Azenta, Inc.

Greetings and welcome to the Azenta Q1 2022 financial results. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, February 8th, 2022 at I will now turn the conference over to Sarah Silverman, Director of Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the first quarter of fiscal year 2022. Our first quarter earnings press release was issued after the close of the market today and is available at our Investor Relations website, located at investors.inventa.com. in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. Please note that due to the divestiture announced in the fiscal fourth quarter, the results of the semiconductor automation business are treated as discontinued operations. Subsequent to quarter end, on February 1st, we completed the sale of this business. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the Safe Harbor slide on the aforementioned PowerPoint presentation on our website, and our various filings with the SEC. including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures which are used in addition to and in conjunction with results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of the events of business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, Steve Schwartz, and our Executive Vice President and Chief Financial Officer, Lyndon Robertson. We will open the call with remarks from Steve on highlights of the first quarter. Then Lyndon will provide a more detailed look into our financial results and our outlook for the second fiscal quarter of 2022. We will then take your questions at the end of the prepared remarks. With that, I would like to turn the call over to our CEO, Steve Schwartz.

Thank you, Sarah. Good afternoon, everyone, and thank you for joining us today. Q1 was another exciting quarter for the company. On top of continued strong performance, we held our Investor Day on November 16th, where we introduced Azenta to the investor and analyst community and presented our new three-year target model for fiscal 2024. In addition, on December 1st, we officially changed our name to Azenta and began trading on the NASDAQ under the ticker AZTA. And subsequent to the quarter close, last Tuesday, February 1st, We announced the completion of the sale of the semiconductor automation business for $3 billion in cash. Recall, we had expected to close the transaction by mid-calendar year. However, our regulatory approvals came quickly, and our internal preparation made it possible to close the transaction earlier in the year. Today, we're a pure play life sciences company with more than $2.5 billion in cash to deploy in a vibrant market landscape. As a standalone life sciences company, we're already seeing great promise from our one Zenta approach. Our unified commercial strategy is resonating with our customers. Our value proposition is strong and we're closely engaged with customers to craft solutions that meet their ever evolving needs. As we continue to grow, we saw an opportunity to bring on another outstanding leader to the organization. Earlier this month, we announced that Dr. Matthew McManus would be joining us as chief operating officer. Matt comes to us from Biotechni, where he was most recently leading the molecular diagnostics division, following its acquisition of Asuragen, where Matt was president and CEO. Matt reports directly to me and has responsibility for life sciences services, products, and the commercial operations of the business. He brings a deep understanding of the industry and a set of experiences that line up perfectly with Azenta. We're fortunate to have Matt on the team. So turning to Q1, I'll now provide some color on our performance and trends we saw in the quarter. Once again, the team delivered impressive results. Our success and strong reputation continues to open the door to new opportunities with customers. Revenue for the quarter was $140 million, up 18% year over year. Our services business remains vibrant with the revenue up 24% compared to Q1 of last year, and we continue to expand our menu of offerings. The products business delivered solid 10% growth and continues to prove itself a critical part of sample exploration and management value proposition. Our services business reported revenue of $90 million with both genomics and sample repository solutions, growing over 20% year over year. Genomics revenue was up 23%, driven by both next-generation sequencing and synthesis businesses. MGS demand was notably strong even through the December holiday timeframe when things tend to slow down. In gene synthesis, we saw strong demand from pharma and biotech customers, particularly in the Americas. This quarter was also our first quarter of synthesis production in our Indianapolis facility. This service is co-located with our largest biorepository and will allow us to provide expedited services to U.S. customers. Our offerings are also expanding beyond the core portfolio of Sanger, NGS, and Synthesis Services with a focus on key growth markets. Revenue from our proprietary AAV solutions have nearly doubled year over year. And while these are still a small portion of revenue, we're gaining the confidence of key cell and gene therapy customers, which we believe is a market still in the very early days of growth. In addition, we continue to expand our reach by adding adjacent services to our clients' workflows, and we continue to ramp our plasmid prep and molecular genetics laboratory services. Most recently, we added proteomics and a gene talentavirus offering, both of which are garnering early interest. The pamphlet and repository solutions business was also strong, growing 26% as we continue to onboard samples from our two most recent large pharma wins, as well as expansion of our on-site sample services model. Our large