Good afternoon and welcome to the Hologic Incorporated Third Quarter Fiscal 2016 Earnings Conference Call. My name is Matt, and I am your operator for today's call. Today's 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. Michael J. Watts - Vice President, Investor Relations & Corporate Communications: Thank you, Matt. Good afternoon and thanks for joining us for Hologic's third quarter fiscal 2016 earnings call. With me today are Steve MacMillan, the company's Chairman, President and Chief Executive Officer, as well as Bob McMahon, our Chief Financial Officer. Steve and Bob both have some prepared remarks today, then we'll have a question-and-answer session. Our third 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. Finally, a replay of this call will be archived on our website through August 26. Before we begin, I'd like to inform you that certain statements we make during this call will be forward-looking. These statements involve known as well as 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 that's 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. Now, I'd like to turn the call over to Steve MacMillan, Hologic's CEO. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Thank you, Mike, and good afternoon, everyone. We're pleased to discuss Hologic's financial results for the third…

Thank you, Steve, and good afternoon, everyone. I am going to walk through the rest of our third quarter income statement, highlight a few balance sheet and cash flow items, and then wrap up with updated financial guidance for 2016. As a reminder, I will focus on non-GAAP results and percentage changes will be on a year-over-year basis unless otherwise noted. As Steve discussed, our revenue performance in the third quarter exceeded expectations, highlighted by global growth in all four business segments. This growth, coupled with favorable product mix and productivity gains, again drove improvements in gross and operating margins. At the same time, we continued to invest in initiatives that position us for long-term, sustainable growth. Net-net, we delivered EPS growth well in excess of sales, reflecting the impact of operational improvements, capital deployment and a lower effective tax rate. Now let's dive deeper into the third quarter income statement. Gross margin of 65.7% increased 50 basis points, and benefited from the growth of our Surgical, cytology and perinatal, and Aptima franchises. We continue to manage pricing well, as we focus on commercial excellence and our marketing initiatives highlight the clinical and economic value of our products. In addition, our operations teams continue to drive efficiencies and reduce costs across our supply chain. Total operating expenses of $229.2 million increased 3.1% in the third quarter. This increase was driven primarily by sales and marketing expense, which increased 15.5%. Given our gross margin expansion, we have invested deliberately and opportunistically in commercial areas where we see a good return. These include our Genius marketing campaign in Breast Health, our cervical cancer co-testing initiatives in Diagnostics, and efforts to gain competitive market share with NovaSure. These strategic initiatives are paying off through increased brand awareness, market share gains, and price stability,…

Thank you. And we'll move to our first question, which is from Jonathan Groberg with UBS.

Thanks a million and congratulations on another solid quarter and raise. Can you maybe talk a little bit, Steve, about international and Diagnostics. I think, you said that was up 20% currency neutral, record Panther placements. Was there anything beyond new management, better execution, that benefit from the Zika that you mentioned. I'm just kind of curious if there was any – if you can – any other color you can provide on that? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yeah, Jon. Thank you. It's really, to be very clear it is the new management that we put in place. We actually hired a new leader for our European Diagnostics business, really just about a year ago, last summer and he has been revamping the team getting up to speed. And then, we did launch, we got the clearance if you recall early this year – really early this calendar year to the viral loads. We got the HCV, HPV and HIV. So they're rolling out in conjunction with the new leadership team and the Panther placements and those things are really driving it. Zika by the way is not in those numbers, so that's really just our core women's health assays plus the viral load. So I think what we are excited about as we started to look forward in Diagnostics. Molecular has effectively been non-existent outside the U.S., I mean, not non-existent but pretty small. And now, we're really getting that footprint and as we're placing these Panthers starting to feel like okay, this is the beginning of something that really is sustainable and has some good growth ahead of it. As well, the cytology business continues to tick along as well with some modest growth outside the U.S. also. So I think (33:07)

I was going to say – hey, Jonathan, this is Bob. Just to build on what Steve was saying. I mean, I think, really what we're seeing right now is a very competitive assay menu when we are going up against the competitive nature with the viral loads and the STD. And so I think, we've got as competitive of a menu as anyone else does. But I think what we have seen is a series of strong quarterly placements for the last several quarters and we are starting to get those back on. They are up and running in that test of record. And so I think, we are seeing that pull through and seeing the benefits of the Panther system, which we've seen here in the U.S. around benefits of automation and so forth, which I think will really play well, particularly in Europe.

