Q4 2024 Hologic Inc Earnings Call
Good afternoon and welcome to the Halogics Fourth Quarter, fiscal 2024 earnings conference call. My name is Shelley and I am your operator for today's call. Today's conference is being recorded. All lines have been placed on mute.
I would now like to introduce Ryan Simon, Vice President, Investor Relations to begin the call.
Ryan Simon: Thank you, Shelley.
Speaker Change: Good afternoon and thank you for joining the Logic Sports Quarter, fiscal 2024 earnings call.
Ryan Simon: with me today are Steve MacMillan, the company's chairman, president and chief executive officer. Essex Mitchell, our chief operating officer and Karleen Oberton, our chief financial officer.
Ryan Simon: Our fourth quarter press release is available now on the investor section of our website. We will also post our prepare-grim mark to our website shortly after we deliver them. And a replay of this call will be available on our website for the next 30 days.
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 differ materially from those expressed or implied.
Ryan Simon: Such factors include those referenced in the safe harbor statement included in our earnings release and SEC filings.
Ryan Simon: Also during this call, we will discuss certain non-gap financial measures. A reconciliation to gap can be found in our earnings release.
Ryan 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, other revenue related to COVID-19, and sales from discontinued products in diagnostics.
Ryan Simon: 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.
Ryan Simon: Now, I'd like to turn the call over to Stephen MacMillan, Hologic CEO. Thank you, Ryan, and good afternoon, everyone. We are pleased to discuss our financial results for the fourth quarter of fiscal 2024.
Ryan Simon: Total revenue was $987.9 million, and non-GAAP earnings per share were $1.01.
Ryan Simon: We close the fiscal year with another solid quarter, with revenue above the high end of our previous guidance range and EPS at the midpoint.
Ryan Simon: Our fourth quarter results underscore the durable growth of our business and our ability to consistently deliver.
Ryan Simon: For the full fiscal year 2024, we posted $4.03 billion in revenue and non-GAAP EPS of $4.08.
Before discussing our themes for today, we'd like to first reflect on the fiscal year we just completed.
Ryan Simon: In 2024, we made great progress strengthening and growing our business.
By leveraging our leading brands, we drove diverse revenue growth and delivered industry leading margins, all while generating exceptional cash flow.
Ryan Simon: This enabled us to achieve broad-based growth and expand our end markets, thanks to our intense focus on workflow automation and identifying opportunities for better solutions.
Ryan Simon: At the same time, we executed our M&A strategy effectively while delivering differentiated solutions for our customers and further solidifying our durable, competitive advantage as champions of women's health.
We also continue to make progress and are still in the early innings of the large international opportunity that lies ahead.
Going a level deeper, we have four highlights to share that reflect our progress.
Ryan Simon: Why?
Ryan Simon: For the full year, our molecular diagnostics business grew 9%, excluding COVID, continuing its strong growth.
Ryan Simon: These results should put to rest any concerns regarding Panther utilization in a post-COVID environment.
Ryan Simon: Two, in Breast Imaging we maintained our market-leading position while effectively navigating through the impact of the global semiconductor chip shortage.
Ryan Simon: 3. From an operating margin perspective, we finished the year at 30%, maintaining profitability in the top tier of our peer group, with opportunities for further improvement in 2025.
Regarding our M&A strategy,
Ryan Simon: We have been patient, disciplined, and notably more active recently as opportunities we've been cultivating have become actionable.
Ryan Simon: More specifically, we acquired Endomagnetics in July and signed a definitive agreement in October to acquire Gynasonics. Both are tuck-in deals that are straight down the fairway as it relates to our M&A strategy and fit nicely into our global portfolio.
Ryan Simon: We are the right partner to maximize these business opportunities, helping to benefit more women with the innovative products from these deals.
Ryan Simon: From a broader capital allocation perspective, in 2024, we fully funded key organic initiatives and continued to reduce our share count.
Ryan Simon: Additionally, as part of our release today, we announced our intention to launch a new $250 million Accelerated Share Repurchase Program.
Ryan Simon: Overall, we have the ability to consistently deliver value to our shareholders through solid top-line growth, operating and net margin expansion, and strong cash generation and deployment.
Ryan Simon: Now, moving to our two themes for our call, one, reinforcing who we are and how we got here, and two, shedding more light on where we are today and where we're headed in 2025 and beyond.
Ryan Simon: As we've said before, Hologic is a company you can count on.
Ryan Simon: Over the past 10 years, our non-GAAP EPS, Compound Annual Growth Rate, is over 10%. A meaningful achievement.
Ryan Simon: Despite changing markets and unexpected macro conditions over the years, we have consistently delivered.
Ryan Simon: Looking ahead, there will be ups and downs, challenges and headwinds, but we expect to deliver as we have over the past decade.
Ryan Simon: Since joining Hologic in 2013.
Ryan Simon: We have dramatically transformed our business through two important phases.
Ryan Simon: First, we steadied the ship and firmly rooted our leadership brands across our three main franchises, Diagnostics, Breast Health, and Surgical.
Ryan Simon: Second, during the COVID pandemic, we added several growth drivers across each of our franchises, both organically and through acquisitions.
Ryan Simon: Today, we have industry-leading platforms in each franchise and some of the strongest commercial channels in healthcare.
