HOLX - NASDAQ

Good afternoon, and welcome to the Hologic Second Quarter Fiscal 2024 Earnings Conference Call. My name is Justin, and I am your operator for today's call. Today's conference is being recorded. [Operator Instructions] I would now like to introduce Ryan Simon, Vice President, Investor Relations, to begin the call.

Thank you, Justin. Good afternoon, and thank you for joining Hologic's Second Quarter Fiscal 2024 Earnings Call. With me today are Steve MacMillan, the company's Chairman, President and Chief Executive Officer; Karleen Oberton, our Chief Financial Officer; and Essex Mitchell, our Chief Operating Officer. Our second quarter press release is available now on the Investors section of our website. We will also post our prepared remarks to our website shortly after we deliver them as well as an updated corporate presentation and a replay of this call will be available on our website for the next 30 days. Before we begin, we would 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. Such factors include those referenced in the safe harbor statement included in our earnings release and SEC filings. Also during this call, we will discuss certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. Two of these non-GAAP measures are: one, organic revenue, which we define as revenue excluding divested businesses and revenue from acquired businesses owned by Hologic for less than 1 year; and two, organic revenue, excluding COVID-19, which further excludes COVID-19 assay revenue, revenue related to COVID-19 and sales from discontinued products in Diagnostics. 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.