I guess, if I can just follow up, the basis for my question is, is there anything that you can learn from kind of the new management and how long it took and what you are seeing that is it all applicable to what you may be able to achieve in Breast Health or are they just two different businesses? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: They are different businesses but there is a lot to learn. I think, Jonathan, probably the way to think about it is, as we started to describe, really about this time last year, we really are moving in – we are really a start-up company outside the U.S. franchise-by-franchise. I think, what we've seen, the new leader within the European Diagnostics business, he is bringing a level of focus, he is building out a team. There were some people there, he has changed some out, gotten the others to operate up, but he really is starting to build it up. And I think that's what Eric Compton has really been driving, especially this year is getting the right people in place for the longer-term. I'd give, just anecdotally, Bob and I happened to be in Japan last week and again, half of our employees in Japan have been with us less than a year. So it truly is – we look at a company of our size from the outside and think okay, they just have to get it going and turnaround what's there, this really is building it out. So I think, we've seen some emerging signs in Diagnostics over the last couple of quarters, didn't want to quite say yet until we thought okay, this is now sustainable. And I think we're in the same infrastructure building in Breast Health and other stuff. Breast Health because more dealers involved, will probably take a little bit longer. But I will tell you underneath the surface we're feeling very good where as I always say, the infrastructure gets better before the numbers show it, and I think that's kind of the stages that we're in right now.

Great. Thanks. Congratulations again. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Thanks, Jonathan.

We'll move now to Tycho Peterson with JPMorgan.

Hey, thanks. Steve, wondering if you could talk about the sustainability of GYN Surg. Obviously you've seen some good strength there, particular on NovaSure, are you able to disaggregate how much of that's coming from the Thermochoice recall and maybe picking up some share there? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Sure. Great question, Tycho. I think the way we should think about it right now is we're clearly benefiting and most of the NovaSure growth I think we should say is candidly coming from the competitive recall, of which we still have another, call like it quarter, quarter-and-a-half-ish ahead of us with that. Having said that, I'd remind everybody, as we said, this was our sixth straight quarter of double-digit growth both domestically and globally for our GYN Surg business. So that business had turned it around and strengthened dramatically and was then well poised when the competitive issue happened. So, we're taking advantage of it. MyoSure continues to grow. And I think the way we think about our GYN Surg business here is, we're not ready to declare it a sustainable double-digit grower, but it's clearly a very solid grower. And again, this is one where internationally we're just in a very early stages as well. So, again, it's moved from what I'd call an appendage on the company a couple years ago to something that can actually start to meaningfully contribute to our total growth. It's also hugely accretive to our gross margin, operating margin. It's a great cash generator. There's a lot of good things and it's helping on our tax rate, frankly.

Yeah. Hey, Tycho, this is Bob. Just to build on that, we actually referenced some of the exceeding expectations. We actually think that some of the share gains materialized a little earlier in the third quarter than what we were expecting in the fourth quarter really on the back of the work that the team has done there and the investments we've made in sales and marketing. So, that's some of the – we think that there still is legs there, as Steve said, but that ramp has actually happened nicely for us in the third quarter.

Okay, and then just a follow-up to the question earlier on Diagnostics, it's early days for viral load. I don't know if you can put any metrics around how that business has tracked relative to your expectations but can you also talk about whether that's a good proxy for when you ultimately do roll out in the U.S. and what's the latest thinking on timing. Could you have viral load here by the end of next year or is that more of a 2018 event? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Sure. It's still pretty small within Europe. It's not yet material to the company but I think the initial signs are pretty good. And what's I think very encouraging to us is in Europe, we're launching from a much weaker base than where we are when we bring the viral loads to the United States. So, when we bring the viral loads, which to the second part of your question is really in 2018, a fiscal 2018 and probably, really second halfish of 2018 by the time we have all three. So, we will have likely one much sooner but by the time we have HPV, HCV and HIV, it will be later on in 2018, and by that point we will be launching in the U.S. from our much bigger install base, much stronger position overall. So I think the fact we are able to even have some success in Europe in other people's backyards is already an increasingly, encouraging sign for it, when we do come to these States.