Ryan Simon: The common theme across these two phases of transformation is our ability to create markets, establish market leading positions, and drive growth by generating new opportunities.
Ryan Simon: Looking back, products such as the Panther, Horizon DEXA, our ThinPrep liquid-based pap test.
Ryan Simon: 3D mammography, Novosur and Myosur, all represented improvements on the standard of care and therefore new markets at the time of their introduction.
Ryan Simon: These trailblazing product lines generated new opportunities which we continue to capitalize on today.
Ryan Simon: Building on our foundation, products such as the Panther Fusion, Breast Cancer Index, Genius Digital Psychology, AI in Mammography.
Ryan Simon: fluent and assessor, leverage our established core businesses and enable more growth through market creating innovation.
Ryan Simon: That said, as an organization, we are never satisfied and consistently aim to create new essential innovations to make the best even better.
Ryan Simon: Our culture and leadership have never been stronger as we continue to make a profound impact on women's health globally.
Ryan Simon: Looking ahead to fiscal 2025, we are excited about our durable revenue base.
Ryan Simon: diverse mix of growth drivers including our latest addition in endomagnetics and the opportunity to further strengthen our new product pipeline through organic and inorganic opportunities.
Ryan Simon: We anticipate 2025 to be another year we deliver on our commitments, positioning Hologic for even greater long-term success. Now, I will pass the call over to Essex.
Essex Mitchell: Thank you, Steve. Good afternoon, everyone. In my remarks, I will highlight where we are as a business today, including divisional-level revenue performance, and share insights into where we are headed.
Essex Mitchell: As Steve discussed, our success transforming Hologic has been underpinned by our ability to excel as market creators.
Ryan Simon: Over time, our products and solutions become integral to our customers' operations. Across our franchises, we provide solutions that enhance our customer success by incorporating industry-leading workflow automation.
Ryan Simon: As our products significantly improve our customers' operational efficiency, we are more than just a supplier, we become a partner.
Ryan Simon: Today, our portfolio includes several new products with considerable potential.
Ryan Simon: These products span our franchises and geographies, creating multiple layers of sustainable future growth. Coupled with our strong balance sheet, we have the firepower to add new growth drivers, both organically and inorganically.
Ryan Simon: We are confident that our robust portfolio, along with future additions, will enable us to grow sustainably and navigate the evolving market landscape with agility and resilience.
Ryan Simon: Now shifting gears to our Divisional Revenue Results for the fourth quarter.
Ryan Simon: In Diagnostics, fourth quarter global revenue of $443.3 million grew 6.2% and 9.2% organically, excluding COVID.
Ryan Simon: Molecular Diagnostics remains a pillar of strength for the division, growing 9.1% and 13.2% excluding COVID.
Ryan Simon: Molecular performance continues to be powered by our BBCB TV assay and biotheranostics business.
Ryan Simon: both of which have runway for future growth. The division's respiratory four-plex COVID-FluA-B-RSV assay also contribute growth for the quarter.
Ryan Simon: For the full year, Molecular posted excellent global growth of 9% X-COVID.
Ryan Simon: This performance was again driven by BBCB TV as we continue to grow this market, moving testing for vaginitis to our FDA-approved assays on our highly automated, high-throughput PANTHER system.
Ryan Simon: In addition, we continue to see accretive growth from our biotherapeutics business as we drive adoption and expand coverage for the breast cancer index test.
Ryan Simon: And finally, we are expanding the global footprint of our Panther Fusion System, allowing us to meet the need for high-throughput molecular diagnostic respiratory testing while also setting us up nicely as we build additional menu on the platform.
Ryan Simon: Shifting to cytology and our perinatal business, within diagnostics, we posted 0.7% growth in our fourth quarter.
Ryan Simon: Since the FDA approval of our Genius Digital Diagnostic System for digital Pap test, we've worked closely with our early adopting customers and they've given us great positive feedback on the system.
Ryan Simon: This platform represents a significant improvement to the current PathTest workflows.
Ryan Simon: It combines AI and advanced digital imaging to provide customers more sensitive disease detection and a streamlined efficiency, a digital AI-assisted Pap test.
Speaker Change: For more information visit www.fema.gov
Ryan Simon: We are proud to announce that our first U.S.
Ryan Simon: Genius Digital Diagnostics customers went live in the fourth quarter. This milestone is yet another example of Hologic understanding the needs of our customers and responding to changing market dynamics with essential innovation.
Ryan Simon: Turning to breast health, total fourth quarter revenue of $375.5 million increased 6.2% or 5.3% organically when excluding SSI and endomagnetics.
Ryan Simon: Organic growth in the fourth quarter was primarily driven by increased breast imaging service revenue along with contributions from our gantry business and interventional products.
Ryan Simon: and surgical...
Ryan Simon: Fourth quarter revenue of $156.5 million increased 5.4% compared to the prior year.
Ryan Simon: The period's growth was once again led by CoreMileshore and the platform's complimentary Fluent Fluid Management System, helping to offset declines in our legacy domestic NovaShore business.
Ryan Simon: In addition, our international surgical business continues to drive strong, broad-based performance as we expand access to our technologies into new markets.
