making a unique difference in the world...reliance on third- party reimbursement policies to support...
TRANSCRIPT
November 2020 1
Making a Unique Difference in the World
November 2020
November 2020
Safe Harbor Statement
2
This presentation contains forward-looking information that involves risks and uncertainties, including statements about the Company’s plans, objectives, expectations and intentions. Such statements include, without limitation: financial or other information based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company’s strategies, positioning, resources, capabilities, and expectations for future performance; and the Company's outlook and financial and other guidance. These forward-looking statements are based upon assumptions made by the Company as of the date hereof and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those anticipated.
Risks and uncertainties that could adversely affect the Company’s business and prospects, and otherwise cause actual results to differ materially from those anticipated, include without limitation: the severity and duration of the COVID-19 pandemic and its impact on the U.S. healthcare system, the U.S. economy and worldwide economy; the timing, scope and effect of further U.S. and international governmental, regulatory, fiscal, monetary and public health responses to the COVID-19 pandemic; continued demand for the Company’s COVID-19 TMA assay; the Company’s ability to manufacture, on a scale necessary to meet demand, its COVID-19 TMA assay as well as the Panther systems on which the assay runs; U.S., European and general worldwide economic conditions, trade relations, and related uncertainties; manufacturing risks, including the Company’s reliance on a single or limited source of supply for key components, the need to comply with especially high standards for the manufacture of many of its products and risks associated with utilizing third party manufacturers; the Company’s ability to predict accurately the demand for its products, and products under development, and to develop strategies to address its markets successfully; the ability of the Company to successfully manage leadership and organizational changes, including the ability of the Company to attract, motivate and retain key employees and maintain engagement and efficiency in remote work environments; the Company’s reliance on third-party reimbursement policies to support the sales and market acceptance of its products, including the possible adverse impact of government regulation and changes in the availability and amount of reimbursement and uncertainties for new products or product enhancements; changes to applicable laws and regulations, including tax laws, global health care reform, and import/export trade laws; changes in guidelines, recommendations and studies published by various organizations that could affect the use of the Company’s products; uncertainties inherent in the development of new products and the enhancement of existing products, including FDA approval and/or clearance and other regulatory risks, technical risks, cost overruns and delays; the risk that products may contain undetected errors or defects or otherwise not perform as anticipated; risks associated with strategic alliances and the ability of the Company to realize anticipated benefits of those alliances; risks associated with acquisitions, including, without limitation, the Company’s ability to successfully integrate acquired businesses, the risks that the acquired businesses may not operate as effectively and efficiently as expected even if otherwise successfully integrated, and the risks that acquisitions may involve unexpected costs or unexpected liabilities; the risks of conducting business internationally; the risk of adverse exchange rate fluctuations on the Company’s international activities and businesses; the early stage of market development for certain of the Company’s products; the Company’s leverage risks, including the Company’s obligation to meet payment obligations and financial covenants associated with its debt; cybersecurity risks; risks related to the use and protection of intellectual property; expenses, uncertainties and potential liabilities relating to litigation, including, without limitation, commercial, intellectual property, employment and product liability litigation; technical innovations that could render products marketed or under development by the Company obsolete; and competition.
The risks included above are not exhaustive. Other factors that could adversely affect the Company's business and prospects are described in the filings made by the Company with the SEC, including its most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statements presented herein to reflect any change in expectations or any change in events, conditions or circumstances on which any such statements are based.
Hologic and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries.