At this time, we will move to Bill Quirk with Piper Jaffray. William R. Quirk - Piper Jaffray & Co.: Great. Thanks. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Hi, Bill. William R. Quirk - Piper Jaffray & Co.: Good afternoon everyone. So, Steve, just start off on tomo here, I think your tomo was little more positive perhaps than last quarter and I am curious if we can dig into why? I mean, does this have anything to do with the competitive dynamic? I mean, it strikes me that, there is potentially an opportunity here over several years to take some incremental share from your two principal competitors in the mammography space domestically. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Sure, Bill. Probably, because I just met with our Breast Health sales leadership team earlier today but no, aside from that, we continue to feel very good about where that business is going. I think some of the comments – one of my comments on the last call might have been more misinterpreted. I think what we are really seeing fundamentally in the Breast Health business is our ability to take more market share than I ever would have imagined call it two years, two-and-a-half years ago. But I think the business is also very encouraging. It's going to be stronger for longer and while there has been so much obsession from the outside of what I call the peak followed by the cliff, we still see – we are still, as we said in the script, we are less than 40% even into our own install base. We are less than 25% even into the installed base in the market place. And as we are gaining market share it says there is…

At this time, we'll move to Doug Schenkel with Cowen. Doug Schenkel - Cowen & Co. LLC: Hey, good afternoon. Thanks for taking the questions, guys. Maybe first question for Steve, second question for Bob. Steve, in the third quarter there were a number of nice developments. Molecular is better than expected, particularly OUS, and Surgical growth was quite strong. You remain enthused about a firm in Brevera. Recognizing one quarter usually doesn't make a trend, would it be fair to say you feel a bit better about your ability to power through the impact of US 3D growth plateauing than you did maybe even a quarter ago? And then for Bob, you beat the midpoint of guidance by I think it is $17 million this quarter. You're increasing full-year guidance to midpoint by only $5 million. I was hoping you could provide a bridge between the quarter and the full-year guide. Thank you. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Great. Thanks, Doug. I would say I feel a little bit better. I think the truth is, I've always felt a lot better than I probably communicated on the last call. I truly believe it was a complete overreaction. And my strength does continue or my confidence continues to build as I watch each quarter play out. We were going up against a monster comp this quarter. And our team is still really, call it two years old or less for the most part, and wanting to make sure that we can deliver before we get out ahead of ourselves. So I think I feel a little bit better, but I think overall I feel very confident about where we're headed. I felt more confident than came off last time. So it's not a dramatic shift in how I feel, but it's clearly probably a dramatic shift in the perception and I own that, but feeling very good about a lot of things we've going on.

Yeah. Doug. Hey, this is Bob. Just to follow-up on the second part of your question. Yeah, as you mentioned, we did raise the guidance by $5 million at the midpoint versus the $17 million beat. If you recall our previous guidance included a fairly sharp sequential increase in Q4 revenue and some of that revenue as I mentioned actually earlier materialized a little earlier than expected places like our Surgical business. And then beyond that, we do see potential for incremental kind of sequential weakness within our blood screening businesses as that business continues to normalize from an inventory perspective. So that said, our fourth quarter guidance still implies solid year-over-year growth despite another challenging comparison and a headwind of about 60 basis points from those divested in discontinued products. So we feel good about the guidance and just as importantly, maybe more importantly, our EPS guidance is even stronger, multiple – a series of multiples above that for the fourth quarter growing at 14% to 16% on an as reported basis. Doug Schenkel - Cowen & Co. LLC: Okay, very helpful. Thank you. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Great. Thanks, Doug.

We'll move along to Jack Meehan with Barclays.

Hi. Thanks, and congrats on the quarter. I want to start with some of the commentary around the service contracts in Breast Health. And I think I caught this was the first quarter over $100 million. I know there is some moving parts around warranty and just how that's rolled through since you hit the inflection at this point last year in terms of the instruments replacements. Could you walk us through what you think the sustainable rate for that is and whether you're seeing better attachment with 3D placement?

Hey, Jack, this is Bob. I think from an attachment rate perspective, we continue to feel very good about our attachment rate. We haven't seen any incremental change either up or down and have continued to be very strong in excess of 85%. And so, I think that's a real testament to our sales teams and more importantly our service teams and the customer satisfaction that we have with our products. So, I don't see any change there and I think what you would expect to see is a continued – the nice part about that is it's a nice solid annuity in that probably mid-single digit growth rate area going forward. Some of this is we are actually transitioning from a 2D system to a 3D system where you'll get the incremental benefit associated with the higher service contract and then the beauty of actually the competitive share gains is you get the full benefit of the service contract on that. And we are seeing both of those as well. So, we think that that has a lot of legs, not only for the rest of this year but certainly into 2017 and beyond.

Great. That's helpful. And one on the early success with viral load in Europe. Just where you are seeing some wins – where do you think you're differentiated in the market? Could you just walk us through the value proposition for the Panther? Thanks. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yeah, I think it's the same benefits largely we have here which is workflow automation and the Panther system, the footprint is a very nice addition for Europe.

