Lazard Capital Markets 9 th Annual Healthcare Conference November 14, 2012 Glenn P. Muir Executive VP and CFO 1
Forward-Looking Statements 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 included herein based upon or otherwise incorporating judgments or estimates relating to future performance, events or expectations; the Company s positioning and expectations for future growth; the anticipated benefits of the Gen-Probe acquisition; 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: U.S., European and general worldwide economic conditions and related uncertainties; the Company s reliance on thirdparty 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; uncertainties regarding the recently enacted or future healthcare reform legislation, including associated tax provisions, or budget reduction or other cost containment efforts; 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 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, the risks that acquisitions may involve unexpected costs or unexpected liabilities, including the risks and challenges associated with the Company s recent acquisition of Gen-Probe and operations in China; manufacturing risks, including the Company s reliance on a single or limited source of supply for key components, and the need to comply with especially high standards for the manufacture of many of its products; 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 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; 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; competition; the risks of conducting business internationally, including the effect of exchange rate fluctuations on those operations; and the Company s ability to attract and retain qualified personnel. The risks included above are not exhaustive. Other factors that could adversely affect the combined company's business and prospects are described in the filings made by the Company with the SEC. 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, APTIMA, Cervista, Dimensions, Gen-Probe, MyoSure, NovaSure, PANTHER, ThinPrep and TIGRIS and associated logos are trademarks and/or registered trademarks of Hologic, Inc. and/or its subsidiaries in the United States and/or other countries. 2
Use of Non-GAAP Financial Measures Hologic has presented the following non-gaap financial measures in this presentation: adjusted revenues; adjusted gross margins; adjusted operating expenses; adjusted pre-tax income; adjusted net income; and adjusted EPS. Hologic defines its non-gaap adjusted revenues to include contingent revenue earned under the Novartis collaboration post-acquisition which was eliminated under purchase accounting. Hologic defines its non-gaap adjusted gross margins, adjusted operating expenses,, adjusted pre-tax income and adjusted EPS to exclude, as applicable: (i) the amortization of intangible assets; (ii) acquisition-related charges and effects, such as charges for contingent consideration (comprised of (a) adjustments for changes in the fair value of the contingent consideration liabilities initially recorded as part of the purchase price of an acquisition as required by GAAP, and (b) contingent consideration that is tied to continuing employment of the former shareholders and employees which is recorded as compensation expense), transaction costs, integration costs including retention, and credits and/or charges associated with the write-up of acquired inventory and fixed assets to fair value, and the effect of a reduction in revenue related to the write-up of acquired unbilled accounts receivable to fair value; (iii) non-cash interest expense related to amortization of the debt discount for convertible debt securities; (iv) divestiture and restructuring charges; (v) non-cash loss on exchange of convertible notes; (vi) litigation settlement charges (benefits); (vii) other-than-temporary impairment losses on investments; and (viii) other one-time, nonrecurring, unusual or infrequent charges, expenses or gains that may not be indicative of Hologic s core business results; and to include income taxes related to such adjustments. Hologic believes the use of non-gaap adjusted net income is useful to investors by eliminating certain of the more significant effects of its acquisitions and related activities, non-cash charges resulting from the application of GAAP to convertible debt instruments with cash settlement features, charges related to