November 2020
Non-GAAP Financial Measures
3
The Company has presented the following non-GAAP financial measures in this presentation: constant currency revenues; organic revenues; non-GAAP gross margin;non-GAAP operating expenses; non-GAAP operating margin; non-GAAP effective tax rate; non-GAAP net income; non-GAAP net margin; non-GAAP EPS; andadjusted EBITDA. The Company defines its non-GAAP net income, EPS, and other non-GAAP financial measures to exclude, as applicable: (i) the amortization ofintangible assets and impairment of goodwill, intangible assets and equipment; (ii) additional depreciation expense from acquired fixed assets and accelerateddepreciation related to consolidation and closure of facilities; (iii) additional expenses resulting from the purchase accounting adjustment to record inventory at fair valueand adjustments to contingent consideration; (iv) restructuring and divestiture charges and facility closure and consolidation charges and costs incurred to integrateacquisitions (including retention, transaction bonuses, legal and professional consulting services) and separate divested businesses from existing operations; (v)expenses related to its divested Cynosure business incurred subsequent to the disposition date primarily related to indemnification provisions for legal and tax matters(vi) transaction related expenses for divestitures and acquisitions; (vii) third-party expenses incurred related to implementing the European MDR/IVDR requirementsand obtaining the appropriate approvals for its existing products (viii) debt extinguishment losses and related transaction costs; (ix) the unrealized (gains) losses on themark-to-market of forward foreign currency contracts and foreign currency option contracts for which the Company has not elected hedge accounting; (x) litigationsettlement charges (benefits) and non-income tax related charges (benefits); (xi) other-than-temporary impairment losses on investments and realized gains and lossesresulting from the sale of investments; (xii) the one-time discrete impact of tax reform and other one-time impacts related to internal restructuring and non-operationalitems; (xiii) other one-time, non-recurring, unusual or infrequent charges, expenses or gains that may not be indicative of the Company's core business results; and(xiv) income taxes related to such adjustments. The Company defines adjusted EBITDA as its non-GAAP net income plus net interest expense, income taxes, anddepreciation and amortization expense included in its non-GAAP net income. The Company defines organic revenue to exclude the divested Blood Screening andCynosure businesses, and the acquired SSI and Acessa businesses.
These non-GAAP financial measures should be considered supplemental to, and not a substitute for, financial information prepared in accordance with GAAP. The company's definition of these non-GAAP measures may differ from similarly titled measures used by others.
The non-GAAP financial measures used in this presentation adjust for specified items that can be highly variable or difficult to predict. The company generally uses these non-GAAP financial measures to facilitate management's financial and operational decision-making, including evaluation of Hologic's historical operating results, comparison to competitors' operating results and determination of management incentive compensation. These non-GAAP financial measures reflect an additional way of viewing aspects of the company's operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures, may provide a more complete understanding of factors and trends affecting Hologic's business.
Because non-GAAP financial measures exclude the effect of items that will increase or decrease the company's reported results of operations, management strongly encourages investors to review the company's consolidated financial statements and publicly filed reports in their entirety. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is included in the tables accompanying this presentation.
November 2020
Presentation Outline
4
Investment thesis
Purpose, passion, promise
Our journey
Leveraging our strengths
Financials and conclusion
November 2020 5
Investment Thesis• Broad portfolio of market-leading
products for women’s health
• Diagnostics division playing key role in fight against COVID-19 pandemic
• Historically MSD top-line, LDD bottom-line growth compounder with huge upside from COVID-19 tests
• All businesses recovering from COVID-19 impact
• Well-positioned to emerge as a stronger company
November 2020
• Revenue of $3,776 million in fiscal 2020, representing 12.1% constant currency growth and 21.7% organic growth
6
Hologic Overview
Consumables69%
Capital 17%
Service14%
By Type
US76%
OUS24%
By Geography
Note: Percentages in pie charts are for FY20 and exclude Cynosure. *Guidance provided by press release on 11/04/20. Presentation here is not, and should not be, construed as re-affirmation of guidance
• Q1’21 guidance for very strong organic revenue, non-GAAP EPS growth*
Diagnostics57%
Breast and
Skeletal33%
Surgical10%
By Division
November 2020
Broad Panther Installed Base
• As one of world’s leading molecular Dx firms, uniquely positioned to help fight COVID-19
• Received EUA for Panther Fusion SARS-CoV-2 assay and a second high-throughput Aptima test More than doubled molecular Dx test
manufacturing capacity, investing for more Enabling greater test volume to run on
~2,250 Panther instruments globally• Dramatically increasing testing
capabilities, helping labs deliver results when and where needed Help re-open economies and save lives
November 2020
Presentation Outline
8
Investment thesis
Purpose, passion, promise
Our journey
Leveraging our strengths
Financials and conclusion
November 2020 9
Presentation Outline
10
Investment thesis
Purpose, passion, promise
Our journey
Leveraging our strengths
Financials and conclusion
November 2020 11
Our Journey
TRANSFORMEDUS Sales
Organizations
BUILTInternationalCommercialCapabilities
REVITALIZEDResearch andDevelopment
DIVISIONALIZEDBusiness
Development Capabilities
PURSUINGOpportunities
in Supply Chain, Infrastructure
November 2020 12
Transformed U.S. Sales Organizations
• In Breast Health, overhauled sales talent, structure and process to help key account managers sell a growing product portfolio more strategically
• In Surgical, changed sales rep compensation to 100% commission to incentivize hunting rather than gathering
• In Diagnostics, upgraded talent and aligned structure to help customersof all sizes grow their businesses
November 2020 13
Built International Commercial Capabilities
Note: Percentage changes are in constant currency, $ amounts are as reported, in millions.