Thank you, Ryan, and good afternoon, everyone. We are pleased to discuss our financial results for the second quarter of fiscal 2024. For the quarter, total revenue was $1.02 billion and non-GAAP earnings per share was $1.03. Both revenue and EPS came in above the high end of our guidance, reflecting another strong quarter. Similar to Q1, it is again important to view our Q2 performance in proper perspective. As we shared on our Q1 earnings call in February, throughout 2024, we faced double-digit comps, massive comps in the first half and still very strong comps in the second. As a reminder, in Q2 of last year, organic Molecular Diagnostics ex COVID posted growth of nearly 25%. And both Surgical and Breast Health posted phenomenal growth of over 25%. This year, in Q2, on top of the high growth rates from a year ago, we grew our Molecular Diagnostics business, ex COVID at 10.7%. Our surgical business, 7.4%; and our Breast Health business 1%, excluding the divested SSI business, a solid result given the elevated gantry placements in Q2 a year ago. We also delivered operating margins of 30.4% in Q2, improving 190 basis points sequentially from Q1 and setting us up nicely to approach 31% for the full fiscal year. Now past the halfway point of fiscal '24, we believe we are in an excellent position to achieve our full year goals. Before moving on to our themes for today, our fiscal second quarter marks the fourth anniversary of when the COVID virus changed the world. When COVID initially surged, we had 3 goals: one, ensure that we take care of our employees; two, make a huge difference in the world with our Panther system and COVID testing. And three, emerge as a bigger, stronger, faster growing company in a post-pandemic world. Fast forward to today, as you can see from our results, we have delivered against these 3 goals, and we're aiming for more. Not only did we achieve our primary objectives, we also successfully managed to strengthen all of our franchises, both in the U.S. and internationally, remain innovative and disciplined in executing our growth strategies and build a fortress balance sheet to facilitate future growth. On top of these achievements, we continue to elevate our already high employee engagement scores and all through complicated macro challenges. That said, we are never satisfied and firmly believe the best is still ahead. As we look further out beyond the horizon, we see significant potential to continue to innovate and unlock growth opportunities for years to come. Now on to our 3 themes for today. First, our core franchises Diagnostics, Breast Health and Surgical continued to showcase the benefits of our diverse portfolio. As planned, we continue to yield robust growth and durability because we benefit from being both Diagnostics and Medtech. Second, our international business quietly continues to drive strong top line growth. demonstrating our ability to capture potential growth opportunities and turn them into reality. And third, our strong balance sheet and disciplined approach to capital allocation, empower us to fortify our foundation as we've done this week with the announcement of the Endomagnetics acquisition. We have the ability to build on our strength with significant operational flexibility, which allows us multiple levers to deliver top and bottom line performance. Turning to our first theme. Sometimes overlooked and misunderstood -- the strength of our business comes from the sum of our parts. We are a unique collection of Diagnostics and Medtech businesses with many more growth drivers than meets the eye. Each business has multiple growth drivers with tremendous runway ahead. To the outside, it may be unclear how we can keep driving growth with the strong market shares we have. In reality, our product and service diversity creates enduring strength as we advance forward and notch incremental wins. Over time, these wins collectively deliver meaningful and durable growth across multiple franchises and multiple geographies. While we know we don't fit neatly into either diagnostics or medical device, we do fit neatly into the world of improving women's health. Our unique set of businesses equips us to deliver results and positively impact more and more women regardless of external macro challenges. Our strong growth over the past 4 years reflects a combination of multiple durable growth drivers intentionally built into each of our businesses. The beauty here is that over time and in any given quarter, our growth drivers can change and morph. What we've done is create multiphase extended and stacked growth cycles. The net result is our ability to consistently deliver on a consolidated basis over time. A few examples to highlight from across our business. In our second quarter, worldwide diagnostics growth ex COVID of 9.8% was again primarily driven by our Molecular Diagnostics business. In Molecular Diagnostics, over the last few years, we've dramatically expanded both our installed base and menu, nearly doubling our installed base from 1,700 Panthers to over 3,200 during the pandemic and going from 4 FDA-approved assays to over 20. Our next phase of growth is about menu adoption and driving more volume by focusing largely on existing customers while adding more geographies. At the same time, we continue to broaden our menu. As a result, we create years of growth ahead as we extend our commercial reach and continue to add products to our portfolio. In the second quarter, U.S. Molecular Diagnostics delivered double-digit growth, led by ongoing adoption of BV/CV/TV on the Panther, strong contributions from our respiratory suite of assays on the fusion as well as continued growth from Biotheranostics. Each of these are newer products to our portfolio, underscoring the power of our extended reach, layering on top of the strong U.S. molecular performance, international cytology was also accretive to worldwide diagnostics growth. Outside the U.S., diagnostics growth was driven primarily by multi-country adoption of our innovative Genius AI digital psychology in the quarter. As a reminder, digital cytology was only recently approved in the U.S. earlier this year. meaning the U.S. opportunity is still ahead. In Breast Health, we've expanded our product offering from imaging to cover the continuum of breast cancer care, including biopsy and surgery. In the second quarter, on a worldwide basis, the gantry and service businesses performed well against very strong comps from the prior year period. Meanwhile, outside the U.S, our emerging interventional breast business grew double digits in Q2, accretive to the worldwide growth rate. And finally, in Surgical. Once essentially only a U.S. 2 product business with NovaSure and MyoSure, we now have Fluent, Accesa and Bolder. And internationally, we are just getting started with both the core business and new product lines. In Q2, worldwide growth of 7.4% was very strong against the high prior year comp. Our performance was driven in large part by very strong double-digit growth in our International Surgical business, which in Q2 is a reflection of continued market penetration as well as our go-direct strategy in the Nordics. All in, we are a powerful women's health composite. As we extend our reach globally, we expect to grow even in product categories and territories that may on their surface appear to be mature and well penetrated. With that, I'll turn the call over to Essex to discuss our final 2 themes for today.

