Q3 2025 Hologic Inc Earnings Call

Lisa: Ladies and gentlemen, good afternoon, and welcome to Hologic's third quarter fiscal 2025 earnings conference call. My name is Lisa, and I'll be 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 Mike Watts, Corporate Vice President, Investor Relations, to begin our call.

Ladies and gentlemen, good afternoon and welcome to hologic's third, quarter fiscal 2025 earnings conference. Call my name is Lisa and I'll be 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 Mike Watts, corporate vice president investor relations to begin our call.

Mike Watts: Thank you, Lisa. Good afternoon, and thank you for joining Hologic's third quarter fiscal 2025 earnings call. With me today are Stephen MacMillan, the company's Chairman, President, and Chief Executive Officer; Essex Mitchell, our Chief Operating Officer; and Karleen Oberton, our Chief Financial Officer. Our third 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, and a replay of this call will be available for 30 days. Before we begin, we'd 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.

Good afternoon, and thank you for joining hologic's. Third quarter, fiscal 2025 earnings call.

Mike Watts: Also, during this call, we will discuss certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. Two of these non-GAAP measures are organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than one year. Also, organic revenue excluding COVID-19, which further excludes COVID-19 assay revenue and other revenue related to COVID-19. Finally, any percentage changes that 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 Stephen MacMillan, Hologic's CEO.

Also, during this call we will discuss certain non-gaap Financial measures. A Reconciliation to Gap can be found in our earnings release.

2 of these. Non-gaap measures are organic Revenue.

Which we Define as Revenue, excluding divested businesses and revenue from acquired businesses owned by hologic for less than 1 year.

Also, organic revenue, excluding COVID-19, which further excludes COVID-19 assay revenue and other revenue related to COVID-19.

Finally, any percentage changes that we discussed will be on a year-over-year basis. And revenue growth rates will be in constant currency unless otherwise noted

Stephen MacMillan: Thank you, Mike, and good afternoon, everyone. Thanks for joining us to discuss our financial results for the third quarter of fiscal 2025. We're pleased with our performance in the quarter, as we delivered both revenue and non-GAAP earnings per share that exceeded our guidance. We've admittedly hit a few speed bumps the last couple of quarters, but we view our results as clear evidence of the significant progress we have made in putting these bumps behind us as we return to higher growth while improving women's health. We have more work to do, but we believe our performance in the third quarter has us very well positioned for better results as we close out fiscal 2025 and move into next year. Specifically, total revenue for the third quarter was $1.024 billion.

Now, I'd like to turn the call over to Steve McMillan. The logic CEO.

Thank you, Mike and good afternoon, everyone. Thanks for joining us to discuss our financial results for the third quarter of fiscal 2025.

We're pleased with our performance in the quarter, as we delivered both revenue and non-GAAP earnings per share that exceeded our guidance.

We've admittedly hit a few speed bumps, the last couple of quarters, but we view our results as clear evidence of the significant progress. We have made in putting these bumps behind us as we return to higher growth while improving Women's Health.

We have more work to do, but we believe our performance in the third quarter has us very well positioned for better results as we close out fiscal 2025 and move into next year.

Stephen MacMillan: This represented a slight growth of 0.4% and exceeded the high end of our guidance range by about $14 million. Our diagnostics business continued to grow nicely compared to the prior year, and our breast health business improved sequentially as planned. Surgical met expectations, and we got a positive contribution from our skeletal franchise as previous supply constraints lifted. These solid revenue results helped non-GAAP earnings per share reach $1.08 in the third quarter. This was a slight increase of 1.9% compared to a year ago and a penny above the high end of our guidance range. We maintained a very strong non-GAAP operating margin just above 30% as we controlled expenses across the organization and mitigated some tariff impacts. Importantly, our third quarter financial results have us squarely on the path toward accelerating growth that we described in our last call.

Specifically total revenue for the third quarter was 1.024 billion dollars.

This represented slight growth of 0.4% and exceeded the high end of our guidance range by about $14 million.

Our Diagnostics business continued to grow nicely compared to the prior year.

Our breast health business improved sequentially as planned.

Surgical Med expectations, and we got a positive contribution from our skeletal franchise, as previous supply constraints were lifted.

These solid Revenue results, helped non-gaap earnings per share. Reach 1.8 cents in the third quarter.

This was a slight increase of 1.9% compared to a year ago and a penny above the high end of our guidance range.

We maintained a very strong non-GAAP operating margin just above 30% as we controlled expenses across the organization and mitigated some tariff impacts.

Stephen MacMillan: In fact, we completed our annual strategic planning process earlier this summer and are optimistic that we will return to solid mid-single-digit organic revenue growth next year and over our STRAT plan horizon. A key reason we are confident in this outlook is the strengthening of our breast health business. I want to spend a little time on this today since it has understandably been a focus for investors. Although breast health revenues declined in the third quarter versus the prior year, this was expected. In fact, quarterly sales finished slightly ahead of our internal expectations. I want to highlight three areas that underpin this performance and excite us about our future. First, better commercial execution, both in imaging and interventional. In the third quarter, we shipped more 3D gantries than in the prior quarter, validating the sequential improvement we had forecast.

Importantly, our third quarter financial results have us squarely on the path toward accelerating growth that we described in our last call.

In fact, we completed our annual strategic planning process earlier this summer.

And we are optimistic that we will return to solid mid-single-digit organic revenue growth next year and over our strategic plan horizon.

A key reason we are confident in this outlook is the strengthening of our breast health business.

I want to spend a little time on this today since it is understandably been a focus for investors.

Although breast health revenues declined in the third quarter versus the prior year, this was expected.

In fact, quarterly sales finished slightly ahead of our internal expectations.

I want to highlight 3 areas that underpin this performance and excite us about our future.

First, better commercial execution, both in imaging and interventional.

Stephen MacMillan: In the United States, especially, our new commercial leadership team began to build on the bifurcated sales structure and tighter processes they established earlier in the year. Based on this foundation, we rolled out a new strategy to upgrade older end-of-life gantries, which we expect to bear more fruit in the fourth quarter and into 2026. As we have previously discussed, gantry replacement cycles have become longer, but we remain encouraged that our leading market share remains intact, and we believe this has been validated by competitive gantry wins in recent quarters. And while all of this was happening in mammography, interventional sales increased 6% organically, reflecting an easier comparable but also the early benefits of our more focused domestic sales force. The second reason we are excited about breast health and a major reason we continue to win competitively is our consistent delivery of both clinical and product innovation.

In the third quarter, we shipped more 3D gantries than in the prior quarter validating the sequential Improvement. We had forecast.

In the United States, especially our new commercial leadership team, we began to build on the bifurcated sales structure and tighter processes they established earlier in the year.

Older end-of-life gantries, which we expect to bear more fruit in the fourth quarter and into 2026.

As we have previously discussed, Gantry replacement cycles have become longer, but we remain encouraged that our leading market share remains intact. We believe this has been validated by competitive Gantry wins. In recent quarters,

And while all this was happening in mammography, interventional sales increased 6% organically, reflecting an easier comparable but also the early benefits of our more focused domestic sales force.

The second reason we are excited about breast health and a major reason we continue to win. Competitively is our consistent delivery of both clinical and product innovation.

Stephen MacMillan: For example, a retrospective study we published recently with physicians from Sanford Health in South Dakota evaluated more than 180,000 mammograms conducted over 10 years. This real-world study found that high-resolution 3D mammography conducted with our Clarity HD software was associated with higher cancer detection rates than our standard resolution 3D. This is one of scores of clinical studies published by our radiology customers that demonstrate the value of our technologies, creating by far the deepest body of evidence in our category. In terms of product innovation, this quarter we are launching our latest artificial intelligence solution, Genius AI Detection Pro, which will extend our leadership and breast-focused software. This cloud-based solution, developed with our partner Therapixel, is essentially an all-in-one AI assistant for the radiologist. It analyzes prior and current mammograms through a 2D and 3D deep learning algorithm for increased accuracy and faster throughput.

For example, a retrospective study we published recently with physicians from Sanford Health in South Dakota evaluated more than 180,000 mammograms conducted over 10 years.

This real-world study found that high-resolution 3D imaging conducted with our Clarity HD software was associated with higher cancer detection rates than our standard resolution 3D.

This is one of scores of clinical studies published by our radiology customers that demonstrate the value of our technologies.

Creating by far the deepest body of evidence in our category.

In terms of product Innovation, this quarter we are launching our latest artificial intelligence solution, genius. AI detection Pro, which will extend our leadership and breast focused software.

This cloud-based solution developed with our partner, Therapy Pixel, is essentially an all-in-one AI assistant for the radiologist.

Stephen MacMillan: A single streamlined interface boosts efficiency up to a 24% reduction in reading time by capturing all key information in one place. This includes breast density scores, patient history, and lesion and case scores. The software will even check image quality and automatically pre-populate the radiologist's report with key findings. It is being sold as an upgrade on our three-dimension system now and will be available on our next-generation instrument, EnVision, when it launches next year. Third, we're really excited about EndoMagnetics, which we acquired last summer. EndoMag expands our portfolio of breast surgery products as we offer additional value across the entire breast cancer continuum of care.

It analyzes prior and current mammograms through a 2D and 3D deep learning algorithm for increased accuracy and faster. Throughput, a single streamlined interface boosts. Efficiency up to a 24% reduction in Reading time.

By capturing all key information in one place.

This includes breast density scores, patient history and lesion and case scores.

The software will even check image quality and automatically pre-populate the radiologist's report with key findings.

It is being sold as an upgrade on our 3 Dimension system. Now,

And will be available on our next Generation instrument and vision when it launches next year.

Third, we're really excited about endomag, which we acquired Last Summer.

