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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
__________________________________________________________ 
FORM 10-Q
 
 __________________________________________________________ 
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2022
or 
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 1-36214
__________________________________________________________ 
HOLOGIC, INC.
(Exact name of registrant as specified in its charter)
 __________________________________________________________
Delaware 04-2902449
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
250 Campus Drive, 
Marlborough,
Massachusetts
01752
(Address of principal executive offices) (Zip Code)
(508) 263-2900
(Registrant’s telephone number, including area code)
 __________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueHOLXNASDAQ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒  Accelerated filer 
☐
Non-accelerated filer 
☐
  Smaller reporting company 
☐
Emerging growth company
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒
As of January 26, 2023, 246,554,026 shares of the registrant’s Common Stock, $0.01 par value, were outstanding.

HOLOGIC, INC.
INDEX
 
 Page
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 6.
EXHIBITS

2
PART I – FINANCIAL INFORMATION
 
Item 1.    Financial Statements (unaudited)
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

(In millions, except number of shares, which are reflected in thousands, and per share data)
 Three Months Ended
 December 31,
2022		December 25,
2021
Revenues:
Product$886.3 $1,303.3 
Service and other187.9 167.8 
1,074.2 1,471.1 
Costs of revenues:
Product296.2 318.1 
Amortization of acquired intangible assets55.6 74.9 
Service and other104.5 91.8 
Gross profit617.9 986.3 
Operating expenses:
Research and development74.8 72.8 
Selling and marketing163.5 147.4 
General and administrative108.5 117.9 
Amortization of acquired intangible assets7.6 10.8 
Contingent consideration - fair value adjustment— (4.1)
Restructuring charges1.1 0.2 
355.5 345.0 
Income from operations262.4 641.3 
Interest income20.6 0.5 
Interest expense(28.1)(25.7)
Debt extinguishment loss— (0.7)
Other income (expense), net(15.8)6.5 
Income before income taxes239.1 621.9 
Provision for income taxes51.7 122.7 
Net income$187.4 $499.2 
Net income per common share:
Basic$0.76 $1.97 
Diluted$0.75 $1.95 
Weighted average number of shares outstanding:
Basic247,319 253,499 
Diluted249,281 256,070 
See accompanying notes.
3
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In millions)
 Three Months Ended
 December 31,
2022		December 25,
2021
Net income$187.4 $499.2 
Changes in foreign currency translation adjustment113.8 (37.8)
Changes in value of hedged interest rate swaps and interest rate caps, net of tax of ($0.9) for the three months ended December 31, 2022 and $2.6 for the three months ended December 25, 2021.
Gain (loss) recognized in other comprehensive income (loss), net(2.9)7.9 
Other comprehensive income (loss)110.9 (29.9)
Comprehensive income$298.3 $469.3 
See accompanying notes.


4
HOLOGIC, INC.

CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In millions, except number of shares, which are reflected in thousands, and par value)
 