debt extinguishment losses, investment impairments, litigation settlements, and divestiture and restructuring initiatives. These measures also reflect how Hologic manages its businesses internally. As with the items eliminated in its calculation of non- GAAP adjusted net income, these items may vary for different companies for reasons unrelated to the overall operating performance of a company s business. When analyzing Hologic s operating performance, investors should not consider these non-gaap financial measures as a substitute for net income prepared in accordance with GAAP. See the most recent reconciliation of the non-gaap financial measures to the comparable GAAP financial measures in the supplement attached to this presentation. 3
Diverse, Innovative Products Focused on Early Detection and Intervention 4
Hologic Today Well-positioned to drive growth and shareholder value through: Dominant franchises in breast health and diagnostics each with critical new product cycles Sales of new products to accelerate overall growth Near- and medium-term cost synergies from acquisition of Gen-Probe to enhance profitability Strong cash flows and focus on de-leveraging NEW PRODUCTS 5
Total Revenues by Business Segment Consolidated Non-GAAP Adjusted Q4 12 Revenues of $600M* Total Diagnostic $265.1M* Legacy $164.0M Gen-Probe $101.1M* 44% Capital $127.2M Breast Health $230.3M 39% GYN Surgical $79.7M 13% Service $95.6M Consumables $377.4 Skeletal Health $25.1M 4% Consumables/Service 79% Capital Equipment 21% * See the definition of non-gaap financial measures on slide 3 and the reconciliation of GAAP to non-gaap on slide 31. 6
Two Exciting New Product Cycles are Just Beginning Dimensions 3D Breast Tomosynthesis PANTHER System 7
Two Exciting New Product Cycles are Just Beginning Dimensions 3D Breast Tomosynthesis Early stage of a promising replacement cycle with technology superior to 2D digital First to market with no near-term U.S. competition Upcoming peer-reviewed publications further support near-term adoption Dimensions 3D Breast Tomosynthesis PANTHER System Ability to offer class-leading automation to low- and medium-volume labs Extends molecular diagnostics into hospital labs, the fastest-growing market segment Menu expansion on the horizon to sustain growth for the long-term PANTHER System 8
Diagnostics Leadership in Cytology and Molecular Diagnostics Premier automated solutions Proprietary chemistries: TMA (Transcription-mediated amplification) and Invader Extending leadership from cytology into molecular via Gen-Probe acquisition Validated by #1 or #2 U.S. market share in key segments* Cervical Cytology CT/NG Testing Blood Screening HPV Testing SHARE * Hologic Estimates 2012 9
Comprehensive Cervical Cancer Screening Solution The only complete cervical cancer screening solution to include PAP + HPV All from the ThinPrep vial, the gold standard in cervical cytology Thoughtfully designed HPV products designed to detect disease by focusing on the genes that matter most: Both APTIMA and Cervista HPV tests target high-risk oncogene types E6 and E7 for disease progression 10
Flagship Brand in STD Testing APTIMA Combo 2 assay remains a growth driver < 40% of sexually active women aged 25 and under are screened for chlamydia and gonorrhea Improved compliance and international expansion opportunities APTIMA Trichomonas experiencing rapid adoption Trichomonas vaginalis is the most common curable STD First FDA-cleared nucleic acid amplified test Menu expansion on the PANTHER is key Trichomonas, HPV and genotyping expected by calendar year-end 2013/early 2014 All APTIMA assays able to test from ThinPrep vial 11
Broad Portfolio of MDx Instrumentation Reference Labs Hospital Labs Test Volume Uniquely Positioned in Molecular Diagnostics Already dominant in high-volume setting Ability to capitalize on lab decentralization trend with introduction of PANTHER Proprietary chemistries, TMA and INVADER, offer further differentiation and flexibility 12
Integrated Sales Organization with a Clear Strategy Combined Sales Call Point Molecular Lab Cytology Lab Physician Drive Test Utilization Drive Compliance Communicate Guidelines Portfolio of Products Combined Company Menu HPV - APTIMA - Cervista - Genotyping CT/NG Trichomonas ThinPrep & Imaging ffn 13