Yeah.

We'll take a question now from David Lewis with Morgan Stanley. David Ryan Lewis - Morgan Stanley & Co. LLC: Good afternoon. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Hey, David. David Ryan Lewis - Morgan Stanley & Co. LLC: Hey, Steve, I was hoping you could – it's hard to miss this qualitative commentary around stronger for longer. You just said it so much this call, I thought maybe you would make it the new Hologic tag line. But the reality is, I would like you to maybe take that qualitative commentary and I wonder if you could make it quantitative for us next year. I know it is too early to give guidance, but I think about the fourth quarter, there is stability. Your guidance for the fourth quarter suggests that stability continues. So, as you think about next year, low-single digits versus mid-single digit revenue growth for the business. Are you comfortable in more of a mid-single digit outlook? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Hey David. Based on the market reaction following our last call, I think we'll stick to giving the guidance in our fourth quarter call rather than commenting on a number before we formally approve the budget. Having said that, we do believe we'll have a solid year in 2017, and we'd clearly be disappointed with the low-single digit 3% number that was mentioned last time. So wherever – and I think the bigger point I was trying to make last time is – by the way wherever revenue guidance ends up, we believe we'll deliver EPS growth at a multiple of that. I think that was the broader point I was trying to make that how better we're feeling about the earnings growth, but do…

And I think, David, just to build on that, I mean, I think, what we feel, we are very comfortable is that we have plenty of capacity to be able to do things when we want to and we will look at many more than we will ever do, and we will be very disciplined in our approach to do deals. And so, I mean, just in this last quarter, free cash flow of $225 million gives us a lot of flexibility, and we continue to use all levers to continue to drive that higher. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: And we do, and David, I think you know from a couple of years back looking at it – and talk about our exec comp plan, we are very focused on ROIC, and given the history of this company and where we've been and that's still been part of a decision to say no to a few of the things we've been looking at. So, we'll continue to be very disciplined on that. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. I think investors will certainly appreciate that, Steve. And then, lastly, Bob, just looking at the fourth quarter guidance, as I mentioned the revenue trends look stable with the third quarter. Is there any reason why margins in the fourth quarter wouldn't show the kind of year-on-year improvement you've been showing through the prior three quarters? Just our back of the envelope math suggest the fourth quarter margin won't be as robust year-on-year relative to the prior three quarters? And I'll jump back in queue. Thanks, guys. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yes. Thanks. Just quickly, we talked about – we anticipate continued commercial investments that are going to drive incrementally or sequentially from Q3 to Q4, and probably more importantly the change in our retirement plan that I mentioned before will be effective in our fourth quarter, that's roughly a $0.01 impact to the quarter.

Moving along to Isaac Ro with Goldman Sachs. Isaac Ro - Goldman Sachs & Co.: Thanks a bunch, guys. Bob, just a question on tax rate, to start. You mentioned in your prepared comments some of the internal restructuring initiatives you've got. Curious if that's an ongoing process that could carry through to next year. As I look back on your prior comments on tax rate in general, you characterized 2016 as a foundational year with leverage to show up next year. So, given that you said things are moving a little faster, just curious if a lot of the leverage that you had hoped for next year has already played out or if we're still kind of in process?

Yeah. So we feel very good about the progress that we've been making, Isaac, and have been working very hard. As you know, our tax rate is much higher than any of our med-tech peers. And so that is one of the big focus areas that my team has got. What I would say is it's too early to tell you specifically what our number in 2017 is. We actually have been able to pull forward but what I will tell you is over time we continue to have opportunities there and expect that effective tax rate to go down. Isaac Ro - Goldman Sachs & Co.: Okay. And then just the last one, coming back to mammography, you covered a lot of ground there. But if I look at what is going on broadly in capital equipment in med-tech, there's been pretty good pockets of strength across various categories. And I think yourselves and your competitors have talked about maybe a little less growth in mammo than you would have otherwise guessed given where we are in the adoption curve for tomo. So, I'm just curious if you could put any more color on the feedback you're getting, at least in the US, with regards to customer appetite for mammography equipment. Is there anything out there that's kind of causing a temporary slowdown in the adoption process that might explain the trend here versus other categories of equipment? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: No, Isaac, we're not seeing any real slowdown or pushback from the customer. It's as much a capacity issue of the hospitals to take what they have and natural replacement cycles more than anything. And I'd say, if anything we've had more customers pull stuff a little bit forward because they wanted to compete and offer it, so we're not seeing that. There is just – I kind of remind people, there is a fundamental limitation to how many systems can be installed and used. The auto industry is an example, right? If every company launched a new product next year, auto sales don't suddenly jump up from 16 million to 20 million. There is just a natural rate of replacement that is still happening here and I think that's what lead us back to the stronger for longer that the market is not going to grow by 25% this year but it's going to be there and it's there for us as we keep converting.

