Azenta, Inc.

Greetings and welcome to the Azenta Q3 2022 financial results. During the presentation, all participants will be in a lesson-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, August 9, 2022. I will now turn the conference over to Sarah Silverman, Head 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 third quarter of fiscal year 2022. Our third quarter earnings press release was issued after the close of the market today and is available on our investor relations website located at investors.azenta.com in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. 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 meanings 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 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 the GAAP financial results and reconciliation of GAAP measures, they provide an even more complete understanding of the event of business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. In addition, we may refer to certain estimates of COVID-based impacts. These figures are estimated based on our insights to customer applications and or product types indicating such demand. or constraints on regional demand or ability to deliver. On the call with me today is our President and Chief Executive Officer, Steve Schwartz, our Chief Operating Officer, Matt McManus, and our Chief Financial Officer, Lyndon Robertson. Yesterday, after the market closed, we issued a separate press release announcing the signing of a definitive agreement to acquire Bee Medical Systems. Following the review of the third quarter results, we will provide highlights of the agreement and the Bee Medical business. 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. I'd like to reiterate that this call will be longer than our usual quarterly call as we dedicate the first half to a detailed review of third quarter results, and the second portion will focus on the pending acquisition of Bee Medical Systems. Our third quarter results reflected continued execution in what was for us a more challenging environment. While Q3 results came in a bit softer than expected, we believe this is a short-term perturbation and we remain extremely positive about our solid positions in robust markets, which will allow us to return to the strong growth profile we've been delivering for many years. Despite the near-term headwinds we experienced, we still delivered solid organic growth of 6% year-over-year, driven by continued momentum in our storage services and cold storage systems. We continue to see customers turn to us to build out their lasting infrastructure, and while we will provide more details later in our remarks, suffice it to say the team is fully engaged and ready to tackle the needs of our customer base. As you will note from our press release yesterday, we've been busy on the M&A front when we announced the acquisition of Bee Medical Systems, a global leader in innovative vaccine cold chain and temperature control transport solutions. This business, along with the addition of Barkey, which we closed on July 1st, are meaningful additions to our portfolio of capabilities in the high-value, highly critical cold chain. Both businesses advance our mission to accelerate discovery and development, and both provide critical capabilities at the point of delivery of life-saving therapies to people across the globe. I want to welcome the Barkey team to Wasenta, and I look forward to the Bee Medical team joining us when we close the acquisition, which is expected in October 2022. Even after these transactions, we will still have roughly $2 billion in cash available to deploy for strategic investment. We're actively pursuing several meaningful organic expansion initiatives, and we continue to work a robust pipeline of additional M&A opportunities to enhance our portfolio. I will now turn to our results for Q3. Revenue for the quarter was $133 million, up 3% year over year. At a headline level, this growth rate is lower than we've delivered in many years, but in terms of our ongoing business, we were up 14% when normalized for the estimated COVID-19 impact in both periods. That said, in the quarter, we experienced a complex operating environment that contained COVID-related headwinds as well as some changes in customer behavior that impacted our results. Regarding the operating environment, similar to past quarters, we continued to manage through logistics and supply chain issues for certain business lines, as well as continued labor inflation. We've begun to implement pricing increases to offset these headwinds that provided a modest benefit in Q3, but the majority of the benefit will be seen in Q4 onward. With respect to COVID, I'll comment on our operations as well as on what we're seeing with demand. On our last earnings call, we shared that in late April, we experienced a two-week shutdown of our facility in Suzhou, China. We estimate that this negatively impacted revenue in our genomics business by roughly $1.5 million in the quarter. Since then, we've not experienced any additional facility shutdowns, and all of our global operations are functioning normally. That said, on the demand side, the COVID situation in China continued to cause headwinds from our Chinese genomics customers, particularly academic institutions, which were closed for an extended period of time. We expect to see some continued demand volatility in China so long as COVID remains present. In addition, although we had anticipated and forecasted a meaningful decrease in our consumables and instruments revenue for Q3, we were taken by surprise at the magnitude of the sequential drop, which turned out to be approximately $3 million more than the original $6 million decrease we had contemplated in our guidance. And although we believe the genomics performance is recovering in Q4, based on the order patterns to date, at present we forecast yet another drop in consumables and instruments in the fourth quarter. Matt and Lyndon will give some additional color in their remarks. We've also received the question from investors on our customer mix as well as exposure to small and early-stage biotech. Overall, we estimate the total of ENTA exposure is roughly two-thirds pharma biotech, one-quarter academic, and the remainder being hospitals, distributors, diagnostics companies, government, and others. The trends we saw with our customers in Q3 were fairly broad and have not been limited to small early-stage customers. Overall, we acknowledge a more difficult environment, but we remain keenly focused on performance and encouraged by the progress we're making operationally, as well as with our customers. We're confident in the market-leading capability we've built that squarely addresses the needs of a growing market, and we anticipate strong growth to be the norm again in the near future. Today, I'm pleased to have our Chief Operating Officer, Matt McManus, with us on the call. Matt joined us earlier in the year and has been a great addition to the team. Matt will cover more detail on the quarter and then turn it over to Lyndon to cover the financials.