Hologic Announces Financial Results for First Quarter of Fiscal 2016

MARLBOROUGH, Mass., Jan. 27, 2016 /PRNewswire/ -- Hologic, Inc. (Nasdaq: HOLX) announced today the Company's financial results for the fiscal first quarter ended December 26, 2015.  Revenue of $695.2 million increased 6.5% on a reported basis, and 8.1% on a constant currency basis.  GAAP diluted EPS of $0.29 increased 190%, and non-GAAP diluted EPS of $0.46 increased 17.9%.

"We are pleased with our first quarter financial results overall," said Steve MacMillan, Hologic's Chairman, President and Chief Executive Officer.  "Our U.S. businesses again performed exceptionally well, with double-digit revenue growth.  This contributed to improvement in our already strong operating margin, and earnings per share growth at nearly three times the rate of revenue."

Key financial results for the fiscal first quarter are shown below.  Throughout this press release, all dollar figures are in millions, except EPS.  Unless otherwise noted, all results are on a reported basis, and are compared to the prior year period.

Revenue Detail

Revenues grew in all four business segments globally:

Other revenue highlights:

• U.S. sales of $545.1 million increased 12.8%, while international sales of $150.1 million decreased (11.5%) on a reported basis, or (5.4%) in constant currency.
• In Breast Health, revenue from breast imaging products and service totaled $218.1 million, an increase of 10.4% on a reported basis, or 12.0% in constant currency.  In the United States, Breast Health revenue of $214.8 million increased 15.3%, as adoption of Hologic's Genius^TM 3D Mammography^TM systems continued to grow.  Internationally, Breast Health sales of $47.4 million declined (15.1%), or (8.4%) in constant currency.
• In Diagnostics:
  • Molecular diagnostics sales of $129.6 million increased 8.8% on a reported basis, or 9.9% in constant currency.  Growth was primarily driven by continued strength across Aptima® women's health products on the fully automated Panther® and Tigris® platforms. 
  • Cytology and perinatal sales of $120.4 million increased 0.3% on a reported basis, or 3.1% in constant currency.  International sales declined (0.2%) on a reported basis, but grew 8.7% on a constant currency basis, while domestic sales increased 0.5%.
  • Blood screening revenue totaled $60.7 million, a decrease of (6.5%) that was driven primarily by ordering patterns by Hologic's partner Grifols.
• In GYN Surgical, MyoSure® sales of $36.9 million increased 45.0% on a reported basis, or 46.1% in constant currency.  NovaSure® sales of $61.7 million increased 5.5% on a reported basis, or 7.5% in constant currency. 
• In Skeletal Health, revenue of $23.5 million grew 5.4% on a reported basis, or 7.7% in constant currency.

Segment revenue highlights by geography are shown below:

Expense Detail

Gross margin was 54.5% on a GAAP basis, and 65.2% on a non-GAAP basis.  Gross margin improved mainly due to strong domestic sales growth, favorable product mix, and operational improvements.  These benefits were partially offset by a stronger U.S. dollar.

Operating expenses were $253.0 million on a GAAP basis, and $221.0 million on a non-GAAP basis.  Operating expenses increased mainly due to marketing investments in the Breast Health and Diagnostics divisions, as well as higher variable compensation and benefits expense.  

Other Key Financial Results

Operating cash flow was $164.3 million, an increase of 7.0% compared to the prior year period.  Free cash flow, defined as operating cash flow less capital expenditures, was $144.6 million.

Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) were $252.0 million, an increase of 8.1% compared to the prior year period. 

Total debt outstanding at the end of the fiscal first quarter was $3,632.4 million, a decrease of $322.4 million compared to the prior year period.  The combination of lower debt and EBITDA growth has helped improve Hologic's leverage ratio (net debt over EBITDA) to 3.1 times.

Similarly, strong profit growth and lower debt have improved Hologic's return on invested capital (ROIC), which was 11.3% on a trailing 12 months basis, a 160 basis point increase compared to the prior year period.