Speaker Change: For more information, visit www.fema.gov
Ryan Simon: And finally, in our skeletal business, fourth quarter revenue of $12.7 million decreased 54.9%.
Ryan Simon: This result was expected based on the Horizon DEXA stop shift we announced on our third quarter earnings call.
Ryan Simon: As a reminder, this is a temporary headwind and we expect to resume shipping in the back half of our first quarter.
Ryan Simon: Moving next to where we're headed, I'll first comment on our international business and close with comments on our M&A strategies.
Ryan Simon: From an international perspective, our efforts to expand globally have been broadly successful.
Ryan Simon: Our international business is nearly 50% larger compared to 2019, with an accretive annual revenue growth.
Ryan Simon: That said, the full potential of our international business remains largely untapped.
Ryan Simon: While we have taken key steps and are more direct in international markets than ever before, there is a vast international opportunity available to us that we are still in the early stages of realizing.
Ryan Simon: Over a multi-year horizon we see meaningful growth prospects for our international business as we continue to penetrate new regions and enhance our presence in existing ones.
Ryan Simon: We expect to be accretive to total company growth rates for years to come.
Ryan Simon: Thank you. Thank you. Thank you.
Ryan Simon: Shifting now to M&A, it should come as no surprise that a combination of organic and inorganic innovation will add fuel for our future growth.
Ryan Simon: Our M&A strategy continues to focus on pursuing tuck-in deals that align with our three franchises.
Ryan Simon: We aim to identify and acquire assets that leverage our existing strengths, drive top-line growth, and add accretion to earnings over time.
Ryan Simon: Going deeper, we prioritize assets that nicely fit into our current market segments or near-adjacent markets.
Ryan Simon: We target strategic and high growth areas across our franchises to enhance our current market position and to build global, durable growth portfolio.
Ryan Simon: In summary, our M&A strategy is designed to identify and integrate valuable assets that drive incremental growth.
Ryan Simon: reinforce our market leadership and deliver sustained value to our shareholders.
Ryan Simon: By maintaining focus on our core markets, exploring adjacent opportunities, and driving essential innovation, we believe we are well positioned to navigate 2025 and the years ahead.
Ryan Simon: With that, I'll hand the call over to Karleen.
Karleen Oberton: Thank you, Essex, and good afternoon, everyone.
Karleen Oberton: In my comments today, we will begin with an overview of our solid fourth quarter and full year financial results.
Karleen Oberton: In closing, we will finish with our fiscal 2025 guidance for Q1 in the full year.
Karleen Oberton: We are pleased to close Fiscal 2024 by continuing to meet or exceed our commitments on both the top and bottom line.
Karleen Oberton: In our fourth quarter, total revenue was $987.9 million, growing 4.2% over the prior year period.
Ryan Simon: and 5% organically excluding COVID.
Ryan Simon: In addition, our Q4 non-GAAP earnings per share were $1.01, growing 13.5%.
Speaker Change: For more information visit www.fema.gov
Speaker Change: For the full fiscal 2024, total revenue was $4.03 billion.
Speaker Change: declining 0.2%.
Speaker Change: And non-GAAP earnings per share were $4.08, growing 3%.
Speaker Change: For more information, visit www.fema.gov
Speaker Change: Given the revenue headwind of the skeletal stop ship in Q4, we view these results as solid.
Speaker Change: More notably, for the second quarter in a row, we returned to top-line growth for our total business.
Speaker Change: As we continue to bend the revenue curve in a positive direction.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Before moving on to the income statement, we'd like to highlight the continued strength of our balance sheet, as well as our commitment to our capital allocation strategy.
Speaker Change: In Fiscal 2024, we pulled both levers of our capital allocation strategy by completing a revenue-accretive, tuck-in M&A deal in endomagnetics.
Speaker Change: while also repurchasing 11.2 million shares for $808 million.
Speaker Change: which includes a $500 million dollar ASR completed in the second quarter.
Speaker Change: Over the course of fiscal 2024, we reduced our diluted share count by over 10 million shares.
Speaker Change: Demonstrating our commitment to leveraging our strong balance sheet and cash flow to manage our share count and deliver EPS growth.
Speaker Change: Starting off 2025, as Steve mentioned, we remain confident in our business.
Speaker Change: We continue to leverage our ability to repurchase shares with the announcement of our intention to enter into a new $250 million dollar ASR.
Speaker Change: With our strong operating cash flow, we are in excellent position to continue funding our priority organic investments, as well as our capital allocation strategy.
Speaker Change: We exited the year with over $2.4 billion in cash and investments on the balance sheet.
Speaker Change: and we'll continue to pursue growth opportunities in fiscal 2025.
Speaker Change: As mentioned earlier on this call, we are off to a great start by signing a definitive agreement in October to acquire Gynasonics.
Speaker Change: We anticipate closing this deal in the first half of calendar 2025.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Now, on to the non-GAAP P&L for the fourth quarter, starting at gross margin.
Speaker Change: For more information, visit www.fema.gov
Speaker Change: In Q4, Gross Margin increased to 61.5%.
Speaker Change: Up 110 basis points year over year.
Speaker Change: Driven by broad-based domestic revenue growth.
Speaker Change: We are pleased with this performance, having achieved steady expansion throughout the year while overcoming several headwinds including the amortization of higher cost inventory of semiconductor chips and the headwind from the skeletal stop ship.
