Hologic, Inc. (HOLX) Earnings Call Transcript & Summary

Okay. Good morning. We're going to go ahead and get started. Welcome to day 1 of the conference. I'm Tycho Peterson from the Life Science Tools & Diagnostics team. It's my pleasure to introduce Hologic. We'll do a breakout right after in the Olympic Room. And with that, let me turn it over to Steve.

Thank you, Tycho, and thanks for having us. It's hard to believe, but I first stood up at this stage at this conference 15 years ago as a new CEO, haven't gotten them all right through the years, but I think we've gotten a lot more right than wrong. And as I stand here today, I will tell you this, I am incredibly proud about the state of Hologic's business, and I don't think it's ever been stronger. Each of our businesses, each of our product lines and particularly our leaders of every business in the U.S. and internationally have never been stronger. And that's why we've highlighted and called the title slide today, reintroducing a unique asset in women's health. Obviously, we have the safe harbor statement, non-GAAP financial measures. And at the end of the day, we'll dive right in here to the investment thesis. We are a broad portfolio of market-leading products for women's health. We'll talk more about that as we go through. And as we look at the last 6 years, despite ups and downs, this or that, at the end of the day, we have been a mid-single-digit top line, low double-digit bottom line growth compounder over this time period. Divesting Cynosure was exactly 2 weeks ago. We actually divested Cynosure, should remove a big overhang, both for investors, and frankly, even for our management team and dramatically simplify our story and allow us to focus on our 3 core businesses going forward, all of which strengthened in 2019. Yet, we still have opportunities to improve our organic revenue growth and our margins as we go into 2020 and beyond, and we generate exceptional cash flows and redeploying those into both acquisitions and aggressively into buybacks as well provides a very strong foundation for us as we come into 2020. There's a lot of companies today in all the stakeholder discussions, some of which are searching for a mission or purpose. Our's is quite simple. Our purpose is to enable healthier lives everywhere, every day. And frankly, our passion is becoming global champions for women's health. And as we get stronger as a company, our ability to improve more lives around the world every day also strengthens. And our promise is to do that using the Science of Sure, which is really clinically proven products and outcomes. We're also quite proud, given our very strong position in both breast and cervical cancer. That as you look over the last generation, both breast and cervical cancers in the United States are down by about 40%. And while that's encouraging, and we have played a role, and it's certainly not the only role, but it does start with diagnosis, there is still much left to do. And to that end, and probably, particularly the women in the audience will know, this is from an article that was published in a magazine last year. The amount of misdiagnosis and underdiagnosis that continues to happen across all kinds of product areas and especially our categories continues to be prominent, both in the United States as well as abroad. And I guarantee, just since we've started this speech this morning, some women's case has probably been kind of looked at askance by a doctor and has probably said, "Ah, just deal with it. It's a little pain, don't worry about it. Come back to me in the future." And we are bringing the products to make those diagnoses so much better. We'll now talk a little bit about our journey over the last few years before we really talk about where we are going from here because this is the foundation. And I won't talk about each of the points on this slide here because we're going to go into them in depth right now. First and foremost, over the last 5 or 6 years, we have dramatically transformed our U.S. sales organization. In Breast Health, we've gone from an organization that largely called on radiologists and sold mammography gantries to one where we're bringing Breast Health solutions to the entire hospital suite. And I would tell you that over 80% of our sales organization in our Breast Health organization today was not part of the company 6 years ago. It's been a dramatic change of people as well as capabilities. And that business is so much stronger and broader as we'll talk about a little bit more. In Surgical, a couple of years ago, we changed our sales rep commission to 100% commission in really incentivizing the hunting and getting new customers. And you'll see, for those who've been watching that business, a dramatic turnaround over the last couple of years. That business also, about 70% of our organization is new just in the last couple of years. And in Diagnostics, where