Hologic Investor Meeting

Document Sample
Hologic Investor Meeting Powered By Docstoc
					                                                                                        Hologic, Inc.
                                                                                    2008 First Quarter
                                                                                      Performance
                                                                                    December 29, 2007

                                                                         • Financial results
                                                                         • Company highlights
                                                                         • Second quarter and fiscal year 2008 outlook



Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                             Safe Harbor Statement
                  This presentation contains forward-looking information that involves risks and uncertainties, including statements
                  regarding the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation,
                  statements regarding the Company’s expectations and guidance for the second quarter and fiscal year 2008; statements
                  regarding the Company’s backlog and any implication that the Company’s backlog may be indicative of future sales; and
                  expectations regarding the demand for the Company’s products and the anticipated benefits from its business combination
                  with Cytyc Corporation. 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.

                  The Company’s backlog consists of purchase orders for which delivery is scheduled within the next twelve months, as
                  specified by the customer. In certain circumstances, orders included in backlog may be canceled or rescheduled by
                  customers without significant penalty. Therefore, backlog as of any particular date should not be relied upon as indicative
                  of the Company’s revenues for any future period.

                  In addition to its merger with Cytyc Corporation, Hologic has recently acquired AEG Elektrofotografie, R2 Technologies,
                  Suros Surgical Systems, and BioLucent, Inc., and prior to Hologic’s acquisition of Cytyc, Cytyc had recently acquired
                  Adiana, Inc. and Adeza BioMedical Corp. Risks and uncertainties relating to the Cytyc merger and these acquisitions could
                  cause actual results to materially differ from those contemplated by the forward-looking statements. Such risks and
                  uncertainties include, without limitation: the ability of Hologic to successfully integrate acquired businesses, which may
                  result in the combined companies not operating as effectively and efficiently as expected; the ability and time it may take to
                  achieve the expected synergies from its acquisitions; the risk that the Company may incur unexpected costs or liabilities in
                  connection with an acquisition; the risk that the combined companies may be adversely affected by future legislative,
                  regulatory, or tax changes as well as other economic, business and/or competitive factors; risks associated with
                  international operations, particularly in respect of the acquisition of AEG, which has headquarters in Germany and operates
                  a manufacturing facility in China; financing risks associated with its acquisition of Cytyc, including risks associated with
                  the Company’s significant debt incurred in financing that transaction and the Company’s obligations to meet financial
                  covenants and payment obligations under the Company’s financing arrangements and leases, restrictive covenants that may
                  limit the Company’s ability to engage in advantageous transactions and other risks generally associated with the incurrence
                  of substantial leverage and the limitations resulting from such financing.

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                             Safe Harbor Statement
                                                                         (continued)

                 Other risks and uncertainties that could adversely affect the Company’s business and prospects include without limitation: The
                 Company’s reliance on third party reimbursement policies to support the sales and market acceptance of its products;
                 manufacturing risks that may limit the Company’s ability to increase commercial production of the Selenia and other of its
                 digital products, including the Company’s reliance on a single source of supply for some key components of its products as
                 well as the need to comply with especially high standards for those components and in the manufacture of digital X-ray
                 products in general; uncertainties inherent in the development of new products and the enhancement of existing products,
                 including technical and regulatory risks, cost overruns and delays; the risk that newly introduced products may contain
                 undetected errors or defects or otherwise not perform as anticipated; the ability of the Company’s sales force to successfully
                 service its product offerings; the Company’s ability to successfully complete or manage current or future acquisitions, alliances
                 or joint ventures; 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; expenses and uncertainties relating to litigation; risks related to the use and protection of intellectual
                 property; technical innovations that could render products marketed or under development by the Company obsolete;
                 competition; general worldwide economic conditions and related uncertainties; future legislative, regulatory, or tax changes as
                 well as other economic, business and/or competitive factors; and the effect of exchange rate fluctuations on international
                 operations. The risks included above are not exhaustive. Other factors that could adversely affect the Company’s business and
                 prospects are described in the Company’s filings with the Securities and Exchange Commission. The Company expressly
                 disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements to reflect any
                 change in the Company’s expectations or any change in events, conditions or circumstances on which any such statement is
                 based.




Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                                         Q1-08 Overview
                                                  Quarter Ended December 29, 2007
             • Record revenues of $371.4 million
                       • Up 127.6% compared to Q1-07
                       • Up 83.4% compared to Q4-07
             • Net loss of $358.6 million (includes acquisition related charges of $442.3 million)
                       • Down $374.7 million from Q1-07
                       • Down $390.7 million from Q4-07
             • 384 Selenias sold
                       • Up from 228 in Q1-07
                       • Up from 351 in Q4-07
             • Backlog of $244.5 million                                 (Excludes Cytyc)
                       • Up 11.5% or $25.3 million from Q1-07
                       • Up 1.6% or $3.9 million from Q4-07

                                 Q1 results exceed expectations…solid momentum continues

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                Q1-08 Financial Performance
                                                      Quarter Ended December 29, 2007
                                                                                  (unaudited)

                                                                                                  %                   %
($’s in millions, except EPS)                                            Q1-08         Q1-07    change     Q4-07    change
Revenues                                                             $371.4            $163.2    127.6%    $202.6    83.4%
Gross margin                                                              45.2%         45.5%              48.1%
Operating expenses                                                       $490.6         $47.7   (928.3%)   $51.0    (861.7%)
Pre-Tax Income/(Loss)                                                ($352.2)           $25.9               $47.7
Net Income/(Loss)                                                        ($358.6)       $16.1               $32.1
EPS                                                                      ($3.31)       $0.30                $0.58
1st quarter 2008 expenses include:
•   $370.0M Non-recurring in-process research and development charge
•   $41.5M Adjustment of acquired inventory to FMV
•   $26.2M Amortization of intangibles
•   $7.6M Stock-based compensation
•   $2.9M Impairment charge

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
            Reconciliation of GAAP Net Income to Non-GAAP Adjusted Net Income
                                                                             (unaudited - in thousands)
                                                                                    Three Months Ended                           Three Months Ended
                                                                                     Decem ber 29, 2007                              Decem ber 30, 2006
                                                                             GAAP         Adjustments       Non-GAAP      GAAP          Adjustments         Non-GAAP
           REVENUES
                                                                         $    371,445          —            $ 371,445    $ 163,212            —             $ 163,212
           COSTS AND EXPENSES:
               Cost of revenues                                               183,445         (725) (1)       141,187       85,785          (173)     (1)      85,612
                                                                                           (41,543) (3)
                   Cost of revenues –
                   Amortization of intangible assets                           20,155      (19,927)   (2)         228        3,072         (2,844)   (2)          228
                   Research and development                                    20,147         (686)   (1)      19,461       10,816           (210)   (1)       10,606
                   Selling and marketing                                       56,986         (715)   (1)      56,271       20,883           (144)   (1)       20,739
                   General and administrative                                  34,334       (5,457)   (1)      28,877       14,731           (989)   (1)       13,742
                   Amortization of acquired intangible
                   assets                                                        6,249      (6,249) (2)          —           1,408         (1,408) (2)           —
                   Impairment charge                                             2,900      (2,900) (4)          —            —              —                   —
                   Charge for in-process research and
                   development                                                370,000     (370,000) (5)          —            —              —                   —
                                                                              694,226     (448,202)           246,024      136,695         (5,768)            130,927

                   (Loss) income from operations                              (322,781)    448,202            125,421       26,517         5,768               32,285
                   Interest income                                                2,253       —                 2,253           261         —                     261
                   Interest and other income (expense),
                   net                                                         (31,674)       —               (31,674)        (842)         —                    (842)

                   (Loss) income before provision for
                   income taxes                                            (352,202)   448,202                96,000       25,936          5,768              31,704
                   Provision for income taxes                                 6,405     28,153 (6)            34,558        9,850          2,192 (7)          12,042
                   Net (loss) income                                     $ (358,607) $ 420,049              $ 61,442     $ 16,086      $   3,576            $ 19,662