Thank you, Steve. As previewed by Steve's discussion of our diverse and durable growth drivers, our strong international growth is a direct result of identifying and capturing underpenetrated market opportunities with steady execution. As a reminder, our international business is over 40% larger than it was in 2019. We are in more territory and more direct than ever before. That said, big picture, we are still in the early days of our international opportunities. Our early success is driven largely by 2 approaches: One, going direct; and two, entering markets where we elevate the standard of care. For example, on the latter, while the ThinPrep Pap test, 2D and even 3D mammo and procedures like NovaSure and MyoSure are widely accepted as standard of care in the U.S., internationally, this is unfortunately not yet the case. Many parts of the world even those considered developed and industrialized, still have the opportunity to elevate their screening, diagnosis and treatment of women to gold standards. These women deserve it, and Hologic is poised to realize this potential. Acceptability to women's health options around the world remains a priority and a great opportunity for Hologic. This is why our work with the Hologic Global Women's Health Index and our worldwide partnership with the Women's Tennis Association to elevate women's health, education and access are critically important. Reinforcing our position, the index clearly shows that we are only scratching the surface of the global opportunity, and this holds true even in Europe, with other large market geographies like Asia Pacific being further out on the time horizon. From our perspective, as leading champions for women's health, we believe there is still significant market adoption opportunity ahead of us. And this adoption will not happen overnight, we expect adoption to grow over time, at different paces around the world as more and more governments prioritize women's health. And for our final theme today, we'd like to underscore the importance of our strong balance sheet and recap our capital allocation priorities. With over $2 billion in cash and strong cash flow we have the capacity to fund key in-house initiatives and also deploy cash towards both M&A and share repurchases. Regarding capital allocation, our strategy remains the same. We are focused on tuck-in opportunities for our 3 core franchises. And as we have stated in the past, we have a strong preference for any potential deal to have a clear line of sight to accretion on both top and bottom line, if not immediately, the sooner, the better. Our business development teams across each of our franchises are consistently building and reviewing opportunities in their respective pipeline. We view our ability to shop across multiple aisles as a strength as we continue to grow into an even greater performing composite than we are today. The ability to shop in multiple aisles also creates the flexibility to maneuver potentially unfavorable valuations in one aisle versus another. Overall, a blend of adding in-house developed and external innovation across our strong fan franchises is an important part of our growth strategy. Leading into our strategy, on Monday, we announced our agreement to acquire Endo-Magnetics LTD -- a provider of breast cancer surgery technologies for approximately $310 million. Endo-Mag's portfolio of innovative breast surgery localization and lymphatic tracing products complements and diversifies our expanding interventional breast business. We are excited for the potential to join forces, amplify growth and better serve patients around the world. In calendar 2023, Endomag generated approximately $35 million of revenue, and we believe our combined global reach and breadth of interventional options will accelerate growth in this exciting space. At this point, we are still early and do not have a definitive time line on closing the transaction, though we estimate to close in the second half of calendar year. Before I turn the call over to Karleen, let me conclude by saying we are proud of our strong Q2 results that build on our Q1 performance. All said, we are in a solid position to carry our success into Q3 and Q4.