we've had a very strong commercial leadership team in place, they've also continued to upgrade our talent and aligned our structure to help our largest customers continue to grow their businesses. And certainly, as things like the contract renewals that got so much attention a year or so ago, come up, it puts us in a very strong position as we continue to help our customers grow their businesses. Quietly as well, we have really been building out the international commercial capabilities. And you see very simply, again, I think this has kind of gotten missed over the last few years, we've posted 3 consecutive years of double-digit growth in our 3 core businesses over the last few years, and we fully expect to continue to have very strong growth internationally as we really have great leaders in place in these businesses. The other piece, as we go back to a few years ago, where we had very little coming out of our pipeline. We spent a lot of 2014, '15, '16 revamping our R&D capabilities. And of course, you don't see that in the early years, but you're starting to see that now coming through where we had very little revenue from new products going back in really 2016, 2017. Now as we go into 2018, and you can see by division, those numbers growing and getting stronger. So we feel great about the revitalized R&D teams and pipelines. We've also created divisional business development capabilities. Candidly, this company had a history of very centralized deal making, of which Cynosure was also one that we did on my watch. But at the end of the day, what I realized is as we divisionalized the company back in 2014 and 2015 to get greater focus on each business unit, we hadn't yet built that capability and business development at the division. That's why we weren't getting good ideas coming through. And over the last few years, we now have great business development teams in each of our businesses to go along with great sales, marketing, R&D teams, and we're now building a very good track record of really the great tuck-in acquisitions. And those of you who've been around the health care world for a long time know, especially in med tech, a lot of the tuck-in deals that add capabilities to your existing products and your existing divisions turn out to be the ones that are really much better and feel really good about what we've done here just in the last few years. What this is allowing us to do is really shifting our portfolio to where we have more higher growth assets. If you go back to 2014, where Blood, call it, U.S. NovaSure and our U.S. Cytology businesses were really drains on the growth rate of the company. As we've been adding more businesses around that. Those are a smaller percentage, allowing our weighted average market growth rate to continue to move up. And now as we really do talk about leveraging our strengths. Let's start. This is really very simple in some ways. In Breast Health, we've taken a core, which is our mammography systems and then built stronger, stronger market shares by the incredible products we have here. And then this is enabling the growth across a broader spectrum. So that our Breast Health business today is far broader, both product and geographically, than it ever has been that leads to the more diverse, consistent revenue. Similarly, in our Diagnostics business, it's really simple. We're placing more Panthers. Every year, we're adding more menu to those Panthers. And collectively that creates additional recurring revenue and strength. In our Surgical business, our best-in-class products, combined with new leadership in commercial models, really accelerating growth in that Surgical business. And as mentioned earlier, we intend to deploy our strong free cash flow more aggressively on growth accretive, tuck-in deals, not huge deals and also share buybacks because we believe in our future. Now I'm going to dive a little bit more into breast. And I think there's -- for those of you who want to go back and look at a couple of key slides after this, just go back and stare at this one. I do. Because if you go back to 2015, 2016, when we placed over 1,000 gantries, I'll challenge anybody in this room to ask if any of your models would have said we could continue to place over 1,000 in each of the next 3 years. All the talk at that point was a cliff or a peak followed by a cliff. And I'm incredibly proud of what Pete Valenti and our Breast Health team have done over time of consistently continuing to place, as you see, over 1,000, and we ended our fiscal year with almost 1,000 -- 7,000 gantries in the United States. What that has meant from a market share standpoint, something else I never could have predicted 5 years ago, when we had about a 56% market share in the United States, as you look at it today, you can see approaching 3/4 of the market are Hologic systems. And if you look at just 3D, obviously, by definition, we're