Provided January 31, 2008 as part of an oral presentation and is
                                                                                      Footnotes are included on following slide
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
  Reconciliation of GAAP Net Income (Loss) to Non-GAAP Adjusted Net Income
                                 - Continued
                                                                         (unaudited - in thousands)
      The Company has provided net income on a non-GAAP basis for the first quarter of fiscal 2008 and 2007 excluding certain
      acquisition related charges and stock compensation expense. A reconciliation of this non-GAAP financial measure to the
      Company’s net (loss) income for the first quarter of fiscal 2008 and 2007 is set forth in the supplemental schedule above. The
      Company believes that this non-GAAP measure is useful to investors in comparing the results of operations in the first quarter of
      fiscal 2008 to the comparable period in fiscal 2007 by eliminating certain of the more significant effects of the acquisitions since
      2006, as well as the Company’s non-cash compensation expense associated with its stock option and other equity awards.
      Management uses this non-GAAP financial measure for this purpose, and these amounts are also excluded by the Company
      when calculating compliance with the Company’s financial covenants under its credit facility. When analyzing the Company’s
      operating performance, investors should not consider this non-GAAP measure as a substitute for net (loss) income prepared in
      accordance with GAAP.

      (1)       To exclude the impact of stock based compensation expense in accordance with Statement of Financial
                Accounting Standards (“SFAS”) No. 123R. For the three months ended December 29, 2007 and December 30,
                2006, the total pre-tax expense for all stock based compensation expense in accordance with SFAS No. 123R
                was $7,583 and $1,516, respectively.
      (2)       To exclude the ongoing, non-cash amortization of the intangible assets acquired since 2006.
      (3)       To exclude the increase in cost of revenues resulting from the write-up of acquired Cytyc inventory sold during
                the first quarter of fiscal 2008.
      (4)       To exclude the non-cash expense associated with the writing off of certain intangible assets acquired from Cytyc
                in the first quarter of fiscal 2008.
      (5)       To exclude the non-cash expense associated with writing off the acquired in-process research and development
                related to the acquisition of Cytyc in the first quarter of fiscal 2008.
      (6)       To reflect the tax effect at an estimated effective rate of 36% of adjustments (1), (2), (3) and (4) above.
      (7)       To reflect the tax effect at an estimated effective rate of 38% of adjustment (1) and (2) above.




Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                         Consolidated Balance Sheet Data
                                                      Quarter Ended December 29, 2007
                                                                               (unaudited)
                                                                              (in millions)

                                                                         DEC 30, 2006         SEP 29, 2007   DEC 29, 2007
Cash and Investments                                                         $ 37.3               $100.4          $189.3
Working Capital                                                               134.7                213.2           502.5

Total Assets                                                                $868.0              $1,066.3        $7,898.6

Long-Term Liabilities                                                         75.4                  74.7         3,038.5
Total Liabilities                                                            240.8                 260.6         3,288.9
Stockholders’ Equity                                                        $627.2                $805.7        $4,609.7

Shares Outstanding                                                            54.4                  55.2           127.4


                                                                               Sound balance sheet

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                                            Product Backlog
                                                      Quarter Ended December 29, 2007
                                                                                                   Orders increasing…
                                                                          (unaudited)
                                                                                                   robust outlook
      ($’s in millions)
                                                                         Q1-08          Q4-07         Q1-07

 Total Backlog (Excludes Cytyc)                                          $244.5         $240.6        $219.2

 Breast Health Backlog                                                   $224.6         $222.0        $205.2

 Number of Selenia’s                                                       578            589            522


                                                                                           1.6%         11.5%

                              FY 08 Q1’s increase in
                              backlog over…
                                                                                           Q4-07       Q1-07
Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                  Full Field Digital Mammography
                                  Number of Selenia’s Sold*
                                                                                                                    Increasing
                                                                                                                     Interest
      Selenia Highlights:
       555 sold in FY06
       1,189 sold in FY07
       Approximately 45% of
                                                                                                                              384
        estimated 5,700 + worldwide
                                                                                                                    328 351
        FFDM installed market                                                                                 282
                                                                                                        228
                                                                                                  193
                                                                                            154
                                                                                   97 111
     3       11 16                               35 37                        71
                               27 27                              44 50 54 64
    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
               2003                                 2004                 2005          2006                   2007         2008
Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                 MQSA U.S. Scorecard*
                                      (Mammography Quality Standards Act of 1992)