Stephen MacMillan: As a reminder, EndoMag markets two primary disposable products: Magseed, a tiny wireless seed that enables breast surgeons to quickly find and remove a tumor, and MagTrace, a radiation-free tracer that finds and maps target lymph nodes to be removed or biopsied during surgery. Both products operate with a small piece of capital called the SENTIMAG system. In the third quarter, EndoMag contributed nearly $20 million of revenue at a very healthy gross margin. The business has been exceeding our deal model and will begin adding to organic growth rates in August. Before I turn the call over to Essex, let me conclude by saying that the operative word for Hologic in the third quarter was progress. Progress in exceeding our near-term financial commitments, progress in strengthening our breast health business, and progress toward accelerating overall company growth in the fourth quarter as well as '26 and beyond.

endomag expands our portfolio of breast surgery products as we offer additional value across the entire breast cancer, Continuum of Care,

As a reminder, Endomag markets two primary disposable products.

Mag seed, a tiny Wireless seed that enables breast surgeons to quickly find and remove a tumor.

And MAG, trace a radiation-free tracer that finds and maps target lymph nodes to be removed or biopsied during surgery.

Both products operate with a small piece of capital called the Center Mag System.

In the third quarter, Endomag contributed nearly $20 million in revenue at a very healthy gross margin.

The business has been exceeding our deal model and will begin adding to organic growth rates in August.

Before I turn the call over to Essex, let me conclude by saying that the operative word for Hologic in the third quarter was progress.

Progress in exceeding, our near-term financial commitments progress in strengthening our breast health business.

Stephen MacMillan: All in all, we are confident in our path and optimistic about our future. Now I will turn the call over to Essex.

And progress toward accelerating overall company growth in the fourth quarter, as well as 26 and beyond.

All in all, we are confident in our path and optimistic about our future. Now, I will turn the call over to Essex

Essex Mitchell: Thank you, Steve, and good afternoon, everyone. In my remarks today, I will first review our divisional revenue performance in the third quarter. Then I'll provide an update on the positive progress we have made in mitigating tariffs. As Steve said, our results in the third quarter were strong, with revenue of $1.024 billion exceeding the high end of our guidance. While we faced several challenges this year, we believe they would be temporary, and we're excited to see the momentum building across the business as we look toward FY26. Starting in diagnostics, third quarter revenue of $448.9 million grew 0.9% or 2.9% organically, excluding COVID-related sales. As a reminder, much of the geopolitical turmoil we've discussed this year affects our diagnostics business. Specifically, funding cuts to USAID in Africa and the challenging operating environment in China lowered otherwise solid growth in the third quarter.

Thank you, Steve, and good afternoon, everyone. In my remarks today, I will first review our divisional revenue performance in the third quarter. Then I'll provide an update on the positive progress we have made in mitigating tariffs.

As Steve said, our results in the third quarter were strong, with revenue of $1.024 billion, exceeding the high end of our guidance.

Decided to see the momentum building, AC the business, as we look towards FY26.

Starting in Diagnostics.

Third quarter, revenue of 448.9 million group 0.9%, with 2, or 2. N organically. Excluding coid related sales.

As a reminder, much of the geopolitical turmoil we've discussed this year, affects our diagnostic business.

Essex Mitchell: As our team navigates these headwinds, the underlying growth drivers in diagnostics remain strong. We are still in the early innings of vaginitis and biotheranoptics opportunities. Worldwide panther utilization continues to reach new all-time highs, and our cytology customers are excited about the rollout of our Genius digital cytology platform. Molecular diagnostics continued to lead the way in the third quarter, with global growth of 2.4% or 5.2% excluding COVID. In the United States, molecular grew 7.3% excluding COVID. Growth was driven by strong sales of our BV/CV/CV assay and our portfolio of panther fusion assays. Our diagnostics team has done an outstanding job taking BV/CV/CV from a new product in 2019 to what is now our second-largest assay. Much of the growth we realized to this point has been from converting existing manual testing to our fully automated high-throughput panther system.

Specifically, funding cuts to U.S. aid in Africa and the challenging operating environment in China lowered, otherwise solid growth in the third quarter.

As our team navigates these headwinds.

The underlying growth drivers and diagnostics remain strong.

We are still in the early innings of vaginitis and BOP. There are fantastic opportunities.

Worldwide Panther utilization continues to reach new all-time highs.

And our psychology customers are excited about the rollout of our Genius digital cytology platform.

molecular Diagnostics continue to lead the way in the third quarter with global growth of 2.4% or 5.2%, excluding Co

In the United States, molecular growth grew 7.3%, excluding COVID.

Growth was driven by strong sales of our BVCB TV, assay, and our portfolio of Panther Fusion assays.

Our Diagnostics team has done an outstanding job taking bvcb TV from a new product in 2019 to what is now our second-largest assay.

Essex Mitchell: There's still meaningful opportunity to convert more of this testing, demonstrated by several key account wins this quarter. But the larger opportunity will be to reach the estimated 60% of women in the US who aren't tested at all when they experience vaginitis symptoms. To this end, we've deployed our physician sales force to provide education and awareness at the provider level, leveraging the same strategy we use to grow testing for sexually transmitted infections. Before moving on, I'd like to highlight our panther fusion sidebar and how it will play a key role in diagnostics growth moving forward. As we emerged from the pandemic, two things became clear across our customer base. Customers loved the workflow advantages of the panther, and labs were looking to consolidate their testing onto fewer platforms. The latter is the opportunity for panther fusion.

Much of the growth we have realized to this point has been from converting existing manual testing to our fully automated, high-throughput Panther system. There's still meaningful opportunity to convert more of this testing, as demonstrated by several key account wins this quarter.

But the larger opportunity will be to reach the estimated 60% of women in the US who aren't tested at all. When they experience vaginitis symptoms,

To this end we've deployed, our physician sales force to provide education and awareness at the provider level leveraging. The same strategy we use to grow testing for sexually transmitted infections.

Before moving on, I'd like to highlight our Panther Fusion sidecar and how.

It will play a key role in Diagnostics growth, moving forward. As we emerge from the pandemic 2 things became clear across our customer base

Customers loved the workflow advantages of the Panther, and labs were looking to consolidate their testing onto fewer platforms.

Essex Mitchell: Fusion uses PCR technology to unlock our full menu of 23 plus assays, spanning across several testing categories. Currently, fusion is mainly used for respiratory testing, but we've been seeing good traction this year as customers adopt more menus. In particular, our open-access testing kits contributed to solid fusion growth in the third quarter. Open access gives labs the flexibility to run their own lab-developed tests on our fusion platform. In addition, over the next several years, we plan to further diversify our menu by launching IVD tests for GI and hospital-acquired infections. As we continue to deliver this innovation, it further cements Hologic as an indispensable presence in the molecular lab. Turning to our cytology and perinatal businesses, third quarter revenue declined 2.2%. This result was expected given the reduction in our China forecast that we discussed the last quarter.

The latter is the opportunity for Panther Fusion.

Fusion uses PCR technology to unlock our full menu of 23 Plus assays.

Spanning across several testing categories.

Currently, Fusion is mainly used for respiratory testing, but we've been seeing good traction this year as customers adopt more menu.

In particular our Open Access testing kits. Contributed to solid Fusion growth. In the third quarter, Open Access gives last the flexibility to run their own lab developed tests on an hour, Fusion platform.

In addition, over the next several years, we plan to further diversify our menu by launching IBD tests for GI and hospital-acquired infections.

As we continue to deliver this innovation, it further cements Whole Logic as an indispensable presence in the molecular lab.

Turning to our psychology and perinatal businesses.

third quarter, Revenue declined, 2.2%

Essex Mitchell: Excluding China, cytology would have grown low single digits for the quarter, a solid result that was fueled by the rollout of our Genius digital diagnostics system. As we implement Genius at more laboratories around the world, we've received resoundingly positive feedback. Genius transforms a traditional manual review of PET slides, which was previously conducted on glass under a microscope, by capturing a digital image of the slide. This digital image can then be reviewed remotely from anywhere in the customer's network on our review station. Using our proprietary artificial intelligence algorithm, Genius identifies precancerous lesions and cervical cancer cells for examination by lab professionals, enabling a faster, more accurate diagnosis. These workflow advantages not only address the growing labor shortages our customers face but also enable cervical cancer screening in areas of the world where infrastructure is limited.

This result was expected given the reduction in our China forecast that we discussed the last quarter.

Excluding China psychology would have grown low single digits for the quarter, a solid result that was fueled by the rollout of our genius. Digital diagnostics system,

as we Implement genius at more Laboratories around the world. We received resoundingly, positive, positive feedback.

Genius transforms or traditional manual.

review of Pepsi's, which was previously conducted on glass under a microscope by capturing a digital image of the slide,

Viewed remotely from anywhere in the customer's Network on our review station.

Using our proprietary, artificial intelligence algorithm genius identifies pre-cancerous lesions and cervical, cancer cells for examination by lab professionals. Enabling a faster more accurate diagnosis

Essex Mitchell: Because the Genius system requires an overhaul of the traditional PET screening workflow, we expect the full rollout to be a multi-year process, contributing to growth for the next several quarters. Moving to breast health, revenue of $365.2 million declined 5.8% or 10.8% organically, excluding EndoMagnetics and SSI. The decline versus prior year was expected as the third quarter of FY24 presented our toughest cut of the year. Importantly, as Steve mentioned, revenue grew sequentially compared to the second quarter and finished slightly ahead of our internal goal. We were encouraged to see the progress in Q3 that gives us confidence this business is rebounding and will return to growth in Q4. Most apparent in the third quarter results was the strong interventional performance, growing 31.8%. EndoMagnetics played a big role in this growth and turned organic in Q4.

These workflow advantages, not only address, the growing labor. Shortages, our customers face but also enables cervical cancer. Screening in areas of the world. Where infrastructure is limited.

Because the Genius system requires an overhaul of the traditional path screening workflow, we expect the full rollout to be a multi-year process contributing to growth for the next several quarters.

Moving to breast health.

Revenue of 365.2 million declined, 5.8% or 10.8%, organically excluding endomag and SSI.