much higher than even this chart suggests. So incredible performance. We've got the best products, the best commercial teams and increasingly putting more products around it from a workflow standpoint and everything else to where we have this incredible base that we are building upon. And to that point, if you look at this slide, really from left to right, what you see is we've taken the -- effectively a screening business that was just targeted on the radiologist and we're moving across into the biopsy space, into localization, into breast surgery, so that we have a business today that, again, is far broader than just the gantry business that we had. And that's what is creating this incredible strength and continued strength and growth in our Breast Health business. What that's done is it's really led to that more consistent revenue growth. If you look at the bottom part of this chart, it's really the U.S. gantry business, which has gone from a 1/4, really down to about 1/5 of our business. Nicely, it hasn't shrunk. It has been very stable and modestly growing as we've continued to place, but you see the rest of the business growing and becoming more diversified, as we go, that creates that ongoing strength. Now we're going to shift to another slide. Why don't you just, kind of, call back up after the conference when you're all inundated with -- trying to remember what you heard in these 42,000 presentations that you're seeing this week and all the one-on-ones. I have no idea how you all do it, frankly. But this would be the other slide I'd have you look at. Five consecutive years of Panther placements in excess of 200 per year. So again, not just the initial, hey, great 2015, 2016, really strong, continuing, both in the U.S. and abroad to place our Panther systems. Each one of these that gets placed becomes a great source of additional revenue. Combined with something else, I think it's been, kind of, missed over the last few years, we have gone from 4 assays approved in the U.S. in 2015 to 16 by the end of 2019. So we're really just still getting going in the early days of this menu expansion. So when you think about our Diagnostics business, we placed more Panthers, and then we put more assays on the Panthers, and it creates the incredible growth that has been -- that's shown both here and on the next slide. If you think about it, we were doing about $150,000 per Panther in 2014. That number is up about 60% over the last 5 years to where we're now doing almost $0.25 million a year on every single Panther. And again, with the more recent clearances and everything else, continuing to see that number go north. So more Panthers, more menu. And that's what has led to our molecular business here. Over the last 5 years, you can see the lowest growth rate we've had has been 6%. A couple of years of double-digit growth in molecular and really becoming a great driver. And the great part for our Diagnostics business is as our cytology business has effectively at least flattened versus declining. And then we have molecular growing at these paces, it's moving that growth rate of our diagnostics business up over time as molecular becomes a much bigger percentage of our Diagnostics business. Our GYN Surgical business. I couldn't be more proud of what our new leadership is doing with really best-in-class products, NovaSure and MyoSure, bar none, best products in their class. We developed a new sales model that as we were putting it a couple of years ago, always, you can question a little bit and wonder. And we have put new launches in, and here's the simple results. From when Sean Daugherty took over this business really right as we came into fiscal '18, he inherited a business that was not in good shape and over time, getting better and better. And for those of you who just saw the preannouncement yesterday, we just posted 10% growth in our Surgical business in the latest quarter, one that many had given up for dead a few years ago. And this really -- it's a highly profitable, great business, growing nicely for us, and we feel very good about the outlook ahead So where does this leave us? Our strong free cash flow is also a great strength. Now the question is what we do with that. So let's be very clear. We'll generate about $650 million to $700 million in cash this year. We are very comfortable with a leverage ratio of 2.5 to 3x. We've actually finished fiscal '19 down below that level, lower than, frankly, we would have liked or fully need to be. We were in the midst, obviously, of the sale process at the time for Cynosure. Our goal is to deploy this cash more aggressively, really in 2 fronts, growth accretive, tuck-in deals, not huge corporate-led deals, feel very good about our footprint of our 3 businesses. We do not need a fourth leg of growth when we're in the businesses that we're in today and really trying to supplement the ones that we have, trying to really