Hologic Q4 2021 Earnings Call Transcript

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Provided by Quartr
October 31, 2021

Key Takeaways

  • Q4 & FY21 outperformance: Q4 revenue of $1.32 B and non-GAAP EPS of $1.61 well above guidance, driving full-year revenue up 47% to $5.63 B and EPS more than doubling to $8.41; ex-COVID core business grew 12% in Q4, ahead of the 5%–7% target.
  • Diagnostics acceleration: FY21 placements of 650 Panther instruments (installed base ~2,900 worldwide) plus new assays like the vaginosis panel (nearly $30 M) and tuck-in deals—BioTheranostics, Diagenode, Mobidiag—set to boost top-line growth.
  • Breast & skeletal health rebound: Q4 revenue rose 15% as US Genius 3D mammography installs reached ~8,700 and service revenue climbed to 40% of the division, reflecting a more balanced, recurring-revenue model versus boom-bust cycles.
  • Surgical portfolio expansion: Transitioning beyond hysteroscopy with the Assessa fibroid removal system and a pending $160 M Boulder Surgical acquisition to broaden OB/GYN device offerings and leverage existing channels.
  • FY22 guidance: Full-year revenue expected at $3.75 B–$4.00 B (core growth 5%–7% ex-COVID), with conservative modeling of $300 M in COVID assay sales; Q1 revenue guided at $1.10 B–$1.15 B and EPS of $1.15–$1.25.
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Earnings Conference Call
Hologic Q4 2021
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Operator

Good afternoon, and welcome to the Hologic fourth quarter 2021 earnings conference call. My name is Sarah, and I'm your operator for today's call. This conference is being recorded. All lines have been placed on mute. I would now like to introduce Mike Watts, Vice President, Investor Relations and Corporate Communications to begin the call. Please go ahead, sir.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Thank you, Sarah. Good afternoon, and thanks for joining us for Hologic's fourth quarter fiscal 2021 earnings call. With me today are Steve MacMillan, the company's Chairman, President, and Chief Executive Officer, Karleen Oberton, our Chief Financial Officer, and Ryan Simon, our new Vice President of Investor Relations. Our fourth quarter press release is available now on the investor section of our website. We also will post our prepared remarks to our website shortly after we deliver them today. A replay of this call will be archived through December 3rd. Before we begin, I'd like to inform you that certain statements we make today will be forward-looking. These statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Such factors include those referenced in the safe harbor statement included in our earnings release and in our filings with the SEC. Also, during this call, we will be discussing certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. One of these non-GAAP measures is organic revenue, which we define as constant currency revenue excluding the divested blood screening business and revenue from acquired businesses owned by Hologic for less than one year. Finally, any percentage changes we discuss will be on a year-over-year basis, and revenue growth rates will be in constant currency unless otherwise noted. Now I'd like to turn the call over to Steve MacMillan, Hologic's CEO.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Thank you, Mike, and good afternoon, everyone. We are pleased to discuss our strong financial results for the fourth quarter of fiscal 2021. Revenue was $1.32 billion, and non-GAAP earnings per share was $1.61. Both figures significantly exceeded our guidance. Since this quarter marked the end of our fiscal year, we want to highlight some annual numbers and themes today. First, the numbers. For the year, total revenue was $5.63 billion, up 47% versus 2020. Non-GAAP EPS was $8.41, more than double the prior year. Some really big numbers and a truly impressive performance that was driven by our COVID test sales, as well as the recovery of our core women's health businesses.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Along these lines, if you back out COVID test sales, as well as revenue from COVID-related products such as instruments and collection kits, we grew about 12% in the quarter. A very nice start versus the long-term guidance of 5%-7% that we introduced in our last call. We believe we are well-positioned for success regardless of the future direction of the pandemic. If it drags on, we have shown that we can respond aggressively and generate financial upside. For example, since the beginning of the pandemic, we have provided more than 130 million highly accurate COVID tests to our customers in more than 50 countries. When the pandemic subsides, we can rely on a base business that has never been stronger or more diversified than it is today. Now let's turn to those annual themes.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

We want to focus on the strengthening of our major businesses over the last 12 months, as well as two very important social initiatives that help improve health access and equality. We're so proud of everything that Hologic has done to help fight the COVID pandemic, and the resulting financial success has made us a significantly stronger company for the future. Our core businesses are more diverse with more growth drivers than ever before. Our R&D pipelines are producing innovative new products, and our commercial organizations are fully engaged. Our international business has emerged as a consistent growth driver with passionate teams on the ground who are building relationships and market presence all around the world.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

On top of all this, we have used the strong cash flow we are generating from COVID test sales to acquire companies that we expect to generate more than $150 million of revenue in 2022. Although these acquisitions are slightly dilutive to near-term EPS, we expect them to accelerate our top line growth rate. Now let's get into the specifics by division. First, in Diagnostics, our Panther footprint continues to grow as we respond to the pandemic. In our fourth quarter, we placed 167 Panther instruments worldwide and about 650 for the year, well ahead of what we originally forecast. Our Panther installed base currently stands at more than 1,500 in the United States and almost 2,900 worldwide.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Remarkably, this represents a two-thirds increase in our total installed base since the end of fiscal 2019 when we had about 1,700 instruments in the field. Looking forward to 2022, we continue to see strong demand for additional placements globally. Utilization of this growing footprint and leveraging our robust portfolio of 19 assays will be key to driving the business forward in a post-COVID world. Toward this end, in 2021, we signed up more new assay business in the U.S. than ever before. While our legacy women's health assays are leading the way, we also expect newer assays to make material contributions. For example, sales of our vaginosis panel almost doubled to nearly $30 million in 2021. We expect significant growth in 2022 as well, which would make this product our most successful Diagnostics launch ever, aside from COVID.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