pharma projects are going well, and we continue to move samples from customer facilities to our global sites. And we see more relationships of similar scale on the horizon. Our value proposition to customers in the SRS business has never been stronger. And as we've scaled, we've gained experience and proficiency unmatched in the industry. As demand across our portfolio of services offerings continues to grow, we maintain our investments in footprint and talent to satisfy strong global demand. In genomics, our new Suzhou, China facility, which will become fully operational later this year, will consolidate our existing multi-site footprint while doubling our potential capacity. In addition, we're relocating our Cambridge, Massachusetts laboratory to a larger site in Waltham, as we've outgrown that facility. In SRS, we're constructing another Indianapolis repository and a manufactured product, a nascent but growing area of the business for us. where we store, distribute, and manage logistics for vaccines and other finished products. We remain bullish about our expansion initiatives that each is tied to satisfying strong existing customer demand. In the products business, we delivered revenue of $50 million for the quarter, representing 10% growth year over year. This business has firmly established itself at a new run rate of revenue and is on a solid growth trajectory. There is much to be enthusiastic about from the products business. We're particularly pleased by the accelerated acceptance of our automated cryogenic store systems, which set another record in Q1, more than doubling year over year, as we provide a truly critical capability for cell and gene therapy application. Additionally, sample management continues to move toward automated systems for all temperature ranges, and we broadened our portfolio to meet these requirements across a wide variety of storage volumes. As a result, we have a very healthy pipeline of stores opportunities, which leaves us particularly bullish about our growth prospects in the second half of 2022 and beyond. Quarter to quarter, we may see some fluctuations in this segment due to the nature of large capital purchases and systems and demand for consumables used in COVID testing. But longer term, we expect continued above market growth. We know many people are curious about the recent business impact of the Omicron variant. so I want to be sure to address that here. Lyndon will talk about the financials in more specifics, but in general, we saw continued demand for our consumables in COVID testing and sample management projects in SRS. On the genomic services side, recent COVID spikes, particularly in China, which implemented lockdown measures, have increased complexity of logistics, but our teams have risen to the occasion. And similar to what we observed in the June quarter of 2020, as COVID first hit, In the first weeks of January, we saw some measurable decrease in Sanger revenue from academic institutions. The decrease was not as dramatic as when labs were completely closed in 2020, but was representative of lower lab activity consistent with absences of lab personnel. And though it appears that as of the last week of January, we are back very close to normal Sanger run rates, our guidance for Q2 does contemplate some impact in Sanger due to Omicron. That said, Our ability to deliver to customers remains resilient in a difficult environment. The team has been creative with sourcing and inventory management. While this has led to some temporary increase in cost, we continue to be able to deliver for our customers. Before I wrap up, I want to take a moment to acknowledge the Brooks Automation employees and team at THL. We're proud of the team's many accomplishments and see nothing but continued success under THL's leadership. Moving forward, Aventa is a fully standalone life sciences company with a strong portfolio of products and services critical to the development of life-saving therapeutics. As we look to the future, our opportunities for more growth are abundant. Our markets are rich and growing, and our portfolio of solutions are at the heart of all that's driving life science and business opportunity. We're aware that there's a considerable interest and attention as to how we'll make use of the balance sheet to add capabilities and more scale to the company, And I can assure you that we're all over this, with a strong deal team giving consideration to a rich pool of opportunities. However, it's important also to emphasize that with the portfolio of sample value chain products and services that we hold today, there remains tremendous opportunity for more organic growth that will be delivered from our scientists and engineers, and also driven by customers who are encouraging us to expand our scale and footprint to allow them to achieve their objectives faster. Over the course of the past five years, we've demonstrated organic growth close to 20%. And we continue to uncover more high value vectors from services like AAV service offerings, cryogenic sample solutions, and the new offerings in our repository solutions business. And although we're actively looking at acquisition targets, we'll remain aggressive investing in organic growth opportunities, and there are still tremendous potential for strong, profitable growth from our current portfolio. In summary, our performance remains strong, our markets are healthy, and we're eager and ready to take on the growing opportunity ahead of us. We're enthusiastic about our strong growth prospects, as well as the opportunity for significant profitability that comes with leverage. And as always, we thank you for your interest and support as we work to deliver value to our customers and shareholders. And I'll turn the call over to Lyndon.