Thank you, Essex, and good afternoon, everyone. In my statements today, I will provide an overview of our revenue results, walk down our income statement showcasing strong performance, touch on a few other key financial metrics and finish with our guidance for the third quarter and full fiscal 2024. As highlighted, our second quarter financial results were very strong. exceeding our expectations on revenue and profitability. Q2 was a continuation of our momentum from Q1. Total revenue came in at $1.018 billion, beating the midpoint of our guidance by $18 million. We delivered organic growth of 4.9%, excluding COVID, on top of a challenging double-digit comp from the prior year. In addition, non-GAAP earnings per share was $1.03, which exceeded the high end of our guidance by $0.03. Before moving on to our franchise results, we want to highlight the continued strength of our balance sheet. In Q2, we generated over $290 million in cash from operating activities and ended the quarter with nearly $2.2 billion on the balance sheet. Our strong cash balance leverage ratio well below our target range and ability to consistently generate strong cash flow provide us the flexibility to fund innovation and execute our capital allocation strategy. We have significant firepower to continue to deploy capital as opportunities arise. Turning to our franchise results. In Diagnostics, second quarter revenue of $450.1 million declined 3.2%. Excluding COVID assay and related revenue, worldwide Diagnostics grew by 9.8%. Within Diagnostics, Molecular Diagnostics continues to contribute significantly, growing 10.7% excluding COVID. We continue to see underlying strength in BV/CV/TV, which continues its outstanding growth trajectory. BV/CV/TV is tracking to become our second largest assay globally. With very little international revenue as we have focused primarily on the U.S. market. Additionally, as expected, non-COVID respiratory assay sales remained solid as the flu season continued into our second quarter. Growth was a combination of more volume year-over-year across our respiratory menu plus ASP lift from elevated contribution from our COVID, Flu A, Flu B and RSV 4-Plex assay. Finally, Biotheranostics remains a strong pillar of growth for our base molecular business. Rounding out Diagnostics, Psychology and perinatal grew 7.9% globally, primarily fueled by double-digit growth internationally as well as impact from the prior year comp. As a reminder, Q2 last year was adversely impacted by supply constraint issues related to a third-party logistics partner. Level set growth in the second quarter is above our long-term expectations for this business. Moving on to Breast Health. Total second quarter revenue of $384.6 million decreased 0.3%, but grew 1% when excluding SSI. As a reminder, Q1 '24 resulted in an elevated growth rate assisted by lapping soft prior year performance due to supply constraints in Q1 '23. The opposite is true for Q2 '24, where we faced significant prior year comps. In Q2 of last year, we placed an elevated number of gantries as semiconductor chip supply and visibility improved. For the remainder of the year, we expect growth rates in the gantry business to normalize. Within Breast Health, growth was driven primarily by our international interventional mix. This highlights the diversity of growth drivers Steve and Essex commented on. And the fact that growth drivers across our business and within our divisions can change and morph over time. Continuing next to Surgical. Second quarter revenue of $156 million increased 7.4%. Surgical growth continues to be fueled by MyoSure in the related Fluent fluid management system. As anticipated, NovaSure continues to be a headwind to growth as we lapped the prior year NovaSure V5 ASP lift. And finally, in our Skeletal business, Second quarter revenue of $27.1 million declined 14.3% from lower capital placements and upgrades. Now let's move on to the rest of the non-GAAP P&L for the second quarter. Gross margin was 60.7% for the quarter and in line with expectations. The decline of 160 basis points from the prior year was anticipated and primarily driven by lower COVID sales compared to the prior year period. As a reminder, we expect gross margin to improve as we work past the amortization of previously procured higher-priced semiconductor chips. Total operating expense of $307.6 million in the second quarter decreased by 3%. This decrease was primarily driven by elimination of expenses related to the divested SSI business. As Steve mentioned, the operating margin was 30.4% for the second quarter. The year-over-year decline of 90 basis points was driven primarily from lower COVID sales. Sequentially, as expected, operating margins expanded 190 basis points from Q1 largely from lower operating expenses in Q2, a strong result for the quarter. Below operating income, other income net represented a loss of nearly $6 million in our first -- in our fiscal second quarter. As expected, interest income is lower due to lower cash balances from the significant share repurchases completed earlier in the fiscal year. Additionally, interest expense is up due to lower proceeds from our interest rate swaps. Finally, our tax rate in Q2 was 19.75% as expected. Now let's move on to our non-GAAP financial guidance for the third quarter and full year fiscal 2024. For Q3 2024, we are expecting total revenue in the range of $992.5 million to $1007.5 million. and EPS of $0.98 to $1.05. For the full year 2024, our guidance assumes revenue of $4 billion to $4.05 billion. and EPS of $4.02 to $4.12. With respect to foreign exchange, we expect the recent strengthening of the U.S. dollar to create a significant headwind in the second half of the year. For Q3, we are assuming FX headwind of about $3 million. For the full year, we now expect a slight tailwind of about $2 million. All in, this represents about a $2 million -- a $10 million impact to our prior guidance. And as a reminder, prior guidance assumed a $12 million tailwind for the full year. Turning to our franchises. We want to reiterate that we expect each to grow at least 5% to 7% in our fiscal 2024, excluding the impact of COVID. While we have navigated the most challenging comps from fiscal '23, we still have strong double-digit comps across the board to close out fiscal '24. Starting with Diagnostics. We expect our Molecular Diagnostics business to drive high single-digit growth, excluding COVID as customers continue to adopt and drive utilization of our expanded menu. In cytology and perinatal, however, we expect minimal growth in Q3. In Q3 of last year, customers built inventory as a result of the third-party shipping constraints experienced in Q2 of '23, resulting in slightly elevated sales. We expect to see more normalized comps for our cytology and perinatal business in fiscal year '25. Closing out on non-COVID diagnostics, we expect blood revenue of approximately $7 million in Q3 and $28 million for the full year. In terms of COVID revenue, we expect COVID assay sales to be about $5 million to $10 million in Q3 '24 and about $60 million to $65 million for the full year. COVID-related items are expected to be about $25 million in the third quarter and approximately $105 million for the full year. Moving on to Breast Health. We remain on pace to grow the business within the 5% to 7% range for the year. As a reminder, we closed out fiscal '23 with 3 straight quarters of 25% plus growth rates. We expect steady performance in Breast Health in the back half of the year as the business continues to improve sequentially. The demand for our portfolio of products and service remains strong. and we continue to have excellent visibility into gantry orders. Further, our confidence in delivering more gantries than last year remains high. We continue to successfully manage resource availability among both our install teams and our customers, as customers balance the need to meet elevated demand for screening and staffing constraints. Finally, in Surgical, we anticipate our full year fiscal 2024 revenue growth to be at the high end of our 5% to 7% long-term target. The growth will continue to come from MyoSure Fluent as well as both Accessa and Bolder. Moving next to margins. We reiterate that our guidance assumes the cadence of improvement throughout fiscal '24 for both gross margin and operating margin. For gross margin, we anticipate Q3 will improve sequentially from Q2 as we continue to work through our higher cost chips in Breast Health. Remain on pace to exit the fiscal year in the low 60s. Our guidance also assumes Q3 operating margins in the low 30s, and we remain on pace to finish fiscal '24, approaching 31%. Below operating income, we estimate fiscal '24 other income net to be an expense of approximately $10 million in Q3 and an expense between $30 million and $40 million for the full year. Our guidance is based on an annual effective tax rate of approximately 19.75%, and diluted shares outstanding are expected to be approximately $238 million for the full year. To conclude, Q2 was another strong quarter and sets us up nicely for the second half of the year. As always, we remain focused on advancing women's health around the world while delivering on our promises and commitments to our shareholders, employees, customers and patients. With that, we ask the operator to open the call for questions.