In addition, we completed the back-to-back-to-back acquisitions of Biotheranostics, Diagenode, and Mobidiag in 2021, our first diagnostic acquisitions in nearly a decade. These deals are broadening our product offering and customer base and strengthening our R&D capabilities around the world. While still in the early innings, Biotheranostics continues to exceed expectations, with sales of more than $16 million in our fourth quarter. In addition, the broad European launch of the Novodiag system represents a meaningful early achievement in our integration process, and we have already secured some encouraging customer wins. We are excited about opportunities to invest in these businesses in the near term and expect them to accelerate our top-line growth in the years to come. Second, in Breast and Skeletal Health, we are well positioned for fiscal year 2022 and beyond.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Our Genius 3D Mammography systems remain the core of our business, and our market share remains very high. Despite COVID pressures, we placed almost 950 3D units in the United States in 2021. We now have a domestic installed base of almost 8,700, which we can build on with new software and hardware upgrades. At the same time, our business is now more balanced than ever as we operate across the entire continuum of Breast Health care, from screening and diagnosis through surgery and treatment. As a result, we are now less susceptible to the boom and bust cycle of years past and better able to capitalize on opportunities as demand continues to recover from the headwinds created by the pandemic.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Third, in our Surgical division, we are executing on our plan to broaden the division from a two-product hysteroscopy business to a more diverse provider focused on the OB/GYN. In fiscal 2021, we broadened our portfolio by adding Acessa, a laparoscopic fibroid removal system used to treat larger, more complicated fibroids that MyoSure cannot reach. We are pleased that insurance coverage for the Acessa procedure has steadily expanded. With this tailwind, we expect to grow Acessa into a third important surgical brand alongside MyoSure and NovaSure. Taking another step forward, we are also very excited about the recent signing of an agreement to purchase Bolder Surgical, which offers additional laparoscopic devices. We expect this deal to close later this calendar year. Bolder offers a portfolio of advanced energy vessel sealing surgical devices currently marketed primarily in the pediatric space.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Once the deal is closed, we expect to again leverage our strong customer relationships to grow Bolder sales in the OB/GYN market, which we estimate to be five times the size of the pediatric market. Bolder and Acessa represent solid examples of executing against our tuck-in acquisition strategy, using our strong cash flow to add products that leverage our existing channel strength and accelerate our growth. Fourth, let's discuss our international business, which was growing nicely before COVID, but has become even stronger, thanks to our pandemic contributions. Even excluding COVID, our international revenue has nearly doubled in just five years, and the business is positioned to continue its impressive string of double-digit core growth. I recently had the pleasure of being with Jan Verstreken's leadership team in Dubai as they made plans to kick off fiscal 2022.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

It was inspiring to see the deep talent that Jan has assembled and the passion for women's health that helps them build and strengthen commercial relationships. I saw a business benefiting from tremendous leadership and from years of dedication transitioning from a distribution model to direct on-the-ground commercial expertise. Further, the acquisitions of Diagenode, based in Belgium, Mobidiag, based in Finland, and Somatex, based in Germany, provide tailwinds to our international business going forward. Since the close of each deal, dozens of team members, including technical experts and leadership, have made numerous trips across Europe and across the Atlantic to ensure successful integration of these companies, all while dealing with strict COVID protocols. Truly a global collaborative effort that we expect to accelerate growth for years to come.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Now let's shift gears and discuss two groundbreaking social initiatives that we launched this year and that were made possible by our financial success. These efforts represent unique ways that we can extend our purpose, passion, and promise even further for the benefit of women's health. First, in May of this year, we launched Project Health Equality, a $20 million initiative to address the structural and cultural barriers that prevent Black and Hispanic women in the United States from receiving the same quality healthcare as white women. By teaming up with leading nonprofit groups focused on minority health, our goals are to drive culturally competent care, improve public health policy, increase access, and ultimately decrease disparities that lead to disproportionate mortality rates for Black and Hispanic women. Second, in September, we released the findings of our inaugural Hologic Global Women's Health Index.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

As leaders in Diagnostics, we understand the importance of data and know that what we can measure, we can improve. We also know that women's health has been overlooked for centuries. That's why we created the index, the first to statistically represent the health of 2.5 billion women and girls worldwide. Developed in partnership with Gallup, the Hologic Global Women's Health Index is an unprecedented in-depth examination of critical markers for women's health by country and territory and over time. Notably, 60% of those surveyed, equating to about 1.5 billion women and girls, had not been tested in the last year for four common diseases that affect women's health, cancer, diabetes, high blood pressure, and sexually transmitted infections.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

As we share this kind of data with international leaders and health organizations, our goal is to provide an actionable science-backed data roadmap for improving life expectancy and quality of life for women around the world. While we have made a tremendous impact around the world with our innovative products, the Hologic Global Women's Health Index may ultimately prove to be our most important accomplishment for women's health. We hope that sharing a little about these initiatives is helpful to all our investors, but especially those who are focused on ESG issues. We also are pleased to share that we recently received some recognition for our efforts as Investor's Business Daily just named us one of their top 100 ESG stocks.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Before I turn the call over to Karleen, let me wrap up by saying that based on the stabilization, growth, and diversification of our core businesses, we expect to grow revenue at least in line with our 5%-7% long-term guidance in 2022. On top of this, we have the potential for significant financial upside based on our sales of COVID tests. To state the obvious, our success in 2021 and our optimism for 2022 would not be possible without our 6,000+ employees. I am incredibly proud of them for their continued dedication and resilience. In a year marked by day-to-day, hour-by-hour management of highly variable pandemic demands, Hologic continues to make an enormous impact on humanity. As I visit Hologic sites and talk to employees, the sense of pride, morale, and engagement is palpable.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