Speaker Change: Moving down to P&L.
Speaker Change: Fourth quarter operating expenses of $311 million increased approximately 2.4%.
Speaker Change: This increase was primarily driven by the inclusion of endomagnetics in our fourth quarter results as well as stronger local currencies in our international business.
Speaker Change: Excluding the impact of endomagnetics and FX, our operating expenses were approximately flat compared to the prior year.
Speaker Change: All together, fourth quarter operating margins finished at 30% and net margin was 24%.
Speaker Change: both representing a modest increase over the prior year.
Speaker Change: Thank you. Thank you.
Speaker Change: Below operating income, other income net represented a loss in our fiscal fourth quarter of slightly less than $1 million.
Speaker Change: Better than previously anticipated due to lower net interest expense.
Speaker Change: Finally, our tax rate in Q4 was 19.75% as expected.
Speaker Change: Now, let's move on to our non-GAAP financial guidance for the first quarter and full fiscal year of 2025.
Speaker Change: In the first quarter of fiscal 2025, we are expecting total revenue in the range of $1.025 to $1.035 billion, an EPS of $1 to $1.03.
Speaker Change: For more information visit www.fema.gov
Speaker Change: For the full year 2025, our guidance assumes revenue of $4.15 billion to $4.20 billion dollars and EPS of $4.25 to $4.35 cents.
Speaker Change: To help with constant currency modeling, we are assuming a foreign exchange tailwind of slightly less than $10 million for Q1 and $30 million for the full year.
Speaker Change: Our guidance assumes the recent trend of strengthening local currencies in our international markets continues in Fiscal 25.
Speaker Change: Overall, for the full fiscal year, our guidance assumes organic ex-COVID growth of approximately 4% at the midpoint.
Speaker Change: We expect revenue growth to build throughout the year.
Speaker Change: In Q1, we will be impacted by several transitory headwinds, such as a stopped ship in our skeletal business.
Speaker Change: as well as strong prior year comparisons in breast health and surgical.
Speaker Change: We are also planning conservatively around the respiratory season.
Speaker Change: and the residual impact from recent hurricanes, including the saline IV fluid shortage that we anticipate will be a headwind to our more elective breast and surgical procedures.
Speaker Change: Now, moving on to assumptions underlying our revenue guidance at the division level.
Speaker Change: For core diagnostics, we expect mid-single-digit growth for the full year, driven by our BVCV-Tv assay and the ongoing adoption of our biotherapeutic BCI test.
Speaker Change: Further, as Essex mentioned, we successfully launched Genius Digital Cytology in the U.S. during the fourth quarter.
Speaker Change: We are excited to continue this rollout and the growth opportunity it represents.
Speaker Change: Regarding COVID and respiratory assay assumptions.
Speaker Change: Given the inherent variability of the respiratory season, we continue to plan conservatively for both.
Speaker Change: while maintaining capacity to aggressively meet any surges in demand.
Speaker Change: In addition, fiscal 2024 saw COVID revenue transitioning to our 4-Plex respiratory assay in our base molecular business.
Speaker Change: In 2025, we anticipate lasting the benefit of this conversion.
Speaker Change: In terms of COVID revenue, we expect COVID assay sales to be about $10 million in the first quarter and approximately $25 million for the full year.
Speaker Change: COVID-related items are expected to be about $24 million in the first quarter and approximately $95 million for the full year.
Speaker Change: Closing out our diagnostics business, we expect blood screening revenue of about $5 million in Q1 and about $20 million for the full year.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Pairing to Breast Health
Speaker Change: Over the past two fiscal years, we experienced elevated growth rates as we gradually recovered from the global chip shortage.
Speaker Change: Moving past this dynamic in fiscal 2025, we expect the gantry business within Breast Health to return to more normal growth ahead of our anticipated next generation gantry launch.
Speaker Change: In our interventional breast segment, we expect continued strong performance from our portfolio of disposable needles and markers.
Speaker Change: So, partially offset by recent withdrawal of Bioabsorb products from the market.
Speaker Change: by Deeper Market Access and Market Penetration Opportunities.
Speaker Change: Thank you for joining us.
Speaker Change: Moving next to margins.
Speaker Change: Our Fiscal 25 guidance assumes both gross margin and operating margin expansion.
Speaker Change: Highlighting our strong operational discipline and commitment to shareholder value.
Speaker Change: Thus, we expect Q1 growth margins around 60% and expect improvement of roughly 50 basis points over the course of the year.
Speaker Change: Additionally, we expect Q1 operating margins around 30% with an expected increase of 50 to 100 basis points throughout the year.
Speaker Change: We are in a standing position given the current macro environment.
Speaker Change: Working down the P&L.
Speaker Change: We expect Q1 to represent our highest quarter of operating expense in Fiscal 25.
Speaker Change: This is due to normal seasonal expenses, including larger marketing campaigns, as well as sales and trade meetings.
Speaker Change: For the balance of the year, we anticipate quarterly operating expense to represent a modest increase over fiscal 24 as we include the addition of endomagnetics business into our fiscal 25 guidance.
Speaker Change: Below operating income, we estimate fiscal 25 other income net to be the expense of approximately $10-15 million in Q1 and an expense between $50-60 million for the full year.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Our guidance is based on an annual effective tax rate of approximately 19.5 percent.