The decline versus prior year was expected as the third quarter of fy24, presented our toughest cut of the Year. Importantly, as Steve mentioned Revenue, grew sequentially compared to the second quarter and finished slightly ahead of our internal goals.

We were encouraged to see the progress in Q3 that gives us confidence. This business is rebounding and will return to growth in Q4, most apparent in the third quarter results, which highlighted the strong Interventional performance.

Growing 31.8%.

Endomag played a big role in this growth.

Essex Mitchell: But even excluding EndoMags, organic interventional sales grew 6%, showing the immediate impact of our refocused sales force. Turning to surgical, third quarter revenue of $178.4 million increased 6.3% or 1.2% organically, excluding gynecotics. Growth continues to be led by International, which grew 24.8%. The investments we've made in our commercial and market access capabilities outside the United States have significantly expanded the. International surgical growth was driven by two key factors in the third quarter: adoption in markets where reimbursement has recently been established and expanding into new markets altogether, and we're encouraged by the strong momentum across our entire surgical portfolio. For example, NovaSure, which has faced challenges in the US, has consistently delivered double-digit growth internationally over the past several quarters. This highlights the significant opportunity we still have to elevate women's health globally.

In turns organic in Q4, but even excluding inomax organic Interventional. Sales groups, 6% showing the immediate impact of our refocused sales force,

Earnings to Surgical.

Third, quarter, revenue of 178.4 million increased 6.3% or 1.2%, organically, excluding gain of tonics.

Growth continues to be led by an international, which grew 24.8%.

The investments we've made in our commercial and market access capabilities outside the United States have significantly expanded the.

international. Surgical growth was driven by 2. Key factors in the third quarter adoption and markets were reimbursement. Has recently been established

And expanding into new markets, altogether.

And we're encouraged by the strong momentum across our entire surgical portfolio. For example, NovaSure, which has faced challenges in the U.S., has consistently delivered double-digit growth internationally over the past several quarters.

This highlights the significant opportunity. We still have to elevate women's health globally.

Essex Mitchell: Finally, in our skeletal business, third quarter revenue of $31.3 million grew 62.1% as we resumed shipping our final DEXA model in the quarter. Sales were roughly in line with our expectations but higher than historic levels as we continue to meet pent-up demand from the prior shipping hold. Before I turn the call over to Karleen, I wanted to provide an update on the positive progress we have made in mitigating the impact of global tariffs on our business. As a reminder, last quarter we shared a worst-case tariff estimate of $20 to $25 million per quarter. We anticipated that approximately two-thirds of this amount would come from the 10% tariff on imports from Costa Rica, where we manufacture most of our surgical and interventional breast health products.

Finally.

In our Skeleton business, third quarter revenue of $31.3 million grew 62.1% as we resumed shipping our final DEXA model in the quarter.

Sales were roughly in line with our expectations but higher than historic levels as we've continued to meet pent-up demand from the prior shipping. Hold

Before I turn the call over to carlen. I wanted to provide an update on the positive progress. We have made in mitigating the impact of global tariffs on our business.

As a reminder, last quarter, we shared a worst-case tariff estimate of $20 to $25 million per quarter.

We anticipate that approximately two-thirds of this amount would come from the 10% tariffs on imports from Costa Rica.

Essex Mitchell: Shipments of both shipments of products to and from China represent the next largest portion, accounting for roughly 15% of the total. Our team has been hard at work over the last 90 days evaluating options to reduce this tariff impact. Through changes to our global supply chain and operating model and various procurement efforts, we expect to mitigate roughly half of the amount we originally provided. This means we now expect to incur $10 to $12 million in tariffs per quarter. Of course, this is based on tariffs as they stand today and is subject to change. With that, I'll hand the call over to Karleen.

Where we manufacture most of our surgical and interventional breast health products.

Shipments of both of shipments of products to and from China represent the next largest portion.

Accounting for roughly, 15% of the total.

Our team has been hard at work over the last 90 days at evaluating options to reduce this tariff impact.

Through changes to our global supply chain and operating model, in various procurement efforts, we expect to mitigate roughly half of the amount. We originally provided.

this means, we now expect to incur 10 to 12 million, in tariffs per quarter,

Of course, this is based on tears as they stand today and is subject to change.

Lisa: Thank you, Essex, and good afternoon, everyone. In my comments today, I will start by walking through the rest of our non-GAAP income statement, then touch on several key financial metrics, and finish with our guidance for fiscal Q4 and the full year. In the third quarter, we delivered EPS of $1.08, growing modestly versus the prior year and exceeding the high end of our guidance range. Strong execution on the top line helped to achieve these results, with all our global divisions meeting expectations in the quarter. Now to the rest of the income statement. Non-GAAP gross margin closed the quarter at 60.3%, representing an 80 basis points decline compared to the prior year.

Thank you, Essex and good afternoon, everyone.

In my comments today, I will start by walking through the rest of our non-GAAP income statement.

Then touch on several key financial metrics.

And finish with our guidance for fiscal Q4, in the full year.

In the third quarter, we delivered EPS of $18, growing modestly versus the prior year and exceeding the high end of our guidance range.

Strong execution on the top line helped to achieve these results.

With all our Global divisions meeting expectations in the quarter.

Now to the rest of the income statement.

Non-gaap gross margin closed, the quarter at 60.3%.

Representing an 80 basis points decline compared to the prior year.

Lisa: This decrease was driven by product mix but also by a reserve recorded in our skeletal health division based on our plan to discontinue sales of our Fluoroscan Insight system at the end of the fiscal year. This was a strategic decision based on the product's low gross margin and growth potential and limited fit in our portfolio. Fluoroscan is expected to generate about $18 million of product and service revenue in fiscal 2025 before we stop selling it next year. I should also mention that cost of goods sold included about $1.4 million of tariff expense in the third quarter, less than anticipated in part as a result of our mitigation efforts. Moving down the P&L, third quarter operating expenses of $309.6 million increased 2.2%.

This decrease was driven by product mix.

But also by our reserve recorded in our Skeletal Health division based on our plan to discontinue sales of our Floor Scan Insight system at the end of the fiscal year.

This was a strategic decision based on the product's low, growth margin and growth potential.

And limited fit in our portfolio.

Laura Scan is expected to generate about $18 million in product and service revenue in fiscal 2025, before we stop selling it next year.

I should also mention that the cost of goods sold includes about $1.4 million in tariff expenses in the third quarter.

less than anticipated, in part as a result of our mitigation efforts,

Moving down the p&l.

Lisa: This increase was driven by the inclusion of EndoMag and gynecotics in our results, as well as increased expense related to our deferred compensation plan. Excluding these acquisitions, operating expenses would have declined 4.3%, underscoring our commitment to disciplined expense management and operational efficiency across the organization. Third quarter operating margin finished at 30.1%, representing a decrease of 110 basis points compared to the prior year, but still best in class relative to our peers. This decrease reflects the dilutive impact that EndoMag and gynecotics currently have on our bottom line. As we continue to integrate these acquisitions, however, we do expect their profitability to improve, especially since both already have gross margins that are creative to our corporate average. Below operating income, other income net was a loss in our fiscal third quarter of slightly less than $6 million.

Third quarter operating expenses of 39.6 million increased 2.2%.

This increase was driven by the inclusion of endomag and Gina's Sonics in our results.

As well as increased expense related to our Deferred Compensation Plan.

Excluding these acquisitions, operating expenses would have declined 4.3%.

Underscoring our commitment to disciplined expense management and operational efficiency across the organization.

Third quarter operating margins finished at 30.1%.

Representing a decrease of 110 basis points compared to the prior year, but still best-in-class relative to our peers.

This decrease reflects the dilutive impact that endomag and geinos currently have on our bottom line.

As we continue to integrate these Acquisitions. However, we do expect there and profitability to improve.

Especially since both already have gross margins that are creative to our corporate average.

Lisa: This was better than anticipated as the increasing value of investments related to our deferred compensation plan largely offset the increase we saw in G&A expense from strong equity market performance in the quarter. Finally, our tax rate in Q3 was 19.25% as expected. Altogether, net margin for the quarter was a very healthy 23.8%, decreasing 100 basis points compared to the prior year but increasing 60 basis points sequentially. Combined, these results led to non-GAAP earnings per share of $1.08, slightly exceeding our bottom line commitment. Our strong profitability helps to drive excellent cash generation as we delivered $343 million of operating cash flow in the third quarter. We finished the quarter with $1.88 billion in cash and short-term investments on our balance sheet in a net leverage ratio of 0.6 times.

Below operating income, other income, net was a loss in our fiscal Q3 of slightly less than $6 million.

This was better than anticipated.

As the increase in value of Investments related to our Deferred Compensation Plan. Largely offset the increase we saw in GNA expense from strong Equity market performance in the quarter.

Finally, our tax rate in Q3 was 19.25% as expected.

Altogether, net margin for the quarter was a very healthy 23.8%.

Decreasing 100 basis points compared to the prior year, but increasing 60 basis points sequentially.

Combined, these results led to non-GAAP earnings per share of $0.018, slightly exceeding our bottom line commitment.

Our strong profitability helps to drive. Excellent cash generation as we delivered 343 million of offering cash flow in the third quarter.

We finished the quarter with $1.88 billion in cash and short-term investments on our balance sheet and a net leverage ratio of 6 times.

Lisa: We also refinanced our credit agreement earlier this month, so we continue to enjoy tremendous financial and strategic flexibility. Now let's move on to our updated non-GAAP financial guidance for the full fiscal year and fourth quarter. For the fourth quarter, we are expecting total revenue of $1.03 billion to $1.04 billion and non-GAAP EPS in the range of $1.09 to $1.12. I would point out that based on our good performance in Q3, the sequential step-up that is required in Q4 is much less than we previously forecasted. At the midpoint of these ranges, we expect mid-single-digit revenue growth and high single-digit EPS growth in the fourth quarter. This would mark a return to our longer-term goals for financial performance.

We also refinanced our credit agreement earlier this month, so we continue to enjoy tremendous financial and strategic flexibility.