leverage those existing channels into the near adjacencies, very much what we've done in Breast Health over the last couple of years with Focal, Faxitron and now SSI, which puts us in the ultrasound space, really coming off of strength of businesses that we know, sales channels we know, customers we know where we can do great due diligence and incorporate and integrate those acquisitions culturally to fit our business. And obviously, looking at attractive ROIC and EPS accretion over time. We've also been fairly aggressive on share buybacks and announced an additional 200 -- basically $205 million ASR in December along with the sale of Cynosure. And also, for those of you who didn't see the prerelease, our Board just authorized an additional $500 million authorization here to kick in, in our next quarter. So feeling very good about ways to use our cash to continue to help both accelerate our top line growth and continue to help drive our strong EPS growth. So as we head to the end here, financials and conclusion. Looking back here over the last 5, 6 years, what you see is we've had about a 6% revenue growth from 2015 through 2019. Didn't always guide to those numbers, but that's what we delivered. And a little over 10%, low double-digit EPS growth, the last couple of years being just slightly below that. I'd remind you, in 2017, we had actually divested our Blood Screening business, which was about 15% of our earnings. So it was about $0.35 of earnings, which we divested actually in that time period and yet still continue to grow, but that was the lower growth there in 2017. For those of you who did not see our preannouncement last night, just want to call some attention here that our Diagnostics business, excluding Blood, which is really the core business because Blood is still -- we've got some trailing revenue that's no margin. It was up 6.5% in the quarter, very good quarter, feeling very good about that. Breast Health. For those of you who weren't following closely, we had guided, we had expected this to be a very softer quarter because last year, we had over 12% growth in this quarter. So it's by far our toughest comp of the year. Just as last year, when we posted the 12% growth, we said, hey, this is not a 12% grower. This was a very strong quarter. As you look at this quarter, it's also probably our slowest growth quarter of the year as we accelerate and get beyond what was going to be that very difficult first quarter comp. Medical Aesthetics, obviously, we divested that exactly 2 weeks ago today on December 30. Came in far weaker in the quarter, given the announcement than what we expected. So frankly, the fact that we just exceeded the top end of our guidance, we would tell you our forecast had called for stronger Medical Aesthetic sales in that quarter, which means we were very pleased with the rest of our businesses, particularly here, the next one, GYN Surgical, up at a double-digit rate to start the year. And all in, about 4.6% organic growth in the quarter. So that's been part of that accelerating organic growth story here, really over the last couple of years and a good way to start our fiscal 2020. So as a reminder here, in a nutshell, again, broad portfolio of market-leading products, we are the leaders in breast and cervical cancer detection and continuing to bring great things to those businesses. And our installed bases provide a strength for us to continue to grow from. We have had a strong portfolio and strong performance collectively over the last 5 to 6 years. Our attention is now fully focused on our 3 core businesses, divesting Cynosure, did remove that overhang. Obviously, a deal we would not do again. But we also recognized it and took action and moved forward. So -- and all during that time, over the last couple of years, a lot of work under the hood, strengthening each and every one of our core businesses, so that as you saw from the beginning of 2018 -- through 2018, continued strength into 2019 where we stood here a year ago and said a lot of the work we had done in the businesses in 2018 would start to show up in 2019. It's exactly what's happened. And now we feel really good here as we head into 2020, continuing to have opportunities to improve that organic rate even further as our bigger businesses get stronger and the growth businesses become a bigger part of the story. Also some work to be able to do to continue to improve margins. And frankly, just getting rid of Cynosure alone will be helping that. And yet, we have additional work that we can also do as we go forward. And ultimately, as we said, redeploying that strong cash flow that is generated because of our market-leading positions, gives us that great cash flow into both smaller tuck-in acquisitions as well as stock buybacks. So with that, Tycho, thank you very much for having us. And I know there's a breakout across the hall or wherever. So thank you all.