The belief in our mission to enable healthier lives everywhere, every day is real. I personally have never been more proud or excited for our organization. As a reflection of our global leadership team's gratitude, in the fourth quarter, we provided all our employees a special one-time cash bonus, regardless of function and level. In an environment where finding and developing talent is increasingly challenging, we've strengthened our talent across all levels of the organization with individuals who embody our purpose, passion, and promise. To all of you around the world, thank you. Now let me hand our call over to Karleen.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Thank you, Steve, and good afternoon, everyone. We are very pleased to share our fourth quarter results that significantly exceeded our guidance. In our last earnings call, we said that while we were forecasting conservatively, we were well prepared to generate upside if COVID testing demand increased due to the Delta variant, and that's exactly what happened. Increased COVID test sales in the fourth quarter more than compensated for macro headwinds that have affected many med tech companies recently. Our fourth quarter performance demonstrates that we are in a strong position regardless of how COVID evolves. We benefit from our invaluable testing contributions if the pandemic drags on or from a strong base business when it wanes. In the fourth quarter, revenue and EPS were down compared to the prior year, when COVID-19 testing volumes were near their peak.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Total revenue of $1.32 billion declined almost 3% and 6% organically. These figures mask the solid recovery of our base businesses. As Steve said, if you back out COVID assay revenue as well as collection kits, instruments, and ancillaries that are shared by our COVID and other tests, revenue grew by 12% organically. This growth, which compares favorably to the 5%-7% long-term guidance we provided last quarter, was driven by resilience across all of our divisions despite utilization pressures from the Delta variant and customer staffing shortages. EPS of $1.61 in the fourth quarter was down 22% compared to the prior year, as expected. Earnings exceeded the midpoint of our guidance by about 68%.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Underlying this, our cash flow conversion remains tremendous, allowing us to continue pursuing tuck-in M&A and share repurchase, which I'll touch on in a moment. Before I do that, let me provide some detail on our divisional revenue results. To provide a more complete picture of our performance, I will at times compare our results to both 2020 and 2019, as well as exclude the impact of COVID-19 where applicable. In Diagnostics, global revenue of $836.8 million declined 11.5% compared to the prior year. However, excluding COVID assay sales and related items, worldwide Diagnostics revenue increased 5%. Although COVID testing revenue declined compared to the prior year, it still far exceeded our expectations as the Delta variant surged throughout the quarter.

Karleen Oberton
Karleen Oberton
CFO at Hologic

In Q4 2021, we shipped about 21 million COVID tests to customers, generating assay revenue of $443 million globally. Demand in the United States was robust and represented about two-thirds of total COVID assay revenue. This dynamic highlights the breadth of our Panther installed base, our commitment to respond to customer needs, and our flexibility to capture testing demand wherever and whenever it occurs. To better understand the underlying performance of our non-COVID molecular business, I will again exclude COVID assay sales and related ancillary items. If we do this, we see that the base molecular revenue grew about 6.5% organically in the fourth quarter. Compared to the same quarter of 2019, molecular grew about 10%. Rounding out Diagnostics, cytology and perinatal grew 3% compared to the prior year.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Compared to 2019, these businesses were down low single digits, as well-woman visits have not yet fully recovered from the pandemic. In Breast Health, global revenue of $334.2 million grew 15% as the business rebounded from a weak prior year period and showcased its increasing diversity in face of the latest Delta surge. Both breast imaging and interventional businesses increased, with imaging growing 12% and the interventional up 27%. Furthermore, our strategy to increase recurring revenue continues to pay off, as global service revenue was approximately 40% of the division's total in the quarter, nearly twice as large as global gantry sales. In Surgical, fourth quarter revenue of $122 million grew 21%. This strong performance was driven by MyoSure, which had another impressive quarter, growing in the mid-teens.

Karleen Oberton
Karleen Oberton
CFO at Hologic

While surgical procedures were depressed in August and September, the impact was far less than what we experienced at the beginning of the pandemic. In fact, compared to 2019 levels, Surgical was up mid-single digits. Further, we continue to add products to the bag of our best-in-class sales force. The acquisition of Acessa and agreement to acquire Bolder set us up nicely for fiscal 2022 and beyond. Lastly, in our small Skeletal business, revenue of $23.6 million increased 26% compared to the prior year period and made mid-single digits compared to 2019. Now, let's move on to the rest of the P&L for the fourth quarter. Gross margin of 69.4% exceeded our forecast, driven by higher-than-expected COVID-19 test volumes in the period. Compared to the prior year, gross margins declined 480 basis points.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Total operating expenses of $353.2 million increased 28% in the fourth quarter, but recent acquisitions contributed about a third of this increase. In addition, we deliberately reinvested for future growth with incremental spending in R&D and marketing, spent $9 million on the one-time employee bonus that Steve mentioned, and made a $10 million donation to our charitable fund in the quarter. Finally, our non-GAAP tax rate in the quarter was 21.5%, consistent with prior periods. Putting all this together, operating margin declined 1,120 basis points versus the prior year period, but came in above our forecast at a very healthy 42.5%. Net margin also declined 880 basis points, but was very strong, 31.6%.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Non-GAAP net income finished at $415.7 million and non-GAAP earnings per share was $1.61, far above the top end of our forecast. Before we cover our 2022 guidance, I'll touch on a few other financial metrics. Cash flow from operations was $465 million in the fourth quarter. This completed our best ever cash flow year as we generated more than $2.3 billion of operating cash in 2021. These strong cash flows continue to give us tremendous financial and strategic flexibility. For example, in the fourth quarter, we agreed to acquire Bolder Surgical for $160 million. Although we did not repurchase any shares in our fourth quarter, we have bought back more than 1 million shares so far in the first quarter of 2022.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Finally, I should mention that we recently refinanced our credit agreement. This further strengthened our balance sheet and financial flexibility by extending the maturity date to 2026, increasing our revolver's borrowing capacity to $2 billion, and lowering our borrowing costs. Based on our strong operational performance, we had $1.17 billion of cash on our balance sheet at the end of the fourth quarter, and our leverage ratio was 0.6x. We intend to continue using our cash on division-led tuck-in acquisitions and share repurchases that improve our top and bottom line growth rates. Finally, ROIC was 32.6% on a trailing 12-month basis, a significant increase of 1,410 basis points. Before we open the call for questions, let me discuss our financial expectations for the first quarter and full year of fiscal 2022.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Although the pandemic remains highly unpredictable and we are not immune from the supply chain challenges you've been hearing about, we believe we have good visibility into the recovery of our base businesses, as well as a valuable hedge to COVID-19 outbreaks with our testing revenue. In the first quarter of fiscal 2022, we expect strong financial results again with total revenue in the range of $1.1 billion-$1.15 billion. For all of fiscal 2022, we expect total revenue in the range of $3.75 billion-$4 billion, significantly exceeding our pre-pandemic sales. To help with your constant currency modeling, we are assuming foreign exchange headwinds of approximately $2 million in the first quarter of 2022 and $25 million for the full year.

