Hologic, inc (HOLX) Q4 2021 Earnings Call Transcript

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Hologic, inc (HOLX 1.27%)
Q4 2021 Earnings Call
Nov 1, 2021, 4:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the Hologic Fourth Quarter 2021 Earnings Conference Call. My name is Sarah and I am your operator for today's call. This conference is being recorded. All lines have been placed on mute.

I would now like to introduce Mike Watts, Vice President, Investor Relations and Corporate Communications to begin the call. Please go ahead, sir.

Michael Watts -- Vice President, Investor Relations and Corporate Communications

Thank you, Sarah. Good afternoon and thanks for joining us for Hologic's fourth quarter fiscal 2021 Earnings Call. With me today are Steve MacMillan, the company's Chairman, President and Chief Executive Officer; and Karleen Oberton, our Chief Financial Officer and Ryan Simon, our new Vice President, Investor Relations.

Our fourth quarter press release is available now on the Investors section of our website. We also will post our prepared remarks to our website shortly after we deliver them today. And a replay of this call will be archived through December 3.

Before we begin, I'd 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 in our filings with the SEC.

Also during this call, we will be discussing certain non-GAAP financial measures. A reconciliation to GAAP can be found in our earnings release. One of these non-GAAP measures is organic revenue, which we define as constant currency revenue excluding the divested Blood Screening business and revenue from acquired businesses owned by Hologic for less than one year.

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.

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Thank you Mike, and good afternoon everyone. We are pleased to discuss our strong financial results for the fourth quarter of fiscal 2021. Revenue was $1.32 billion, and non-GAAP earnings per share was $1.61. Both figures significantly exceeded our guidance.

Since this quarter marked the end of our fiscal year, we want to highlight some annual numbers and themes today. First the numbers. For the year, total revenue was $5.63 billion, up 47% versus 2020. Non-GAAP EPS was $8.41, more than double the prior year. Some really big numbers, and a truly impressive performance that was driven by our COVID test sales, as well as the recovery of our core women's health businesses. Along these lines, if you back out COVID test sales, as well as revenue from COVID-related products such as instruments and collection kits, we grew about 12% in the quarter, a very nice start versus the long-term guidance of 5% to 7% that we introduced in our last call. So we believe we are well-positioned for success regardless of the future direction of the pandemic. If it drags on, we have shown that we can respond aggressively and generate financial upside. For example, since the beginning of the pandemic we have provided more than 130 million highly accurate COVID tests to our customers in more than 50 countries. And when the pandemic subsides, we can rely on a base business that has never been stronger or more diversified than it is today.

Now let's turn to those annual themes. We want to focus on the strengthening of our major businesses over the last 12 months, as well as two very important social initiatives that help improve health access and equality. We're so proud of everything that Hologic has done to help fight the COVID pandemic. And the resulting financial success has made us a significantly stronger company for the future. Our core businesses are more diverse, with more growth drivers, than ever before. Our R&D pipelines are producing innovative new products and our commercial organizations are fully engaged. And our international business has emerged as a consistent growth driver with passionate teams on the ground who are building relationships and market presence all around the world. On top of all this, we have used the strong cash flow we are generating from COVID test sales to acquire companies that we expect to generate more than $150 million in revenue in 2022. Although these acquisitions are slightly dilutive to near-term EPS, we expect them to accelerate our top line growth rate.

Now let's get into the specifics by division. First, in Diagnostics, our Panther footprint continues to grow as we respond to the pandemic. In our fourth quarter, we placed 167 Panther instruments worldwide, and about 650 for the year, well ahead of what we originally forecast. Our Panther installed base currently stands at more than 1,500 in the US, and almost 2,900 worldwide. Remarkably, this represents a two-thirds increase in our total installed base since the end of fiscal 2019, when we had about 1,700 instruments in the field. And looking forward to 2022, we continue to see strong demand for additional placements globally. Utilization of this growing footprint and leveraging our robust portfolio of 19 assays will be key to driving the business forward in a post-COVID world. Toward this end, in 2021 we signed up more new assay business in the US than ever before. While our legacy women's health assays are leading the way, we also expect newer assays to make material contributions. For example, sales of our vaginosis panel almost doubled to nearly $30 million in 2021. We expect significant growth in 2022 as well, which would make this product our most successful Diagnostics launch ever, aside from COVID.

In addition, we completed the back-to-back-to-back acquisitions of Biotheranostics, Diagenode and Mobidiag in 2021, our first diagnostic acquisitions in nearly a decade. These deals are broadening our product offering and customer base, and strengthening our R&D capabilities around the world. While still in the early innings, Biotheranostics continues to exceed expectations, with sales of more than $16 million in our fourth quarter. In addition, the broad European launch of the Novodiag system represents a meaningful, early achievement in our integration process, and we have already secured some encouraging customer wins. We are excited about opportunities to invest in these businesses in the near term, and expect them to accelerate our top line growth in the years to come.

Second, in Breast and Skeletal Health, we are well-positioned for fiscal year 2022 and beyond. Our Genius 3D mammography systems remain the core of our business, and our market share remains very high. Despite COVID pressures, we placed almost 950 3D units in the United States in 2021. We now have a domestic installed base of almost 8,700, which we can build on with new software and hardware upgrades. At the same time, our business is now more balanced than ever as we operate across the entire continuum of breast healthcare, from screening and diagnosis through surgery and treatment. As a result, we are now less susceptible to the boom-and-bust cycle of years past, and better able to capitalize on opportunities as demand continues to recover from the headwinds created by the pandemic.