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
2014 2015 2016 2017 2018 2019 2020
Core OUS Revenue (ex. Blood, Aesthetics)
0%11%
13%
-5% 5%
11%
31%
$533 $510 $491 $538 $634 $671 $879
November 2020 14
Revitalized Research and Development
Note: New products represent those launched since 2015. Not all revenue is incremental. For example, MyoSure and NovaSure line extensions are included in Surgical. $ amounts are as reported, in millions.
B&SHB&SH B&SH B&SH
DxDx
Dx
Surgical
SurgicalSurgical
Surgical
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2017 2018 2019 2020
Revenue from Recently Launched Products
November 2020 15
Created Divisional Business Development Capabilities
November 2020 16
Growth Products
US Cytology & Perinatal
US NovaSure
Blood
2014
Growth Products
US Cytology & Perinatal
US NovaSure
Blood2020 Ex-Cynosure
Result: Portfolio Has Shifted Toward Higher Growth
71% 89%
November 2020
Presentation Outline
17
Investment thesis
Purpose, passion, promise
Our journey
Leveraging our strengths
Financials and conclusion
18
Leveraging Our Strengths• In Diagnostics, more Panther instruments in more countries, with more menu,
leading to strong increases in consumables sales and consistent revenue growth– Uniquely positioned to help fight COVID-19 pandemic with two SARS-COV-2 tests and large
installed base
• In Breast Health, more Genius 3D mammography systems are strengthening our competitive position and enabling more diverse growth across the continuum of care
• In Surgical, best-in-class products, new leadership, new commercial models and new product launches are strengthening leadership positions
19
In Dx, More Panthers in More Countries …
0
500
1000
1500
2000
2500
2014 2015 2016 2017 2018 2019 2020
Cumulative Global Shipments*
US Shipments OUS Shipments
+252
+214
+207
+253
+213
* Bars represent units at end of Hologic fiscal years.
+511
0
5
10
15
20
US Assays Cleared in 2015
20
… Combined with More Menu …
40
5
10
15
20
US Assays Cleared in 2020*
18
* Includes two assays for COVID-19. In March 2020, Hologic received emergency use authorization (EUA) for the Panther Fusion®
SARS-CoV-2 assay. In May 2020, Hologic received EUA for its Aptima® SARS-CoV-2 assay for the Panther system.
… And Two COVID Tests …• Received EUAs for Panther Fusion® and
Aptima® SARS-CoV-2 assays More than doubled molecular Dx test
manufacturing capacity, investing for more Enabling greater test volume to run on ~2,250
Panther instruments globally
• Dramatically increasing testing capabilities, helping labs deliver results when and where needed Help re-open economies and save lives
• Further strengthening competitive position for Panther, Panther Fusion Record new business for non-COVID tests
Watch Hologic COVID-19 response video at www.Hologic.com
22
… Lead to Massive Growth in Consumable Sales …
$0
$100
$200
$300
$400
$500
$600
$700
2014 2015 2016 2017 2018 2019 2020
Global Assay Pull-Through per Panther
~$150k
~$680k
* Data as of end of Hologic 2020 fiscal year.