Now let's move on to our updated non-gaap Financial guidance, for the full fiscal year and fourth quarter.

For the fourth quarter, we are expecting total revenue of 1.03 billion to 1.04 billion.

And non-GAAP EPS in the range of $1.99 to $112.

I would point out that based on our good performance in Q3.

The sequential step up that is required in Q4 is much less than we previously forecasted.

At the midpoint of these ranges. We expect mid single-digit Revenue growth and high single-digit EPS growth in the fourth quarter.

This would mark a return to our longer-term goals for financial performance.

Lisa: For the full year, we are also calling up the midpoints of our guidance ranges for revenue and EPS based on our strong performance in the third quarter, as well as lower tariff headwinds. We now expect revenue in the range of $4.081 billion to $4.091 billion and non-GAAP EPS of $4.23 to $4.26. All in all, we remain on the financial improvement path that we outlined earlier this year: stabilization in Q2, progress in Q3, and a return to growth in Q4. As our teams continue to execute on this plan, our divisional outlook from our prior guidance remains largely unchanged. However, there are a few trends worth calling out for the fourth quarter. In breast health, as Steve and Essex discussed, we expect to return to slight top-line growth in the fourth quarter.

For the full year, we are also calling up the midpoints of our guidance ranges for revenue and EPS based on our strong performance in the third quarter, as well as lower tariff and Henwood headwinds.

We now expect revenue in the range of $4.081 billion to $4.091 billion.

In non-gaap, EPS of 4.23 to $4.26.

All in all remain on the financial Improvement, path that we outlined earlier this year.

Stabilization and Q2.

Progress in Q3.

In a return to growth in Q4.

As our teams continue to execute on this plan. Our divisional Outlook from our prior prior, guidance remains largely unchanged.

However, there are a few Trends worth calling out for the fourth quarter.

In breath health, as Steve and Essex discussed.

We expect to return to slight topline growth in the fourth quarter.

Lisa: Compared to the prior year, our diagnostics business outside the United States will continue to be affected by the difficult operating environment in China and reduced funding for our HIV tests in Africa. In surgical, we expect to benefit from an easy comparable period in Q4 of fiscal '24, coupled with better commercial execution. As a result, we anticipate in the fourth quarter will be our strongest quarter of revenue growth for the year. In skeletal, we anticipate outsized growth in the fourth quarter as we'll be comping against a full quarter of the DEXA stop ship in the prior year period. In 2026, however, skeletal revenue will be less than in recent quarters as we will have fulfilled pent-up demand and stop selling our Fluoroscan product.

Compared to the prior year, our Diagnostics business outside the United States will continue to be affected by the difficult operating environment in China.

In reduced funding for our HIV tests in Africa.

In surgical, we expect to benefit from an easy comparable period in Q4 of fiscal 24.

Coupled with better commercial execution.

As a result we anticipate in the fourth quarter will be our strongest quarter of Revenue growth for the year.

In skeletal, we anticipate outsized growth in the fourth quarter. As we will be comping against a full quarter of the dexa. Stop shift in the prior year, period.

In 2026. However,

Skeletal revenue will be less than in recent quarters, as we will have fulfilled pent-up demand and stopped selling our Flora Scan product.

Lisa: To help with a few other modeling items, based on recent foreign exchange rates, the weaker US dollar should represent a tailwind of approximately $6 million in the fourth quarter. We expect COVID assay sales to be about $5 million in the fourth quarter and sales of COVID-related items to be about $25 million. Finally, we expect blood screening revenue of about $5 million in Q4. As a reminder, both COVID-related sales and blood screening revenue are backed out of our organic growth calculations. Moving to the rest of the P&L, our full-year expectations for growth in operating margins in the low 60s and low 30s, respectively, remain unchanged. In the fourth quarter, we do expect to incur about $8 million of tariff expenses, and as Essex said, this number will increase to $10 to $12 million on a quarterly basis in fiscal 2026.

To help with a few other modeling items,

Based on recent foreign exchange rates.

The weaker US dollar should represent a Tailwind of approximately 6 million dollars in the fourth quarter.

We expect Co assay sales to be about million dollars in the fourth quarter and sales of Co related items to be about 25 million dollars.

Finally, we expect blood screening revenue of about 5 million in Q4.

As a reminder, both co-related sales and blood screening revenue are backed out of our organic growth calculations.

Moving to the rest of the P&L.

Our full year, expectations for gross and operating margins in the low 60s and low 30s. Respectively remain unchanged.

In the fourth quarter, we do expect to incur about $8 million in tariff expenses. And as Essex said, this number will increase to $10 to $12 million on a quarterly basis in fiscal 2026.

Lisa: While this is roughly half what we originally expected, it will still represent a headwind to gross margin of almost 100 basis points compared to this year. Below operating income, we estimate that other income net to be an expense of approximately $20 million in the fourth quarter. Our annual effective tax rate of 19.25% and diluted share count of 228 million shares for the full year are both unchanged from our previous guidance. To conclude, our strong third quarter results were an important step in the right direction as we delivered revenue and non-GAAP EPS above our guidance ranges. We expect to build on this momentum in the fourth quarter, and we believe we are well positioned to finish the year from a position of strength as we enter fiscal '26. With that, we ask the operator to open the call for questions.

While this is roughly half, what? We originally expected, it will still represent a headwind to gross margin of almost 100 basis points compared to the year.

Below operating income, we estimate that other income net to be an expensive approximately 20 million dollars in the fourth quarter.

Our annual effective tax rate of 19.25% and diluted share count of 228 million shares for the full year of both unchanged from our previous guidance.

To conclude, our strong third quarter results represent an important step in the right direction. We delivered revenue and non-GAAP EPS above our guidance ranges.

We expect to build on this momentum in the fourth quarter, and we believe we are well positioned to finish the year from a position of strength as we enter fiscal 2026.

With that, we ask the operator to open the call for questions.

Karleen Oberton: And ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, that is star one to ask a question. We'll pause briefly to allow everyone the opportunity to signal for a question. And our first question comes from Doug Schenkel with Wolf Research.

And ladies and gentlemen, if you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. And again, that is *1 to ask a question.

We'll pause briefly to allow everyone the opportunity to signal for questions.

And our first question comes from Doug Shinkle with Wolfe Research.

Stephen MacMillan: Hey, good afternoon. Thank you for taking my questions. So just I'll throw out two. First, you know, you talked about continued progress you made in fiscal Q3. You're expecting around 4.5% organic growth in Q4, which would be the strongest since the pandemic. The Street is modeling a continuation of trend in fiscal '26, recognizing we have to wait another quarter for formal guidance. Are there any dynamics we should be contemplating in our models, either tailwinds or headwinds that could move you off trend towards continued progress and continued momentum into fiscal '26? And then just the second question is, we have heard about some China DRG impact in the quarter for other diagnostic companies. I don't think this would be a meaningful factor for you guys, but I just want to make sure there was nothing there that had impact for you guys in the quarter.

Hey, good afternoon, thank you for taking my questions. So

just uh,

Expecting around 4.5% organic growth in Q4, which would be the strongest since the pandemic. The street is modeling a continuation of the trend in fiscal 26.

Recognizing we have to wait another quarter for formal guidance. Are there any Dynamics? We should be contemplating in our models, either Tailwinds or headwinds that could move you off Trend um towards continued progress and continued momentum into fiscal 26.

Stephen MacMillan: Thank you.

And then just a second question is, um, we have heard about some China DRG impact in the Q4 for other diagnostic companies. I don't think this would be a meaningful factor for you guys, but I just want to make sure there was nothing there that had an impact for you guys in the quarter. Thank you.

Karleen Oberton: Yeah, Doug, I'll just start off with the outlook for '26. You know, I agreed. I think we said in our prepared remarks that we're expecting mid-single-digit growth for '26. I think a couple of things that I would call out is the Fluoroscan discontinuation. We talked about that. It's not terribly significant, but call that out. And the other piece is that the headwinds that we are realizing this quarter and next quarter related to China and HIV will also impact the first half of fiscal '26. So I would factor that implications into your outlook for next year.

Yeah. Doug I'll just start off with the, the outlook for 26. You know, I I I agreed I think we set up prepared remarks that were expecting mid single digit growth for 26. I think a couple of things that would call out is the floor scan discontinuation. We talked about that, it's not terribly, uh significant, but call that out and the other piece is that the headwinds that we are realizing this quarter and next quarter related to China. And HIV will also impact the first half of fiscal 26. Um, so I would factor that, uh, implications into your outlook for, for next year.

Karleen Oberton: And our next question comes from Jack Meehan with Nephron Energy.

And our next question comes from Jack men with nephron energy.

Analyst: Thank you, and good afternoon.

Stephen MacMillan: Hey, Jack.

Thank you and good afternoon.

Analyst: Eve, I wanted to ask you about capital allocation in the quarter. It was a very strong quarter cash flow. Didn't expect the balance sheet cash to tick up. I was curious what your thoughts are around M&A. Are there any larger things in the funnel that you were considering?

Hey, Jack Eve. I want I wanted to ask you about Capital allocation in the quarter. It was very strong quarter cash flow. Um, didn't expect the balance sheet cash took up. I was curious what your thoughts are around. M&a. Are there any larger things in the funnel that you were considering?

Stephen MacMillan: No, not particularly. I think the way to think about it, Jack, is through the year to date, we've spent over $750 million on buybacks. And you know, it's sometimes a little more in a quarter, sometimes a little less. Overall, I feel good about what we have done, you know, and certainly we'll continue both to focus on M&A and buybacks, but there was nothing, you know, here enough to do something big.

No, no take care. I think the way to think about it Jack is through the year to date. We've spent over 750 million dollars, um, on BuyBacks. Uh, and you know, it's sometimes it a little more in a quarter, sometimes a little less, um, overall feel good about what we have done, you know, and certainly will continue both the focus on m&a and, um, and BuyBacks, but there was nothing, you know, hearing up to do something big.

