Hologic Inc (HOLX) Q3 2025 Earnings Call Highlights: Surpassing Expectations Amidst Challenges

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Total Revenue: $1.024 billion, a slight growth of 0.4%, exceeding guidance by $14 million.
Non-GAAP Earnings Per Share (EPS): $1.08, a 1.9% increase year-over-year, exceeding guidance by a penny.
Non-GAAP Operating Margin: Just above 30%.
Diagnostics Revenue: $448.9 million, 0.9% growth, 2.9% organically excluding COVID-related sales.
Breast Health Revenue: $365.2 million, declined 5.8%, 10.8% organically excluding Endomagnetics and SSI.
Surgical Revenue: $178.4 million, increased 6.3%, 1.2% organically excluding Gynesonics.
Skeletal Revenue: $31.3 million, grew 62.1%.
Non-GAAP Gross Margin: 60.3%, an 80 basis points decline year-over-year.
Operating Expenses: $309.6 million, increased 2.2%.
Net Margin: 23.8%, decreased 100 basis points year-over-year, increased 60 basis points sequentially.
Operating Cash Flow: $343 million.
Cash and Short-term Investments: $1.88 billion.
Net Leverage Ratio: 0.6 times.
Fourth Quarter Revenue Guidance: $1.03 billion to $1.04 billion.
Fourth Quarter Non-GAAP EPS Guidance: $1.09 to $1.12.
Full Year Revenue Guidance: $4.081 billion to $4.091 billion.
Full Year Non-GAAP EPS Guidance: $4.23 to $4.26.
Warning! GuruFocus has detected 2 Warning Sign with HOLX.
Release Date: July 30, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Hologic Inc (NASDAQ:HOLX) exceeded its revenue and non-GAAP earnings per share guidance for the third quarter of fiscal 2025.
The diagnostics business showed growth, with molecular diagnostics leading the way, particularly in the United States.
The breast health business showed sequential improvement, with positive contributions from the skeletal franchise as supply constraints lifted.
Endomagnetics, acquired last summer, contributed nearly $20 million in revenue with a healthy gross margin, exceeding deal expectations.
The company has made significant progress in mitigating tariff impacts, reducing expected quarterly tariff expenses by half.
Negative Points
Breast health revenues declined by 5.8% compared to the prior year, although this was expected.
The operating environment in China and reduced funding for HIV tests in Africa negatively impacted the diagnostics business.
Non-GAAP gross margin decreased by 80 basis points due to product mix and a reserve recorded in the skeletal health division.
Operating expenses increased by 2.2%, driven by acquisitions and increased expenses related to the deferred compensation plan.
The company faces ongoing challenges with tariffs, expecting $10 million to $12 million in tariff expenses per quarter in fiscal 2026.
Q & A Highlights
Q: Are there any dynamics we should consider in our models for fiscal 2026, either tailwinds or headwinds, that could affect the continuation of trends? Also, was there any impact from China DRG in the quarter? A: For fiscal 2026, we expect mid-single-digit growth. Factors to consider include the discontinuation of the flu scan and ongoing headwinds related to China and HIV, which will impact the first half of fiscal 2026. Regarding China DRG, while it hasn't been a significant factor for us, the challenging environment in China has affected our business, with total China revenue down more than 50% compared to the prior year.
Q: What are your thoughts on capital allocation, particularly regarding M&A, given the strong cash flow this quarter? A: We have spent over $750 million on buybacks year-to-date and feel good about our actions. We will continue to focus on both M&A and buybacks, but there are no plans for any large acquisitions at this time.
Q: Can you discuss the progress and outlook for the breast health business, particularly regarding new product launches and replacement cycles? A: We are optimistic about the breast health business, having addressed previous challenges. We are excited about launching our new product, Vision, which will be significant in the latter half of 2026 and beyond. The interventional business is also becoming a strong driver, contributing to recurring revenue and better margins.
Q: How do you view the diagnostic setup for fiscal 2026, considering the growth of molecular diagnostics and BV CV/TV? A: We expect diagnostics to be within the mid-single-digit growth range for fiscal 2026, despite first-half headwinds from China and HIV. The diagnostics business, particularly molecular diagnostics, continues to have significant growth potential, driven by the expansion of Panther systems and new menu offerings.
Q: Can you provide more details on the tariff impacts and any further mitigation steps you might take? A: We have successfully mitigated about half of the initially anticipated tariff impacts through operational efficiencies within our supply chain. We continue to evaluate the situation, but for competitive reasons, we won't disclose specific strategies.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.