23
… And Tremendous Revenue Growth …
Note: Percentage changes are in constant currency, $ amounts are as reported, less one-time royalties 2014-2017.
$459 $487 $513 $570 $612 $675 $1,648
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2014 2015 2016 2017 2018 2019 2020
Global Molecular Sales Ex. One-Time Royalties
6% 12% 7%-3% 7%
11%
143%
24
In Breast, More Genius 3D Mammography Systems …
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
2014 2015 2016 2017 2018 2019 2020
Cumulative US Shipments*
+1,098
+1,163
+1,042
+1,086
+1,159
* Bars represent units at end of Hologic fiscal years.
+816
25
… Strengthen Our Competitive Position …
HologicAll
others
2013
Hologic
All others
2020
US Mammography Market Share
R A D I O L O G I S T
S U R G E O N R A D I A T I O N O N C O L O G I S T
P A T H O L O G I S T
S C R E E N D X I M A G E B I O P S Y L O C A L I Z E S L N BR E M O V E ,
F I L L , & M A R K
S P E C I M E N E V A L U A T I O N
R A D I A T I O NT H E R A P Y
APBISpecimen Radiography
… And Enable Growth Across the Continuum of Care …
$-
$200
$400
$600
$800
$1,000
$1,200
FY'15 FY'20
Breast Conserving Surgery
Total OUS
Service
Interventional
Accessories and Equipment
Gantries
27
… Leading to More Diverse Revenue Growth
Note: All except “Total OUS” are US only. Percentages do not add to 100% due to rounding.
13%
20%
25%
11%
30%
17%
10%
13%
34%
23%
3%• Gantry sales impacted by COVID-19 pandemic
• Service and consumable revenue streams helping insulate business
• Demand for capital recovering
28
Surgical Momentum Strong Pre-COVID, Now Recovering
• Best-in-class products
• New leadership
• New sales model
• New launches
• Sales recovering from COVID faster than expected
-7% -3%
0% 3% 1% 4% 5% 7%10%
4%
-54%
-13%
13%
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
Surgical Revenue Accelerating Pre-COVID
*
*% change reflects year on year growth through two months of second quarter of fiscal 2020. Final growth rate for the second quarter of fiscal 2020 was 3.6% in constant currency.
• Large markets, low shares present opportunities for under-penetrated businesses• Growth from new leadership, new products, going direct• COVID assay sales provide significant upside, accelerate growth strategies
29
Realizing International Potential
Note: Percentage changes are in constant currency, $ amounts are as reported.
$-
$200
$400
$600
$800
$1,000
2017 2018 2019 2020
Core OUS Revenue (ex. Blood, Aesthetics)
11%13%
11%
31%
$634 $671 $879$538
30
Strong Free Cash Flow Also a Strength
• Expect robust free cash flow in fiscal 2021 due to benefits of COVID assays and other businesses recovering– Significant growth versus $740 million in fiscal 2020
• Comfortable with leverage ratio 2 to 3x in the long-term, but lower in near-term due to benefits of COVID assay sales
• Strong cash flow, uncertain market conditions provide opportunity to pursue growth accretive acquisitions
» Division-led deals» Leverage existing channels or expand into near adjacencies» Accretive to growth rate» Attractive ROIC, EPS accretion over time
Presentation Outline
31
Investment thesis
Purpose, passion, promise
Our journey
Leveraging our strengths
Financials and conclusion
$2,511 $2,705 $2,833 $3,059 $3,218 $3,367 $3,776
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
2014 2015 2016 2017 2018 2019 2020
Total Revenue¹
0.4%
7.0% Annual Revenue Growth from 2014 to 2020
32
9.9%
¹ Total non-GAAP revenue growth in millions. Growth rates in constant currency. As reported except FY14, which excludes ~$20 million one-time revenue from amending Roka license. Results include contributions from the Blood Screening business that was divested in 2017, the Medical Aesthetic business that was acquired in 2017 and divested in 2020, and other smaller acquisitions. 2Excluding the divested Blood Screening and Medical Aesthetics businesses, growth was 22.5% in 2020.