Analyst: Got it. And then I wanted to follow up on the breast health business. Good to see the progress. I agree that was the key word here. I was just curious your feel, like, within the overall company context, looking into 2026, how you feel about the reception around the new product launch and also just durability of gantry placement, you know, continuing to progress in the next year.

Got it. And then wanted to follow up on the breadth Health business. It's good to see the progress. I agree. That was the key word here. Um, it was just curious your feel like within the overall company context, looking into 2026, how you feel about, um, the reception around the new product launch and also just durability again, to replacement, you know, continuing to progress and

The next year.

Stephen MacMillan: Yeah, I think really as we think about not only next year but the next few years, starting to feel like we've really got the hiccups behind us in that business and we're going to be end-of-life-ing a lot of the older gantries. We'll be launching EnVision and, you know, very excited about what that's going to bring. And that's really a, you know, call it second half, later '26-ish before that really starts to be meaningful. And that's going to be a big driver probably in '27, '28, '29, as you well know. And the other part I would keep your eyes on will be the interventional business. Yeah, you might notice that hit $100 million this quarter for the first time.

Stephen MacMillan: It's starting to become a really nice driver and really starting to pay off that vision we put in place years ago of the breast care continuum and really starting to get that business, which is both recurring revenue and better margins. And we're feeling really excited about where that's headed.

Yeah, I think really, as we think, about not only next year, but the next few years starting to feel like we've really got the hiccups behind us in that business. And we're going to be end of life thing. Um, a lot of the older gantries will be launching in vision and, you know, very excited about what that's going to bring. And and that's really a, you know, called second, half leader, 26 before that really starts to be meaningful and that's going to be a big driver probably in 2728 29, um, as you well know. And the other part I would keep your eyes on will be the Interventional business. Yeah, you might notice that hit a hundred million dollars this quarter for the first time, and it started to become a really nice driver. And really starting to pay off that Vision. We put in place years ago, if the Breast Care, Continuum and really starting to get, uh, that business, which is both recurring revenue and better margins. Um, and we're feeling really excited about where that's headed.

Karleen Oberton: And we'll take our next question from Patrick Donnelly with CITI.

And we'll take our next question from Patrick Donnelly with City.

Stephen MacMillan: Hey, guys, thanks for the question.

Analyst: Hey, Peter.

Stephen MacMillan: Maybe a follow-up there on, hey, Steve, maybe a follow-up there on the breast side. Can you just talk about the visibility into 4Q? You know, certainly a big focus from investors in our conversation is just the progress there, the step-up. You know, it sounds like you guys are confident in the rebound here. It sounds like maybe some of those sales changes are bearing fruit. But can you just talk about the building blocks through to the 4Q to get back to growth? Sounds like interventional you're feeling pretty good about, but just curious how you're thinking about the visibility here into the 4Q return to growth on the breast side.

Hey guys, thanks for the question. Um, hey maybe a follow-up there. Hey speak. Maybe a follow up there on the breath side. Can you just talk about the visibility into 4q? You know certainly a big Focus from investors and our conversations is just the progress there. The step up, you know, it sounds like you guys are are confident in the rebound. Here it sounds like maybe some of those sales changes or or bearing fruit.

Can you just talk about the building blocks for Q2 to Q4 to get back to growth? Um, sounds like Interventional, you're feeling pretty good about, but just curious how you think about the visibility here into the Q4 return to growth on the breast side.

Stephen MacMillan: Yeah, it starts with the sales force and the rigor and discipline and processes and leadership that's been put in there, where just as we're coming into the quarters now, you know, we've got much more clarity around where we're headed. We're getting off to better starts in the quarter and feeling really good. And that team now has hit what they've said they're going to hit each of the last few quarters, and just our degree of confidence and belief in them has gone really high. So I think we're feeling really good about that. You know, the other part that will be nice is EndoMag, as we said, is running well ahead of plan. In the final two months of this quarter, that starts to flip into organic revenue because we've just actually closed it just about a year ago today almost.

Stephen MacMillan: And so we're really excited about how that continues to go. So it's just, you know, one of these that I think we went through a little rough period on breast health. Again, it's going to continue to show me, but we can see the trends and really starting to feel so much better about that business. You know, proof will be when, you know, obviously we want to put back, you know, real growth in the coming quarter and then have that really accelerate. Yeah, I think we see our breast health business being even stronger next year than where we'll even finish this year.

The last few quarters. And and just our degree of confidence and belief in them is gone really high. So, I think we're feeling really good about that, you know, the other part that will be nice is endo mag as we said, is running. Well, ahead of plan, uh, and the final 2 months of this quarter, that starts to flip into organic Revenue because, uh, we've just actually, uh, closed it just about a year ago today almost. Um, and so we're really excited about how that continues to go. So uh, it just, you know, 1 of these that I think we we went through a little rough period on breast health. Again, it's going to be continued to show me, uh, but we can see the trends and really starting to feel so much better about that business. You know, the proof will be 1. Uh, you know, obviously we want to put back, you know, real growth um in the coming quarter and then have that really accelerate. You know, I think we see our breast health business being even stronger next year than than where we'll even finish this year.

Analyst: Before we move on to the next.

Stephen MacMillan: Yeah, go ahead, Mike.

Before we move on.

Analyst: No, go ahead. No, after you, after you.

Stephen MacMillan: Sorry. I was just going to say, you know, Karleen, maybe on the margins, can you just talk about, you know, obviously there's some moving pieces, right, with the tariffs and even this product discontinuation. Can you talk about where we're going to be on 4Q? It sounds like the low 30s is a good place to be. And then what the right launching point is as we think about just progressing into '26. I know it's usually not the exit rates, but I just want to make sure we're thinking about it correctly. Thanks so much.

Yeah. Go ahead, Mike. Go ahead. No, after you. After you.

Sorry, I was just going to say, you know, carlen maybe on the margins. Um, can you just talk about, you know, obviously there's some good pieces right with the tariffs and and even this product, that's its continuation. Uh, can you talk about where we're going to be on 4 q u? It sounds like below 30 is a good place to be and then what the right launching point is as we think about just progressing into into 26, uh I know it's usually not the exact I just want to make sure we're thinking about it correctly. Thanks.

Karleen Oberton: Yeah, we are expecting a step-up Q3 to Q4 on gross margins. It starts first with the revenue with higher revenue and similar to the product mix with a higher gantry portion of the revenue. Those are margin accretive. And then coupled with Q4 is always seasonally our lowest operating expense quarter. And then we won't have the one-time charges that we had here in Q3. You know, I think the outlook, I would say the Q2 operating margin is not your jumping-off point for the full year '26. I would look to the full year of '25 as more of the jumping-off place for margins. We would expect that as we absorb the incremental tariffs, we will be in line with '25 in that range.

So much.

Yeah, we are expecting a step up Q3 to Q4 on Gross margins. It's, you know, it starts first with the revenue with higher revenue and similar to the product mix with a higher Gantry portion of the revenue, those are our margin of creative. Uh, and then coupled with Q4 is always seasonally out lowest operating expense quarter, um, and then we won't have the 1-time charges that we had here in Q3. Um, you know, I think the Outlook, I would say the Q2 operating margin is not your jumping off point for the full year. 26, I would look to the full year of 25 as more of the jumping off place for, for margins. Uh, we would expect that as we absorb the incremental tariffs, uh, we will be in line with 25, uh, in that range.

Stephen MacMillan: Hey, Patrick, sorry.

Karleen Oberton: And our next.

Stephen MacMillan: We've interrupted you there, but I wanted to just come back to Doug's question. A couple of questions ago, we kind of got interrupted there. DRG. Yeah, on China. So sorry about that. We're not directly exposed to a lot of the specific issues that some of our peers are in China, but as we talked about last quarter, it has become a pretty challenging environment for us for a number of reasons. So as we predicted, you know, total China was less than a $10 million business for us in the third quarter and was down more than 50% compared to prior year. So I just wanted to tie that one up. All right. Next.

Hey Patrick, sorry to interrupt but I wanted to just come back to to Doug's question a couple questions ago. We kind of got interrupted there. Um, drg yeah. On on China. So, sorry about that, we're not directly exposed to a lot of the specific issues that some of our peers are in China. But as we talked about last quarter at, it has become a pretty challenging environment for us for a number of reasons. So as we predicted, you know, total China was less than a 10 million dollar business for us in the third quarter and was down more than 50% compared to Prior year. So just wanted to tie that 1 up.

Karleen Oberton: And our next question comes from BJ Kumar with Evercore.

All right, next and our next question comes from BJ. Kamar with evercore.

Stephen MacMillan: Hi, Steve. Thanks for taking my question. Helpful color on fiscal '26, return back to solid mid-singles. Are we excluding is COVID a headwind, Steve? Are we backing that out when we say mid-singles? And I know Fluoroscan, that's moved to disk ops. Should we be removing that and then calculating organic, excluding COVID and disk ops? Or how do you think it would organic? You know, when you say solid mid-singles, is that four, four plus? Or, you know, is that more of a five, five plus?

Hi Steve. Um, thanks for taking my question. Um,

Help helpful caller on 5126 return back to a solid mid singles. The the uh, a we um, excluding um is is code. I had been uh, Steve, I'll be backing that out when you say mid singles and I know floor scan um, that's moving to disc Ops. Um, should we be removing that and and then calculating organic excluding code and and um this cops are highly think you were organic. You know when you say solid mid singles, the 4 4 4 plus or uh you know, is that more of a 5 5 plus

Karleen Oberton: Yeah. No, no, no. You know, when we talk about the mid-single digits, I would say the ex-COVID is really inconsequential at this point. So I wouldn't push the number up because of that.

Yeah, yeah, no, no no. Uh, you know when we talk

About the mid single digits. Um, I would say the

Co is really inconsequential at this point. Uh, so I wouldn't push the number up, uh, because of that.

Stephen MacMillan: And sorry, on Fluoroscan, Karleen, is that should we back that out when we were calculating organic?