December 31,
2022		September 24,
2022
ASSETS
Current assets:
Cash and cash equivalents$2,441.3 $2,339.5 
Accounts receivable, less reserves673.8 617.6 
Inventories677.7 623.7 
Prepaid expenses and other current assets197.3 232.2 
Prepaid income taxes31.1 49.0 
Total current assets4,021.2 3,862.0 
Property, plant and equipment, net494.3 481.6 
Intangible assets, net1,255.4 1,280.6 
Goodwill3,289.6 3,236.5 
Other assets229.8 210.5 
Total assets$9,290.3 $9,071.2 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt$20.6 $15.0 
Accounts payable201.8 197.7 
Accrued expenses539.0 535.3 
Deferred revenue191.6 186.5 
Finance lease obligations3.2 3.2 
Total current liabilities956.2 937.7 
Long-term debt, net of current portion2,806.2 2,808.4 
Finance lease obligations, net of current portion17.7 18.0 
Deferred income tax liabilities71.7 90.8 
Deferred revenue, net of current portion10.9 9.4 
Other long-term liabilities335.1 330.7 
Stockholders’ equity:
Preferred stock, $0.01 par value – 1,623 shares authorized; 0 shares issued
— — 
Common stock, $0.01 par value – 750,000 shares authorized; 299,485 and 298,533 shares issued, respectively
3.0 3.0 
Additional paid-in-capital6,060.6 6,042.6 
Retained earnings1,787.7 1,600.3 
Treasury stock, at cost – 52,940 and 51,401 shares, respectively
(2,631.5)(2,531.5)
Accumulated other comprehensive loss(127.3)(238.2)
Total stockholders’ equity5,092.5 4,876.2 
Total liabilities and stockholders’ equity$9,290.3 $9,071.2 
See accompanying notes.
5
Hologic, Inc.
Consolidated Statements of Stockholders' Equity
(In millions, except number of shares, which are reflected in thousands)
 Common StockAdditional
Paid-in-
Capital		Retained
Earnings 		Accumulated
Other
Comprehensive
Loss		Treasury StockTotal
Stockholders’
Equity
 Number of
Shares		Par ValueNumber of
Shares		Amount
Balance at September 25, 2021297,306 $3.0 $5,965.8 $298.3 $(59.1)43,653 $(1,989.4)$4,218.6 
Exercise of stock options45 — 1.9 — — — — 1.9 
Vesting of restricted stock units, net534 — (22.4)— — — — (22.4)
Stock-based compensation— — 18.7 — — — — 18.7 
Net income— — — 499.2 — — — 499.2 
Other comprehensive income activity— — — — (29.9)— — (29.9)
Repurchase of common stock— — — — — 2,335 (167.0)(167.0)
Balance at December 25, 2021297,885 $3.0 $5,964.0 $797.5 $(89.0)45,988 $(2,156.4)$4,519.1 
Exercise of stock options140 — 5.8 — — — — 5.8 
Vesting of restricted stock units, net14 — (0.1)— — — — (0.1)
Common stock issued under the employee stock purchase plan164 — 9.5 — — — — 9.5 
Stock-based compensation— — 17.8 — — — — 17.8 
Net income— — — 455.7 — — — 455.7 
Other comprehensive income activity— — — — (15.1)— — (15.1)
Repurchase of common stock— — — — — 2,863 (200.0)(200.0)
Balance at March 26, 2022298,203 $3.0 $5,997.0 $1,253.2 $(104.1)48,851 $(2,356.4)$4,792.7 
Exercise of stock options128 — 5.2 — — — — 5.2 
Vesting of restricted stock units, net4 — (0.1)— — — — (0.1)
Stock-based compensation— — 15.3 — — — — 15.3 
Net income— — — 228.4 — — — 228.4 
Other comprehensive income activity— — — — (43.6)— — (43.6)
Balance at June 25, 2022298,335 $3.0 $6,017.4 $1,481.6 $(147.7)48,851 $(2,356.4)$4,997.9 
Exercise of stock options23 — 0.9 — — — — 0.9 
Vesting of restricted stock units, net9 — (0.3)— — — — (0.3)
Common stock issued under the employee stock purchase plan166 — 9.7 — — — — 9.7 
Stock-based compensation— — 14.9 — — — — 14.9 
Net income— — — 118.7 — — — 118.7 
Other comprehensive income activity— — — — (90.5)— — (90.5)
Repurchase of common stock— — — — — 2,550 $(175.1)(175.1)
Balance at September 24, 2022298,533 $3.0 $6,042.6 $1,600.3 $(238.2)51,401 $(2,531.5)$4,876.2 
Exercise of stock options267 — 10.3 — — — — 10.3 
Vesting of restricted stock units, net514 — (23.0)— — — — (23.0)
Common stock issued under the employee stock purchase plan171 — 10.2 — — — — 10.2 
Stock-based compensation— — 20.5 — — — — 20.5 
Net income— — — 187.4 — — — 187.4 
Other comprehensive income activity— — — — 110.9 — — 110.9 
Repurchase of common stock— — — — — 1,539.0 (100.0)(100.0)
Balance at December 31, 2022299,485 $3.0 $6,060.6 $1,787.7 $(127.3)52,940 $(2,631.5)$5,092.5 