[Operator Instructions] We'll take our first question from Patrick Donnelly with Citi.

Steve, maybe one on the Diagnostics, particularly the molecular DXP continues to put up pretty good numbers in spite of obviously some tough comps, pretty competitive environment, too. Can you just to back that a little bit and just talk about what you're seeing in the market? Again, you called out obviously a few assays that are doing well. But just curious the key drivers of the strength there and the durability as you look forward and how you think about that franchise over the next few quarters?

Yes, Patrick, I really call it. It's the dividend and reward for coming to the country and the world's rescue when they needed a stern COVID. And as you well know, we placed a ton of Panthers, almost doubled our worldwide placements. And the big question all through that time and through those next few years was, yes, what's going to happen to those Panthers on the back end. And what we said is just keep watching, because I think what we feel great about is in a labor-constrained world, our Panther and the workflow automation, combined with the incredible menu that we have the tight footprint on Panther. And then we've added the Fusion sidecar that these things are just incredible workhorses that really are getting the adoption. And I think you start to -- when you put a double-digit number on top of a 25% number from last year, what we're really just seeing is more customers putting more menu on their Panthers. And I think it's -- the proof is what we've been saying for years and hopefully, it's starting to become evident in the results.

That's helpful. I appreciate it. And then maybe just on the capital allocation side, that remains focus obviously you guys announced the recent deal. Can you just talk about the priority? You have the larger repo. I think that last quarter, a smaller deal, a little bit of dilution. How do you think about the priorities here in terms of the balance sheet? And how actively be on the M&A side post that deal? Just how large your thinking would be helpful.