         Total Certified Facilities                                                               8,837
         Total Accredited Units                                                                 13,610
         Certified Facilities with FFDM Units                                                     2,627           29.7%
         Accredited FFDM Units                                                                    3,945           29.0%
         Total U.S. Annual                                                                    = 35.6 Million
         Mammography Procedures
         Hologic U.S. Installed Base                                                              1,968          50% (of FFDM units)
                                                                         *(http://www.fda.gov/cdrh/mammography)
Provided January 31, 2008 as part of an oral presentation and is         Certified Statistics as of January 1, 2008
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                      Q1-08 Segment Highlights
                                         Total Breast Health
                                (Includes Mammography, R2, Suros, Mammopad, DRC, AEG and Mammosite)
                                                                                 (unaudited)
           ($’s in millions)                                                                      %                 %
                                                                         Q1-08         Q1-07    change   Q4-07    change
Revenues                                                            $197.0             $137.6    43.2%   $177.0    11.3%
Gross margin                                                             49.5%          47.0%            51.4%
Operating income                                                         $42.7         $ 24.6    73.6%   $48.1    (11.2%)


   1st quarter highlights:
   •   53% of total revenues
   •   Increase in Selenias to 384 (288 included CAD)
   •   Includes $6.8M of amortization of intangibles
   •   Includes $4.9M stock-based compensation
   •   Includes $2.5M adjustment of acquired inventory to FMV



Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                      Q1-08 Segment Highlights
                                             Diagnostic
                                                                    (Includes ThinPrep and Full Term)
                                                                                 (unaudited)
           ($’s in millions)                                                                         %                   %
                                                                         Q1-08         Q1-07       change      Q4-07   change
Revenues                                                                 $100.3
Gross margin                                                             36.2%                     - New Segment -
Operating income                                                         ($82.0)

   1st quarter highlights:
   •   27% of total revenues
   •   Includes $85.2M non-recurring in-process research and development charge
   •   Includes $15.1M of amortization of intangibles
   •   Includes $1.0M stock-based compensation
   •   Includes $26.6M adjustment of acquired inventory to FMV



Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                      Q1-08 Segment Highlights
                                           GYN Surgical
                                                                    (Includes NovaSure and Adiana)
                                                                                 (unaudited)

           ($’s in millions)                                                                      %                   %
                                                                         Q1-08         Q1-07    change      Q4-07   change
Revenues                                                                 $49.9
Gross margin                                                             53.6%                  - New Segment -
Operating income                                                    ($282.9)

   1st quarter highlights:
   •   13% of total revenues
   •   Includes $284.8M non-recurring in-process research and development charge
   •   Includes $4.5M of amortization of intangibles
   •   Includes $2.9M impairment charge
   •   Includes $0.7M stock-based compensation
   •   Includes $12.4M adjustment of acquired inventory to FMV


Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                      Q1-08 Segment Highlights
                                           Skeletal Health
                               (Includes Osteoporosis, Mini C-arm, Extremity MRI and General Radiography)
                                                                                 (unaudited)

           ($’s in millions)                                                                      %                    %
                                                                         Q1-08         Q1-07    change     Q4-07     change
Revenues                                                                 $24.3          $25.6    (5.1%)     $25.6    (5.1%)
Gross margin                                                             29.9%          37.3%               25.4%
Operating income                                                         ($0.6)          $1.9   (131.6%)    ($1.5)   (60.0%)



   1st quarter highlights:
   • 7% of total revenues
   • Includes $1.0M stock-based compensation
   • Includes $2.0M impairment charge/reserve increase



Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                                  Guidance for Q2-08
                                                     (at Quarter ending March 29, 2008)

   ($’s in millions)                             Q2-07                   Q1-08                         Guidance for Q2-08
   Revenues - total                              $181.1                  $371.4     Up significantly from last year. Cytyc adds revenues of $200M in
                                                                                    the quarter. Total increase of approximately $45M over Q1-08


   Selenias - #                                     282                    384      We’re targeting a sequential increase of 11, or a total of 395 units in
                                                                                    the quarter.