Speaker Change: and Deluded Shares Outstanding are expected to be approximately $235 million for the full year.
Speaker Change: To conclude, our solid fourth quarter completes another successful year for Hologic.
Speaker Change: As always, our focus remains on advancing women's health globally and delivering durable long-term results.
Speaker Change: Entering fiscal 25, we are excited about the opportunities ahead.
Speaker Change: With that, we ask the operator to open the call for questions.
Speaker Change: Hi, how are you please? Hi, how are you? I am good, you? Thank you very much. Here we go... OK let's break it down. Yes, sit down please. Question... Yes, ok. Examine... Question... Comer... Yes, Debbie? Question... Yes, Debbie? Question... Gam... Yes, Debbie. Do you say bet... yourself? What? wha?
Speaker Change: Thank you, and if you would like to ask a question, please signal by pressing Star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Again, you can press star 1 to ask a question. We do ask that you would ask one question with a follow-up question. And again, press star 1 on your phone to ask a question. We'll pause for a brief moment to allow everyone an opportunity to signal for questions.
Speaker Change: And our first question is coming from the line of Patrick Donnelly, Witt City.
Patrick Donnelly: Hey guys, thanks for taking the questions. Karleen, maybe you start where you finished it. Hey Steve, how are you?
Patrick Donnelly: On the margins, Karleen, can you talk through how to think about the year? Obviously, a lot of folks were anchored to kind of the 31.5% for the year. And I know there was a lot of focus, you know, as COVID finally gets cleaned up, land on that number. Can you talk about the moving pieces on the margin front for the year and kind of where we should be thinking about the year and then the expansion potential off of this as well?
Karleen Oberton: Yeah, so you're talking about Fiscal 25, Patrick?
Patrick Donnelly: Moving forward? Yes, correct.
Karleen Oberton: Yeah, yeah, so I think we talked about certainly some headwinds in the first half of the year that we think those are Transitory in nature and certainly when we talked about the IV fluids shortage impacting surgical You know our most profitable business that gives you some of the first half Challenges that we think are again transitory and we'll work through those over the course of the year
Karleen Oberton: Some of the key items that we look to over the course of the year and again if you look at the full year revenue guidance.
Karleen Oberton: 4% at the midpoint to the full year, lower than that, certainly in Q1 as we start off, that gives you a sense of accelerated revenue growth in the back year that's going to help that margin expansion at the end of the year.
Speaker Change: Yeah, thanks, Patrick. I think, you know, the reality of the new gantry is it's going to be more impacted in kind of 26, 27, 28.
Speaker Change: for Revenue. We are in that year prior to the launch that it might be a touch slower on pure gantries.
Speaker Change: The flip side is as our service business
Speaker Change: As the interventional business and particularly things like endomag coming through, it's the magic of continuing to deliver. So probably a little bit lower than the last couple of years, as Karleen mentioned, but still very solid. And we still feel really good about the existing gantries and the customers we still have.
Speaker Change: to go, but probably just a little bit lower than last year before it re-accelerates.
Speaker Change: Our next question is coming from Jack Meehan with Nephron Research.
Jack Meehan: Hello, Jack. Thank you. Hello, Steve. Go birds.
Jack Meehan: had a couple of diagnostic questions.
Jack Meehan: ballpark of what the sales were, and then what your view is on kind of how much the level of growth we should expect in 2025.
Speaker Change: Yeah, so I would say a couple of points on VBCV, I think we've talked about that, is approximately our second largest assay, so it's going to be several hundred million dollars in revenue.
Jack Meehan: BioTheranostics is not at that level, it's probably closer to the $100 million plus level. I would think about those as BVCV, a very strong double-digit grower in 24.
Jack Meehan: Great.
Jack Meehan: Yeah, I mean it was definitely in the several tens of millions of dollars for the 4-Plex assay. And so I think at this point again, that was a transition from COVID revenue to this product. And so I think we're going to expect another transition year, if you will. So that's why it's a little bit of a headwind here as we think about the first half of 25.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: Thanks, Jerry.
Speaker Change: Our next question is coming from Anthony Patron with Mizuho Group.
Anthony Patron: Thanks and congrats on the quarter here. Maybe one on breast health and one on gynosonics, the acquisition announced a couple of weeks ago. On breast health just in terms of
Anthony Patron: You know gantry rollout post RS&A and we think about next fiscal year
Anthony Patron: You know, should we be thinking that, you know, sort of the
Jack Meehan: 2014 to 2027 sort of installs from the 3D tomosynthesis initial product cycle, those would be up.
Jack Meehan: for renewal beginning next year? Or is there a bigger portion of that install base that potentially is eligible for an upgrade?
Jack Meehan: And then just on Gynasonics, the Sonata system, maybe just a little bit on how many systems are already out there in the marketplace and just synergies with the existing GYN surgical portfolio.
Speaker Change: Yeah, on the on the breast health piece, I would think, you know, it's going to be a
Speaker Change: I wouldn't expect some big bolus of the 2014 to 2017 all coming due. I think we're going to be phasing it out and frankly, again, looking for more durable growth than the quick bolus of uptake.