6
HOLOGIC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In millions)
Three Months Ended
 December 31,
2022		December 25,
2021
OPERATING ACTIVITIES
Net income $187.4 499.2 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation22.7 22.3 
Amortization of acquired intangible assets63.2 85.7 
Stock-based compensation expense20.5 18.7 
Deferred income taxes(26.2)(21.9)
Debt extinguishment loss— 0.7 
Other adjustments and non-cash items29.1 5.7 
Changes in operating assets and liabilities, excluding the effect of acquisitions:
Accounts receivable(45.0)(48.1)
Inventories(47.0)(17.4)
Prepaid income taxes17.9 (4.6)
Prepaid expenses and other assets26.2 0.3 
Accounts payable1.5 (13.8)
Accrued expenses and other liabilities0.8 42.4 
Deferred revenue2.3 (5.0)
Net cash provided by operating activities253.4 564.2 
INVESTING ACTIVITIES
Acquisition of businesses, net of cash acquired— (157.3)
Capital expenditures(15.8)(20.5)
Proceeds from the Department of Defense— 21.3 
Increase in equipment under customer usage agreements(13.3)(17.0)
Purchase of equity investment(10.0)— 
Other activity(1.9)— 
Net cash used in investing activities(41.0)(173.5)
FINANCING ACTIVITIES
Proceeds from long-term debt, net of issuance costs— 1,491.2 
Repayment of long-term debt(3.8)(1,387.5)
Payment of deferred acquisition consideration(0.8)— 
Repayment of acquired long-term debt— (63.6)
Repurchases of common stock(100.0)(167.0)
Proceeds from issuance of common stock pursuant to employee stock plans15.1 6.4 
Payment of minimum tax withholdings on net share settlements of equity awards(23.0)(22.4)
Payments under finance lease obligations(1.0)(0.6)
Net cash used in financing activities(113.5)(143.5)
Effect of exchange rate changes on cash and cash equivalents2.9 3.3 
Net increase in cash and cash equivalents101.8 250.5 
Cash and cash equivalents, beginning of period2,339.5 1,170.3 
Cash and cash equivalents, end of period$2,441.3 $1,420.8 
See accompanying notes.
7
HOLOGIC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(all tabular amounts in millions, except number of shares, which are reflected in thousands, and per share data)

(1) Basis of Presentation

The unaudited consolidated financial statements of Hologic, Inc. (“Hologic” or the “Company”) presented herein have been prepared pursuant to the rules of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and disclosures required by U.S. generally accepted accounting principles (“GAAP”) for annual financial statements. These unaudited financial statements should be read in conjunction with the consolidated financial statements and related notes for the fiscal year ended September 24, 2022 included in the Company’s Form 10-K filed with the SEC on November 15, 2022. In the opinion of management, the unaudited financial statements and notes contain all adjustments (consisting of normal recurring accruals and all other necessary adjustments) considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented.

The unaudited consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The preparation of financial statements in conformity with GAAP requires management to make significant estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from management’s estimates if past experience or other assumptions do not turn out to be substantially accurate. Operating results for the three months ended December 31, 2022 are not necessarily indicative of the results to be expected for any other interim period or the entire fiscal year ending September 30, 2023. Fiscal 2023 is a 53-week fiscal year, and the additional week is included in the first quarter of fiscal 2023 consistent with the Company's historical fiscal calendar.

Subsequent Events Consideration

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates or to identify matters that may require additional disclosure. Subsequent events have been evaluated as required. There were no material recognized or unrecognized subsequent events affecting the unaudited consolidated financial statements as of and for the three months ended December 31, 2022.

8
(2) Revenue

The Company accounts for revenue pursuant to ASC 606, Revenue from Contracts with Customer (ASC 606) and generates revenue from the sale of its products, primarily medical imaging systems and related components and software, diagnostic tests and assays and surgical disposable products, and related services, which are primarily support and maintenance services on its medical imaging systems, and to a lesser extent installation, training and repairs. In addition, the Company generates service revenue from performing laboratory testing services through its Biotheranostics CLIA laboratory, which is included in its Molecular Diagnostics business. The Company's products are sold primarily through a direct sales force, and within international markets, there is more reliance on distributors and resellers. Revenue is recorded net of sales tax. The following tables provide revenue from contracts with customers by business and geographic region on a disaggregated basis:    

Three Months Ended December 31, 2022
Business (in millions)
United StatesInternationalTotal
Diagnostics:
Cytology & Perinatal$78.2 $48.6 $126.8 
Molecular Diagnostics328.2 97.0 425.2 
Blood Screening7.3 — 7.3 
Total$413.7 $145.6 $559.3 
Breast Health:
Breast Imaging$212.2 $52.2 $264.4 
Interventional Breast Solutions57.8 12.0 69.8 
Total$270.0 $64.2 $334.2 
GYN Surgical$123.1 $31.0 $154.1 
Skeletal Health$16.8 $9.8 $26.6 
$823.6 $250.6 $1,074.2 