Third, in our Surgical division, we are executing on our plan to broaden the division from a two product hysteroscopy business to a more diverse provider focused on the OB/GYN. In fiscal 2021, we broadened our portfolio by adding Acessa, a laparoscopic fibroid removal system used to treat larger, more complicated fibroids that MyoSure cannot reach. We are pleased that insurance coverage for the Acessa procedure has steadily expanded, and with this tailwind, we expect to grow Acessa into a third important surgical brand alongside MyoSure and NovaSure.

Taking another step forward, we are also very excited about the recent signing of an agreement to purchase Bolder Surgical, which offers additional laparoscopic devices. We expect this deal to close later this calendar year. Bolder offers a portfolio of advanced energy, vessel sealing surgical devices currently marketed primarily in the pediatric space. Once the deal is closed, we expect to again leverage our strong customer relationships to grow Bolder sales in the OB/GYN market, which we estimate to be five times the size of the pediatric market. Bolder and Acessa represent solid examples of executing against our tuck-in acquisition strategy, using our strong cash flow to add products that leverage our existing channel strength and accelerate our growth.

Fourth, let's discuss our International business, which was growing nicely before COVID, but has become even stronger thanks to our pandemic contributions. Even excluding COVID, our International revenue has nearly doubled in just five years, and the business is positioned to continue its impressive string of double digit core growth. I recently had the pleasure of being with Jan Verstreken's leadership team in Dubai as they made plans to kickoff fiscal 2022. It was inspiring to see the deep talent that Jan has assembled, and the passion for women's health that helps them build and strengthen commercial relationships. I saw a business benefiting from tremendous leadership, and from years of dedication transitioning from a distribution model to direct, on-the ground commercial expertise. Further, the acquisitions of Diagenode, based in Belgium, Mobidiag, based in Finland, and Somatex, based in Germany, provide tailwinds to our international business going forward. Since the close of each deal, dozens of team members, including technical experts and leadership, have made numerous trips across Europe and across the Atlantic to ensure successful integration of these companies, all while dealing with strict COVID protocols. Truly a global, collaborative effort that we expect to accelerate growth for years to come.

Now let's shift gears and discuss two groundbreaking social initiatives that we launched this year, and that were made possible by our financial success. These efforts represent unique ways that we can extend our Purpose, Passion and Promise even further for the benefit of women's health. First, in May of this year, we launched Project Health Equality, a $20 million dollar initiative to address the structural and cultural barriers that prevent Black and Hispanic women in the US from receiving the same quality healthcare as white women. By teaming up with leading non-profit groups focused on minority health, our goals are to drive culturally competent care, improve public health policy, increase access, and ultimately decrease disparities that lead to disproportionate mortality rates for Black and Hispanic women.

Second, in September, we released the findings of our inaugural Hologic Global Women's Health Index. As leaders in diagnostics, we understand the importance of data, and know that what we can measure, we can improve. We also know that women's health has been overlooked for centuries. That's why we created the Index, the first to statistically represent the health of 2.5 billion women and girls worldwide. Developed in partnership with Gallup, the Hologic Global Women's Health Index is an unprecedented, in-depth examination of critical markers for women's health, by country and territory, and over time. Notably, 60% of those surveyed, equating to about 1.5 billion women and girls, had not been tested in the last year for four common diseases that affect women's health cancer, diabetes, high blood pressure and sexually transmitted infections. As we share this kind of data with international leaders and health organizations, our goal is to provide an actionable, science-backed data roadmap for improving life expectancy and quality of life for women around the world.

While we have made a tremendous impact around the world with our innovative products, the Hologic Global Women's Health Index may ultimately prove to be our most important accomplishment for women's health. We hope that sharing a little about these initiatives is helpful to all our investors, but especially those who are focused on ESG issues. We also are pleased to share that we recently received some recognition for our efforts, as Investor's Business Daily just named us one of their top 100 ESG stocks.

Before I turn the call over to Karleen, let me wrap up by saying that based on the stabilization, growth, and diversification of our core businesses, we expect to grow revenue at least in line with our 5% to 7% long-term guidance in 2022. And on top of this, we have the potential for significant financial upside based on our sales of COVID tests. To state the obvious, our success in 2021 and our optimism for 2022 would not be possible without our 6,000 plus employees. I am incredibly proud of them for their continued dedication and resilience. In a year marked by day-to-day, hour-by-hour management of highly variable pandemic demands, Hologic continues to make an enormous impact on humanity.

As I visit Hologic sites and talk to employees, the sense of pride, morale and engagement is palpable. The belief in our mission to enable healthier lives everywhere, every day is real. I personally have never been more proud or excited for our organization. As a reflection of our Global Leadership Team's gratitude, in the fourth quarter we provided all our employees a special, one-time cash bonus regardless of function and level. In an environment where finding and developing talent is increasingly challenging, we've strengthened our talent across all levels of the organization with individuals who embody our Purpose, Passion and Promise. To all of you around the world, thank you.

Now let me hand our call over to Karleen.