All right. I guess this is being webcast for those of you. Now obviously we have Mike Watts, our head of Investor Relations communications. Karleen, greatest CFO around. And myself, Steve MacMillan here to answer any questions. Did we have one right there? I couldn't tell.

Yes. So I was wondering if we could start off with the strong growth we saw with Surgical. If you could talk about the dynamics there and how NovaSure and MyoSure fared. We saw some stabilization in the quarter.

Sure. We have not announced the individual product lines. We'll do that with the full release. But I think you can imagine with the overall performance of Surgical, that the trends on NovaSure are probably getting better than where they've been. And MyoSure as well as some of the new products, flew into our fluid management system, everything else also very strong. We couldn't have gotten double-digit growth without MyoSure being really strong and NovaSure's performance certainly getting better than it's been.

And as we talk about that business, I think one thing we try to emphasize going forward, it's a business now that's more than those 2 products. Obviously NovaSure and MyoSure are at the core and still doing well but have introduced a new hysteroscope, new cervical dilator, the fluid management products that Steve referenced, so those new products were really driving a lot of the growth.

Yes. It's really the first time in our history where we've actually got products coming out of R&D for that division. If you think about it, historically, for those of you who don't know the history, the company NovaSure was acquired really via Cytyc and then MyoSure was acquired -- so both products were acquired. Incredible products but we didn't have the internal R&D capabilities. So what we've done over the last 5 years is really created R&D capabilities to both drive line extensions, but then as you're getting out there and talking to the docs, we're starting to create more of a typical medical device organization where you're hearing from the doctors, okay, what else can they use in and around these procedures, building those relationships such that our surgical business will start to also -- and is starting to become more than just those 2. Next question.

And then with diagnostics, you also saw really great strong growth there. Just wondering if you're still seeing some issues for the cytology business, if it's -- if it was flat this quarter, especially given [indiscernible].

Sure. The question is, Diagnostics, what did we see as the growth there and particularly the breakout between Cytology and Molecular. I think, again, we've been fairly consistent on our Cytology business. Feel really good for a business that was declining 8%, 9% a year back in the -- earlier in the decade, where we really have flattened it largely in the U.S. plus or minus a 1% to 2% almost any given quarter. I don't think we're seeing any real change in that. There has been pressure on the guidelines, you'll recall. We actually got the guidelines where by the time the draft guidelines on cervical cancer screening became final, there were some changes and I think co-testing has continued to be recognized as a very good way to go. So our Cytology business I think holding up very, very well. Not a growth engine as we've defined in the U.S. Internationally, still some opportunities there, but I think increasingly, what we have going on in our Diagnostics business, if 5, 6 years ago, Cytology, Perinatal were roughly the same size as Molecular, with the strong growth we've had in Molecular over those last 5 years is becoming a bigger, bigger part of the business. By just maintaining that base in Cytology, it's allowing that growth rate for our full Diagnostics business, which was really flattish to down back in 2014, to really becoming a nice growth driver. And then it's becoming a bigger part of the company.

And I would just add on the Cytology business, even though it's not a huge growth driver, it's a huge cash cow. So that's a lot of cash generation from that business that's driving our free cash flow.

Says our CFO.

And then in terms of cancer menu expansion, you've had great progress this year. Just wondering how we should think about certain effects here [indiscernible]. Will we be expecting as many sort of testing launches?

Probably not -- the question is on Panther. We had a lot of assay approvals here in the last 12, 18 months. Should we expect that many going forward? Probably not as much going forward this year. I think the great part is there's enough from what we've gotten in the last few years that the way the assays build, really our pipeline, commercially, for the next few years, has the sales force with their hands full and just a great product lineup while we're working additional things. But I think you'll see a slow down in actual approvals but a ramp up as the ones we've gotten approved in the last few years really start to hit the market.

Yes. One way to put a number behind that, we showed this in our presentation. Although we have 16 different assays approved in the U.S., a little less than half of our customers still use only 1 or 2 tests on their Panthers. So still some room for upside even in the U.S. and certainly outside the United States as well. Question in the back.

Which of your newer assays are your biggest opportunities?

Question is which of the newer assays are the bigger opportunities. I think -- oh, do you want it?

Yes. I think we probably wouldn't highlight any one. I think in Diagnostics we see good growth even out of our core, given some of our partnering activities with big labs. So even chlamydia, gonorrhea, HPV, trichomonas still growing strongly. Those are clearly the bigger current businesses. Of the newer assays, I would keep an eye on the vaginosis panel. BV/CV is an area, it's one of the most common reasons why women go to the doctor. And have pretty high hopes for that. In addition, the viral load assays which are HIV, hepatitis C, hepatitis B quantitative have been doing well and we would expect that to continue. So I'd probably highlight virals and vaginosis.