Breast Health Mammography Leader in Breast Cancer Screening & Diagnosis Market leadership: ~65% of current U.S. installed base Approximately $4 billion addressable U.S. market Strong competitive advantages of 3D Dimensions Clinical superiority to 2D First-to-market with no near-term U.S. competition Substantial replacement cycle expected Robust Service Offering Recurring revenue stream driven by system placements 14
3D Dimensions Tomosynthesis Superior Next-Generation Digital Mammography Superiority over 2D Digital Mammography Improved Tissue Visualization and Detection Lower Recall Rates Tomosynthesis uptake ahead of expectations U.S. installed base of 10,000 digital systems potential for conversion to Tomo On track to ship 500 to 700 units within first two years of approval (by end of fiscal Q2 13) 60% of target achieved by end of Fiscal 2012 15
Substantial 3D Dimensions Opportunity Leading Share of U.S. Installed Base and a Growing Replacement Cycle 14000 Installed Base - Analog Installed Base - Digital Replacement Potential 12000 10000 8000 6000 4000 2000 0 2004 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E 2016E 2017E Source for historical information: MQSA Registry Data, Oct. 2012. 16
Leveraging a Global Footprint Global Initiatives Continue driving 3D Tomo adoption Expand reach of Gen-Probe products Further establish ThinPrep as standard of care Expand NovaSure and successfully roll out MyoSure EU Focus on pockets of growth to manage around region s economic challenges Most immediate opportunity to leverage Gen-Probe products China Creating fully integrated, direct Breast Health business Grow ThinPrep and HPV Register Gen-Probe products and prepare MDx lab channel Key Facts International approximately 25% of sales and over one-third of growth 1,300+ associates, including 500 in China alone 17
Update on Our Recent Acquisition of Gen-Probe Fully-integrated operations since close of acquisition on August 1 Financial performance has been in line with expectations Targeting high single to low double-digit growth Cost synergies on track for a minimum: $40M in the first year $75M within three years 18
Q4 FY 2012 Financial Performance Quarter Ended September 29, 2012 (unaudited) NON-GAAP* $s in millions, except EPS Q4 12 Q4 11 Change Q3 12 Change Revenues $600.2 $467.0 28.5% $470.2 27.6% Gross Margins 62.2% 61.9% 30 bps 62.0% 20 bps Operating Expenses $186.6 $143.6 29.9% $141.1 32.2% Pre-Tax (Loss) Income $149.0 $132.5 12.5% $140.3 6.2% Net (Loss) Income $98.3 $88.8 10.8% $92.6 6.2% Diluted EPS $0.37 $0.34 $0.03 $0.35 $0.02 19 * See the definition of non-gaap financial measures on slide 3 and the reconciliation of GAAP to non-gaap on slide 31.
Fiscal 2013 Guidance Quarter Ending December 29, 2012 and Year Ending September 28, 2013 $s in millions (except EPS) FY 2013 (Guidance)* Non-GAAP ** Q1 2013 (Guidance)* Revenues $2,610 $2,640 $640 $645 Gross Margins 62.5% 63.0% 62.5% 63.0% Operating Expenses*** $775 $800 $195 $200 Interest Expense $220 $55 Diluted EPS $1.56 $1.58 $0.37 * As provided on November 12, 2012. ** See the definition of non-gaap financial measures on page 3 of this presentation. *** Includes $25 million for medical device tax beginning in FY Q2 13. 20
Balance Sheet & Debt Paydown Road Map Focus on De-leveraging Total debt obligations of $5.2B, including $3.5B borrowed for acquisition of Gen-Probe Goal to reduce total debt to EBITDA from approximately 5.1x to 2.5x over next 3 years Expect to generate $600M in Free Cash Flow in FY 13 Debt Paydown Roadmap Initial focus on $775M tranche of our convertible notes putable in December 2013 $65M in scheduled payments for Tranches A and B of our Term Loans Build cash through FY 13 and FY 14, then focus on paying down remaining Gen-Probe-related debt 21
Hologic Summary Prepared to deliver on the promise of 3D Tomo Leading diagnostics franchise materially strengthened with acquisition of Gen-Probe Well-positioned for sustained growth with new product cycles and a global infrastructure Poised for earnings growth, strong cash flow and de-leveraging the balance sheet 22
23