5.4%8.3%
4.3%5.7%
12.1%²
$1.46 $1.67 $1.96 $2.03 $2.23 $2.43 $3.98
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
2014 2015 2016 2017 2018 2019 2020
Non-GAAP EPS*
-2.7%
18.2% Annual Growth in Non-GAAP EPS
33
9.0%9.9%3.6%17.4%14.4%
* Non-GAAP EPS as reported except FY14, which excludes ~$0.05 one-time contribution from amending Roka license. Results include contributions from the Blood Screening business that was divested in 2017, the Medical Aesthetic business that was acquired in 2017 and divested in 2020, and other smaller acquisitions.
63.8%
34
Strong, Consistent Free Cash Flow
$707 $704
$599$687
$608
$740
$0
$200
$400
$600
$800
2015 2016 2017 2018 2019 2020
Adjusted Free Cash Flow*
• Sales of two COVID assays represent significant upside in 2021
*Notes:1) Adjusted for $650 million of taxes paid related to the gain on the divestiture of our blood screening business and $50 million of convertible notes tax recapture in FY’17; $60 million for convertible notes tax recapture in FY’18; and $35 million for a litigation payment, $28 million for acquisition-related tax payments, $10.5 million for a litigation payment, and $6 million for a litigation receipt in FY’19.2) Capital expenditures calculated as the sum of purchase of property and equipment and expenditures due to increase in equipment under customer usage agreements.3) Free cash flow defined as operating cash flow less capital expenditures.
Revenue Highlights 4Q20
35
Non-GAAP
Revenue ($M) 4Q20CC ∆
vs. 4Q19Diagnostics $939.0 202.8%
Excluding Blood $930.3 217.3%
Breast Health $289.2 (16.2%)
Excluding SSI $283.0 (18.0%)
GYN Surgical $100.2 (12.9%)
Skeletal Health $18.6 (26.3%)
Medical Aesthetics* $0.0 N/A
Total Revenue $1,347.0 54.2%
Core (ex. Blood and Aesthetics) $1,338.3 71.7%Organic (ex. Blood, Aesthetics, SSI, Acessa) $1,331.8 70.9%
US Organic $985.0 64.0%OUS Organic $346.8 95.0%
* The Cynosure Medical Aesthetics business was divested on 12/30/2019.
Financial Overview 4Q20
36
Non-GAAP$M, except EPS 4Q20 ∆ vs. 4Q19Revenue $1,347.0 55.6%, 54.2% CC
Core (ex. Blood and Aesthetics)* $1,338.3 73.3%, 71.7% CC
Organic (ex. Blood, Aesthetics, SSI)* $1,331.8 72.5%, 70.9% CC
Gross Margin 74.2% 1,250 bps
Operating Expenses $276.6 (1.0%)
Operating Margin 53.7% 2,430 bps
Net Margin 40.4% 2,020 bps
Diluted EPS $2.07 218.5%
EBITDA $748.5 169.5%
* The Cynosure Medical Aesthetics business was divested on 12/30/2019.