Karleen Oberton
Karleen Oberton
CFO at Hologic

In terms of our divisions, we expect Breast and Skeletal Health, Surgical, and Core Diagnostics, excluding COVID effects, to grow in line with the 5%-7% guidance we provided last quarter. In Diagnostics, molecular should continue to lead the way based on our larger Panther installed base, uptake of new assays like our vaginosis panel, international expansion opportunities, as well as the recent change in chlamydia/gonorrhea screening guidelines that supports opt-out testing. In Breast Health, we have quietly been adding multiple growth drivers through acquisitions in breast-conserving surgery, ultrasound, and specimen radiography, as well as internal development of software and hardware upgrades. Further, we have significant opportunities to expand our 3D installed base and service business internationally. Finally, in Surgical, we expect MyoSure to continue to drive growth, but to get help from a broadening portfolio of products such as Fluent and Acessa ProVu.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Bolder is not included in our guidance because the deal has not yet closed. In terms of COVID assay sales, let me remind you that in the last 12 months, we have seen testing demand increase rapidly, then decline rapidly, then increase rapidly again. Said another way, demand remains unpredictable and a lot can change between now and the end of our fiscal 2022. We continue to forecast conservatively and view COVID as upside to our strong base business. We will act aggressively to meet testing demands when and where it rises. With this perspective, we expect COVID assay sales to be at least $200 million in the first quarter of 2022 and at least $300 million for the full year.

Karleen Oberton
Karleen Oberton
CFO at Hologic

COVID-related items and Diagnostics are expected to be approximately $45 million in the first quarter and at least $120 million for the full year. Finally, COVID has given us the opportunity to discontinue certain older products in our Diagnostics franchise. We expect a headwind of about $11 million from rationalizing these products in 2022. Let me remind you that our organic guidance backs out acquired revenue until the first full quarter after the deals annualize, as well as revenue from our divested blood screening business. We expect blood screening revenue of $5 million-$6 million in Q1 and $20 million-$25 million for the full year. In total, we are backing out roughly $100 million of inorganic revenue for the year, which means that we expect organic revenue to decline 30%-34% in fiscal 2022 based on lower sales of COVID tests.

Karleen Oberton
Karleen Oberton
CFO at Hologic

However, to appreciate the underlying growth of our base women's health franchises, it's important to back out of organic revenue COVID assay sales, related ancillary items, and the small amount of SKU rationalization that I mentioned. On this measure, we expect revenue in 2022 to be at least in line with the 5%-7% long-term guidance that we provided last quarter. Moving down the P&L, for the full year, we forecast our gross margin percentage to be between 63%-65% and our operating margin percentage to be in the low-to-mid 30s. We expect both percentages to decline sequentially throughout the year since the vast majority of COVID testing revenue will likely be recorded in the first half of 2022. In addition, we have incorporated some inflationary pressure in our supply chain into our guidance.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Despite this, for the full year, both gross and operating margins should be better than before the pandemic. In terms of operating expenses, we expect spending to be flat to down slightly versus elevated levels in 2021, even as we absorb cost increases and continue to invest proactively in our acquisitions in our base business to drive future growth. Below operating income, we expect other expenses net to be a little less than $25 million a quarter. Our guidance is based on a tax rate of 21.5% and diluted shares outstanding of around 260 million for the full year. All this nets out to expected EPS of $1.15-$1.25 in the first quarter and $3.55-$3.85 for the year.

Karleen Oberton
Karleen Oberton
CFO at Hologic

As you update your forecast, let me remind you that macro uncertainty due to the pandemic is still high. We would therefore encourage you to model at the middle of our ranges, which incorporates both potential upsides and downsides. Let me wrap up by saying that Hologic posted a strong end to our fiscal 2021, with the results in our fourth quarter that far exceeded expectations and guidance. With organic investments in multiple acquisitions, we are emerging from the pandemic as a stronger company with core top-line growth rates of 5%-7% and potential upside from COVID. With that, I will ask the operator to open the call for questions. Please limit your question to one plus a related follow-up, and then return to the queue. Operator, we are ready for the first question.

Operator

Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up question. At that time, your line will be muted. Again, press star one to ask a question, and we'll pause for just a moment to allow everyone an opportunity to signal. We will take our first question from Brian Weinstein with William Blair.

Brian Weinstein
Brian Weinstein
Managing Director in Investment Banking at William Blair

Thanks for taking the question. I don't usually believe in public accolades for management team members on these calls. I don't think I've done this very often, but just wanna thank Mike for his work and his friendship over the last 14 or so years that we've worked together, going back to Gen-Probe. Lots of history there. Enjoy retirement. You've certainly earned it, Mike.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Thanks, Brian.

Brian Weinstein
Brian Weinstein
Managing Director in Investment Banking at William Blair

Yeah, of course. So just to think about 2022 for a second, then I also want to ask a bigger macro question. On 2022, Karleen, for you, just want to kind of understand the core operating margin. I wasn't sure if you mentioned it right there at the end. I might have missed it. If we were to sort of back out COVID-19 from both, let's say 2021 and 2022, how is that core operating margin expanding, and what does that look like relative to pre-pandemic? Because it looked like on our math that operating margin may actually be coming down on the core a little bit, and I wasn't sure if that was acquisitions or other things that were there. Can you just address kind of the trend in the core there?