Yes, Pat, let's try to put this into context. We were talking as a team about this the other day and said, if we can line up the perfect world, we'd love to do like one Endomag every quarter. right? $300 million deal, bring in some additional revenue products that drop in that we know what to do and just kind of keep phasing those along and then maybe a little bit of a buyback here or there. The real world doesn't work nearly as linear. But that's what we would like to be doing is those size deals on a fairly regular basis. Because they don't always pop up from time to time, it is where we'll jump in and do some buybacks, and we're comfortable amassing the cash because there might be a year where we can do a number of these like we did at one point during COVID when we picked up Biotheranostics, Fluent, Accesa, Diagenode, these things that have all been very good for us. So no real change. We think the Endomagnetics deal is right down the fairway, hopefully, exactly what anybody would expect from us and what we've been signaling and if we can find more of those, that'd be great. With that, I'll kick it to Karleen.

Yes. I would just emphasize, Patrick, that the strength of our balance sheet as well as our ongoing cash flow generation allows us significant flexibility to do things like Endomag and the share repurchase on an ongoing and regular basis. So for years to come as we look at our financial projections over the coming years, so we have a lot of flexibility and strength.

And our next question will come from Jack Meehan with Nephron Research.

I wanted to -- can take the eagle's questions off-line. For now, I wanted to focus on the Breast Health business pick up where we just left off. I was wondering Essex talked a little bit about the time line to close Endomagnetics. Is there any commentary you can share just around the valuation for the deal in context of like what your expectations are in terms of the growth rate of this business maybe more broadly, just how it fits with the existing portfolio.

Yes. Well, I think we think it fits really nicely with our existing interventional portfolio. And I think that's 1 of the values that we'll bring is that currently Endomag uses a mix of direct and distributors, and we obviously have a significant direct sales force in the U.S. that I think will be a differentiator for us with that asset in our hands.

And then any comments you can share around like the growth rate you're expecting for this business?

Yes. I would just say, Jack, we would expect it to be accretive certainly to the division's growth rate.

Sorry. I'm sorry, go ahead, Justin.

Oh, I'm sorry. I was just going to say our next question is from Tejas Savant with Morgan Stanley.

This is Yuko on the call for Tejas. I have one question on the recent breast cancer screening update. If USPSTF recommends annual mammal screening them, what does that do from a physician adoption standpoint, given ACS is already there? And then from a quantitative standpoint, how much of an uplift would annual testing represent to your Breast Health business?

Yes. As you saw, they're really kind of still in the biannual world and we don't think the USPSTF guidelines changed much. Recall that our Breast Health is really a screening business where it's a capital sale and less volume dependent. But we really don't see much of an impact either way, just as when the guidelines shifted "negatively" a few years back, I didn't see a downturn there and don't see a big shift now. We do think the guidelines are a step forward for women. Unless you're a woman over 74 where they still haven't gone far enough.

Got it. That was helpful. And then another question on USPSTF. If they were to move to an HPV primary what would a potential trial design look like to establish primary HPV delay claim on your existing optima test? And what would the time line be to run such trial? Is there a possibility of using real-world data? Or would you need a prospective trial?

We are very focused on maintaining co-testing as the gold standard. If anything, what we're seeing is a modest uptick in cervical cancer in women in the United States that really started when the intervals went from to 3 to 5 years back almost 10 years ago and believe absolutely the co-testing is the right way to go. That continues to be -- our base is based on the scientific facts.

And our next question comes from Vijay Kumar with Evercore.

This is Kevin on for Vijay. Congrats on the quarter, 5% on top of a tough comp last year is impressive. Just on your organic revenue guide range, it looks like it's tightening versus being raised, given performance in the quarter, why not raise guidance? and was this quarter performance above your internal expectations?

Yes. I would just say the impact on the full year guidance is primarily related to currency, if you actually look at the midpoint of this guide versus our prior guide on a constant currency basis, it's up slightly. So we really view the performance in this quarter a lot of to tighten the range as you indicated really hone in and delivering within that range.

No need to get too far ahead of ourselves. Great.

We'll take a question from Puneet Souda with Leerink Partners.