Karleen Oberton -- Chief Financial Officer

Thank you Steve, and good afternoon everyone. We are very pleased to share fourth quarter results that significantly exceeded our guidance. In our last earnings call, we said that while we were forecasting conservatively, we were well prepared to generate upside if COVID testing demand increased due to the Delta variant. And that's exactly what happened. Increased COVID test sales in the fourth quarter more than compensated for macro headwinds that have affected many medtech companies recently. Our fourth quarter performance demonstrates that we are in a strong position regardless of how COVID evolves. We benefit from our invaluable testing contributions if the pandemic drags on, or from a strong base business when it wanes.

In the fourth quarter, revenue and EPS were down compared to the prior year, when COVID-19 testing volumes were near their peak. Total revenue of $1.32 billion declined almost 3%, and 6% organically. But these figures mask the solid recovery of our base businesses. As Steve said, if you back out COVID assay revenue, as well as collection kits, instruments and ancillaries that are shared by our COVID and other tests, revenue grew by 12% organically. This growth, which compares favorably to the 5% to 7% long-term guidance we provided last quarter, was driven by resilience across all our divisions, despite utilization pressure from the Delta variant and customer staffing shortages.

EPS of $1.61 in the fourth quarter was down 22% compared to the prior year, as expected. But earnings exceeded the midpoint of our guidance by about 68%. Underlying this, our cash flow conversion remains tremendous, allowing us to continue pursuing tuck-in M&A and share repurchase, which I'll touch on in a moment.

Before I do that, let me provide some detail on our divisional revenue results. To provide a more complete picture of our performance, I will at times compare our results to both 2020 and 2019, as well as exclude the impact of COVID-19 where applicable.

In Diagnostics, global revenue of $836.8 million, declined 11.5% compared to the prior year. However, excluding COVID assay sales and related items, worldwide Diagnostics revenue increased 5%. Although COVID testing revenue declined compared to the prior year, it still far exceeded our expectations, as the Delta variant surged throughout the quarter. In Q4 2021, we shipped about 21 million COVID tests to customers, generating assay revenue of $443 million globally. Demand in the United States was robust and represented about two-thirds of total COVID assay revenue. This dynamic highlights the breadth of our Panther installed base, our commitment to respond to customer needs, and our flexibility to capture testing demand wherever and whenever it occurs.

To better understand the underlying performance of our non-COVID molecular business, I will again exclude COVID assay sales and related ancillary items. If we do this, we see that base molecular revenue grew about 6.5% organically in the fourth quarter. Compared to the same quarter of 2019, molecular grew about 10%. Rounding out Diagnostics, cytology and perinatal grew 3% compared to the prior year. But compared to 2019, these businesses were still down low-single digits, as well woman visits have not yet fully recovered from the pandemic.

In Breast Health, global revenue of $334.2 million grew 15%, as the business rebounded from a weak prior year period and showcased its increasing diversity in the face of the latest Delta surge. Both breast imaging and interventional business increased, with imaging growing 12% and interventional up 27%. Furthermore, our strategy to increase recurring revenue continues to pay off, as global service revenue was approximately 40% of the division's total in the quarter, nearly twice as large as global gantry sales.

In Surgical, fourth quarter revenue of $122 million grew 21%. This strong performance was driven by MyoSure, which had another impressive quarter, growing in the mid-teens. While surgical procedures were depressed in August and September, the impact was far less than what we experienced at the beginning of the pandemic. In fact, compared to 2019 levels, Surgical was up mid-single digits. Further, we continue to add products to the bag of our best-in-class sales force. The acquisition of Acessa and agreement to acquire Bolder set us up nicely for fiscal 2022 and beyond.

Lastly, in our small Skeletal business, revenue of $23.6 million increased 26% compared to the prior year period, and mid-single-digits compared to 2019.

Now let's move on to the rest of the P&L for the fourth quarter. Gross margin of 69.4% exceeded our forecast, driven by higher-than-expected COVID-19 testing volumes in the period. Compared to the prior year, gross margin declined 480 basis points. Total operating expenses of $353.2 million increased 28% in the fourth quarter, but recent acquisitions contributed about a third of this increase. In addition, we deliberately reinvested for future growth with incremental spending in R&D and marketing, spent $9 million on the one-time employee bonus that Steve mentioned, and made a $10 million donation to our charitable fund in the quarter. Finally, our non-GAAP tax rate in the quarter was 21.5%, consistent with prior periods. Putting all this together, operating margin declined 1,120 basis points versus the prior year period, but came in above our forecast at a very healthy 42.5%. Net margin also declined 880 basis points, but was a very strong 31.6%. Non-GAAP net income finished at $415.7 million, and non-GAAP earnings per share were $1.61, far above the top end of our forecast.

Before we cover our 2022 guidance, I'll touch on a few other financial metrics. Cash flow from operations was $465 million in the fourth quarter. This completed our best ever cash flow year, as we generated more than $2.3 billion of operating cash in 2021. These strong cash flows continue to give us tremendous financial and strategic flexibility. For example, in the fourth quarter we agreed to acquire Bolder Surgical for $160 million. And although we did not repurchase any shares in our fourth quarter, we have bought back more than a million shares so far in the first quarter of 2022.

Finally, I should mention that we recently refinanced our Credit Agreement. This further strengthened our balance sheet and financial flexibility by extending the maturity date to 2026, increasing our revolver's borrowing capacity to $2 billion, and lowering our borrowing costs. Based on our strong operational performance, we had $1.17 billion of cash on our balance sheet at the end of the fourth quarter, and our leverage ratio was 0.6 times. We intend to continue using our cash on division-led, tuck-in acquisitions and share repurchases that improve our top and bottom line growth rates. Finally, ROIC was 32.6% on a trailing 12-month basis, a significant increase of 1,410 basis points.