Karleen Oberton
Karleen Oberton
CFO at Hologic

Yeah. Certainly acquisitions are dilutive. I think we've talked about at least $0.10 in 2022. You know, I think when we look at the core, we would expect that the operating margin would be at or slightly above where we prior to the pandemic. I think we've referenced that 31.5%, right at Q2 2020 is what to think about on the base business. Certainly as we move forward, the acquisitions are dilutive and, you know, while we're really pleased about the international growth, that is also dilutive to the operating margin profile. Certainly our job is to continue to look for opportunities to drive efficiencies.

Brian Weinstein
Brian Weinstein
Managing Director in Investment Banking at William Blair

The inflationary pressures there, they are being offset, or are those flowing through as well?

Karleen Oberton
Karleen Oberton
CFO at Hologic

To some extent offset, but the sum is dropping to the bottom line as well, as we always have initiatives to improve costs. Certainly those initiatives aren't at the pace of these headwinds that we're experiencing.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Brian, the other piece to keep in mind is what we kinda called out as well, which additional charitable contributions, extra employee bonuses. It was our, you know, as you can tell, it was our fiscal year-end. It was a tremendous year. Dropping an extra penny or two, you know, to Wall Street at this point on a $8.41 number was probably not our top priority versus investing for the future. You look in total, our R&D spending up significantly over 20% for the year. We really used it to make additional investments for the future.

Operator

Our next question will come from Vijay Kumar with Evercore ISI.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore ISI

Hey, guys. Thanks for taking my question. Steve, maybe on Q1 on the guidance. Maybe I'll start with the Q1. Breast Health, can you just talk about the CapEx environment? It looks like imaging was down Q-on-Q. I'm just curious if there was anything in the Q1, whether it was a pandemic impact that had some disruption.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah, overall, we feel really good. There were clearly some impacts on installations here and there, you know, as hospitals hunkered back down a little bit in that August-September period. We continue to feel good about the backlog and, you know, feel good about the overall trends within that Breast Health business.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore ISI

Understood. One on the fiscal 2022 guidance. The underlying base is expected to grow 5%-7%. I wanna make sure I have these numbers correct. The total COVID contribution for the year, I think, the guidance is contemplating about $420, including $300 of testing and $120 of others. Did I get those numbers right? Bolder-

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Correct.

Vijay Kumar
Vijay Kumar
Senior Managing Director at Evercore ISI

I'm curious what the contribution from Bolder is, what the revenue run rate is and margin is.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Yes. You have the $420 is correct, Vijay. There's no contribution from Bolder in the guidance as the deal hasn't closed.

Operator

Our next question will come from Tycho Peterson with JPMorgan.

Tycho Peterson
Tycho Peterson
Managing Director of Life Science Tools and Diagnostics at JPMorgan

Hey, thanks. First question, I'll stick with the guidance theme. Just as we think about Panther placements, do you think about being back to kind of pre-pandemic levels, call it 190-200 systems next year? Any rough guidance you can give us on pull-through, you know, versus the historical 240,000?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Sure, Tycho. I think we continue to feel really good that we will not see a drop-off relative to historical placements on Panthers. If anything, we'll probably do a little bit better than the number you just mentioned, and therefore probably a little bit better than even we've been doing the previous years going into it, as global demand continues to be great. You know, the average dollars per Panther, you know, it's all over the place right now because obviously we have COVID running through a bunch of them. I think the logical expectation is we'd probably be a little bit lower than that $240 number given the incredible number we've placed. Also, a huge amount of them are outside. If you basically look at it on a base business basis.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

I think what, you know, with COVID, those numbers are gonna, you know, continue to be good, but it's hard to predict for the full year, obviously given where COVID will go. I think what we love is they're out there, they're placed. We probably take a slight short-term dip on revenue per Panther in the short term while that continues to go up as they port our, you know, our base assays onto those Panthers. I do think as you're getting to the overall number of Panthers we have placed has got to bode very well. The other reality is, you know, we're all seeing about labor constraints.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Do not underestimate, again, I know you know it, Tycho, but the fact that Panther is such an automated system, and I know there's ongoing questions of, okay, what's gonna happen with all these Panthers once COVID runs down? Most of our customers are dying to get our base business onto these and for those labor savings opportunities.

Tycho Peterson
Tycho Peterson
Managing Director of Life Science Tools and Diagnostics at JPMorgan

Okay. A follow-up on China. You know, there's kind of two dynamics in the market there. There's Made in China 2025, you know, encouraging local competition, and then there's kind of the near-term dynamic around volume-based tenders. Can you maybe just touch on, you know, either or both of those and whether you're seeing any impact?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. I hate to say it, but I think we're a little fortunate in that we're pretty small in China, and therefore are not seeing big impact in the volume-based tenders, probably not coming quite after our categories at this stage and time. I would tell you truthfully, it's a time I'm glad we're smaller there. We see opportunities to grow there, but you know, we probably have more upside than downside as we look at that part of the world.

Operator

Our next question will come from Jack Meehan with Nephron Research.

Jack Meehan
Equity Research Analyst at Nephron Research

Thank you. Good afternoon. Wanted to continue on with Panther. Looked like just based on the disclosures, most of the incremental Panthers in the quarter were placed internationally, rather than just looking at some of Karleen's commentary around the U.S. versus international mix of the COVID sales. You know, most of the incremental sales actually came in the U.S., which kind of makes sense, I guess, because of Delta. Was just curious, maybe more broadly, you got thoughts around the international adoption of these Panthers, you know, how much is getting used now for COVID and, you know, versus broadening the footprint for other things internationally.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Sure. I think, you know, a lot of it in the nearer term has still been COVID. Even there are a lot of hospitals and a lot of labs that even as they started to see some declines pre-Delta, they were starting to ramp up our base assays and then decided, you know what, we better stay loose. I would tell you there's probably some Panthers being a little bit underutilized right now internationally because they don't wanna start to ramp them up with our tests and then have to stop. So we feel great about that as, you know, basically on deck and ready to go as soon as they have the ability.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

It's one reason why the Panther placements internationally have continued to be very strong because they've gotten the exposure, and they want to build up with our, you know, with our tests. I think feeling great. There has been, you know, we've even had a number of customers in the United States as well that were just starting in kind of July to start to ramp down the COVID and ramp up our women's health stuff, and then all of a sudden said, "Whoa, time out. You know what? We wanna keep this capacity for right now on COVID.