Karleen Oberton: Yeah, yeah. We do organic if that's a discontinued product. I'd back that out.

Stephen MacMillan: Yeah. Understood. And Steve, one thing on EndoMag, I think that this business grew like 100% in the quarter, right? Was there any timing element? I think you're analyzing at 80 million. If this thing can grow like strong double digits, right? This, it could be a sizable organic contributor. So was there any one-off in 3Q? Like what we're describing as strength in the business? No, it's really our commercial execution. You know, we took it over fully in the United States. If you recall, when we acquired this, it was going through a different party that had the distribution rights in the United States. We took it over at the very end of our previous quarter, and it looked a little sloppy last quarter because we had an inventory adjustment as we bought back inventory, this and that.

I'm sorry, I'm floor. Scan. Um, um, carlen is that should be back there out when we were calculating organic. Yeah. Yeah. We do organic, if that's a discontinued product, I'd back that up. Yeah.

Understood and Steve, uh 1 Fiona endomag. I think that this business is really like a 100% in the quarter rate. Uh was it, was there any any timing element? I think you're analyzing at 80 million if this thing can grow like strong double digits, right? This, this it could be in you know, sizeable organic contributor. So was there anyone off and into you like what is driving this uh strength in the business?

Stephen MacMillan: The magic of this business right now, I would tell you, just from watching daily sales, is it's just incredibly steady and growing. And you know, I think it's where we feel really, really good. Our whole team was just over in the UK about a month ago with the team over there that had developed the products. And no one-offs. And I think both domestically and internationally, we feel really good about where it's headed. Understood. Thank you. Great. Thanks, BJ.

Inventory adjustment as we bought back inventory this and that this the magic of this business. Right now I will tell you just from watching daily sales is it's just incredibly steady and growing and uh you know, I think it's where we feel really, really good. Our whole team was just over in the UK about a month ago uh with the team over there that uh, that had developed the products and uh no 1 offset. Both domestically and internationally. We feel really good about where it's headed.

Mr. Thank you.

Alright, thanks Vijay.

Karleen Oberton: And we'll go next to Lu Li with UBS.

And we'll go next to Lou Lee with UBS.

Analyst: Great. Thank you for taking my questions. I think the first one on the molecular diagnostic, I think you mentioned that you're going to have a test menu expansion on fusion. I wonder if you can comment a little bit on the timing and the potential revenue contribution down the road. Thank you.

Great. Thank you for taking my questions. Um, I think the first one on the molecular diagnostic. I think you mentioned that you're going to have a test menu expansion on fusion. Um, I wonder if you can comment a little bit on the timing and the potential revenue contribution down the road. Thank you.

Karleen Oberton: Yeah, I would think that those assays will come online probably later in '26, early in '27. So probably not meaningful contribution next year, more in the '27, '28. But I would just caution that these are, what I'll call incremental assays to the menu. They're not a BV/CV type opportunity.

Stephen MacMillan: And a good example of that is the open channel product. That's available now. Did contribute to growth in the quarter, but is relatively small in the grand scheme of things.

Yeah, I would think that those assays will come online probably later in 2026, early in 2027. So probably not a meaningful contribution next year, more in the 2027-2028 range. But I would just caution that these are, I'll call, incremental assays to the menu. They're not a BVCV type opportunity.

A good example of that is the open Channel product that's available. Now did contribute to growth in the quarter but is relatively small in the grand scheme of things.

Analyst: Got it. And Karleen, I think one of the questions I wanted to follow up on is the size of the China impact and HIV impact in 2026. So you mentioned there will be some residual headwinds in the first half. I wonder, can you quantify what will be the magnitude of that?

Got it. And um, Colleen, I think 1 of the question I wanted to, uh, follow up on is the size of the China impact and HIV impact in 2026. So you mentioned, there will be some residual happens in first half. I wonder can you quantify what will be the manicure of that.

Karleen Oberton: Yeah, so I think in the first half of '25, you know, our China business was more on track to be a $60 to $70 million business. We're exiting more at a $10 million a quarter. So that's the rough difference in the first half of the year.

Yeah, so I think in the uh in the first half of 25 uh you know our China business was uh more on track to be a 60 to 70 million dollar business. We're exiting more at a 10 million dollars a quarter. Um so that's the the ruffle difference in the first half of the year.

Stephen MacMillan: And I'm sure, and then there's the HIV.

Karleen Oberton: Yeah.

Stephen MacMillan: The HIV business was stronger in our first quarter, quarter and a half, really our first two quarters. And we're assuming that's going to, you know, de minimis numbers in the next year.

And I'm sure. And then there's the HIV, the HIV business was

Stronger in our first quarter, quarter quarter and a half, really our first 2 quarters. And we're assuming that's going to, you know, diminish numbers, um, in the next year,

Analyst: All right. Got it. Thank you.

got it. Thank you.

Karleen Oberton: And we'll move next to Anthony Pertron with Mizuho Group.

And we'll move next to Anthony for drone, with Meizuo Group.

Analyst: Anthony.

Stephen MacMillan: Anthony?

Hey Anthony.

Karleen Oberton: Anthony, you will need to unmute for us to hear you.

Anthony, you will need to unmute for us to hear you.

Analyst: Lu, sorry, hopping between calls. Hi. Apologies for that. I was on mute. Thanks and congrats on a solid quarter here. I think I want to maybe just focus on fusion for a moment there. And you gave some good updates last quarter in the prepared remarks here. And the goal is to get fusion to 100% of Panther. Maybe could we get an update on, you know, the fusions that are out there today? Just where is their utilization intensity versus a non-fusion platform? And then how does pricing on a fusion platform stack up to non-fusion assays? And I'll have one quick follow-up. Thanks.

Sorry.

Uh hi. Uh, apologies for that. I was on mute. Um, thanks and congrats on on a solid quarter here. I think I want to

Maybe just focus on Fusion for a moment there and you gave some good updates.

Uh, last quarter and a prepared remarks here. And the goal is to get

Fusion to 100% of Panther.

Maybe we could get an update on, you know, the fusions that are out there today. Just where is their utilization intensity versus a non-fusion platform, and then how does pricing on a fusion platform stack up?

Karleen Oberton: Yeah, so let me start off to clarify that the goal is not for every Panther to have a fusion. It's really for every customer or every lab to have a fusion capability within the lab. We never anticipated that it'd be a one-for-one situation. What I would say is, you know, I think it's still plenty of run room in rolling out more fusions to our customers. Probably over a third of our customers have a fusion at this point, and that will continue to grow over our strat horizon period. And I would say just from a pricing perspective, of course, the women's health assays, the legacy assays are obviously the least pricing on the legacy Panther. So we would expect that as the menu rolls out on fusion, it'll probably be a pricing premium.

in non-fusion assays and I have 1 quick follow-up. Thanks.

Yes, so let let me start off to clarify. Um, that the goal is not for every Panther to have a fusion. It's really for every customer or every lab to have a fusion capability within the lab, we never anticipated that would be 1 for 1, uh, situation. Um, but I would say is, you know, I think it's still plenty of run room in uh, rolling out more fusions to our customers, probably over a third of our customers have a fusion, uh, at this point and that will continue to grow, um, over our Strat Horizon period. And I would say, just from a pricing perspective, of course, the women,

Women's Health. The Legacy assays are obviously priced the least on the Legacy Panther. So we would expect that as the menu rolls out on Fusion, there will probably be a pricing premium.

Stephen MacMillan: That's helpful. And then just on the mammography side, gantry, obviously next year, 2026, looking for more of a meaningful ramp. But just maybe on the inventory build and working capital, you know, should we expect to see, you know, a working capital uptick here in the second half of the year as the company prepares, you know, more for that full launch next year? Thanks.

That tell well. And then just on the mamography side Gantry. Obviously, next year 2026 looking

For more of a meaningful ramp but just maybe on an inventory. Build.

And working capital, you know, should we expect to see, you know, a working capital uptick here in the second half of the year as as the company prepares, you know, more more for that full launch next year. Thanks.

Karleen Oberton: No, Anthony, I would not anticipate an increase in inventory to support that launch at this period of time. I think we're well positioned to handle that. Many of the components are similar to our legacy 3D gantry, so I wouldn't expect any meaningful change.And

so, um, I wouldn't expect any meaningful change

Yeah.

Event Specialist: our next question comes from Andrew Brekman with William Blair.

And our next question comes from Andrew breckman with William Blair.

Lisa: Great. Hi, everyone. Good afternoon. Thanks for taking the question. Steve, you opened the call sort of discussing your confidence in returning to that mid-single-digit growth, not just for '26, but it sounded like over the entire STRAT plan. So can you maybe talk about that target in the context of how international plays into the build-up there? And then, as my follow-up, maybe just talk about how pricing and your ability to take price plays into that as well. Thanks.

Great. Uh, hi everyone. Good afternoon. Thanks for taking the question. Uh, Steve you open the call sort of discussing your confidence and returning to that mid single digit growth, not just for 26, but it sounded like over, uh, over the entire Strat plan. So, can you maybe talk about that Target in the context of how International plays into the build up there? And then as my follow-up, maybe just talk about how pricing, uh, in your ability to take price plays into that as well, thanks.

Essex Mitchell: Yeah. I think as we look over the STRAT plan horizon, we see international being accretive to that growth rate with kind of, again, probably some caveats. The beginning of next year might be a little squirrely because of the Africa stuff, because of China. But in general, over both really the bulk of '26 and beyond, we see international continue to be a really nice grower to that point. And then regarding pricing, you know we probably see it a little bit more of our opportunities in mix and new product innovation versus actual kind of year-over-year price increases. We're looking at targeted price increases here or there where we can. But in general, it's much more about the innovation curve. So it's more of a mixed gain than a price gain.