Before we open the call for questions, let me discuss our financial expectations for the first quarter and full-year of fiscal 2022. Although the pandemic remains highly unpredictable, and we are not immune from the supply chain challenges you've been hearing about, we believe we have good visibility into the recovery of our base businesses, as well as a valuable hedge to COVID-19 outbreaks with our testing revenue. In the first quarter of fiscal 2022, we expect strong financial results again, with total revenue in the range of $1.1 billion to $1.15 billion. For all of fiscal 2022, we expect total revenue in the range of $3.75 billion to $4.00 billion, significantly exceeding our pre-pandemic sales. To help with your constant currency modeling, we are assuming foreign exchange headwinds of approximately $2 million in the first quarter of 2022 and $25 million for the full year.

In terms of our divisions, we expect Breast and Skeletal Health, Surgical and core Diagnostics, excluding COVID effects, to grow in line with the 5% to 7% guidance we provided last quarter. In Diagnostics, molecular should continue to lead the way, based on our larger Panther installed base, uptake of new assays like our vaginosis panel, international expansion opportunities, as well as the recent change in chlamydia gonorrhea screening guidelines that supports opt-out testing. In Breast Health, we have quietly been adding multiple growth drivers through acquisitions in breast conserving surgery, ultrasound and specimen radiography, as well as internal development of software and hardware upgrades. Further, we have significant opportunities to expand our 3D installed base and service business internationally.

Finally, in Surgical, we expect MyoSure to continue to drive growth, but to get help from a broadening portfolio of products such as Fluent and Acessa's ProVu. Bolder is not included in our guidance because the deal has not yet closed.

In terms of COVID assay sales, let me remind you that in the last 12 months, we have seen testing demand increase rapidly, then decline rapidly, then increase rapidly again. Said another way, demand remains unpredictable, and a lot can change between now and the end of our fiscal '22. So we continue to forecast conservatively, and view COVID as upside to our strong base business. But we will act aggressively to meet testing demand when and where it arises. With this perspective, we expect COVID assay sales to be at least $200 million in the first quarter of 2022, and at least $300 million for the full year. COVID-related items in Diagnostics are expected to be approximately $45 million in the first quarter, and at least $120 million for the full year. Finally, COVID has given us the opportunity to discontinue certain older products in our Diagnostics franchise. We expect a headwind of about $11 million from rationalizing these products in 2022.

Let me remind you that our organic guidance backs out acquired revenue until the first full quarter after the deals annualize, as well as revenue from our divested blood screening business. We expect blood screening revenue of $5 million to $6 million in Q1, and $20 million to $25 million for the full year. In total, we are backing out roughly $100 million of inorganic revenue for the year, which means that we expect organic revenue to decline 34% to 30% in fiscal '22, based on lower sales of COVID tests. However, to appreciate the underlying growth in our base women's health franchises, it's important to back out of organic revenue COVID assay sales, related ancillary items, and the small amount of SKU rationalization that I mentioned. On this measure, we expect revenue in 2022 to be at least in line with the 5% to 7% long-term guidance that we provided last quarter.

Moving down the P&L, for the full year we forecast our gross margin percentage between 63% and 65%, and our operating margin percentage to be in the low- to mid-30s. We expect both percentages to decline sequentially throughout the year, since the vast majority of COVID testing revenue will likely be recorded in the first half of 2022. In addition, we have incorporated some inflationary pressure in our supply chain into our guidance. Despite this, for the full year both gross and operating margins should be better than before the pandemic.

In terms of operating expenses, we expect spending to be flat to down slightly versus elevated levels in 2021, even as we absorb cost increases and continue to invest proactively in our acquisitions and base business to drive future growth. Below operating income, we expect other expenses, net, to be a little less than $25 million a quarter. Our guidance is based on a tax rate of 21.5%, and diluted shares outstanding of around 260 million for the full year. All this nets out to expected EPS of $1.15 to $1.25 in the first quarter and $3.55 to $3.85 for the year.

As you update your forecasts, let me remind you that macro uncertainty due to the pandemic is still high. We would therefore encourage you to model at the middle of our ranges, which incorporate both potential upsides and downsides.

Let me wrap up by saying that Hologic posted a strong end to our fiscal 2021, with results in our fourth quarter that far exceeded expectations and guidance. With organic investments and multiple acquisitions, we are emerging from the pandemic as a stronger company with core top line growth rates of 5% to 7% and potential upside from COVID.

With that, I will ask the operator to open the call for questions. Please limit your questions to one plus a related follow-up, then return to the queue. Operator, we are ready for the first question.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. And we will take our first question from Brian Weinstein with William Blair.

Brian Weinstein -- William Blair -- Analyst

Thanks for taking the question. And not usually believe in public accolades for management team members on these calls, I don't think I've done this very often, but just wanted to thank Mike for his work and his friendship over the last 14 or so years that we worked together going back to Genpro, lots of history there, enjoy your retirement, you've certainly earned it.