Jack Meehan
Equity Research Analyst at Nephron Research

That makes sense. Then on the Breast Health and the GYN Surgical businesses, they both came in a little below what I was expecting. Was curious if you could call out just what impact you think Delta might have had on the results in the quarter. As you were thinking about the 2022 guidance, did you assume that was the baseline just when you were thinking about the 5%-7% to grow off of?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah, we did kind of view that in the baseline. You know, they were a touch on, you know. Obviously, as we saw the August, but especially September, you know, they had a little bit of an impact. Again, I think there's been way too much overall focus on these short-term ups and downs of of COVID and what it does to the base. I think overall, we feel very, very good about that core and about where we're headed as we come into 2022 on both of those businesses. As, you know, Karleen and I both mentioned, those businesses are more diversified than ever, both product-wise as well as geography-wise. I think that sets us up well here for 2022 and for the longer term.

Operator

Next, we'll take a question from Anthony Petrone with Jefferies.

Anthony Petrone
Anthony Petrone
Senior VP and Equity Research Analyst at Jefferies

Hi. Thanks. I wanna congratulate the team on a strong execution for the whole year, and congratulations as well, Michael Watts, on your retirement. Good luck on the next phase of the transition. A couple questions, one on actually the acquisitions, the $34 million of total deal contribution. How much of that was actually Mobidiag? And when we think about a quarterly run rate, I think the timing on Mobidiag was not a full quarter. So should we be expecting a number perhaps in the $40 million-$45 million range for total quarterly contribution from recently closed deals? And then I'll have one quick follow-up on COVID testing.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Yes. Mobidiag was roughly $7 million in the quarter. I think, as we look to 2022, I think we talked about, you know, $150 million plus from all the acquisitions, and about half of that's organic.

Anthony Petrone
Anthony Petrone
Senior VP and Equity Research Analyst at Jefferies

Okay, great. Then just on the newly placed Panther systems throughout the pandemic, I mean, how many of those systems are actually only doing COVID testing exclusively? You know, at what point do you think they will transition to just broader diagnostic contracts? Thanks again.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Thank you, Anthony. You know, the reality is we don't exactly know and track at that level of the Panther. What we do know is they've clearly been running, you know, in many cases, not quite flat out, but close to it, during the pandemic. That all of which creates the opportunity as COVID ramps down for us to really shift over our base business. I think that's what makes us so excited about the future of Diagnostics. You know, we had good growth rates going in, particularly internationally. You've been seeing, you know, we'd had double-digit, almost 20% growth in our molecular diagnostics business for, you know, the last few years and a number of quarters.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

As we come out of the pandemic or even as things slow down to a more manageable level, which looks to be hopefully on the horizon here, that creates meaningful opportunity for more and more of our base businesses to really get ramped up there.

Operator

Derik de Bruin with Bank of America has our next question.

Derik de Bruin
Derik de Bruin
Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America

Hi. Good afternoon. Mike, happy trails. It's been a pleasure.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Thanks.

Derik de Bruin
Derik de Bruin
Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America

Just once again, another Panther question, but how much is greenfield versus people just adding on additional molecular testing capabilities versus replacements of or swap outs from competitors?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

You're talking new customer, completely new customers?

Derik de Bruin
Derik de Bruin
Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America

Completely new customers to, yeah. Maybe, yeah, completely new customers to testing that you've not been in the lab before versus people who have been doing molecular testing or adding systems or ones where you're just beating out some competitor that's installed.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. The vast majority, Derik, are customers that we've already been doing business with. You know, when you consider our, just our market shares, as you well know, in women's health, we're pretty much in most customers. There are very few customers, you know, certainly in the United States that we're not in. So it's really expanding their capacities. You know, a few more greenfield outside the United States, which is new customers coming online, but some that we were already prospecting. But the vast majority across the board really is our core business. Mike, you wanna add something?

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Hey, Derek, the only thing I might add is we are seeing a lot of customers add on new assays, of course, right?

Derik de Bruin
Derik de Bruin
Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America

Yeah.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

They might be customers for our, say, women's health panel today, call it chlamydia, gonorrhea, HPV, Trichomonas. We're seeing a lot of excitement in particular around our vaginosis panel, which we highlighted in the script as well as Mycoplasma genitalium. That's an existing customer, but they're bringing on a new assay or assays.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah.

Derik de Bruin
Derik de Bruin
Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America

Got it. Just one follow-up. On what are you assuming for breast imaging growth in 2022? On the services component at 40%, is there additional upside to that number?

Karleen Oberton
Karleen Oberton
CFO at Hologic

No, I mean, I think if you think about that, the service is tied to our installed base, and as we even place new gantries, sometimes the replacements, they kind of come off of service for a year. They have warranty. I would expect that the service would probably be a lower end of growth when I think about that division. Certainly, as I said in the prepared remarks, the overall division should be in that 5%-7%.

Operator

Next, we'll take a question from Mike Matson with Needham & Company.

Mike Matson
Mike Matson
Senior Research Analyst at Needham & Company

Hi. Thanks for taking my question. I guess I wanna ask one about this COVID flu combined test that you've launched. Do you see a scenario where if you know, COVID, maybe we don't have another big wave, but we have kind of a worse flu season that you know, you could still see kind of a benefit from that to that combined test?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. Mike, you know, we're prepared. When we say we've launched it, we've had it cleared now and it's ready to go for customers. We're still basically hearing from most of our customers they want the straight COVID test. As the months evolve here, you know, do we start to get a bigger, you know, spike in the flu season? Clearly, I do think that we believe as you go forth this year, and let's face it, probably even next year, you know, most people that are gonna get tested for flu are probably gonna end up getting tested for COVID as well. You know, we will see how it plays out. We're assuming, you know, relatively small volumes as it relates to our multiplex test at this point in time until it starts to materialize.

