Azenta, Inc.

Greetings and welcome to the Azunta third quarter 2024 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 star followed by 1-1 on your telephone. As a reminder, this conference is being recorded Tuesday, August 6, 2024. I will now turn the conference over to Yvonne Perrin, Vice President, FP&A and 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 2024. 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 agenda 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, Herman Kudo. We will open the call with remarks from Steve on highlights of the third quarter. Then Herman will provide a more detailed look into our financial results and our outlook for fiscal year 2024. We will then take your questions at the end of the prepared remarks. And with that, I'd like to turn the call over to our CEO, Steve Schwartz.

Thank you, Yvonne. Good afternoon, everyone, and thanks for joining us today. It's great to have the opportunity to report another strong quarter of execution in fulfillment of our long-term growth and profitability objectives. We delivered solid above-market growth and more acceleration of profitability. In a life sciences market environment that's still struggling to find its footing, our unique portfolio of capabilities and our market-leading positions in each of our segments leaves us less vulnerable to market slowness. We're in a position to capitalize on the fact that all methods of discovery require high quality, consented samples that can be retrieved, measured, annotated, and stored for future reference and interrogation. As a matter of fact, it's the driving forces of lower cost and faster time to discovery that are moving the markets and attracting customers to Azenta, as we can provide immediate, tangible benefits to customers looking to manage and measure samples with best-in-class capability. We enable breakthroughs faster, and that's the name of the game. Furthermore, in addition to our core business, there's an increasing desire from our customers to have access to rare and valuable samples from human populations that were previously inaccessible. As we expand the breadth of our capabilities to source, manage, and measure samples, we aim to be the provider of a full complement of critical inputs, not just for laboratory discovery, but also as inputs for powerful AI models, which are hungry for this information and an important factor in the transformation of life sciences and healthcare. At our investor day in March, we outlined a 10-quarter plan to continue to grow revenue faster than the market growth rate, while simultaneously transforming the company to deliver on the profit potential that comes with this unique capability portfolio. Today, we report strong progress against these commitments with big, positive moves in both areas. Now we'll turn to highlights from the quarter. At $173 million, organic revenue was up 5% year-over-year and 9% sequentially, with all three segments contributing positive growth. Sample management solutions grew 7% year-over-year, with products contributing 5% and sample repository services contributing 11%. On the product side, revenue was up 10% in large automated stores, consistent with the double-digit growth trend we've seen for more than a year. And we're particularly pleased that our cryogenic stores revenue was up almost 40% to a level we've not seen in a couple years. This is a good sign from the standpoint of cell and gene therapy applications, where we're again starting to see opportunities for multiple-unit automated systems orders. We remain encouraged by the persistent move toward automated cold storage equipment and away from manual systems. Consumables and instruments grew a healthy 17% year-over-year and 20% sequentially, the best performance in more than one year, and although we're optimistic about the increase, we'll be cautious about calling a turn until we witness this for a few quarters. That said, it's a positive indicator, and we remain aggressive in our push for market share in this space. As I mentioned, in our SRS repository business, we delivered 11% year-over-year growth. Not only are we seeing continued strong growth, but we're simultaneously transforming our operations to be able to handle the significant volume we anticipate in the coming years by aggressively implementing our transformation to automated repositories. For example, today samples arriving at our repositories can be automatically registered utilizing tools we've developed for high-speed registration. These samples are subsequently stored in automated stores and managed utilizing our now fully operational software as a service sample management system. We're beginning to recognize the benefits of this transformation through reduced cycle times and lower registration costs. And these new capabilities are impressing customers who recognize the significant benefits we can provide to them compared to how they manage sample assets today. Toward that end, after almost two years of slower activity from large pharma companies, we're seeing an increase in the number of new, sizable sample management opportunities. Our consultative evaluations of customer storage sites are picking up again, and it's these assessments that are typically the precursors to large contractual deals. In the quarter, we want a multi-year contract to take over management of a large sample collection for a pharmaceutical company that's closing a facility and will transfer all sample responsibility to us. At the request of the customer, we'll manage their samples in a dedicated, automated store installed at our new Boston biorepository. We continue to see tremendous value in our stores and storage services portfolio, and we're pleased with the momentum that continues to build behind what we believe will be a huge transformation in how samples are managed, with automation at scale being a game changer for the industry. The multi-omics GeneWiz team had another great quarter, delivering 1% organic year-over-year revenue