Yeah, Chris. So just to think about 2022 for a second and then I also want to ask a bigger macro question but on 2022, Karleen for you, just want to understand the core operating margin. I wasn't sure if you mentioned it right there at the end, I might have missed it, but if we were to sort of back out COVID-19 from both, let's say '21 and '22. How is the core operating margin expanding and what does that look like relative to pre-pandemic? Because it looks like on [Indecipherable] operating margin may actually be coming down on the core a little bit and I wasn't sure if that was acquisitions or others. So can you just address kind of the trend in the quarter?

Karleen Oberton -- Chief Financial Officer

Yeah. So certainly acquisitions are dilutive. I think we've talked about at least $0.10 in 2022. I think when we look at the core, we would expect that the operating margin would be at or slightly above where we at prior to the pandemic. I think we've referenced that 31.5% right at Q2 '20 as what to think about on the base business, but certainly as we move forward. The acquisitions are dilutive and while we're really pleased about the international growth that is also dilutive to the operating margin profile. But certainly our job is to continue to look for opportunities to drive efficiencies.

Brian Weinstein -- William Blair -- Analyst

Then in the inflationary pressures, they are being offset or are those flowing through as well?

Karleen Oberton -- Chief Financial Officer

To some extent it is offset, but some is dropping to the bottom line as well. As we always have initiatives to improve cost, but certainly those initiatives aren't at the pace of these headwinds that we're experiencing.

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Right. And other piece to keep in mind is what we kind of called out as well which additional charitable contributions, extra employee bonuses, it was our -- as you can tell it was our fiscal year-end. It was a tremendous year dropping an extra penny or two to Wall Street at this point on 841 [Phonetic] number was probably not our top priority versus investing for the future. When you look in total, our R&D spending up significantly over 20% for the year, we really used to make additional investments for the future.

Operator

And our next question will come from Vijay Kumar with Evercore ISI.

Vijay Kumar -- Evercore ISI -- Analyst

Hey guys, thanks for taking my question. And Steve, maybe on one on the Q and one on the guidance. Maybe I'll start with the Q, Breast Health, can you just talk about the capex environment, it looks like imaging was down Q-on-Q. I'm just curious if there was anything in the Q, whether it was the pandemic impact that had some disruption?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Overall, we feel really good. There were clearly some impacts on installations here and there. As hospitals hunkered back down a little bit in that August-September period. We continue to feel good about the backlog and feel good about the overall trends within that Breast Health business.

Vijay Kumar -- Evercore ISI -- Analyst

Understood. One on the fiscal '22 guidance. So underlying base is expected to grow 5% to 7%, want to make sure I have these numbers correct. The total COVID contribution for the year, I think the guidance is contemplating about 420 including 300 of testing and 120 of others, did I get those numbers right? And Bolder, I'm curious what the contribution from Bolder versus what their revenue run rate is in [Indecipherable]?

Karleen Oberton -- Chief Financial Officer

Yes, so you have the 420 is correct, Vijay. There is no contribution from Boulder in the guidance, as the deal hasn't closed.

Operator

And our next question will come from Tycho Peterson with J.P. Morgan.

Tycho Peterson -- J.P. Morgan -- Analyst

Hey, thanks. First question, I'll stick with the guidance theme. As we think about Panther placement, do you think about being back to kind of pre-pandemic levels, call it 190 to 200 systems next year and then any rough guidance you can give us on pull through versus the historical 240,000?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Sure, Tycho. I think we continue to feel really good that we will not see a drop off relative to historical placements on Panthers. And if anything, we'll probably do a little bit better than the number you mentioned. And therefore, probably a little bit better than even we've been doing the previous year's going into it. As global demand continues to be great. The average dollars per Panther it's all over the place, right now, because obviously we have COVID running for a bunch of them, I think the logical expectation is we probably be a little bit lower than that 240 number given the incredible number we've placed also a huge amount of them are outside, if you basically look at it on a base business basis. I think what, with COVID those number is going to continue to be good, but it's hard to predict for the full year obviously given where COVID will go, but I think what we love is they are out there, they're placed, we probably take a slight short term dip on revenue per Panther in the short term while that continues to go up as they port our base assays on to those Panthers. So I do think as you're getting to the overall number of Panthers, we have placed has got to bode very well. And the other reality is we're all seeing about labor constraints, do not underestimate again, I know you know Tyco, but the fact that Panther is such an automated system and now there is ongoing questions OK what's going to happen with all these Panthers once COVID runs down. Most of our customers are dying to get our base business onto these and for those labor savings opportunities.

Tycho Peterson -- J.P. Morgan -- Analyst

Okay. And then a follow-up on China, there's kind of two dynamics in the market there, there is China 2025 encouraging local competition and then there is kind of the near-term dynamic around volume based tenders. Can you maybe just touch on either both of those and whether you're seeing any impact?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, I hate to say, but I think we're little fortunate in that we're pretty small in China and therefore are not seeing big impact in the volume based tenders, probably not coming quite after our categories at this stage in time, but I would tell you, truthfully, it's a time I'm glad we're smaller there. We see opportunities to grow there, but we probably have more upside than downside. As we look at that part of the world.