Financial Appendix
38
39
Capitalization as of Q4 FY20Proforma for $950 Million Senior Notes Refinancing
TrancheAmount Leverage Coupon Rating Call Date Maturity
Cash & Equivalents 701
Revolving Facility ($1,500 million) 250 L + 125 Baa3 / BBB- 12/17/23Term Loan 1,463 L + 125 Baa3 / BBB- 12/17/23Total Secured Debt 1,713 1.1x
Senior Unsecured Notes - 2028 400 4.625% Ba2 / BB- 02/01/23 02/01/28Senior Unsecured Notes - 2029 (New) 950 3.250% Ba2 / BB- 09/28/23 02/15/29Total Guaranteed Debt 3,063 2.0xTotal Debt 3,063 2.0xNet Debt 2,361 1.5x
LTM Adjusted EBITDA 1,558
Corporate Rating Ba1 / BB+
Reconciliation of GAAP to Non-GAAP (unaudited)
40
$s in millions, except earnings per shareYears Ended
September 26, 2020 September 28, 2019GROSS PROFITGAAP gross profit $2,227.5 $1,170.9
Adjustments:Amortization of intangible assets 253.2 318.5Additional Cynosure related expenses 2.3 -Integration/consolidation costs 0.9 0.3Impairment of intangible assets and equipment 25.8 578.7Fair value write-up of acquired inventory 6.7 7.1
Non-GAAP gross profit $2,516.4 $2,075.5GROSS MARGIN PERCENTAGEGAAP gross margin percentage 59.0% 34.8%
Impact of adjustments above 7.6% 26.8%Non-GAAP gross margin percentage 66.6% 61.6%
OPERATING EXPENSESGAAP operating expenses $1,122.5 $1,294.7
Adjustments:Amortization of intangible assets (39.7) (52.0)Transaction expenses (5.7) (4.5)Additional Cynosure related expenses (3.2) -Contingent consideration adjustment (0.3) (1.7)Integration/consolidation costs (7.9) (10.9)MDR expenses (2.5) -Litigation settlements (0.7) (4.5)Restructuring and divestiture charges (15.3) (6.6)Non-income tax settlement adjustment 2.9 -Purchased research and development asset charges - (4.5)Impairment of intangible asset and equipment (4.4) (106.7)Acquisition related adjustments 3.8 -
Non-GAAP operating expenses $1,049.5 $1,103.3
Continued on next page
Reconciliation of GAAP to Non-GAAP (unaudited)
41
$s in millions, except earnings per shareYears Ended
September 26, 2020 September 28, 2019OPERATING MARGINGAAP (loss) income from operations $1,105.0 ($123.8)Adjustments to gross profit as detailed above 288.9 904.6Adjustments to operating expenses as detailed above 73.0 191.4Non-GAAP income from operations $1,466.9 $972.2OPERATING MARGIN PERCENTAGEGAAP operating margin percentage 29.3% (3.7%)Impact of adjustments above 9.5% 32.6%Non-GAAP operating margin percentage 38.8% 28.9%PRE-TAX INCOMEGAAP pre-tax (loss) earnings $1,001.9 $(257.7)
Adjustments to pre-tax (loss) earnings as detailed above 361.9 1,096.0Debt extinguishment loss and debt transaction costs - 1.6(Gain) Loss on sale of available-for-sale marketable securities - (0.9)Loss from SSI (1.5) 1.5Unrealized losses (gains) on forward foreign currency contracts (3.8) 2.1Other charges 0.5 -
Non-GAAP pre-tax income $1,359.0 $842.6NET INCOMEGAAP net (loss) income $1,110.5 $(203.6)
Adjustments to GAAP net (loss) income as detailed above (269.7) 1,100.3Tax benefit of internal reorganization - (19.2)Discrete tax benefit from sale of Cynosure 313.4 -Income tax effect of reconciling items 2 (104.4) (218.2)
Non-GAAP net income $1,049.8 $659.3Net loss attributable to non-controlling interest (3.4) -Non-GAAP net income attributable to Hologic $1,053.2 $659.3EARNINGS PER SHAREGAAP (loss) earnings per share – Diluted $4.21 $(0.76)
Adjustments to net earnings (as detailed below) (0.23) 3.19Non-GAAP earnings per share – Diluted 1 $3.98 $2.43ADJUSTED EBITDANon-GAAP net income $1,053.2 $659.3
Interest expense, net, not adjusted above 112.2 135.3Provision for income taxes 309.1 183.3Depreciation expense, not adjusted above 83.1 91.0
Adjusted EBITDA $1,557.6 $1,068.91Non-GAAP earnings per share was calculated based on 264,613 and 269,413 weighted average diluted shares outstanding for the years ended September 26, 2020 and September 28,2019 respectively. 2 To reflect an annual effective tax rate of 22.75% and 21.75% on a non-GAAP basis for fiscal 2020 and 2019, respectively.