The Company ended the quarter with cash and cash equivalents of $650.3 million. 

Financial Guidance for Fiscal 2016

"Building on our solid performance in the first quarter, we are updating our fiscal 2016 revenue guidance based on a stronger U.S. dollar, but increasing our EPS guidance to reflect greater-than-expected earnings power," said Bob McMahon, the Company's Chief Financial Officer.

The guidance below is based on recent foreign exchange rates, an improved full-year tax rate of approximately 33%, and diluted shares outstanding of between 296 and 298 million for the full year.

For the second quarter of fiscal 2016, Hologic expects:

Use of Non-GAAP Financial Measures

The Company has presented the following non-GAAP financial measures in this press release: constant currency revenues; non-GAAP gross margin; non-GAAP operating expenses; non-GAAP operating margin; non-GAAP net income; non-GAAP EPS; and adjusted EBITDA. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization of intangible assets and impairment of goodwill and intangible assets; (ii) additional depreciation expense from acquired fixed assets and accelerated depreciation related to consolidation and closure of facilities; (iii) non-cash interest expense related to amortization of the debt discount from the equity conversion option of the convertible notes; (iv) restructuring and divestiture charges and facility and consolidation charges; (v) debt extinguishment losses and related transaction costs; (vi) litigation settlement charges (benefits); (vii) other-than-temporary impairment losses on investments and realized gains resulting from the sale of investments; (viii) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results; and (ix) income taxes related to such adjustments.  The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, and depreciation and amortization expense included in its non-GAAP net income.

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

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

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

Future Non-GAAP Adjustments

Future GAAP EPS may be affected by changes in ongoing assumptions and judgments, and may also be affected by non-recurring, unusual or unanticipated charges, expenses or gains, which are excluded in the calculation of the Company's non-GAAP EPS guidance as described in this press release. It is therefore not practicable to reconcile non-GAAP EPS guidance to the most comparable GAAP measure.

Conference Call and Webcast

Hologic's management will host a conference call at 4:30 p.m. ET today to discuss its financial results for the first quarter of fiscal 2016.  Approximately 10 minutes before the call, dial 877-719-9786 (U.S. and Canada) or 719-325-4908 (international) and enter access code 7932634.  A replay will be available starting two hours after the call ends through February 26, 2016 at 888-203-1112 (U.S. and Canada) or 719-457-0820 (international), access code 7932634.  The Company will also provide a live webcast of the call at http://investors.hologic.com.

About Hologic, Inc.

Hologic, Inc. is a leading developer, manufacturer and supplier of premium diagnostic products, medical imaging systems and surgical products.  The Company's core business units focus on diagnostics, breast health, GYN surgical, and skeletal health.  With a unified suite of technologies and a robust research and development program, Hologic is dedicated to The Science of Sure.  For more information on Hologic, visit www.hologic.com.

Hologic, Genius 3D Mammography, Aptima, ThinPrep, MyoSure, NovaSure, Panther, Tigris, The Science of Sure, and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.

Forward-Looking Statements

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

Risks and uncertainties that could adversely affect the Company's business and prospects, and otherwise cause actual results to differ materially from those anticipated, include without limitation: the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees; U.S., European and general worldwide economic conditions and related uncertainties; the Company's reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; uncertainties regarding healthcare reform legislation, including associated tax provisions, or budget reduction or other cost containment efforts; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company's products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company's ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company's international activities and businesses; manufacturing risks, including the Company's reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; the Company's ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the early stage of market development for certain of the Company's products; the Company's leverage risks, including the Company's obligation to meet payment obligations and financial covenants associated with its debt; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.

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

Contact
Michael Watts
Vice President, Investor Relations and Corporate Communications
(858) 410-8588

Explanatory Notes to Reconciliations:

Other Supplemental Information:

SOURCE Hologic, Inc.