Yes, I think the other piece we feel good about, today we have capabilities, particularly for our Molecular business. Our European team has also gotten a lot stronger. So as we're starting to launch products, in our Molecular business particularly, we've got a much stronger team on the ground in Europe and even a little bit in Africa as well as Asia-Pac so that we're seeing -- and for those of you who've been following closely are seeing really nice growth, particularly in the Molecular business outside the U.S. and in addition to in the U.S.

Then turning to Breast Health, I was wondering if you could touch a bit upon like the recent acquisitions of Focal and Faxitron, how those are faring? And then also a bit more about sort of interventional and breast [indiscernible] and what are the different drivers you are expecting going forward from here?

Sure. The question is around the 3 acquisitions we've done in the Breast Health business over the last, what is really, I guess, 18 months. It started with Focal in the summer of 2018, as time starts to fly, and then in the fall we did Faxitron and then just in this latest quarter completed the acquisition -- or almost completed the acquisition of SSI. It's now part of our numbers. I think they're performing very well. I think that the real simple way to think about these is they are accretive to our overall company growth rate on the top line and they're expanding our capabilities to move across that breast continuum. So if you think about our -- the journey we've been on in Breast Health, from what was what we call a gantry business. So the core mammography machines of 6, 7 years ago, which are really all about the screening and initial diagnosis, but especially the screening of mammography. Then we moved, really, and said how do we leverage this incredible base of 3D in moving more into the biopsy space? So the Affirm Prone Biopsy, Brevera which will be coming back to the market later this year, but moving across that continuum. So a woman gets diagnosed and [ you've ever get screened ], you effectively get 2 outcomes, right? It's either, hey, all clear, great, come back next year, or whatever that time line is for you. Or we see something suspicious, what's the next step? The next step is biopsy. So we've built into that biopsy business. Now after the biopsy, again, one of 2 things. Okay, either, hey, everything is fine, you're okay. Or we've got to go and look, maybe there's some cancer in there more. And that starts to move into, what we call, obviously, the world of breast surgery. Now the great part with the invention of 3D mammography is we're picking up cancers so much earlier. So in the old days, my mother who had radical mastectomy, today, women when we're catching these cancers so much earlier, we're able really to do what we're calling much more breast conserving surgery. So instead of the mastectomy, it's things like -- you've heard the phrase lumpectomy or things like that, that are much more minimally invasive. And as we've been moving into that continuum because of our technology creating the opportunity to find cancers earlier, the surgery is both less expensive and far better for the patient. It's not nearly as difficult for the patient is earlier in the process so we've been moving into that continuum to create that business. And that's where Faxitron comes in and then Focal as well and now also getting into the ultrasound business. So what's great about these businesses, as we've built our capabilities, we're in touch with the KOLs in the industries and we're seeing and hearing what's emerging. Instead of just being a technology organization, it's that technology combined with the relationships with the key opinion leaders that give you that insight. And that's what's really starting to play out in our various areas. It's the same with -- shifting back to Diagnostics just for a second, the emergence of BV/CV is because we are so strong in our women's health assays as they are in trich, in the other products we have HPV, everything else. You're talking to the KOLs and then you start to see ways through these other things are merging or key unmet needs and then we're able to build the R&D around that. So that's really what's been happening in each of our businesses. But back to Breast Health, very excited. The last piece, I'd say, to answer your question on SSI, which is the ultrasound technology. This is a business that most of the revenue has been outside the United States and yet, obviously, we have an enormously strong sales organization in the U.S. so I think we're very excited about what we'll be able to do with that product in our bag and we just had the RSNA meeting this year in early December, late November, whatever it was, right after Thanksgiving in Chicago. I think a lot of excitement to have that in our portfolio. Back there, yes.

