MARLBOROUGH, Mass., July 27, 2016 /PRNewswire/ -- Hologic, Inc. (Nasdaq: HOLX) announced today the Company's financial results for the fiscal third quarter ended June 25, 2016. GAAP diluted earnings per share (EPS) of $0.30 increased 200% compared to the prior year period, and non-GAAP diluted EPS of $0.51 increased 18.6%. Revenue of $717.4 million increased 3.4%, or 3.6% in constant currency terms.
"We posted very good results across the board in our fiscal third quarter," said Steve MacMillan, Hologic's Chairman, President and Chief Executive Officer. "Despite difficult comparisons in the prior year period, global sales grew in all four of our businesses, led by GYN Surgical. In addition, we continue to improve gross and operating margins, and our capital deployment efforts helped EPS increase significantly faster than revenue."
Key financial results for the fiscal third quarter are shown below. Throughout this press release, all dollar figures are in millions, except EPS. Unless otherwise noted, all results are compared to the prior year period.
GAAP | Non-GAAP | |||||
Q3'16 | Q3'15 | Change | Q3'16 | Q3'15 | Change | |
Revenues | $717.4 | $693.9 | 3.4% | $717.4 | $693.9 | 3.4% |
Gross Margin | 54.8% | 54.6% | 20 bps | 65.7% | 65.2% | 50 bps |
Operating Expenses | $253.7 | $262.7 | (3.4%) | $229.2 | $222.4 | 3.1% |
Operating Margin | 19.4% | 16.7% | 270 bps | 33.8% | 33.2% | 60 bps |
Net Income | $84.8 | $29.4 | 188.1% | $145.1 | $126.9 | 14.3% |
Diluted EPS | $0.30 | $0.10 | 200.0% | $0.51 | $0.43 | 18.6% |
Revenue Detail
Revenues grew in all four business segments globally, led by the GYN Surgical division. Growth rates were affected by exceptionally strong performance in the prior year period, when reported revenues increased by 9.7% on a year-over-year basis.
$s in millions | Q3'16 | Q3'15 | Reported | Impact of Foreign | Constant | |
Cytology & Perinatal | $122.2 | $118.1 | 3.5% | $(0.4) | (0.4%) | 3.9% |
Molecular Diagnostics | 131.8 | 124.6 | 5.7% | (0.3) | (0.3%) | 6.0% |
Blood Screening | 55.9 | 64.2 | (12.9%) | - | - | (12.9%) |
Total Diagnostics | $309.9 | $306.9 | 1.0% | $(0.7) | (0.2%) | 1.2% |
Breast Imaging | 239.3 | 234.1 | 2.2% | $(0.2) | (0.1%) | 2.3% |
Interventional Breast Solutions | 41.3 | 43.3 | (4.8%) | 0.1 | 0.1% | (4.9%) |
Other | 2.0 | 2.1 | (6.3%) | 0.1 | 2.1% | (8.4%) |
Total Breast Health | $282.5 | $279.5 | 1.1% | - | - | 1.1% |
GYN Surgical | $102.0 | $85.5 | 19.3% | $(0.5) | (0.5%) | 19.8% |
Skeletal Health | $23.0 | $22.0 | 4.8% | - | - | 4.8% |
Total | $717.4 | $693.9 | 3.4% | $(1.2) | (0.2%) | 3.6% |
Other quarterly revenue highlights:
- U.S. sales of $564.9 million increased 4.7%, continuing strong recent trends.
- The Company's international businesses continued to show signs of stabilization and improvement. International sales of $152.5 million decreased (1.2%), or (0.4%) in constant currency, driven by inventory fluctuations in blood screening. Excluding sales of discontinued products, international sales increased slightly on a constant currency basis, driven by sales of GYN surgical and molecular diagnostics products.
- Excluding sales of discontinued products, global revenue increased 4.6%, or 4.8% in constant currency.