Speaker Change: on Gynasonics. Yeah I can answer the Gynasonics question. So first we won't go into too many details on install base or anything like that and so
Jack Meehan: We actually closed, but what I will say is that we believe this really complements our portfolio and really aligns with what our Surgical team is doing every day. So the same customers
Jack Meehan: doing the same type of procedures that are hysteroscopic or transcervical, which really aligns where our strength is at. So excited about it. We'll have a little bit more information once we close.
Speaker Change: I appreciate that. Thank you.
Jack Meehan: Thanks.
Speaker Change: Our next question is coming from Vijay Kumar with Evercore ISI.
Vijay Kumar: Thank you. Thank you.
Vijay Kumar: I guess, how do we make the bridge to the LRP of 5.7? Is skeletal still a headwind here in fiscal 25? Anything else that we need to be aware of?
Speaker Change: draw the bridge from your current guide to the five to seven.
Speaker Change: Yes, so what you missed BJ is talking about what we call transitory headwinds that we're experiencing here Let's say Q1 and potentially into Q2 Both the skeletal again that we in our prepared mock said we start shipping that at the latter half of Q1 So it's definitely a headwind here
Speaker Change: And then we talked about being conservative on our respiratory products, again, given the seasonality of flu. And then finally, the IV fluid shortages that is the result of the hurricanes. We do anticipate that this is going to be a headwind for our surgical and breast businesses that need those fluids.
Speaker Change: here on Q1 and it could creep into Q2.
Jack Meehan: So if you take all those as transitory headwinds for the first half, you look at the midpoint of our guide for the full year, that 4%, much lower growth rate here in Q1, that gives you a sense that the back half is going to have accelerated growth on the revenue.
Jack Meehan: http://www.fema.gov
Speaker Change: Understood. Steve, maybe on this IV fluid shortage, none of the other metric companies have called this out. I'm curious, are you seeing something now or is this more of a modeling assumption? Thank you.
Speaker Change: A bit of both, I think a few have mentioned it and I think the other piece is Canada, I'd remind you we were the first ones that called out the chip shortage.
Steve Macmillan: We've been the first to call out a lot of things, VJ, as you well know, because we're very close to the business. And we are seeing little pockets. I think the other part is our surgical business is very highly elective.
Steve Macmillan: And so part of what is happening is clearly Baxter is prioritizing, or hospitals are prioritizing the emergency and non-elective procedures, so we expect we probably do have a slight more, you know, short-term, clearly transitory impact that again, nothing lurking beyond that as soon as we come bouncing back.
Steve Macmillan: You know, frankly, could be a headwind that could turn into a tailwind, but we always want to be conservative going into starting the year. Yeah, Vijay, I would say at least three to four other med tech companies have called it out specifically. So we're not alone in this.
Speaker Change: Our next question is coming from Ben Leonard with UBS.
Speaker Change: For more information, visit www.fema.gov
Speaker Change: Thank you. This is Lu An for Dane. I just wanted to go back to the transitory headwinds. Is it possible to kind of like quantify like what's the magnitude in shortages and then what is in the kind of like conservatism in the regulatory revenue? Just any more colors that would be great.
Speaker Change: Yeah, I mean, we haven't quantified it specifically. You know, I think from we've talked about the skeletal shop stop ship is roughly $5 million a month.
Speaker Change: We talked about returning to shipment in the back half, so that gives you a sense of what that could be. Certainly, conservatism in the respiratory could be in a range of at least $10-20 million.
Steve Macmillan: and on the IV fluid I think that's still evolving and we really don't have a sense of that quite yet.
Speaker Change: Okay, got it. And then I wanted to touch a little bit on the share repo that you mentioned, the 250. Is that going to happen entirely in one quarter or is that like a year or multi-year program?
Speaker Change: Yeah, we expect we're going to kick that off in the next couple weeks here and it should finish within our fiscal second quarter.
Speaker Change: So we'll have a prorated benefit, if you will, within the fiscal 2025 full year.
Speaker Change: Thank you for joining us. Thank you.
Speaker Change: Our next question is coming from Kasey Woodring with J.P. Morgan.
Kasey Woodring: Hi, great, thanks for taking my questions. I was curious if you could break out the one cue guide by business segment just to help us understand the growth acceleration expected over the course of the year between segments and then also curious what you're expecting in terms of international business growth versus you know domestic sales in 25 and what the outlook is you know across the different businesses internationally.
Speaker Change: Yeah, I mean, we haven't provided the specific detail, but if you think about, we talked about those transitory headwinds, least impact probably in diagnostics, so you can think about diagnostics is in the mid-single-digit growth for the first quarter, and you have the other businesses below that.
Speaker Change: And then just internationally as well, how you're thinking about that.
Speaker Change: Yeah, we expect that our national will grow at a faster rate than our domestic did.
Speaker Change: Melville.
Melville: Got it. Okay. And then just maybe if I can fit in one quick last one. So, you know, you talked about leveraging, you know, some supply chain costs moving around to give you some tax benefit. Just wondering if there's anything baked in there from a supply chain perspective that 19.5% tax rate for 25, or if there's some upside to that number. Thank you.
Speaker Change: Yes, Casey, I would remind you that the 19.5 is lower than fiscal 24. We're taking it down 25 basis points.