Mike Matson
Mike Matson
Senior Research Analyst at Needham & Company

Okay, thanks. That's helpful. Then, I just wanna ask about Breast Health outside. You know, can you just maybe give us an update on where things stand with 3D penetration, because it, from what I remember, there was a much bigger, you know, opportunity there to upgrade customers to 3D, and some of the other, you know, newer software and things that you've offered or introduced, sorry.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. 3D is still very low penetration rates in much of, you know, the international markets. Frankly, it's something that we hope the Hologic Global Women's Health Index will actually be able to start to highlight a little bit more, which is, you know, many countries outside the U.S. are still only reserving 3D more for diagnostic mammograms as opposed to screening. Frankly, many still don't have great screening programs in general. We're able, ultimately through the Global Women's Health Index, I think, to start to have more discussions about better screening programs, about the need for 3D, and the fact that 3D, in many cases, is economically advantageous over the longer term, particularly in single payer systems, where, you know, the ability to detect earlier, treat earlier, avoiding all the false positives, the false callback, you know, the unneeded callbacks and all of that.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

I think we remain very bullish over the longer term. It continues to be something that's gonna play out over years, not quarters.

Operator

Next, we'll take a question from Tejas Savant with Morgan Stanley.

Tejas Savant
Tejas Savant
Executive Director and Senior Healthcare Equity Analyst at Morgan Stanley

Hey, guys. Good evening. Just a two-parter on COVID to start with. Karleen, can you give us a sense of the impact on how we should think about pricing from the combo test launch and the OUS mix here seems to have dipped sequentially in favor of the states and what that means for margins?

Karleen Oberton
Karleen Oberton
CFO at Hologic

Yeah. Certainly, you know, from Q3 to Q4 with the Delta variant, we saw, you know, an uptick in U.S. testing. About two-thirds were from the U.S. versus last quarter it was two-thirds OUS. Obviously that's a little bit more favorable on pricing, so a little more benefit on the margin profile. What was the other part of his question?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Combo test.

Tejas Savant
Tejas Savant
Executive Director and Senior Healthcare Equity Analyst at Morgan Stanley

It was on the combo test. Yeah.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Certainly that pricing would be favorable from the single test. We've to Steve's comments, really haven't assumed much related to that at this point, given it seems like customers still just want COVID only.

Tejas Savant
Tejas Savant
Executive Director and Senior Healthcare Equity Analyst at Morgan Stanley

Got it. Just a couple of quick ones on the recent deals. On Mobidiag, I mean, given the broader launch in Europe for Novodiag, Steve, how are you thinking about that installed base of 200 units expanding over the next 12 months or so? On Bolder, I think you called out sort of five times higher lap procedures versus the pediatric setting. Over what timeframe do you think you can capture that opportunity?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Sure. I think, you know, we're probably not ready to give exact numbers on Novodiag, but the initial sales off to a good start and we're just loving that acquisition so far. As it relates to Bolder, you know, I think that'll be clearly a multi-year journey to build up the market of that size. But I think, you know, the magic for us with both Acessa and Bolder is, as you know, we've long targeted Surgical as an opportunity to put more into those sales forces' bags. I'm really proud of the team, you know, Sean Daugherty and then Essex more recently running that division, who are finally starting to make some good deals happen for that business.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

The sales forces are excited, and I think it'll create a great runway for years to come here in the Surgical business.

Operator

Our next question will come from Patrick Donnelly with Citi.

Patrick Donnelly
Patrick Donnelly
Director at Citi

Great. Thanks for taking the questions, guys. Steve, maybe just on kinda some of the macro uncertainty you talked about, can you just talk about the different businesses? I know you guys have kind of that internal, you know, red light, green light for each segment, each region. You know, any segments that are maybe coming back a little slower than you expected? It certainly sounds like you are pretty confident on breast. Just wanted to talk through the different segment recovery timelines and how you thought about those going into 2022.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah, I think the magic, Patrick, for the first time, you know, that I've been with the company, as we look at all three franchises and we look both domestically and international, so if you just, you know, play that out in six buckets or nine if you count U.S., international, and then worldwide, they're all looking good in that 5%-7% range. There's not any, you know, major hiccups that are out there. I think we feel really, really as good across the board. You know, there'll always be a country here or there or a little business and, you know, all those kinds of things. Overall, it's probably been as solid across the board as we've seen.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

I think that's part of what really gave us the confidence, frankly, on the last call, to put out the 5%-7% guidance, 'cause there'd always been, you know, there was always a little more red lurking on the horizon there than, you know. It wasn't as green across the board as it looks now.

Patrick Donnelly
Patrick Donnelly
Director at Citi

That's encouraging to hear. Then maybe just on the cash flow, you know, you talked about over $2 billion in the year, another nice quarter here.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Can you hear me?

Patrick Donnelly
Patrick Donnelly
Director at Citi

Oh, sorry.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah.

Patrick Donnelly
Patrick Donnelly
Director at Citi

No, yeah, exactly. Obviously, you know, nice to see you guys buy back 1 million shares already this quarter. How should we think about your M&A appetite? You know, obviously you've done a bunch of smaller deals, you know, relatively small. How should we think about your appetite there, you know, continue with these bolt-ons? Any appetite for anything larger? Just wanted to talk through that.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. You know, the appetite and the ability are certainly there financially, as we look to continue doing tuck-ins. You know, just because we're generating a bunch of cash doesn't mean, okay, we're gonna start to go bigger and bigger. I would say the bigger things we're also thinking about right now is we're digesting a lot, so there's also the organizational bandwidth. Right now, our international teams are incredibly busy. Kevin's Diagnostics team, and frankly, the Surgical teams are all very, very deep into a lot of integration activity. The other factor that would be in our minds is, you know, ease of integration. If anything, you know, probably a slower pace this year than last year as we really make sure that we optimize what we did last year.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

As Karleen has mentioned, we're comfortable, you know, continuing to build a little cash here. We're not just gonna go out and spend it because we have it. Karleen, do you wanna build on that?