- The GYN Surgical business performed exceptionally well in the quarter. MyoSure® sales of $40.8 million increased 29.4%, or 29.8% in constant currency. NovaSure® sales of $61.0 million increased 13.9%, or 14.6% in constant currency.
- Breast Health revenue totaled $282.5 million, an increase of 1.1%. In the United States, revenue increased 1.9%, as adoption of Hologic's GeniusTM 3D MammographyTM systems continued to grow despite a difficult comparison in the prior year period. Internationally, Breast Health revenue declined (3.0%), or (2.9%) in constant currency. However, excluding sales of discontinued products, international Breast Health revenues increased slightly.
- In Diagnostics:
- Molecular diagnostics sales of $131.8 million increased 5.7%, or 6.0% in constant currency. Growth was driven primarily by continued strength across Aptima® women's health products on the fully automated Panther® and Tigris® platforms, both in the United States and internationally.
- Cytology and perinatal sales of $122.2 million increased 3.5%, or 3.9% in constant currency, as sales grew both in the United States and internationally.
- Blood screening revenue totaled $55.9 million, a decrease of (12.9%) that was driven, as expected, primarily by inventory fluctuations and ordering patterns by Hologic's partner Grifols.
- In Skeletal Health, revenue of $23.0 million increased 4.8%.
Segment revenue highlights by geography are shown below:
U.S. Change | International (Reported) | Impact of Foreign Currency | International | ||
Increase (Decrease) | |||||
Diagnostics | 3.5% | (5.5%) | $(0.7) | (0.8%) | (4.7%) |
Breast Health | 1.9% | (3.0%) | - | (0.1%) | (2.9%) |
GYN Surgical | 17.0% | 34.9% | $(0.5) | (4.4%) | 39.3% |
Skeletal Health | 2.7% | 9.2% | - | 0.2% | 9.0% |
Total Revenues | 4.7% | (1.2%) | $(1.2) | (0.8%) | (0.4%) |
Expense Detail
Gross margin was 54.8% on a GAAP basis, and 65.7% on a non-GAAP basis. GAAP gross margin improved by 20 basis points, while non-GAAP gross margin improved 50 basis points, mainly due to strong domestic sales growth, favorable product mix, and operational improvements.
Operating expenses were $253.7 million on a GAAP basis, and $229.2 million on a non-GAAP basis. GAAP operating expenses decreased (3.4%), while non-GAAP operating expenses increased 3.1%, mainly due to planned investments in Breast Health and Diagnostics marketing, and increased selling expenses.
Hologic's effective tax rate was 16.1% on a GAAP basis, and 30.6% on a non-GAAP basis, reflecting changes in income mix and internal restructuring completed in fiscal 2015 and 2016. For the fourth quarter and all of fiscal 2016, the Company expects an effective tax rate of approximately 23% on a GAAP basis, or 32% on a non-GAAP basis.
Other Key Financial Results
Adjusted non-GAAP earnings before interest, taxes, depreciation and amortization (EBITDA) were $262.5 million, an increase of 5.1%.
Operating cash flow was $246.2 million, an increase of 1.6%. Free cash flow, defined as operating cash flow less capital expenditures, was $225.1 million, 165.4% higher than GAAP net income and 55.1% higher than non-GAAP net income.
Total debt outstanding at the end of the quarter was $3.4 billion, a decrease of ($0.5) billion compared to the prior year period.
The Company ended the quarter with cash and cash equivalents of $441.5 million.
The combination of lower debt and EBITDA growth helped improve Hologic's leverage ratio (net debt over EBITDA) to 2.97 in the quarter, the first time this ratio has fallen below 3.0 since the Gen-Probe acquisition.
Strong profit growth and lower debt have continued to improve Hologic's adjusted return on invested capital (ROIC), which was 12.3% on a trailing 12 months basis, an increase of 170 basis points.
During the quarter, Hologic repurchased 3.0 million shares of its common stock for $101.2 million, exhausting the Company's prior $250 million share repurchase program.
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