Hologic, Inc. (NASDAQ:HOLX) Q1 2023 Earnings Call Transcript

Karleen Oberton: Yes. So we have, as you said, that number includes the COVID assay revenues. So I think you’ve attempted to take some of that up. We also have the ancillaries, which are part of that, that are elevated because of COVID. But I think certainly we’re seeing the uptake, again, with newer customers in more than COVID. As well as our initiatives like in Africa, what Steve talked about the viral picking up some nice traction there as well. I think we — as we think about international molecular, we would think that that is going to grow a little faster than U.S. given the commercial investments that we’ve made there and the Panther placements.

Stephen MacMillan: Yes, Jack, just to pick up on that point that you’ve noticed. We placed a lot of Panthers with so many, especially in the European countries as we responded with COVID and every one of those was coming with trailing shift over to the STI business. So I think that’s a big piece of it.

Jack Meehan: Interesting. Okay. Then my second question is on breast imaging. So the U.S. sales in the quarter were $212 million. I think that’s actually like the largest first quarter you’ve had, at least several years. International still seeing some pressure, but I’m just trying to juxtapose this versus your comment about you’re still seeing ongoing semiconductor pressure. What was going on in the U.S. in the quarter? Was there any flush of some sort as chips came in and just what does 2Q assume?

Stephen MacMillan: Yes, there was absolutely no flush we can tell you. We did get a little bit more supply that we we’re able to install. And candidly, Jack, we had the extra week. We got a little bit of service revenue in there, because of that extra week in the quarter. So that kind of pushed us into the growth without that extra week that would have been slightly down a bit. But we like where we’re coming and we were able to kind of refurb a few more chips, got a few more chips in and we’re able to get a little more product out, but we’re feeling really good about where we’re headed this quarter and for the rest of the year in Breast Health.

Operator: And our next question will come from Max Masucci with Cowen & Company.

Max Masucci: Great. Thanks for taking the question. First one on operating margins. So it looks like the COVID testing and related items were about 15% of the organic revenues. So just based on your expectations for global COVID testing revenues this year and as we near the end of the U.S. government’s DAG program, does COVID testing and reimbursement remain the big needle mover for 2023 operating margins? Or is the operating margin expansion opportunity now more dependent on the Breast Health rebounds and/or continued strength in non COVID molecular DX?

Karleen Oberton: Yes, I would say that the margin accretion from COVID is less and less dependent on COVID as we move throughout the year and it’s going to be more driven by the Breast Health recovery and certainly Q1 to Q2 lower operating expenses, which will persist throughout the year.