Yeah. Hey, Isaac, this is Bob. Just one of the things that we look at that that we continue to feel good about and pleased with is the actual bookings as well, those continue to meet and exceed our expectations.

We'll move now to Vijay Kumar with Evercore ISI.

Hey, guys, congrats on a nice quarter. Maybe I'll start with a big-picture question, Steve. I know you said that you wouldn't comment on the 2017 outlook, but just maybe if I think out loud on some of the moving parts for next year, right, so it looks like Diagnostics international has to come in better. We're feeling better about Breast Health. And when we really think about next year, you have blood coming, declining maybe for the first half of next year but offsetting that you have GYN. Is that sort of the mix of when you talk about balance, is that how we're supposed to think about growth for next year? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Vijay, I'd love to give you a better answer but I really want to get the budget nailed but I think we're feeling good about the trajectory of where we are headed. And sorry I can't be specific at this point but...

No, no fair enough and... Stephen P. MacMillan - Chairman, President & Chief Executive Officer: It didn't serve me well last time to – pre-talk about the next year. Fundamentally, we're feeling good about where this company is headed.

That's fantastic and maybe one question on breast imaging or interventional breast, I guess. I know you guys launched a table launch and it maybe looked – a tad little softer on the interventional side. We don't talk a whole lot about it. I'm just trying to understand is this a function of – does this allow you to bundle your table along with mammo systems. Is there an opportunity in that area? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yeah. What's really in the interventional today is mostly the disposable activity and that has been under a little bit of pressure. I think as we do launch the table, whether it's bundling per se or just the fact that we've got probably the best product and we've got a great sales team I think we have good hopes for the Affirm table and that'll really be – we're in the very early stages right now of getting the quotes and getting the orders, basically the sales process. We think that will be a nice contributor to start to kick in here in 2017 for us and it will help just the overall Breast Health business. Michael J. Watts - Vice President, Investor Relations & Corporate Communications: Operator, I think we have time for one or two more quick questions.

Okay. Next question is from Raj Denhoy with Jefferies.

Hi. Thanks. So maybe just staying on Breast Imaging for a minute. There is still lack of insurance coverage for I think most women in United States for 3D imaging. Is there any progress on expanded coverage at this point or anything we can look forward to over the next few quarters? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yeah. I think Raj, we are deeply engaged in a lot of discussions. And I think, I've said historically that was not – the private pay competency was not something we had as much in our company but our team has really made a lot of progress just in the last – I'd say, last six months or so. It's hard to predict timing and I candidly for any modeling or whatever, I wouldn't assume we necessarily have anything this calendar year. Having said that, we are getting a couple of state mandates. And if you saw recently both the State of Illinois and the State of Connecticut have now mandated coverage, and we're probably overall in the 40% to 45-ish percent coverage, maybe up to 50% in terms of covered lives but the private pay piece will be probably the next step up for us. And having said that, just like prior to getting the incremental reimbursement from CMS, we're not sitting there waiting for this to come to sell our systems.

We'll take the final question from Richard Newitter with Leerink Partners.

Hi. Thanks. Just a quick one. I wasn't sure if you provided it, but the OUS Breast Health growth rate, did you guys give that number and can you remind us what it was last quarter and what the trend was?

Sure. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Oh yeah, go ahead Bob.

Yeah. Down in constant currency 2.9% and if you adjust it for the divested and discontinued, it's roughly flat. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yeah.

And what was it last...? Stephen P. MacMillan - Chairman, President & Chief Executive Officer: And sequentially it was about flattish...

Right. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: As well

Right.

And the year-over-year rate (01:00:27) last quarter?

Sorry, you faded out. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: We just got a garble.

I was just looking for the trend, what was that year-over-year growth rate trend from last quarter to the current quarter?

Improved. (01:00:44) Yes. Stephen P. MacMillan - Chairman, President & Chief Executive Officer: Yes. This quarter versus same quarter last of last year net of divestitures was about flat yeah.

Ladies and gentlemen, that is all the time we have for questions today. This now concludes Hologic's third quarter fiscal 2016 earnings calls. Have a good evening.