Three Months Ended December 25, 2021
Business (in millions)
United StatesInternationalTotal
Diagnostics:
Cytology & Perinatal$80.9 $49.8 $130.7 
Molecular Diagnostics528.0 285.3 813.3 
Blood Screening6.4 — 6.4 
Total$615.3 $335.1 $950.4 
Breast Health:
Breast Imaging$208.9 $73.4 $282.3 
Interventional Breast Solutions62.1 14.9 77.0 
Total$271.0 $88.3 $359.3 
GYN Surgical$109.3 $25.0 $134.3 
Skeletal Health$16.8 $10.3 $27.1 
$1,012.4 $458.7 $1,471.1 

9
Three Months Ended
Geographic Regions (in millions)
December 31, 2022December 25, 2021
United States$823.6 $1,012.4 
Europe147.4 295.1 
Asia-Pacific63.8 119.7 
Rest of World39.4 43.9 
$1,074.2 $1,471.1 

The following table provides revenue recognized by source:

Three Months Ended
Revenue by type (in millions)
December 31, 2022December 25, 2021
Disposables$727.8 $1,106.3 
Capital equipment, components and software158.5 197.0 
Service183.3 162.8 
Other4.6 5.0 
$1,074.2 $1,471.1 

The Company considers revenue to be earned when all of the following criteria are met: the Company has a contract with a customer that creates enforceable rights and obligations; promised products or services are identified; the transaction price, or the amount the Company expects to receive, including an estimate of uncertain amounts subject to a constraint to ensure revenue is not recognized in an amount that would result in a significant reversal upon resolution of the uncertainty, is determinable; and the Company has transferred control of the promised items to the customer. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract. The transaction price for the contract is measured as the amount of consideration the Company expects to receive in exchange for the goods and services expected to be transferred. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control of the distinct good or service is transferred. Transfer of control for the Company's products is generally at shipment or delivery, depending on contractual terms, but occurs when title and risk of loss transfers to the customer which represents the point in time when the customer obtains the use of and substantially all of the remaining benefits of the product. As such, the Company's performance obligation related to product sales is satisfied at a point in time. Revenue from support and maintenance contracts, extended warranty, and professional services for installation, training and repairs is recognized over time based on the period contracted or as the services are performed as these methods represent a faithful depiction of the transfer of goods and services.

The Company recognizes a receivable when it has an unconditional right to payment, which represents the amount the Company expects to collect in a transaction and is most often equal to the transaction price in the contract. Payment terms are typically 30 days in the U.S. but may be longer in international markets. The Company treats shipping and handling costs performed after a customer obtains control of the good as a fulfillment cost and records these costs within costs of product revenue when the corresponding revenue is recognized.

The Company also places instruments (or equipment) at customer sites but retains title to the instrument. The customer has the right to use the instrument for a period of time, and the Company recovers the cost of providing the instrument through the sales of disposables, namely tests and assays in Diagnostics and handpieces in GYN Surgical. These types of agreements include an embedded lease, which is generally an operating lease, for the right to use an instrument and no instrument revenue is recognized at the time of instrument delivery. The Company recognizes a portion of the revenue allocated to the embedded lease concurrent with the sale of disposables over the term of the agreement.

Revenue from laboratory testing services, which is generated by the Company's Biotheranostics business, is recognized based upon contracted amounts with payors and historical cash collection experience for the same test or same payor group. Revenue is recognized once the laboratory services have been performed, the results have been delivered to the ordering physician, the payor has been identified, and insurance has been verified. The estimated timeframes for cash collection are three months for Medicare payors, six months for Medicare Advantage payors, and nine months for commercial payors.

Some of the Company's contracts have multiple performance obligations. For contracts with multiple performance obligations, the Company allocates the transaction price to each performance obligation using its best estimate of the standalone
10
selling price of each distinct good or service in the contract. The Company determines its best estimate of standalone selling price using average selling prices over 3- to 12-month periods of data depending on the products or nature of the services coupled with current market considerations. If the product or service does not have a history of sales or if sales volume is not sufficient, the Company relies on prices set by its pricing committees or applicable marketing department adjusted for expected discounts.