   Gross margin                                  47.6%                   45.2%      The forecast is 62 – 63% on an adjusted non-GAAP basis
                                                                                    (excluding the amortization of intangibles of $25 million) due to the
                                                                                    Cytyc acquisition and increasing revenues (or 55 -56% on a GAAP
                                                                                    basis).

   Operating                                      $48.7                  $490.6     The forecast is $130M on an adjusted non-GAAP basis (excluding
                                                                                    amortization of intangibles of $8 million) primarily due to the
   expenses                                                                         inclusion of Cytyc and higher sales and marketing expenses.
                                                                                    Adjusted non-GAAP operating expenses are estimated to be 31%
                                                                                    of revenues (or 32% on a GAAP basis).

   Interest expense                                $0.7                   $31.7     Interest on $1.725 billion convertible and term loan of $295 million,
                                                                                    approximately $18 - $19M of interest expense.

   Pre-tax income                                 $34.3                  ($352.2)   Forecasting adjusted non-GAAP pre-tax income (excluding
                                                                                    amortization of intangibles of $32 million) of approximately
                                                                                    $110M.

   Effective tax rate                            37.0%                   36.0%      Effective tax rate is expected to be 36%.

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
                                                          Guidance for 2008
                                                     (Fiscal Year ending September 27, 2008)
($’s in millions)                                 Fiscal                                    Guidance for Fiscal 2008
                                                  2007
Revenues - total                                  $738.4            Revenues forecast to increase to approximately $1.71 billion, > 130% growth, led by
                                                                    the Cytyc acquisition, increased Selenia, R2 and Suros sales.

Selenias - #                                       1,189            The FY-08 target is 1,580, an increase of 391 over FY-07.

Gross margin                                      46.8%             The forecast is 62-63% on an adjusted non-GAAP basis (excluding the amortization
                                                                    of intangibles of $95 million and a $43 million write-up of inventory to fair value)
                                                                    due to the Cytyc acquisition, higher Selenia volumes, and increased R2 and Suros
                                                                    sales which have higher product GM’s.

Operating expenses                                $197.6            Expected to increase to $515-$520 million on an adjusted non-GAAP basis (excluding
                                                                    the charge for in-process R&D of $370 million, amortization of intangibles of $31
(R&D, S&M, G&A)                                                     million and an impairment charge for certain intangible assets of $2.9 million), or
                                                                    approximately 30% of sales (or 53% on a GAAP basis), reflecting the Cytyc
                                                                    acquisition coupled with significant growth in overall revenues (commissions) and
                                                                    continued research and development investments.

Interest expense                                    $2.5            Interest expense of approximately $80 million for the year.

Pre-tax income                                    $148.5            Expecting adjusted non-GAAP pre-tax income (excluding the charge for in-process
                                                                    R&D of $370 million, amortization of intangibles of $126 million, a $43 million write-
                                                                    up of inventory to fair value and an impairment charge for certain intangible assets
                                                                    of $2.9 million) of approximately $450-455 million.

Effective tax rate                                  36%             Effective tax rate expected to be 36%.

Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.
          Hologic - Our Opportunity
                                  Technology                             Leading innovator
                                                                         Strong position with 50% share in
         Current Market Share
                                                                         core markets
                                                                         Expanded reach and contact with
                                 Distribution                            customers/prospects through increased sales
                                                                         and service coverage
                                                                         Positioned to take advantage of markets
                         Market Growth                                   in the formative stages of growth

                                                                         3D imaging, guidance and broader adoption
                          Future Drivers
                                                                         of MIS techniques for the breast

                                 Hologic Remains a Technology Leader in an
                                            Expanding Market
Provided January 31, 2008 as part of an oral presentation and is
qualified by such, contains forward-looking statements, actual results
may vary materially – Hologic disclaims any duty to update.