Reconciliation of GAAP to Non-GAAP (unaudited) In thousands, except earnings per share Three Months Ended September 29, 2012 September 24, 2011 June 23, 2012 REVENUES GAAP revenues $588,548 Adjustment related to Novartis collaboration 11,606 Non-GAAP adjusted revenues $600,154 1 (LOSS) EARNINGS PER SHARE GAAP (loss) earnings per share- Diluted $(0.29) $0.10 $0.09 Adjustments to net (loss) income (as detailed below) 0.66 0.24 0.26 Non-GAAP adjusted earnings per share- Diluted $0.37 2 $0.34 2 $0.35 2 GROSS MARGINS GAAP gross margins $274,317 $243,199 $244,640 Adjustments: Contingent revenue from Novartis collaboration 11,606 - - Amortization of intangibles 66,072 45,978 45,280 Fair value write-up of acquired inventory sold 19,918 - - Fair value adjustment for depreciation expense 1,203 - - Adiana closure costs (427) - 1,546 Acquisition-related costs 612-138 Non-GAAP gross margins $373,301 $289,177 $291,604 GROSS MARGIN PERCENTAGE GAAP gross margin percentage 46.6% 52.1% 52.0% Impact of adjustments above 15.6% 9.8% 10.0% Non-GAAP adjusted gross margin percentage 62.2% 61.9% 62.0% Continued on next page Footnotes: 1 To reflect a fair value adjustment recorded in purchase accounting relating to contingent revenue earned and received under the Novartis collaboration post acquisition which was eliminated under purchase accounting. 2 Non-GAAP adjusted earnings per share was calculated based on: 268,106; 264,878; and 267,294 weighted average diluted shares outstanding for the three months ended September 29, 2012, September 24, 2011, and June 23, 2012, respectively. 24
Reconciliation of GAAP to Non-GAAP (unaudited) In thousands, except earnings per share Three Months Ended September 29, 2012 September 24, 2011 June 23, 2012 OPERATING EXPENSES GAAP operating expenses $318,020 $169,778 $164,113 Adjustments: Amortization of intangible assets (24,832) (14,492) (15,733) Contingent consideration (40,399) (11,316) (2,226) Acquisition-related costs (37,901) (153) (4,892) Restructuring and divestiture costs (16,697) 71 14 Impairment of goodwill (5,826) - - In-process research and development (4,500) - - Fair value adjustment for depreciation expense (1,300) - - Adiana closure costs - - (150) Other charges (2) (320) - Non-GAAP adjusted net operating expenses $186,563 $143,568 $141,126 INTEREST EXPENSE GAAP interest expense $56,673 $29,079 $25,593 Adjustment for non-cash interest expense relating to convertible notes (16,514) (18,470) (15,119) Other interest expense - (214) (186) Non-GAAP interest expense $40,159 $10,395 $10,288 PRE-TAX (LOSS) INCOME GAAP pre-tax (loss) income $(97,964) $41,606 $55,007 Adjustments to pre-tax (loss) income as detailed above 246,955 90,872 85,256 Non-GAAP pre-tax income $148,991 $132,478 $140,263 NET (LOSS) INCOME GAAP net (loss) income $(77,767) $27,569 $23,594 Adjustments to pre-tax (loss) income as detailed above 246,955 90,872 85,256 Income tax effect of reconciling items (70,854) 3 (29,655) 3 (16,276) 3 Non-GAAP adjusted net income $98,334 $88,786 $92,574 EBITDA Non-GAAP adjusted net income $98,334 $88,786 $92,574 Interest expense, net, not adjusted above 39,766 9,887 9,593 Provision for income taxes 50,657 43,692 47,689 Depreciation expense, not adjusted above 21,241 17,908 15,926 Adjusted EBITDA $209,998 $160,273 $165,782 Footnotes: 3 To reflect an annual effective tax rate of 34.0%, 33.2% and 34.0% on a non-gaap basis for the three months ended September 29, 2012, September 24, 2011, and June 23, 2012, respectively. 25
Financial Guidance The Company s guidance reflects its current operations, including revenues from its approved/cleared products and its recently acquired businesses. Hologic may not generate expected revenues and may incur expenses or charges, realize income or gains, or execute acquisitions or dispositions in fiscal 2013 that could cause actual results to vary from the guidance provided in this presentation. In addition, the Company is continuing to monitor the effects of the U.S., European and general worldwide economic and regulatory conditions and related uncertainties, including the implementation of healthcare cost containment measures and healthcare reform legislation, as well as foreign currency fluctuations, which, along with other uncertainties facing the Company s business including those referenced elsewhere herein and its filings with the Securities and Exchange Commission, could adversely affect anticipated results. Future Non-GAAP Adjustments: Future GAAP EPS may be affected by changes in ongoing assumptions and judgments relating to the Company s acquired businesses, and may also be affected by nonrecurring, unusual or unanticipated charges, expenses or gains, all of which are excluded in the calculation of non-gaap adjusted EPS as described in this presentation. It is therefore not practicable to reconcile non-gaap adjusted EPS guidance to the most comparable GAAP measure. 26