Steve First one, if I could touch on the Genius digital cytology system. I mean you've had that in the U.S. market for -- correct me, for a quarter or so. Just, can you provide a feedback on sort of what are you hearing from the early folks in the field? And do you expect the international adoption of this sort of playing out similarly within the U.S.? And are you hearing anything in terms of the pushback in terms of the overall throughput of the system?

Yes. Let me kick off in that. Yes, it was just recently approved in the U.S., and I would say that we're really partnering with our lab customers on implementing and integrating into the workflow, so that's what we're focused on really more of a successful integration into the lab workflow at this point. So minimal contribution in '24 from the U.S. approval. But I think the feedback here, early days, there's a lot of excitement of what this can do in what we've talked about in a labor-constrained environment. And we think those will be really well received.

Got it. And a broader question maybe for Steve. I mean when you look at the overall competitive landscape, Steve, there's another larger peer who's in the point-of-care testing side, but they pointed out 40% growth in [Strep A] and women's health -- and I know sort of their positioning is different in the market, but just wondering sort of how you're seeing the share shift. We're also seeing that one of the larger peers that's in the reference lab side, they still don't have RSV in the market for their product. So just trying to understand sort of where the opportunity set for Hologic continues to be the most strongest and where you think the share opportunities will be -- will continue to be the sort of the strongest going forward?

Yes. It's funny in so many ways, we don't focus always as much probably on share as we do on just building our business for our customers and growing the categories. So I think what we continue to feel great about is we've got, as you know, more respiratory menu than we've ever had. We've got the Fusion sidecars, so we're building a respiratory business. We're not competing in the point of care business. We are very strong in our reference labs in the hospital systems, the public health labs and just really focused on delivering for those customers. And we believe we've got both an economic and workflow advantage as well as, frankly, the sensitivity specificity of a lot of our assays. So continue to feel very good about the growth rates there. And at the end of the day, these are big markets, and there will be, I think, several companies going up and others that will be shared donors in the equation.

And moving on to Casey Woodring with JPMorgan.

Great. So just now that we're halfway through the fiscal year, looking at the top line guidance above the LRP range on an ex COVID and ex selling day basis after the strong quarter, particularly in Diagnostics and Surgical. I'm curious on how you guys are thinking about your fiscal '25 and if growth could fall on potentially the higher end of the LRP range or even above the range? How should we think about the different moving parts there given the outperformance here so far?

Yes, Casey, you'll love it. We're not going anywhere near '25 guidance at this point in time. So we've given the long range we're delivering for now, investing for the future. But stay tuned for the November call, and we'll get into that. But thank you.

All right. And then maybe if I could just follow up here. How do you assess the international opportunity for BV/CV/TV, you mentioned in the prepared that the strong growth you've seen in that assay really hasn't included any international contribution. So maybe help us frame how much growth runway you have on that assay just based on phasing in the international piece.

Yes. We're earlier stages of really looking at the opportunity there. There are some other things on the markets and frankly, the indication is not necessarily developed. So it's probably a little more of a market development longer-term opportunity for us internationally as frankly, many of our products have been. So very minimal expectations in the near term internationally. I would tell you though we love the momentum we have, certainly in the United States on it.

And we have a question from Andrew Brackmann with William Blair.

Maybe on the international business and margins, in particular, can you maybe just sort of talk to us about some of the levers which exist there to drive future margin expansion for that segment in general? And how much of that is in your control? And I guess as a related follow-up here, if we go back a handful of years, logic has been pretty successful in acquiring distributors, namely international distributors. So I guess, how does that sort of play into that margin expansion opportunity?

Yes. Certainly, that is one of the strategies to improve margins as we go direct and we find that as we go direct, we have better outcomes in those markets with our market development and market access capabilities, which -- that is something we have invested in over the last 5 years. So that strength that commercial investment at the point of leverage as we move forward as well as we continue to grow the portfolio, specifically surgical -- it's early days, but certainly, the surgical portfolio is an accretive product to the overall margin profile for that business. So I think there'll be multiple drivers as we move forward.

And our next question will come from Andrew Cooper with Raymond James.