Speaker Change: primarily related to limiting some of our foreign losses that weren't deductible. And of course, we're always looking at other supply chain opportunities, or business opportunities to drive the rate. But I wouldn't say that we're ready to commit to anything lower than the 19-5 that's already lower than 24.
Speaker Change: Steady progress.
Speaker Change: Our next question is coming from Matt Mike Madsen with Needham and Company.
Speaker Change: Thank you for joining us. Thank you.
Speaker Change: Yeah, thanks. So I want to ask one on the surgical business. So NovaShirt sounds like it's declining in the U.S. So can you talk about why and whether or not that's something that could be stabilized and maybe return to growth, or is it going to be a perpetual decline?
Speaker Change: For more information visit www.fema.gov
Speaker Change: Yeah, what I would say is that, you know, for a number of years, the volumes of global intermediary operation across the market have been a slow decliner. We've continued to maintain our market share and do well in this space.
Speaker Change: versus competitors become more prevalent, such as IUDs and other things.
Speaker Change: to control.
Speaker Change: hormonal abnormal uterine bleeding. So as of right now we do expect that to continue on a slow decline. Feel great about our ability to continue to grow internationally, which is expanding and has a nice growth rate with Novashore. So expecting all in to still put up market leading results, but we do see it declining in the U.S.
Speaker Change: Okay, got it.
Speaker Change: And then just another one on the Gynostomics deal. I understand it hasn't closed, so I don't know if you can or...
Speaker Change: If you're willing or able to answer this, but I guess, you know, it looks like it's for fibroids, similar to myosur. So I guess why won't, why isn't this something that will cannibalize myosur to some degree? Is it used for, you know, different patients or different types of fibroids or something like that? Is that why it won't work?
Speaker Change: Yeah, it sounds like you're right on it.
Speaker Change: It is for different fibroids. So we have large fibroids on the outside and in the wall of the uterus with the SESA, small polyps, and I'd say only up to type 2 fibroids with Myosur. There are six different types of fibroids.
Speaker Change: Dynasonic, so the Sonata system, fills the gap in between both Assessa and MyoShore. So it is attacking a different type of fibroid using a different technology than MyoShore.
Speaker Change: Our next question is coming from Navan Tai with BNP Paribas.
Navan Tai: Hi, thank you for taking my question. I have one on M&A. If you could discuss recent M&A environment in Hologix 3 segments and maybe more broadly your capital allocation priorities in 2025. Thank you.
Speaker Change: Yeah, I would say that, you know, AskLogic, you know, M&A is within each division, so each division has their own business development teams that are out there identifying assets.
Speaker Change: cultivating relationships and hopefully we're able to acquire assets, you know, before they jump into a process.
Speaker Change: And I would say, as we look to 2025, I think it's probably more of the same as what we saw in 24, a balance of M&A and share repurchase is what we're looking to do.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Thank you.
Speaker Change: Our next question is coming from Michael Ryskamp.
Speaker Change: with Bank of America.
Speaker Change: Hello, this is John on for Michael. I wanted to ask about the Panthers.
Speaker Change: What I believe is one of your manufacturing partners recently missed their results and was wondering if that has something to do with.
Speaker Change: I know that utilization and the Assay Menu expansion is the way to growth. But I'm sure that the level of placements
Speaker Change: It's far different from what it used to be pre-pandemic, but still wanted to ask how that's been trending.
Speaker Change: Yeah, absolutely. I think this is something we've talked about. For the last couple of years, we have an installed base of over 3300 Panthers worldwide, which is significantly higher than what we had prior to the pandemic. And we had obviously an accelerated placement of Panthers during that time. And as we expected, those placements have flowed.
Speaker Change: but no impact on the growth of the business. As we said, molecular diagnostics, excluding COVID, grew 9% in fiscal 24, many years after the end of the post-pandemic, so continued strength with that business.
Speaker Change: Go ahead, please. Go ahead.
Speaker Change: Oh, well, I mean, if you wanted to give me more color, but I would have taken that. But as you know, Michael, and you know, not some people I think sometimes forget is
Speaker Change: We make all of the revenue.
Speaker Change: on the assays, not on Panthers. So I know that we've gotten some questions from investors that are thinking, gee, if we sell less Panthers, is that showing a downturn? But as you know, it's a reagent rental model. So frankly, right now, the next few years are largely driving that assay adoption without having to even place a lot of Panthers, which is even better on the Catholic side. So it's a very good story for us.
Speaker Change: Thank you. Thank you. Thank you.
Speaker Change: 55 users using two or more assays and a third having four or more.
Speaker Change: We haven't provided an update to that and just in general, I'd say that those trends continue to improve, move in the right direction.
Speaker Change: Our next question is coming from Mason Carrico with Stevens.
Mason Carrico: Thank you. Thank you.
Speaker Change: Hey, thanks for taking the questions. This is Harrison on Formasin. It looks like so last quarter I believe you talked about some facility integrations within the breast health business. Could you maybe talk a little bit about the cadence or timeline of how those integrations...
Speaker Change: will play out this year and then the margin impact as we progress through the year. Thanks.
Speaker Change: Yeah, we expect that migration to be completed over the course of 25, which is great, not only from a manufacturing, but also R&D will be seated there and in some great synergies with the R&D teams, but we haven't provided specific improvements, but it is part of the improvement we will see over the course of the year.