[indiscernible]

Sure, [ Kyle ]. And I think the question is, can we talk about the new buyback and how it impacts our M&A strategy? I think it is very clearly -- what we've been saying is, look, we're generating $650 to $700 million a year. We do not expect to lever up and do any big deals. The more that I've looked at the capabilities within our existing divisions, we have really good flow of ideas coming through. I'll tell you what. We've also said no quite recently to some nice tuck-in deals within the divisions because our due diligence suggested there were issues. And part of that, I think the hidden strength of doing division-led due diligence versus what we did, for example, with CynoSure, which was more corporate-led. When you're doing it within divisions, you have the KOL relationships, you have the sales expertise, you have the R&D expertise. And I think it allows for much better due diligence. So frankly, we've had a couple of deals we've been pretty excited about that, for one reason or another, may not be there. And I think what we're really saying is we're probably going to use that $650 to $700 million a year. We're probably not going to spend more than that on M&A and be able to really have a balanced -- and I want to be careful saying we're balanced because it could imply an equal balance like work-life balance, probably one of the goofiest phrases ever invented because there's no such thing. But I think certainly the ability to both do the tuck-in deals as well as additional buybacks -- and I think, frankly, we feel really good about our prospects. And as we think about acquisitions to make, probably continue to think that acquiring us is not a bad thing with our own money. So [indiscernible]

In terms of divisional deals, is there -- you mentioned that you're looking into like small tuck-ins that would either be -- it fits with the portfolio right now. I was just wondering if there's anything on your mind right now, any sort of [indiscernible].

I think all -- the question is, as we think about M&A and the tuck-in deals, are there any particular segments or things that we're thinking about? I've probably learned through the years, as soon as you start to go down that path, people start speculating around individual targets and everything else. I think what we feel really good about, during the last couple of years as we really looked at both CynoSure and then the core businesses, realizing each of the businesses have great opportunities and I probably feel better today that the 3 legs that we have for this company each have both organic and inorganic opportunities to expand. And really all we've executed on over the last couple of years is one division, which is really Breast Health. So as we start to get additional deals that can come through -- and frankly, our Breast Health business right now is probably going to be more focused on still the integration and execution and we're probably a little more active on both diagnostics and surgical at this point. And some will be small, some will be little technologies, some hopefully may be a little bit bigger but all well within our annual cash flow that leaves us opportunities to continue to buy back some shares. Did you want to add to that, Karleen, at all?

No, I think you hit it all, Steve.

Great. Karleen landed about 3:00 this morning because her flight from Boston was put down, what, in Chicago for some medical emergency and the guy promptly walked right off the airplane so maybe his medical emergency was he needed a Chicago deep dish pizza. I don't know, but...

I was wondering about sort of the trends you're seeing in the international market as menus have converted from analog to digital and the opportunity there.

Sure. The question is, trends that we're seeing in the international markets particularly as some of the -- many of the countries' trends move from still analog to digital. I think long term we feel really, really good, particularly about the Breast Health opportunities internationally. The market is still so underdeveloped. And I think part of what we feel great about is we're building capabilities. And if you think about our presence in Europe today, so much stronger. Literally 5 or 6 years ago this was a company that international breast health was effectively export. We had a couple of people in Marlborough, Massachusetts, that at the end of the quarter would call our dealers and ask if they wanted to place orders. And over that time period, we're now directing the U.K., we acquired our distributors in Spain and Portugal, acquired our distributors in Germany, Switzerland, Austria. So we're now directing those markets. And it creates a very different ability to deal with the customers. But also more importantly, deal with the governments. Because to the core of your question, when you really look at the rest of the world, 3D is still very much niched in the rest of the world. And if I fast forward over the next 10 years, we have to believe that'll be much more established. But a lot of it is actually still driving policies. Many countries are still -- they don't have great screening programs to begin with. They certainly -- many are using 3D still as, frankly, a reflex. So they're using 2D for screening and 3D for diagnosis. So now as we're more directing these countries we're able to start to influence the policies. Now none of those are going to affect next quarter or probably even next year but we're getting in and we're having discussions with the governments about, frankly, how 3D ultimately is better for the patients and really an economic win oftentimes because we're detecting the cancers earlier when they're far less expensive to treat and deal with. So we think we have a great, still long term, position. I would love to tell you that we wish a lot of the governments were more proactive than they are, but I think also the combination increasingly what we are seeing is as we're getting stronger now internationally and moving from dealers to direct, the ability to go and talk to governments, frankly, about both cervical and breast cancer puts us in a unique position where having both of those together allows us to have a different discussion. Again, are you going to see that over the next even year or 2 the impact? Probably not, but over the next 3, 5, 7 years I think is where we feel great about the runway ahead.