and 2% sequential growth in a market that remains meaningfully down. The solid performance in a slow market environment continues to position us extremely well for a fast ramp-up in a market recovery. We're gaining share because of the quality and capability of our new offerings as well as our ability to continue to reduce cycle time and deliver the highest quality scientific results that keep current customers coming back to us. Specifically, the next-generation sequencing team had another great quarter. In the face of significant price reductions due to the dramatic decrease in sequencing costs, volume was up more than 20% for the fifth consecutive quarter in terms of number of samples processed and measured. And amidst these large changes, overall NGS revenue was up 3% on an organic basis year over year. Profitability in this product line also ticked up again, and we're bullish that we're at an inflection point. Pricing's been stable over the past three quarters and we're positioned to sustain growth and higher profitability. This market dynamic is consistent with each of the past three meaningful NGS technology inflections, but this time it feels as though demand elasticity is driving even more outsourcing of NGS. Two specific results add to our confidence about the future of our NGS business. First, in the quarter we added more than 700 of what we call new to NGS customers. This is a huge number of new customers, but it's also great because these are the customers who are the fuel for our future work. And second, our NGS quoting activity in both number of quotes and dollar volume were at record highs in Q3, so all in a comfortable position for us in our NGS business. As we reported last quarter, we believe we're past the bottom in revenue for our overnight sequencing, with Sanger and Plasmid Easy offerings growing sequentially for the first time in more than a year. If you recall, our Q2 revenue was flat with Q1, and we believed we'd stemmed any further decline. Indeed, that was the case as we grew sequentially 4% in overnight sequencing, and we anticipate more sequential growth in the fourth quarter. In our synthesis business, we grew by a few percentage points year over year. We're seeing good traction from value-enhancing products we refer to as gene-to-X that allows customers to give us more of their downstream workflow from the synthesized gene products. These are differentiated higher value extensions of our gene synthesis business. Finally, I report on the overall performance of what we call our new vectors, where we delivered a sequential revenue increase of 9% and double what we delivered from these offerings just a year ago. Moreover, growth from these new offerings is expected to increase rapidly, boosted by the FinGen proteomics contract that we announced a few weeks ago, as well as business from new service offerings that are associated with our PlasmaDZ solutions. Momentum continues to be strong from the adoption of new offerings and share gains, and we believe organic revenue growth in a down market represents significant outperformance, giving us confidence that we're positioned to meaningfully outgrow with any recovery in biotech and pharma spending. Finally, B Medical delivered a very solid quarter with revenue of $29 million and an accretive EBITDA margin. As we've shared before, we're positioning B Medical to focus solely on vaccine cold chain products as we wind down blood management and medical refrigeration product lines. The reshaping of B Medical is part of a long-term value creation strategy that derives from B Medical's unique cold chain capability, serving fast-growing emerging markets. In the quarter, we advanced several initiatives which are part of this strategy that are expected to begin to deliver additional benefits from B Medical into 2025. The first of these is operational. The Bee Medical Factory in Luxembourg has now absorbed production from three SMS factory sites that we'd close, giving us meaningful synergies, more manufacturing capacity, lower cost, and better Bee Medical Factory cost absorption. These are important milestones that are part of creating the world-class factory that we described to you at Investor Day. Importantly, we received our first order from Democratic Republic of Congo from the large MOU announced last November. It's small in terms of dollars, but it's positive because it signals a commitment to this 60 million euro project that will be driven by the health ministry now that the new government is finally in place. Again, this is not a signal of timing, but rather reinforcement that we believe the business will happen. Finally, we advanced our participation in two multi-party sample sourcing initiatives where we are a critical partner. One of these projects is set to deploy in Q4. and will be a first critical test of our capability to source and protect valuable human biological samples. So, a good quarter for B-Medical and great progress in its transformation to align to Azenta's strategic initiatives. All in, we're extremely pleased with our strong results for Q3. We demonstrated solid growth in a soft environment, we delivered meaningful strategic gains in each of our business segments, And as you'll now hear from Herman, we accelerated results from our transformation initiatives, allowing us to grow while we transform the company for scale and improve profitability. Moreover, we continue to distance ourselves further from competitors. Every day we're charting new and next opportunities to benefit our customers, which we know we can uniquely deliver. Before I turn the call over to Herman, I want to give a brief update on the search for my replacement. Of course, we can't comment too much except to say that search is a top priority, and its proceeding is planned. We have a strong interest from highly qualified, experienced candidates, and the interview process is ongoing. We're confident we'll identify a great next CEO for Azenta. And now I'm pleased to turn the call over to Herman.