Operator

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

Jack Meehan -- Nephron Research -- Analyst

Thank you. Good afternoon. Wanted to continue on with Panther, it look like just based on the disclosures, most of the incremental Panthers in the quarter were placed internationally. Then just looking at some of Karleen's commentary around US versus international mix of the COVID sales. Most of the incremental sales actually came in the US, which kind of makes sense. I guess, because of delta. But I was just curious maybe more broadly, you got thoughts around international adoption of these Panthers, how much is getting used now for COVID and versus broadening the footprint for other things internationally sure?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Sure. I think a lot of it in the near term has still been COVID and even there are a lot of, a lot of hospitals and a lot of labs that even as they saw us starting to see some declines pre Delta, they were starting to ramp up our base assays and then decided we better stay lose and so I would tell you there's probably some Panther being a little bit underutilized right now internationally, because they don't want to start to ramp them up with our tests and then have to stop. So we feel great about that as basically on deck and ready to go as soon as they have the ability, it is one reason why the Panther placements internationally have continued to be very strong because they've gotten the exposure and they want to build up with our tests. So I think feeling great, but there has been -- we've even had a number of customers in the United States as well that we're just starting in kind of July to start to ramp down the COVID, ramp up our women's health stuff and then all of a sudden said time out. We want to keep this capacity for right now on COVID.

Jack Meehan -- Nephron Research -- Analyst

That makes sense. Then on the Breast Health and GYN Surgical businesses. They both came in a little below, I was expecting. Was curious you call out what impact you think Delta might have had on the results in the quarter. And as you were thinking about the 2022 guidance, you just -- do you assume that was the base line just when you're thinking about the 5% to 7% to grow off?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, we did kind of view that in the baseline. They were a touch soggy, obviously, as we saw the August especially September, they had a little bit of an impact. Again, I think there has been way too much overall focus on the short-term ups and downs of COVID and what it does to the base. But I think overall, we feel very, very good about that core and about where we're headed as we come into 2022 on both of those businesses. And as Karleen had both mentioned those business are more diversified than ever, both product wise as well as geography wise. And I think that sets us up well here for 2022 and for the longer term.

Operator

Next, we'll take a question from Anthony Petrone with Jefferies.

Anthony Petrone -- Jefferies & Company, Inc. -- Analyst

Hi, thanks. I want to congratulate the team on a strong execution for the whole year and congratulations as well as Mike Watts on your retirement, good luck on the next phase of the transition.

A couple of questions, one on actually the acquisitions, the $34 million of total deal contribution. How much of that was actually Mobidiag and when we think about our quarterly run rate, I think the timing on Mobidiag was not a full quarter. So should we be expecting a number, perhaps in the $40 million to $45 million range for total quarterly contribution from recently closed deals? And then I have one quick follow-up on COVID testing.

Karleen Oberton -- Chief Financial Officer

Yes. So Mobidiag was roughly $7 million in the quarter. And so I think as we looked at 2022, I think we talked about $150 million plus from all the acquisitions and about half of that is organic.

Anthony Petrone -- Jefferies & Company, Inc. -- Analyst

Okay, great. And then just on the newly placed Panthers throughout the pandemic, I mean how many of those systems are actually only doing COVID testing exclusively and at what point do you think they will transition to just broader diagnostic contracts? Thanks again.

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Thank you, Anthony. The reality is we don't exactly know and track at that level of the Panthers. But what we do know is they've clearly been running, in many cases, not quite flat out, but close to it during the pandemic, that all of which creates the opportunity as COVID ramps down for us to really shift over our base business. And I think that's what makes us so excited about the future diagnostics. We had good growth rates going in, particularly internationally, you've been seeing we had double-digit almost 20% growth in our molecular diagnostics business for the last few years and numbers of quarters as we come out of the pandemic or even as things slow down to a more manageable level, which looks to be hopefully on the horizon here that creates meaningful opportunity for more and more of our base businesses to really get ramped up there.

Operator

And Derik de Bruin with Bank of America has our next question.

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Hi, good afternoon. And Mike happy trails, it's been a pleasure. So just on -- just once again another Panther question, but how much is greenfield versus people just adding on additional molecular testing capabilities versus replacements of -- or swap outs from competitors?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Two customers, completely new customers?

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Completely new customers to -- Yeah, I mean I completely new customers to testing that you've not been in the lab before versus people who have been doing molecular testing or adding systems or ones where you're just being out some competitor that's installed?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, the vast, vast majority Derik are customers that we've already been doing business with, when you consider just our market shares, as you will know in women's health, we're pretty much in most customers. There are very few customers certainly in the United States that we're not in. So it's really expanding their capacities. Few more greenfield outside the United States, which is new customers coming online, but some that we were already prospecting, but the vast, vast majority across the board really is our core business. Mike, you wanted to add something?

Michael Watts -- Vice President, Investor Relations and Corporate Communications

Hey, Derik. The only thing I might add is we are seeing a lot of customers add on new assays, of course, right, so I think new customers for our say women's health panel today, call it [Indecipherable], but we're seeing a lot of excitement in particular around our vaginosis panel, which we highlighted in the script, as well as Mgen. So that's an existing customer, but they are bringing on a new assay or assays.

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Got it. And then just one follow-up on what are you assuming for breast imaging growth in '22? And on the services component at 40% is there additional upside to that number?

Karleen Oberton -- Chief Financial Officer

Yeah, I mean I think the, if you think about that services tied to our installed base in that as we even place new gantries now sometimes they replacements, they kind of come off of service for year they have warranty. So I would expect that the service would probably be a lower end of growth and when I think about that division. But certainly, as I said in prepared remarks the overall division should be in that 5% to 7%.