Variable Consideration

The Company exercises judgment in estimating variable consideration, which includes volume discounts, sales rebates, product returns and other adjustments. These amounts are recorded as a reduction to revenue and classified as a current liability. The Company bases its estimates for volume discounts and sales rebates on historical information to the extent it is reasonable to be used as a predictive tool of expected future rebates. To the extent the transaction price includes variable consideration, the Company applies judgment in constraining the estimated variable consideration due to factors that may cause reversal of revenue recognized. The Company evaluates constraints based on its historical and projected experience with similar customer contracts. The Company's contracts for the sale of capital equipment and related components, and assays and tests typically do not provide the right to return product, however, its contracts for the sale of its GYN Surgical and Interventional Breast Solutions surgical handpieces provide for a right of return for a limited period of time. In general, estimates of variable consideration and constraints are not material to the Company's financial statements.

Remaining Performance Obligations

As of December 31, 2022, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied was approximately $875.7 million. These remaining performance obligations primarily relate to support and maintenance obligations and extended warranty in the Company's Breast Health and Skeletal Health reportable segments. The Company expects to recognize approximately 35% of this amount as revenue in fiscal 2023, 32% in fiscal 2024, 20% in fiscal 2025, 9% in fiscal 2026, and 4% thereafter. As permitted, the Company does not include remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

Contract Assets and Liabilities

The Company discloses accounts receivable separately in the Consolidated Balance Sheets at their net realizable value. Contract assets primarily relate to the Company's conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were immaterial.

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. The Company records a contract liability, or deferred revenue, when it has an obligation to provide service, and to a much lesser extent product, to the customer and payment is received or due in advance of performance. Deferred revenue primarily relates to support and maintenance contracts and extended warranty obligations within the Company's Breast Health and Skeletal Health reportable segments. Contract liabilities are classified as other current liabilities and other long-term liabilities in the Consolidated Balance Sheets. The Company recognized revenue of $66.8 million and $56.4 million in the three months ended December 31, 2022 and December 25, 2021, respectively, that was included in the contract liability balance at September 24, 2022 and September 25, 2021, respectively.

Practical Expedients
The Company applies a practical expedient to expense costs to obtain a contract with a customer as incurred when the amortization period would have been one year or less. These costs solely comprise sales commissions and typically the commissions are incurred at the time of shipment of product and upon billings for support and maintenance contracts.

11
(3) Leases

Lessor Activity - Leases where Hologic is the Lessor

Certain assets, primarily diagnostics instruments, are leased to customers under contractual arrangements that typically include an operating lease and performance obligations for disposables, reagents and other consumables. These contractual arrangements are subject to termination provisions which are evaluated in determining the lease term for lease accounting purposes. Contract terms vary by customer and may include options to terminate the contract or options to extend the contract. Where instruments are provided under operating lease arrangements, some portion or the entire lease revenue may be variable and subject to subsequent non-lease component (e.g., reagent) sales. Sales-type leases are immaterial. The allocation of revenue between the lease and non-lease components is based on stand-alone selling prices. Lease revenue represented less than 3% of the Company's consolidated revenue for all periods presented.

(4) Fair Value Measurements

Assets/Liabilities Measured and Recorded at Fair Value on a Recurring Basis

The Company has investments in derivative instruments comprised of an interest rate swap, forward foreign currency contracts and foreign currency option contracts, which are valued using analyses obtained from independent third-party valuation specialists based on market observable inputs, representing Level 2 assets. The fair values of these derivative contracts represent the estimated amounts the Company would receive or pay to terminate the contracts. Refer to Note 9 for further discussion and information on derivative contracts. In addition, the Company has a contingent consideration liability that is recorded at fair value and based on Level 3 inputs. The contingent consideration liability as of December 31, 2022 and December 25, 2021 was related to the Acessa acquisition.

12
Assets and liabilities measured and recorded at fair value on a recurring basis consisted of the following at December 31, 2022: 

  Fair Value at Reporting Date Using
 Balance as of December 31, 2022Quoted Prices in
Active Market for
Identical Assets
(Level 1)		Significant
Other
Observable
Inputs (Level 2)		Significant
Unobservable
Inputs (Level 3)
Assets:
Interest rate swap$35.1 $— $35.1 $— 
Forward foreign currency contracts3.0