Speaker Change: . . . . .
Speaker Change: Got it. Yep, sounds great. And then, so within
Speaker Change: Breast Health.
Speaker Change: Have we largely moved past the high the higher cost of chips at this point? Are we at a more normalized level, you know heading into 25? Or is there still a drag on margin earlier in the year relative to the back half?
Speaker Change: Thanks.
Speaker Change: Yeah, we're probably on the tail end of that, you know, there was wasn't just one ship There was you know, many many different ships that had had the issue. So there could be still a few You know working their way through the system, but you know, I think as we go through 25, we will move past that
Speaker Change: Our next question is coming from Tejas Savant with Morgan Stanley.
Speaker Change: Hi, this is Jason on for Tejas. Thank you for taking our questions. So just a few modeling related questions. So in skeletal health, you expect the supply chain issue to be resolved by the end of F1Q. So how much of any of these sort of $15 million per quarter that are lost can we expect to be recouped in fiscal year 2025, on top of the base sales expectations? And then on a biosorb, could you quantify the financial impact from removing this product for fiscal year 2025? Thank you.
Speaker Change: at Lexington.
Speaker Change: Less than $10 million in 24, so pretty de minimis. And I think on the skeletal, you know, I think what we're really focused on is getting this back on the market and satisfying our customer demand. You know, I wouldn't project right now that there'll be some level of pickup. Again, we need to get it back to shipping status here in the first quarter.
Speaker Change: Hi, this is Ricardo Moreno for Connor. Thank you for taking the question.
Ricardo Moreno: I had a question about, as normal growth returns to the gantry business, how does that coincide with earlier the chip shortage that was experienced with the gantry business intersecting with equipment upgrades and replacement cycles?
Speaker Change: For more information visit www.fema.gov
Speaker Change: Unknown Speaker
Speaker Change: So, what I would say is, as we're kind of through the CHIP issue, and I think we covered that in the prepared comments, that as we get into 25, we expect more normalized growth rates.
Speaker Change: with potentially a little bit of headwind again as we anticipate this next-gen gantry.
Speaker Change: But as Steve talked about, we don't expect a significant increase in that conversion cycle given that.
Speaker Change: Technology Improvements, Software Improvements, AI, has been available to customers in our install base over the past several years. It's been very intentional that our R&D efforts were producing upgrades that were backwards compatible to the install base so that we didn't create this pent-up demand. So I think we're really going to move into a more normalized replacement cycle or ongoing replacement cycle here in the U.S.
Speaker Change: which is a great business to have that steady state.
Speaker Change: Fantastic and coming from Essex comments earlier about the international business and focus there how does that roll in in terms to reaching the pre-pandemic operating margin goal of 31.5% usually those traditionally those margins have been a bit lower than 30
Speaker Change: John Sourbeer, John Sourbeer
Speaker Change: Yeah, well, I think as we've talked about our guide here for fiscal 2025, starting at 30 and expecting some improvement.
Speaker Change: Unknown Executive, Karleen Oberton, Stephen MacMillan, Unknown Executive, Karleen Oberton,
Speaker Change: continue to drive improvement in margins where we can while we know that international is getting bigger and that's usually diluted to the margins. But as international continues to grow, they have their own opportunities to create leverage on their operating margin line. So it's an ongoing balance and we're really pleased about what we expect for 2025.
Speaker Change: For more information visit www.fema.gov
Speaker Change: Hi everyone, this is Maggie Bowie on for Andrew today. Thanks for taking our questions. Maybe one on biothermostics. I know you spoke to earlier you're expecting kind of that double-digit growth that you saw in fiscal 24 for fiscal 2025, but how should we be thinking about the contribution from that to growth moving forward and just where do you feel like you are in terms of that opportunity?
Speaker Change: Yeah, I think we think it's still early innings on that opportunity. You know, I think there's...
Speaker Change: It's pretty low market penetration at this point, but we haven't given guidance beyond 25, but to say that it's still early innings
Speaker Change: It certainly seems accretive to our company for many years to come, as are most of the acquisitions we've been doing over the last few years.
Speaker Change: Great, thank you so much.
Speaker Change: Thank you.
Speaker Change: And our final question is coming from Andrew Cooper with Raymond James.
Andrew Cooper: Hey everyone, thanks for squeezing me in. Maybe just one more on the margin side.
Andrew Cooper: To the degree you can help sort of frame the swing factors of adding that 50 to 100 bits over the course of the year, how much of that is just these transitory items, you know, getting lapsed by the time or resolved by the time you get to the fiscal fourth quarter versus the network optimization and other things you called out in one of your earlier answers.
Speaker Change: Yeah, we haven't quantified them specifically, but certainly they're contributing to, you know, kind of lower margins here in the beginning, the first half of the year. But again, we view this as transitory, and as they clear, we'll reap that margin benefit.
Speaker Change: Okay, I will, I'll stop there. Thank you.
Speaker Change: Great. Thanks, Andrew.
Speaker Change: . . . . .
Speaker Change: Thank you. And this now concludes Hologic's third quarter fiscal 2024 earnings conference call. Have a good evening.
Speaker Change: Don't forget to subscribe on our channel.