Karleen Oberton
Karleen Oberton
CFO at Hologic

Yes, certainly. I mean, Patrick, we're gonna maintain our discipline as it relates to M&A, and make sure that we certainly wanna do well on the deals that we've executed so far, so that will be a little bit more of flex on the focus. But certainly the divisions still have their BD teams out there, identifying assets, and if we find the right opportunity, you know, we'll execute on it.

Operator

Our next question will come from Max Masucci with Cowen and Company.

Max Masucci
Max Masucci
Senior Research Analyst at Cowen and Company

Hi, thanks for taking the questions. Wanna extend a congratulations to Mike.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Thanks, Max.

Max Masucci
Max Masucci
Senior Research Analyst at Cowen and Company

On Bolder. Yeah, Bolder Surgical estimated $10 million in calendar 2021 revenues around 2%-3% of the annualized Surgical revenues in fiscal Q4. I know it's a small product line today, but you know, given the multiple on the deal, I'd imagine that the growth is already solid with the potential to accelerate as it's cross-sold into the OB/GYN channel. You know, with that in mind, is there any way to think about how quickly Bolder's products could penetrate the OB/GYN channel or what percentage of your existing OB/GYN customers would be adopters?

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. We'll probably give more of that once we close the deal. We're still obviously in the midst of closing. We'll probably close it the end of the calendar year and probably be in a better position, Max, honestly, to answer it next quarter. Clearly it is growing pretty nicely. They've gotten some nice products approved over the course of the last 12 months and, you know, we'll be very hopeful in terms of the uptick. It's a new sale. It's gonna take a couple of, you know, oftentimes one or two visits and, you know, still, frankly, in some of these COVID-constrained worlds, you know, we wanna manage our expectations up front, but feel really good about the opportunity.

Max Masucci
Max Masucci
Senior Research Analyst at Cowen and Company

Yep. Makes sense. Appreciate the color on Mobidiag. If we just think about the initial pandemic disruption, you know, serving, you know, as an accelerant for Panther placements globally, you know, are there any parallels to be drawn, you know, between what you could see for Novodiag in the decentralized setting in Europe following the launch in early October? Then just curious, you know, the role of the AmpliDiag instrument in the context of, you know, also having Panther.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Yeah. I think the Novodiag and the launch going on there, I think that's gonna be the big opportunity for us as we go into, you know, the smaller labs, a broader menu, and already feeling really good. Obviously, it's CE marked at this point. It's still a few years away in the United States. Feeling really good that there'll be a nice opportunity to really drive the international business in the nearer term on that, and then ultimately, you know, a big play in the U.S. over time.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Operator, I think we have time for one more question.

Operator

Thank you. That final question will come from Ryan Zimmerman with BTIG.

Ryan Zimmerman
Ryan Zimmerman
Managing Director and Medical Technology Analyst at BTIG

Thanks for squeezing me in on the end here. I'll just keep it to one. It's for Karleen. You know, given the COVID assay sales guidance, $200 million in the first quarter, you know, $300 million for the year, let's just assume that that's kinda how it goes right now. I understand that that's a very conservative estimate, but it would suggest somewhat of a drop-off in gross margins quite rapidly, Karleen. One, you know, following the first quarter, I mean, is that the right way to think about it? Two, you know, how should we be thinking about the gross margin profile, kind of net the assay contribution from COVID when we think about a kind of a post-COVID Hologic? Thanks for taking the questions.

Karleen Oberton
Karleen Oberton
CFO at Hologic

Certainly, I think we said in our prepared remarks that we would expect, you know, margins to come down sequentially throughout the year as the COVID at this point is heavily weighted to the first half of the year. You know, and as I look at where we exit the year in 2022, you know, the margins are in the low 60s% on the gross margin and, you know, low 30s% on the operating margin as we had indicated. You know, and that assumes a pretty low COVID contribution as we exit the year as we plan for right now.

Ryan Zimmerman
Ryan Zimmerman
Managing Director and Medical Technology Analyst at BTIG

Okay. All right. Thank you. Appreciate taking the questions. Mike, adios. Thank you.

Mike Watts
Mike Watts
VP of Investor Relations and Corporate Communications at Hologic

Thank you, sir. Thanks, everybody.

Steve MacMillan
Steve MacMillan
Chairman, President, and CEO at Hologic

Thank you.

Operator

Thank you. This now concludes the Hologic fourth quarter 2021 conference call. Have a good evening.

Executives
    • Karleen Oberton
      Karleen Oberton
      CFO
    • Mike Watts
      Mike Watts
      VP of Investor Relations and Corporate Communications
    • Steve MacMillan
      Steve MacMillan
      Chairman, President, and CEO
Analysts
    • Anthony Petrone
      Senior VP and Equity Research Analyst at Jefferies
    • Brian Weinstein
      Managing Director in Investment Banking at William Blair
    • Derik de Bruin
      Managing Director and Life Sciences Tools and Diagnostics Analyst at Bank of America
    • Jack Meehan
      Equity Research Analyst at Nephron Research
    • Max Masucci
      Senior Research Analyst at Cowen and Company
    • Mike Matson
      Senior Research Analyst at Needham & Company
    • Patrick Donnelly
      Director at Citi
    • Ryan Zimmerman
      Managing Director and Medical Technology Analyst at BTIG
    • Tejas Savant
      Executive Director and Senior Healthcare Equity Analyst at Morgan Stanley
    • Tycho Peterson
      Managing Director of Life Science Tools and Diagnostics at JPMorgan
    • Vijay Kumar
      Senior Managing Director at Evercore ISI
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