Operator

Next, we'll take a question from Mike Matson with Needham and Company.

Mike Matson -- Needham -- Analyst

Hi, thanks for taking my question. I guess I wanted to ask one about the COVID flu combined tests that you've launched. So, do you see a scenario where if COVID maybe we don't have another big wave, but we have a couple of worst flu season that you could stop seeing kind of a benefit from that, to that combined tests?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, Mike. We're prepared, and when we said we would launch we've had it cleared now and it's ready to go for customers. We're still basically hearing for most of our customers. They want the straight COVID test. As the months evolve here, do we start to get a bigger spike in that the flu season. Clearly, I do think that we believe as you go forward this year. And let's face it, probably even next year, most people that are going to get tested for flu are probably going to end up getting tested for COVID as well. So we will see how it plays out. We're assuming relatively small volumes as it relates to our multiplex test at this point in time until it starts to materialize.

Mike Matson -- Needham -- Analyst

Okay, thanks. That's helpful. And then I just wanted to ask about the Breast Health [Indecipherable], can you just maybe give us an update on where things stand with 3D penetration and because from what I remember there was a much bigger opportunity there to upgrade customers to 3D and some of the other newer software and things that you offer, or introduce sorry?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yes, 3D is still very low penetration rates in much of the international markets. And frankly, it's something that we hope the Hologic Global Women's Health Index will actually be able to start to highlight a little bit more which is many countries outside the US are still only reserving 3D more for diagnostic mammograms as opposed to screening and frankly many still don't have great screening programs in general. So we are able, ultimately through the Global Womens Health Index I think to start to have more discussions about better screening programs about the need for 3D and the fact the 3D, in many cases is economically advantageous over the longer term. Particularly in single payer systems where the ability to detect earlier treat earlier, avoiding all the false positives, the false call -- the unneeded callbacks and all of that. So I think we remain very bullish over the longer term. It continues to be something that is going to play out over years not quarters.

Operator

Next, we'll take a question from Tejas Savant with Morgan Stanley.

Tejas Savant -- Morgan Stanley -- Analyst

Hey guys, good evening. Just a two part and COVID to start with. And can you give us a sense of the impact on how we should think about pricing from the combo test launch and the OUS mix here, it seems to have dipped sequentially in favor of the states and what that means for margins?

Karleen Oberton -- Chief Financial Officer

Yes, certainly from Q3 to Q4 with the Delta variant we saw an uptick in US testing, about two-thirds were from the US versus last quarter it was two-thirds OUS. So obviously that's a little bit more favorable on pricing. So a little more benefit on the margin profile. And then, what was the other part of the question.

Tejas Savant -- Morgan Stanley -- Analyst

It was on the combo test and yeah.

Karleen Oberton -- Chief Financial Officer

So certainly that pricing would be favorable from this -- the single test, but we've to Steve's comments really haven't assumed much related to that at this point given it seems like customer still just want COVID only.

Tejas Savant -- Morgan Stanley -- Analyst

Got it. And then just a couple of quick ones on the recent deals. On Mobidiag, I mean given the broader launch in Europe for Novodiag. Steve, how are you thinking about that installed base of 200 units expanding over the next 12 months or so? And then on Bolder, I think you called out sort of five times higher lab procedures versus the pediatric setting. So, over what timeframe do you think you can capture that opportunity?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Sure. I think we're probably not ready to give exact numbers on Novo, but the initial sales off to a good start and we are just loving that acquisition. So far, as it relates to Bolder, I think that be a multi -- clearly a multi-year journey to build up the market of that size, but I think the magic for us with both the Acessa and Boulder is as you know we've long targeted surgical as an opportunity to put more into those sales forces bags and I'm really proud of the team Sean Daugherty and then Essex more recently running that division, finally starting to make good deals happen for that business and the sales forces are excited. I think it will create at a great runway for years to come here in the surgical business.

Operator

And our next question will come from Patrick Donnelly with Citi.

Patrick Donnelly -- Citi -- Analyst

Great, thanks for taking the question guys. Steve, maybe just on kind of some of the macro uncertainty you talked about, can you just talk about the different businesses. I know you guys have kind of that internal red light, green light for each segment, each region. Any segments that are maybe coming back a little slower than you expected certainly sounds like you're pretty confident on Breast, but just wanted to talk through the different segment recovery timelines and how you thought about those going into '22?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, I think the magic, Patrick for the first time that I've been with the company, as we look at all three franchises and we look, both domestically and international. So if you just play that out in six buckets or nine if you count US international and then worldwide. They're all looking good in that 5% to 7% range and there is not any major hiccups that are out there. So I think we feel really, really as good across the board, there will always be a country here or there, a little business and those kinds of things. But overall, it's probably been a solid across the board as we've seen. I think that's part of what really gave us the confidence frankly on the last call to put out the 5% to 7% guidance because there always been -- there were always little more red lurking on the horizon there and it wasn't as green across the board as it looks now.