Yeah, I think as we look over the Strat plan Horizon, we see International being a creative to that growth rate, um, with kind of again, probably some caveats. At the beginning of next year, might be a little squirrely because of the Africa stuff because of China. Uh, but in general, over both really the bulk of 26 and and Beyond, we see International continue to be a really nice grower, um, to that point. And then, uh, regarding pricing, you know, we probably see it a little bit more of our opportunities is in mix and new product Innovation versus actual, you know, kind of year-over-year price increases, we're looking at, you know, targeted price increases here or there, where we can. But in general, it's much more about the Innovation curve. So it's more of a mixed game than a price.

Game.

Lisa: Great. Thanks for that.

Great. Thanks for that.

Essex Mitchell: Thank you.

Thank you.

Event Specialist: We'll move next to Navan Thai with BNP Paribas.

We'll move next to Navan Thai with BNP Paribas.

Mike Watts: Hi. Thank you. Just a clarification on breadth health. So have the updated end-of-life strategy and refocused sales force been fully implemented in Q3? So we have most results in Q4 and minimal impact in Q3. And then on the M&A side, can you discuss the M&A environment in what happened for Hologic Inc Q2? Thank you.

Hi, thank you. Um, just a clarification on breast health. So, have the updated end-of-life strategy and refocus sales force been fully implemented in Q3, so we have most results in Q4 and minimal impact in Q3? Um, and then on the M&A side, can you discuss the M&A environment and what happened for Hologic? Thank you.

Essex Mitchell: Sure. On the breadth health piece, I think what we're really encouraged by is typically, when you reorganize a sales force, you often take a step back or two. And I think our team implemented really the sales force restructure largely in our second quarter. And if we would have seen the disruption, it usually would have been in this third quarter-ish. And the teams have really settled in very, very nicely on that. So we feel very good. And it was really just this quarter where they began the end-of-life strategy. So that's in the early stages but with some very good early wins. And I think we've already seen some lined up here for this quarter, which is our fourth quarter, and then looking into next year. In terms of the M&A environment, we, you know, I'd say there's two pieces.

Essex Mitchell: One is we continue to be patient and looking for more things like the EndoMags and the GynEsonics and the Biothera and AUSTX that have been on our more recent deals. And we've also dramatically strengthened our own capabilities over the last few years, both in the divisional area and corporately to where we feel really good about those last few. And we've continued to walk away from more things than we're acquiring. But I feel like the deal, the funnel of size deals that we like is very good right now. But actionability, you know, we'll continue to see. And we're going to be patient and do it from a position of strength.

Sure. On the uh, on the breast health piece. I think what we're really encouraged. By is typically when you reorganize a sales force, you often take a step back or 2. And I think our team implemented really the sales force restructure largely in our second quarter. And if we would have seen the disruption, it usually would have been in this third quarter is and uh, the teams have really settled in very, very nicely um, on that. So we feel very good and it was really just this quarter where they began the end of life strategy. So that's in the early stages, but with some very good early wins and I think, uh, we've already seen some lined up here for, uh, for this quarter, which is our fourth quarter. And then looking into next year, in terms of the m&a environment, we you know, I'd say there's 2 pieces 1 is we can

You need to be patient uh and looking for more things like the endomag and the kind of Sonics is uh the biotheranostics that have been on more recent deals. And we've also dramatically strengthened our own capabilities uh, over the last few years and both in the divisional area and corporately to where we feel really good about those last few. Um, and we've continued to walk away from more things than we're acquiring. Um, but I feel like the deal the The Funnel of size deals that we like um is very good right now but actionability, you know, will continue to see and we're going to be patient and uh do it from a position of strength.

Mike Watts: Thank you. That's very helpful.

Thank you. That's very helpful.

Essex Mitchell: Great. Thank you.

Great. Thank you.

Event Specialist: And our next question comes to Ryan Zimmerman with BTIG.

And our next question comes from Ryan Zimmerman with btig.

Stephen MacMillan: Hi, everyone. This is Izzy on for Ryan. Thank you for taking the question. Just one for me on tariff impacts. It's great to see that you guys have been able to mitigate about half of what you called out last quarter. I was just curious if you or if you could provide a little bit more color around the steps you took that allowed you to get to this rate. And if you have any more levers as we move into next year, just given the fact that this is still a pretty dynamic situation. Thanks for taking the question.

Karleen Oberton: Yeah. Well, we certainly continue to evaluate the situation. And to your point, this can change daily. But you know, basically, we leveraged operational efficiencies within our supply chain to drive those changes. And just for competitive reasons, we're not going to comment anything more specifically.

Hi everyone. This is Izzy on for Ryan. Thank you for taking the question. Um, just 1 for me on tariff impacts. It's great to see that you guys have been able to mitigate about half of what you called out last quarter. I was just curious if you, uh, or if you could provide a little bit more color around the steps you took that allowed you to get to this rate. And if you have any more levers as we move into next year, just give them the fact that this is still a pretty Dynamic situation. Thanks for taking the question.

Yeah, well, we certainly continue to evaluate the situation. To your point, this can change daily. But, you know, basically we leveraged operational efficiencies within our supply chain to drive those changes. And just for competitive reasons, we're not going to comment any anything more specifically.

Event Specialist: And we'll move next to Casey Woodring with JPMorgan.

And we'll move next to Casey Woodring with JP Morgan.

Stephen MacMillan: Hi, guys. Thanks for taking my questions. Maybe the first one, can you just unpack the breast imaging revenue number in the quarter? You mentioned 3D gantry placements grew sequentially, but imaging revenue declined sequentially. So just maybe some more color there. And then you know how you're thinking about gantry placements and imaging revenue stepping up in 4Q.

Just unpack the breast imaging revenue number in the quarter. You mentioned 3D gantry placements grew sequentially, but imaging revenue declined sequentially, so just maybe some more color there. And then, you know, how you're thinking about gantry placements and imaging revenue stepping up in Q4.

Karleen Oberton: Yeah. So within that imaging line, there's more than just the 3D gantry. So the 3D gantry line itself did sequentially increase quarter over quarter. There were some other components that were down quarter on quarter, but definitely, the 3D was up. And I think to Steve's comments, looking into Q4, we're absolutely expecting another sequential uptick in the number of 3D gantries shipped in Q4. And we feel really confident. And we have much better visibility at this point in this quarter than we even did in Q3. So that gives us confidence that we'll be able to deliver that uptick in gantry.

Yeah, so um, it's within that uh, Imaging line. There's more than just the 3D Gantry. So the 3D Gantry line itself, did sequentially increase quarter over quarter. Um, there are some other components, uh, that were down quarter on quarter, but definitely the 3D was up. And I think to Steve's comments, um, looking into Q4 we we're absolutely expecting another sequential uptake in the number of gantries. 3D Gantry shift and Q4 and we uh feel for it really confident and we have uh much better visibility at this point in this core than we even did in Q3. So that's what gives us confidence that we'll be able to deliver that uptick in gantry.

Stephen MacMillan: Got it. That's helpful. And then if I can just squeeze one more in, just how should we think about the diagnostics setup for fiscal '26? Molecular is becoming a larger part of the base here, as is BD, CB, TV, and Biothera and AUSTX within that revenue line item. So just curious at what point you'll run into the law of large numbers there. And ultimately, where do you think diagnostics growth will shake out relative to that mid-single-digit range for next year? Thank you.

Got it, that's helpful. And then if I can just squeeze 1 more in just how should we think about the diagnostic setup uh for fiscal 26? You know, molecular is becoming a larger part of the base here as is cdcv TV and biotheranostics within that Revenue line item. So just curious at 1 at what point the, you know, you'll run into the law of large numbers there. And you know, ultimately where do you think Diagnostics growth will shake out uh relative to that, mid single digit range for for next year. Thank you.

Karleen Oberton: Yeah. I'll start off. For next year, I think we expect diagnostics to be within that mid-single-digit range, and primarily because of that first half headwinds that we talked about that are pressuring the growth in both cytology and molecular because of China and the HIV. So we feel really great about the diagnostics business. I think we called out BVCV. Still lots of runway there. Just a couple of headwinds in the first half of '26. But over the longer term, we expect diagnostics to be a strong contributor to our growth.

Essex Mitchell: Yeah. The core business of our molecular, our Panthers, the expanding Panthers with our fusions, and then bringing more menu on there, we've got a really good, you know, short and midterm outlook for the diagnostics business. And even our Genius digital diagnostics has been breathing some life into cytology. You know, keeps that, you know, from certainly declining and very low growth. But overall, you know, continue to be very excited about the opportunities despite it getting much bigger.

Yeah, I'll start off, you know, for next year. I think we expect, uh, Diagnostics to be within that mid single digit range. And primarily because of that first half headwinds that we talked about that are pressuring the growth in both cytology and molecular, uh, because of China and the HIV. So, uh, we feel really great about the Diagnostics business. I think we called out BV CV, still lots of Runway there. Uh, just a couple of headwinds in the first half of 26, uh, but over the longer term, we expect Diagnostics, uh, to be a strong contributor to our growth. Yeah, the core business of our molecular, our Panthers, the expand expanding Panthers with our fusions and then bringing more menu on there. We've got a really good, you know, short and mid-term outlook for the Diagnostics business. And even our genius. Digital Diagnostics has been, you know, breathing some life into cytology, uh, you know, keeps that, you know, from certainly to

Declining and very low growth but overall, you know, continue to be very excited about the opportunities despite it getting much bigger.

Stephen MacMillan: Thank you.

Thank you.

Essex Mitchell: Great. Thanks, Casey.

Great. Thanks. K.

Event Specialist: And our next question comes from Mason Carico with Stevens.

And our next question comes from Mason Kerico with Stevens.

Karleen Oberton: Good afternoon. This is Harrison on for Mason. Thanks for taking the questions. Could you talk about the benefits you're seeing so far selling endomagnetics through your direct sales force? How has that initial transition played out? And could you talk about the demands you're seeing from your customers there?

Good afternoon. This is Harrison on for Mason. Thanks for taking the questions.