And I would just add a couple of things to that, Steve. So to the point of some countries still being analog, our 2D unit is upgradable to 3D with software. So if the health ministry wants to move to digital, but not all the way to 3D throughout the market, we kind of have the step plan for them to do that, to have access to the 3D where they want, when they want. I think the other thing I would add to the international story, both on the breast cancer and cervical cancer, one of the rate-limiting factors outside the U.S. is lack of radiologists and cytologists to actually read these images. So what we're doing in our R&D pipeline is look how can we use artificial intelligence to move images digitally as well as help radiologists and cytologists read slides faster -- images faster to develop markets outside the U.S.

Yes.

And then similar question for Diagnostics. Just wondering how you're thinking about the international opportunity?

Sure. The question is also similar. How are we thinking about international for Diagnostics. I think we're incredibly excited by what we have going on internationally in Diagnostics. And we brought a sales leader in gosh, 4, I think, it'll be 5 years this coming summer, who joined to run our European Diagnostics team. And the team he has put together has really been phenomenal. And both within Europe and then also moving increasingly into Africa, particularly with some of the virals and HPV testing and everything that we have. So he's built an incredible team that we've -- he's now morphed into a slightly different role and got broader responsibilities. But overall, if you look at our international molecular business, I start to lose track, but I think it's 15 of the last 16 quarters or whatever, it's been double digit and many of those quarters, really very healthy double -- into the 20-ish percent growth areas. So I think just our capabilities as well as Panther, which is a great instrument, given its smaller footprint but high throughput and great workflow, it's really a great system for a lot of the European labs and even as we go elsewhere. So I think we feel really, really good about the trajectory. As we look at Asia Pac, still a lot of opportunity ahead in that we're still in the early days of getting more assays cleared. We were, again -- in the old days, we didn't necessarily apply for approvals even in all the products because we were very U.S. focused organization. So we're behind the curve on still getting a number of the assays cleared particularly even in Asia Pac. So a lot of strength that we feel really good about just growing.

Great. Anything else?

And then I was just wondering, as we're thinking about, I guess, 2020 guidance, I know you're planning to update it with your call. But just wondering if the low end of mid-single digits is still the right way to think about Breast Health and Diagnostics, given they both, sort of, outperformed this quarter.

Yes, I think we want to be, obviously, very careful. We'll update our guidance in a couple of weeks. But as we -- as you know, the guidance that we put out at the start of the year was really called for about a 3% to 4.5% organic number, given that our organic growth in the first quarter was 4.6%. So certainly, at the high end or a touch above that, we feel pretty good about the start to the year. And I think when you look at it, when the dust settles this year, I think we feel really good, back to my opening comments in the previous room, never felt better about all 3 businesses, both in the U.S. and internationally. We've had this habit of one up, one down, one's doing well. And I think we really feel like we have strength in all 3 of the businesses here as we certainly demonstrated in the first quarter. I mean, the Breast Health number looks a little punky, but it was against just a ridiculously strong quarter last year. And I think, again, as we said, last year at this conference, Breast Health isn't quite that strong. This time, it's not nearly as weak as it might appear to some. It's a really strong, good healthy business in that, call it, more in those mid-singles. It's not a -- Breast Health is not a high single-digit organic grower, just given the dynamics, but feel great about the trajectory.

45 seconds left. If you want one last quickie or we'll call it.

Going once.

Great. Thanks everybody.

All right. Well, thank you, everybody.