Patrick Donnelly -- Citi -- Analyst

That's encouraging to hear. And then maybe just on the cash flow you talked about over $2 billion of the year, another nice quarter here [Speech Overlap] and obviously, nice to see you guys buy back a million shares already this quarter. How should we think about your M&A appetite? Obviously, you've done a bunch of smaller deals, relatively small, but how should we think about your appetite there continue with these bolt-ons any appetite for anything larger, just want to talk through that?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, the appetite is -- the appetite and the ability are certainly there financially as we look to continue doing tuck-ins. Just because we're generating a bunch of cash, doesn't mean OK, we're going to start to go bigger, bigger. I'd say the bigger -- the bigger things we're also thinking about right now is we're digesting a lot. So there is also the organizational bandwidth and right now our international teams are incredibly busy. Kevin's Diagnostics team and frankly the surgical teams are all very, very deep into a lot of integration activities. So the other factor that would be in our minds is ease of integrations [Phonetic]. So if anything, probably a slower pace this year than last year as we really make sure that we optimize what we did last year. And as Karleen has mentioned we're comfortable continuing to build a little cash here, we're not just go out and spend it, because we had it. Karleen, do you want to build on that?

Karleen Oberton -- Chief Financial Officer

Yes, certainly. I mean, Patrick. We're going to maintain our discipline as it relates to M&A and make sure that we certainly want to do well on the deals that we've executed so far that will be a little bit more flex and the focus, but certainly the division still have their BD teams out there, identifying assets and if we find the right opportunity, we'll execute on it.

Operator

And our next question will come from Max Masucci with Cowen and Company.

Max Masucci -- Cowen and Company -- Analyst

Hi, thanks for taking the questions. I want to extend the congratulations to Mike.

So on Boulder Surgical, estimated $10 million in calendar '21 revenues around 2% to 3% of the annualized surgical revenues in fiscal Q4, so I know it's a small product line today, but given the multiple on the deal. I'd imagine that the growth is already solid with the potential to accelerate as it's cross-sold into the OB/GYN channel. So with that in mind, is there any way to think about how quickly Boulder's products could penetrate the OB/GYN channel or what percentage of your existing OB/GYN customers would be adopters?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

We'll probably give more of that once we close the deal. We're still obviously in the midst of -- we will probably close it the end of the calendar year and probably be in a better position Max honestly to answer it next quarter, but clearly it is growing pretty nicely. They've gotten some nice products approved over the course of the last 12 months and will be very helpful in terms of the uptick, but it is -- it's a new sale is going to take a couple of oftentimes one or two visits and still frankly in some of these COVID constrained world, we want to manage our expectations upfront, but feel really good about the opportunity.

Max Masucci -- Cowen and Company -- Analyst

Makes sense. Appreciate the color on Mobidiag. If we just think about the initial pandemic disruption serving as an accelerant for Panther placements globally, are there any parallels to be drawn between what you can see for Novodiag and the decentralized setting in Europe following the launch in early October? And then, just curious, the role of the [Indecipherable] instrument in the context of also having Panther?

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Yeah, I think Novodiag and the launch going on there, I think that's going to be the big opportunity for us, as we go into the smaller labs a broader menu and already feeling really good obviously it's CE marked at this point, it's still a few years away in the United States, but feeling really good to be a nice opportunity to really drive the international business in the nearer term on that and then ultimately a big play in the US over time.

Michael Watts -- Vice President, Investor Relations and Corporate Communications

Operator, I think we have time for one more question.

Operator

Thank you. That final question will come from Ryan Zimmerman with BTIG.

Ryan Zimmerman -- BTIG -- AnalystA

Thanks for squeezing me in on the end here. I'll just keep it to one. And so it's for Karleen, you know given the COVID assay sales guidance $200 million in the first quarter, $300 million for the year. Let's assume if that's kind of how it goes, right now, I understand that that's a very conservative estimate, but it would suggest somewhat of a drop off in gross margins quite rapidly, Karleen and so one, following the first quarter I mean, and one is that the right way to think about it? But then two, how should we be thinking about the gross margin profile kind of net the assay contribution from COVID when we think about kind of a post-COVID Hologic? Thanks for taking the questions.

Karleen Oberton -- Chief Financial Officer

Yeah. So certainly, I think we said in our prepared remarks that we would expect margins to come down sequentially throughout the year as the COVID -- at this point is heavily weighted to the first half of the year. As I look at where we exit the year in 2022, the margins are in that low 60s and the gross margin in low 30's and the operating margin as we had indicated. And that assumes a pretty, pretty low COVID contribution as we exit the year as we planned for right now.

Ryan Zimmerman -- BTIG -- AnalystA

Okay. All right, thank you. Appreciate taking the good questions. Mike, adios, thank you.

Michael Watts -- Vice President, Investor Relations and Corporate Communications

Thank you, sir. Thanks, everybody.

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Thank you.

Operator

[Operator Closing Remarks]

Duration: 62 minutes

Call participants:

Michael Watts -- Vice President, Investor Relations and Corporate Communications

Stephen P. MacMillan -- Chairman, President and Chief Executive Officer

Karleen Oberton -- Chief Financial Officer

Brian Weinstein -- William Blair -- Analyst

Vijay Kumar -- Evercore ISI -- Analyst

Tycho Peterson -- J.P. Morgan -- Analyst

Jack Meehan -- Nephron Research -- Analyst

Anthony Petrone -- Jefferies & Company, Inc. -- Analyst

Derik de Bruin -- Bank of America Merrill Lynch -- Analyst

Mike Matson -- Needham -- Analyst

Tejas Savant -- Morgan Stanley -- Analyst

Patrick Donnelly -- Citi -- Analyst

Max Masucci -- Cowen and Company -- Analyst

Ryan Zimmerman -- BTIG -- AnalystA

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