Um, could you talk about the benefits? You're you're seeing so far selling and do magnetics through your direct sales force? How is that initial transition played out and could you talk about the demands you're seeing from your customers there?

Essex Mitchell: Yeah. I think we're feeling really good based on the fact that we sold almost $20 million of endomag in the quarter. And the other, you know, benefit that we have is by bifurcating the sales force, as we also indicated, we saw organic growth of about 6% in the interventional line. So what we've got now is a more dedicated sales force that's able to really focus in on that customer group and feeling really good about where that's headed.

Yeah, I think we're feeling really good. Based on facts, we sold almost $20 million of Endomag in the quarter, and the other benefit that we have is by bifurcating the sales force. As we also indicated, we saw organic growth of about 6% in the Interventional line. So, what we've got now is a more dedicated sales force that's able to really focus in on that customer group, and we're feeling really good about where that's headed.

Karleen Oberton: Great. And in the breast health business, are you seeing early signs from the commercial reorg starting to bear fruit there? And how has demand shaped up following instituting that initiative?

Great. And and the breast health business, are you seeing early signs from the commercial commercial reorg? Starting to bear fruit there and how is demand shaped up following instituting that initiative.

Karleen Oberton: Yeah, sure. So I think, as we said in our prepared remarks and you've highlighted here, that we're seeing great traction early on. You know, typically, when you have a disruption in the sales force or reorg, you might take a step back. But clearly, we have not taken a step back here in the third quarter and feel good about the commercial leadership and a lot of the plans they've put in place from the reorg of the sales team to the end-of-life strategies and getting ready to lift for the Envision launch in '26.

Yeah sure. So I think, as we said in a prepared remarks and these highlighted here that we're seeing great traction early on, uh, you know, typically when you have a, A, A disruption in the sales force or reorg, you might take a step back. But clearly, we have not taken a step back here in the third quarter, um, and feel good about uh, the commercial leadership in a lot of the plans. They've put in place from the reorg of the sales team to the end of Life Strategies, um, and, and getting ready to look for the end Envision launch and 26.

Stephen MacMillan: And our next question comes from Taiko Peterson with Jeffries.

More. I think.

And our next question comes from, Tau Peterson with Jeff.

Lisa: Yeah. Hi. This is Jack on for Taiko. Appreciate you taking our question. Just on Genius cytology, which you touched on in the call, would be great if you could share some metrics that you're seeing regarding penetration or growth that can sort of help frame the contribution of the new product and sort of its contribution to the second-level growth.

Jack on for Tico, I appreciate you taking our question.

Um just on genius psychology, which you touched on in the call. Um,

Sort of help frame the contribution of the, the new product and um sort of its uh contribution to the second level growth.

Karleen Oberton: Yeah. So we haven't really put out any metrics that we're going to share publicly, but I'll just offer a couple of comments. One, from a revenue model perspective, a lot of the elements of the cytology, you know, selling the collection kit, do not change. What does change is that we get an uptick on the digitization of the image, which enables the AI capabilities within our Genius platform. What I'd also say is that this is a significant workflow change within the lab. So the rollout has been slow and measured given the significance of the change. But despite that, you know, the feedback is overwhelmingly positive of what this enables from an efficiency. And hopefully, at some point, clinically, we'll be able to, you know, we'll support further detection of cancers and the like.

Karleen Oberton: So just feel really good about this product and what it's doing for the cytology business.

Yeah so so we haven't really put out any uh metrics that we're going to share publicly but I'll just offer a couple of comments 1 from a from a revenue model perspective. Um a lot of the elements of the cytology you know, selling the collection kick do not change. What does change is that we get an uptick on the digitization of the of the image which enables uh the AI capabilities within a a genius platform. Uh but I'd also say is that this is a significant workflow change within the lab so the rollout has been slow and measured um given the significance of the change. But despite that um you know, the feedback is overwhelmingly positive of the of what this enabled from an efficiency and hopefully at some point clinically will be able to, you know, will support, you know, further detection of cancers and the like so, um, just feel really good about this product and and what it's doing for the cytology business.

Lisa: Okay. Then I guess it's sticking on this theme of cytology and HPV here. We've seen a fair bit of news on HPV self-collect. A lot of the reference labs are coming out with commercialized offerings for self-collection that use competitor collection systems. And I'm just curious how you guys are viewing this development, if it's a greenfield opportunity that would be nice down the road to have, or if you're looking at it like a necessity and that it might be taking some share away from the in-office volumes that you procure.

Okay, then I guess it's sticking on this theme of psychology and HPV here. Um, you've seen a fair bit of news on HPV self, collect a lot of the reference labs are coming out with commercialized offerings, um, for self collection, that use competitor, um, you know, collection systems and

I'm just curious how you guys are viewing this development, if it's a Greenfield opportunity, that would be nice down the road to have or if you're looking at it. Like uh, necessity in that, it might be taking some share away from the in-office volumes that you

Here.

Karleen Oberton: Yeah. I think at the highest level, we view this as expanding the market and getting more testing out there to women that maybe don't have access to a gynecological exam and to have a speculum exam to capture the specimen appropriately. So we have partnered with some of the labs to have self-collect as well. So again, we view this as expanding the market.

Yeah, I think at the highest level, um, we view this as expanding the market and getting more testing out there to women that maybe don't have access to a gynecological exam and to have a speculum exam to capture the specimen appropriately. So, uh, we have partnered with some of the labs to have self-collect as well. So, again, we view this as expanding the market.

Lisa: Operator, I think we have time for maybe one more question.

Operator, I think we have time for maybe 1 more question.

Event Specialist: And ladies and gentlemen, our last question comes from Puneet Sauda with BlueRing Partners.

and ladies and gentlemen, our last question,

Essay with blurring partners.

Analyst: Yeah. Hi, Steve. I'm Karleen. Thanks for taking my questions.

Essex Mitchell: Hey, Puneet.

Analyst: Yeah. Thanks, Steve. So first one, maybe on the gantry side, I mean, 2,000 legacy units that you have out there, with the change in the commercial strategy and the actions you're taking, can you elaborate a little bit about, you know, how do you see that conversion in the last quarter here and then '26? And how should we think about, you know, maybe on an annual basis? I know Steve used to give that number for sort of a Panther, but I just wanted to know on this side of the business, how do you think about, you know, these legacy gantries getting replaced?

Yeah. Hi Steve. Um, carlen, thanks for taking my questions. Um, hey, the first 1 May yeah. Thank thanks, Steve. So, uh, first 1, um, maybe on the Gantry side, I mean 2,000 Legacy units that you have out there with the um, change in the commercial strategy and the actions you are taking. Can you elaborate a little bit about, you know, how do you see that conversion in in the last quarter here and then 26 and how should we think about? Um you know, maybe on an annual basis? I know Steve used to give that number for sort of a panther

Uh, just wanted to know on this side of the business. How do you think about, um, you know, these these Legacy gantries, um, getting replaced.

Essex Mitchell: Yeah. I think we see them kind of steadily improving is the way I would keep thinking about it, Puneet, that, you know, we'll sell more this quarter than last quarter, and then I think continuing to strengthen next year. You know, candidly, the end-of-life ones are, you know, more ones that will convert to our existing product. And then Envision, because these, by definition, are a lot of the older ones that, you know, people hadn't upgraded or whatever, you know, have had for a while and might not have been the leading adopters. And then we see Envision really kicking in on top of that, you know, later next year, really for a lot of the thought leaders and being exciting. So I think, again, we view that our worst days in breast health, we had those speed bumps.

Essex Mitchell: But as we have both better commercial execution and the new product coming next year, feeling really good about where we're headed.

Really improving is the way I would keep thinking about it pane that, uh, you know, we'll sell more of this quarter than last quarter and then, I think continuing to strengthen next year, you know, candidly the end of life ones are, you know, more ones that will convert to our existing product. And then Envision, because these by definition are a lot of the older ones that, you know, people had an upgraded or whatever, you know, had for a while and might not have been the leading adopters, and then we see Envision really kicking in, on top of that. You know, later next year, uh, really for a lot of the thought leaders, and, and being exciting. So, I think again, we, we view that our worst days in breast health, we had those speed bumps. Uh, but as we have both better commercial execution, and the new product coming next year. Feeling really good about where we're headed.

Analyst: Got it. And then, I mean, if I may ask about, again, I don't think you were expecting a USPSTF question, but the USPSTF members, as you saw, the committee has been purged, and there's an expectation new members are going to come in. Just wanted to get your thoughts on the legacy assays, if there's an impact to that. Is the co-testing fully intact as a result? And how are you thinking about this change, which sort of happened recently?

Got it. And then, um, I mean, if I may ask about again, I I don't think you were expecting a uspstf question, but um, the uspstf, um, members, um uh, as you saw the, you know, the the committee has been first and and there's an expectation, new members are going to come in. Um, just wanted to get your thoughts on, um, the the Legacy assets, if there's an impact to that, um, uh, is is the code testing uh, fully in

Contact as a result. And how are you thinking about? Uh, this this change uh, which uh, you know, sort of happened recently

Essex Mitchell: I think at the end of the day, we're looking at it as women's health and the tests that we're involved with are all going to be very important and there. And it's, you know, positive for women's health, positive for the payers, and economically makes a lot of sense. So, you know, the short-term machinations and turmoil there, as you've watched USPSTF, you know, with us for years and years, doesn't have much of a, you know, a quarterly impact or even an annual impact on us because of fundamentally what we're doing. So we just kind of keep our heads down. We get the payers covered and feel good about where we're headed. So thanks, Puneet.

You've watched uspstf, uh, you know, with us for years and years, uh, doesn't have much of a, uh, you know, a a quarterly impact or even an annual impact on us because of fundamentally, what we're doing. So we just kind of keep our heads down, we got the payers covered um and feel good about where we're headed.

Thanks penny.

Event Specialist: And ladies and gentlemen, that concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.

And ladies and gentlemen, that concludes today's conference call. Thank you, everyone, for your participation. You may now disconnect.