invested in over the last five years. So that strength, that commercial investment, is a point of leverage as we move forward, as well as as we continue to grow the portfolio, specifically surgical. It's early days, but certainly, the surgical portfolio is an acquisitive product. So I think there will be multiple drivers as we move forward.

Unknown Speaker: Thanks for taking the questions. Maybe on the international business and margins in particular, can you maybe just sort of talk to us about some of the levers which exist there to drive future margin expansion for that segment in general and how much of that is in your control? And I guess as a related follow-up here, you know, if we go back a handful of years, Hologic has been pretty successful in acquiring distributors, namely international distributors. So I guess how does that sort of play into that margin expansion opportunity? Thanks. Yeah, certainly. That is one of the reasons

Unknown Speaker: And our next question will come from Andrew Cooper with Raymond Jean.

Unknown Speaker: Hey, everybody. It's always great to get the Andrews back to back, I guess.

Unknown Speaker: Maybe just start with international. One thing jumps out just looking at the table at the bottom of the release. The region that seems to have the most outsized growth has really been kind of all others. I think part of that might just be COVID unwinding a little bit, but maybe any thoughts there? And then, you know, as you think about the international opportunity, can you highlight, maybe, if it's a particular product in a particular region, or a particular region in general? What areas are you most excited about in terms of that geographic expansion opportunity as we sit here at the start of May 24?

Stephen P. MacMillan: Yeah, I think the magic of our international business is that it's a lot of individual products in individual countries that we've been building market access capabilities and everything over the years. And while there's no one that's driving it, we've just got a series of different products in different geographies that are really building momentum, and a lot of them in kind of the surgical and interventional space. Certainly, you know, we're getting very excited about our surgical business and its opportunities internationally, both what we've been doing with our own sales forces, plus we did mention we acquired our distributor in the Nordics, so continuing to go very well there. And then, you know, it's just, you get different times.

Stephen P. MacMillan: The fact we got our digital psychology approved internationally, that's been going very well in Western Europe. So it's, it's just this collection of the different franchises, the different geographies, building over time. And I think the magic is, you know, Andrew, from the years in the past, we always said we'd be building these businesses internationally, not by showing up one day and saying, hey, we're going to dramatically expand our sales forces and take a year off in profit growth.

Stephen P. MacMillan: We've been making the investments all along. And then as certain products launch in certain countries, we use that funding to fund the next year and keep building. So it's really just this inexorable building of success.

Unknown Speaker: Great, that's helpful. I'll stop there. Thank you.

Unknown Speaker: Oh, thanks Andrew. Take care.

Unknown Speaker: Hi, this is Brad Bowers on for Anthony, not another Andrew, but... I just wanted to talk about the breast health business.

Unknown Executive: Yeah, I think the biggest piece is it's just a continuation of what we've been doing over the last five, six years, where we've tried to build, especially the gantry business, and build out across the breast care continuum, so into biopsies and into interventional techniques.

Unknown Executive: So as we've been building our own markers business, this has been an area we've been looking into; we got into localizer a few years ago; we've been doing both organic and inorganic, and the timing on this one really is driven by the opportunity to pick up endomag. They've been a company we've been tracking for quite some time that we liked a lot. And the opportunity finally became available to grab it. But yeah, just continuing on what we've been doing.

Unknown Executive: Got it, that's helpful. And then just to stay on the breast business, you recently called out some of the life cycle in the boxes, the 2014 launch timeframe, so maybe getting to the nine, 10 year timeframe. Can you just remind us, I guess, the lifespan on these devices and how Hologic plans to kind of best monetize the upgrade replacement opportunity, and also if this is part of the rationale for the timing of any new systems, software, or product advancements, and thanks again.

Unknown Executive: Yeah I would say we've been very intentional and to really smooth out that business and really move away from the boom bust of a life cycle replacement or a replacement cycle and as we've talked about we've had many software and other upgrades to the gantry system over the past several years all of which have been backwards compatible to that install base so customers have been able to get improvements and upgrades along the way they don't have to wait for that next-gen gantry but having said that we certainly have something in development but that's what we'll be talking about later probably in 25 I think we have one more question. Absolutely, that question will come from Michael Ryskin with Bank of America.

Unknown Speaker: Absolutely, that question will come from Michael Ryskin with Bank of America. Good afternoon.

Unknown Speaker: Good afternoon,

Unknown Executive: Yeah, so I think if we go back to 2019, we would say that, you know, less than or about 20% of our customers were running about four or more assays. At the end of that, end of 23, that was probably approaching high 30%, maybe 40%. But I think, you know, that's the entire installed base. But I think the other metric I'd look to point to is the newer Panthers that were placed since April of 2020.

Unknown Executive: So new customers acquired since the pandemic, you know, over 90% of those customers are running at least one other assay, and over 55% are running at least two other assays. So, you know, I think that all points to the value, the workflow that our customers see with the Panther instrument in the menu, and that, you know, there is a long runway ahead to continue to drive utilization on the installation.

Unknown Speaker: Great, thanks Michael, er, John.

Operator: Thank you. And this now concludes Hologic's first quarter fiscal 2024 earnings conference. Have a good evening.