Maybe just first sticking with international. One thing jumps out, just looking at the table at the bottom of the release. The region that seems to have the most outsized growth has really been kind of all other. I think part of that might just be COVID unwinding a little bit, but maybe any thoughts there? And then as you think about the international opportunity, can you highlight maybe if it's a particular product in a particular region or a particular region in general? What areas are you most excited about in terms of that geographic expansion opportunity as we sit here in the start of May '24.

Yes. I think the magic of our international business is -- it's a lot of individual products in individual countries that we've been building kind of market access capabilities and everything over the years. And while there's no one that's driving it. We've just got a series of different products and different geographies that are really building momentum. And a lot of them in kind of the surgical and interventional space. Certainly, we're getting very excited about our Surgical business and its opportunity internationally, both what we've been doing with our own sales forces plus we did mention we acquired our distributor in the Nordics. So continuing to go -- feel very well there. And then it's just -- you get different times. The fact we got our digital cytology approved, internationally, that's been going very well in Western Europe. So it's just this collection of the different franchises, the different geographies building over time. And I think the magic is, Andrew, from the years in the past, we always said we're going to be building these businesses internationally, not by showing up 1 day and saying, hey, we're going to dramatically expand our sales forces and take a year off on profit growth. We've been making the investments all along. And then as certain products launch in certain countries, then we use that funding to fund the next year and keep building. So it's really just this inexorable building of success.

Our next question come from Andrew Petrone with Mizuho Securities.

This is Brad Davis on for Anthony. -- not another Andrew, but -- talk on the Breast Health business. I figure -- whenever we see you guys make a move in Breast Health, obviously, core competency at which you're paying attention. The one to kind of hear your strategic rationale on the Endomag acquisition, why you see now as kind of a time to get bigger on the procedural side of the business and if we should expect kind of further moves to cover the swap and the continuum, if there's any other assets that you think that you'd like to have in that portfolio?

Yes. I think the biggest piece is it's just a continuation of what we've been doing over the last 5, 6 years where we've tried to build, especially the gantry business and build out across the breast care continuum. So into biopsies and into interventional techniques. So as we've been building our own markers business, this has been an area we've been looking. We got into localizer a few years back. We've been doing both organic, inorganic. And the timing on this one really is driven by the opportunity to pick up Endomag. They've been a business we've been tracking for quite some time that we liked a lot, and the opportunity finally became available to grab them. Thank you. But yes, just continuing on what we've been doing.

Got it. That's helpful. And then just to stay on the breast business, you recently called out some of the life cycle in the boxes 2014 launch time frame. So maybe getting to the 9-, 10-year time frame. Can you just remind us, I guess, the life span on these devices and how Hologic plans to kind of best monetize the upgrade replacement opportunity and also if this is part of the rationale on timing of any new systems software and product enhancements.

Yes. I would say we've been very intentional into really smooth out that business and really move away from the boom bust of a life cycle replacement -- replacement cycle. And as we've talked about, we've had many software and other upgrades to the gantry system over the past several years, all of which have been backwards compatible to that installed base. The customers have been able to get improvements and upgrades along the way. They don't have to wait for that next gen gantry. But having said that, we certainly have something in development, but that's what we'll be talking about later, probably in '25.

Absolutely. That question will come from [Michael Ryskin] with Bank of America.

This is John came on for Mike. I think we've talked about these numbers before, and I was wondering the improved utilization seems to be the main contributor. So I was wondering how the average number of assay used for Panther has been trending, like what percentage of the customers is using more than one assay versus more than 4 assays.

Yes. So I think if we go back to 2019, we would say that less than or about 20% of our customers were running about 4 more assays at the end of that into '22, that was probably approaching high 30%, maybe 40%. But I think that's the entire installed base. But I think the other metric I'd look to -- point to is the newer Panthers that were placed since April of 2020. So new customers acquired since the pandemic over 90% of those customers are running at least one other assay and over 55% of running at least 2 other assays. So I think that all points to the value, the workflow that our customers see with the Panther instrument in the menu and the long runway ahead to continue to drive utilization on the installed base.