Azenta, Inc.

Greetings and welcome to the Aventa Q3 2023 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, August 8, 2023. I will now turn the conference over to Sarah Silverman, Head of Investor Relations.

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 2023. 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 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 event 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 Chief Financial Officer, Lyndon Robertson. We will open the call with remarks from Steve on highlights of the third quarter. Then Lyndon will provide a more detailed look into our financial results and our outlook for the fourth fiscal quarter of 2023. 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. We're pleased to report on a solid third quarter with results that show a strengthening position across our business units that we believe will set us up to outgrow the market once again. We've spoken to you over the past few quarters about our actions to reinvigorate growth in revenue and profitability, and today we're pleased to report meaningful results and evidence of strong traction. We can say unequivocally that the steps we've taken were the right ones. We restructured our go-to-market approach to align sales with customer decision makers and purchasing patterns. We've recruited more incredible talent to our sales team, and we're seeing results wherever we've added these targeted resources. We're substantially aligned to implement a new reporting structure beginning October 1st, which we expect will significantly improve our operating efficiency while better aligning our offerings to customer needs. We've initiated two tranches of meaningful cost reduction since the start of the calendar year. One is complete, and the other is on track to meet our committed objectives over the next three quarters. These actions are improving our operating leverage while bolstering operations capability to meet any and all demands. Today, we report on the status of these important initiatives, but before I do that, it's noteworthy that in Q3, the combination of a return to growth and our cost reductions allowed us to demonstrate positive free cash flow for the first time as a standalone life sciences company. We're proud of this accomplishment and recognize it as an important milestone in our growth trajectory. Now, let's look at the business by segment. In services, we delivered strong organic growth of 8% year over year. Genomics was up 8%, led by strength in next-generation sequencing, as well as continued strong growth in gene synthesis. We're pleased by the performance of this business, especially in what's become a more challenging macro environment. We've added roughly 20 new sales specialists who are rapidly coming up to speed on our Zenta offerings and will continue to make targeted investments in the business where we see opportunities for growth. Gene synthesis delivered a second consecutive quarter of sequential improvement with 9% growth. We're winning because of our ability to manufacture all manner of complex constructs and deliver with exceptional speed. We're confident that we're back to a sustainable growth pattern in our synthesis business, and though we don't necessarily expect a linear path of growth from here, we do believe we've taken the right actions building a business for growth over the long term. Our next-generation sequencing business grew by double digits over last year. We're ramping this business on the newest Illumina, NovaSeqX, and PacBioRevio platforms. and our proteomics offering continues to advance as we look to remain at the forefront of technological advancement in the market. This quarter, we also launched several new multiomics services, including AAV viral packaging and gene synthesis, and Plasmid EZ in our next-generation sequencing business, which provides efficient plasmid sequencing using Oxford Nanopore technology. In the sample repository solutions business, we grew 6% year over year, led once again by double-digit growth in storage. We also announced that later this year we'll be opening a new biorepository location in the greater Boston area. This 40,000 square foot facility will be our second largest biorepository in terms of sample capacity, after our flagship location in Indianapolis. We measure relative size not in square footage, but rather in the sample capacity that will be enabled by state-of-the-art automation, which will define this highly differentiated capability. We also announced our collaboration with the Lupus Research Alliance, to support the advancement of lupus research and discovery. We're pleased to report that we've received initial samples for this partnership. This project is notable as it reinforces once again our ability to support customers in active trials, which in this case will start small in terms of collection size, but will grow and establish a healthy base of samples for us over time. Moving to the product segment, as expected, the products business declined 9% year-over-year on an organic basis, reflecting continued softness in the consumables business. However, excluding the consumables and instruments business, the rest of the products segment delivered 10% organic growth. A significant contributor to the growth was store systems, which grew 15% year-over-year and 23% quarter-over-quarter, reflecting record performance in our large automated stores business, stemming from the strong backlog we've accumulated over the past few quarters. We expect to deliver another record quarter in Q4 as well. BioStor's revenue was essentially flat quarter-to-quarter as we continued to see some softness due to budget uncertainty. The good news is that quarter-to-quarter we're seeing an increase in our sales funnel, but it's just going to take longer to convert these opportunities into sales as compared to 6 to 12 months ago. The dynamic in the sample management business continues to move toward Aventa, With each quarter, we're changing the sample management landscape as we bring dependable, automated sample management to a market that demands higher efficiency, better economics, and safer handling and connectivity to more effectively manage precious biosample assets, which, by the way, now measure in the billions of individual samples around the world. It's clear to us that over the coming years, large scale manual freezer farms will be retired in favor of automated systems as the only means for safe sample handling and high volume sample management. The increasing demand for large-scale workflow automation is clear, and we're uniquely positioned to support this paradigm shift. Toward that end, over the past eight quarters, we've won automated system orders that will add more than 60 million samples of automated sample storage capacity. Automation for sample management at all temperatures, including cryogenics, is the future, and we're ready to meet the market demand. In consumables, we continue to see high levels of inventory at our customers, and while this effect is temporary, we have limited visibility into how long the channel may be slower. That said, we're encouraged by what was a relatively strong quarter in our instruments business, and our recent acquisition of Zyath is performing well. Instrument sales are a good indicator that investments in workflow automation continue, and as our instruments tend to be closely tied into our consumables, we expect that these sales will support future growth in consumables once inventory levels normalize. Finally, B Medical provided $27 million of revenue, and the team did a great job delivering on several additional cold chain solution orders that were received and shipped within the quarter. We continue our business development activities to leverage B Medical's geographic footprint in fast-growing emerging markets in support of Azenta capabilities in biological sample management. We remain confident of meaningful synergy opportunities over time. Before we conclude the call, I'll give an update on our disciplined capital deployment strategy. As of today, we've completed more than three-fourths of the $1 billion share repurchase we announced in November last year, which has allowed us to retire approximately 20% of our outstanding shares to date. We're investing in new strategic capacity additions for which we see strong future demand, and we have an exciting pipeline of new product and service offerings in development. And we continue to evaluate a healthy pipeline of potential acquisition targets, which remains an important element of our growth strategy. As I conclude my remarks, I want to emphasize the progress we've made and the strength of our execution this quarter, where our top line performance and operational execution contributed to both EBITDA and EPS. Encouraged by the positive results of our actions, our team remains laser focused on sustaining this momentum as we move toward 2024. Our enthusiasm stems from our incredibly strong portfolio of products and services, combined with a balance sheet that will support continued growth in our existing markets, expansion into new geographies, and innovation that will bring new markets into existence. We thank you for your interest and support as we work to deliver value to our customers and shareholders. And I'll now turn the call over to Lyndon.