Reconciliation of GAAP to Non-GAAP (unaudited)
42Continued on next page
$s in millions, except earnings per shareThree Months Ended
September 26, 2020 September 28, 2019GROSS PROFITGAAP gross profit $931.8 $249.5
Adjustments:Amortization of intangible assets 63.8 78.6Additional Cynosure related expenses 2.3 -Integration/consolidation costs 0.3 0.1Impairment of intangible assets and equipment - 204.1Fair value write-up of acquired inventory 1.5 1.7
Non-GAAP gross profit $999.7 $534.0GROSS MARGIN PERCENTAGEGAAP gross margin percentage 69.2% 28.8%
Impact of adjustments above 5.0% 32.9%Non-GAAP gross margin percentage 74.2% 61.7%
OPERATING EXPENSESGAAP operating expenses $299.0 $335.9
Adjustments:Amortization of intangible assets (10.2) (11.9)Transaction expenses (1.5) (1.4)Additional Cynosure related expenses (0.5) -Contingent consideration adjustment 0.1 (1.7)Integration/consolidation costs (0.9) (3.5)MDR expenses (1.8) -Restructuring and divestiture charges (10.5) (0.6)Non-income tax settlement adjustment 2.9 -Impairment of intangible asset and equipment - (37.5)
Non-GAAP operating expenses $276.6 $279.3
Reconciliation of GAAP to Non-GAAP (unaudited)
43¹Non-GAAP earnings per share was calculated based on 263,179 weighted average diluted shares outstanding for the three months ended September 26, 2020 and 268,894 for the three months ended September 28, 2019.2 To reflect an effective tax rate of 22.75% and 21.0% respectively on a non-GAAP basis for the three months ended September 26, 2020 and September 28, 2019 respectively.
$s in millions, except earnings per shareThree Months Ended
September 26, 2020 September 28, 2019OPERATING MARGINGAAP (loss) income from operations $632.8 ($86.4)Adjustments to gross profit as detailed above 67.9 284.5Adjustments to operating expenses as detailed above 22.4 56.6Non-GAAP income from operations $723.1 $254.7OPERATING MARGIN PERCENTAGEGAAP operating margin percentage 47.0% (10.0%)Impact of adjustments above 6.7% 39.4%Non-GAAP operating margin percentage 53.7% 29.4%PRE-TAX INCOMEGAAP pre-tax (loss) earnings $617.1 $(122.7)
Adjustments to pre-tax (loss) earnings as detailed above 90.3 341.1(Gain) Loss on sale of available-for-sale marketable securities - (0.1)Loss from SSI - 1.5Unrealized losses (gains) on forward foreign currency contracts (5.0) 1.9
Non-GAAP pre-tax income $702.4 $221.7NET INCOMEGAAP net (loss) income $493.6 $(123.5)
Adjustments to GAAP net (loss) income as detailed above 10.7 12.3Amortization of acquired intangible assets 74.0 90.5Impairment of intangible assets and equipment - 241.6Income tax effect of reconciling items 2 (35.7) (45.9)
Non-GAAP net income $542.6 $175.0Net loss attributable to non-controlling interest (1.1) -Non-GAAP net income attributable to Hologic $543.7 $175.0EARNINGS PER SHAREGAAP (loss) earnings per share – Diluted $1.88 $(0.46)
Adjustments to net earnings (as detailed below) 0.19 1.11Non-GAAP earnings per share – Diluted 1 $2.07 $0.65ADJUSTED EBITDANon-GAAP net income $543.7 $175.0
Interest expense, net, not adjusted above 24.7 33.5Provision for income taxes 159.8 46.7Depreciation expense, not adjusted above 20.3 22.5
Adjusted EBITDA $748.5 $277.7
Reconciliation of GAAP to Non-GAAP EPS Guidance
44
Guidance Range
Quarter Ending December 26, 2020Low High
GAAP Net Income Per Share $1.88 $2.03Amortization of acquired intangible assets $0.27 $0.27Restructuring, Integration and Other charges $0.02 $0.02Tax Impact of Exclusions $(0.07) $(0.07)
Non-GAAP Net Income Per Share $2.10 $2.25