Azenta, Inc.

Greetings and welcome to the Azenta 4th Quarter 2024 Financial Results. During the presentation, all lines 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 star followed by the number 1 on your telephone. As a reminder, this conference is being recorded on Tuesday, November 12, 2024. I will now turn the conference over to Yvonne Perron, Vice President, FB&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 fourth quarter of fiscal year 2024. Our fourth 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 on 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, John Murata, and our Chief Financial Officer, Herman Kudo. We will open the call with remarks from John, then Herman will provide a detailed look into our financial results and our outlook for fiscal year 2025. We will then take your questions at the end of the prepared remarks. And with that, I would like to turn the call over to our CEO, John Murata.

Thank you, Yvonne. Good afternoon, everyone, and thank you for joining us today as we share our fourth quarter and full year fiscal 2024 results. I'm honored to have the opportunity to lead Azenta in its next phase of delivering value for our customers, employees, and shareholders. On behalf of Azenta employees and shareholders, I want to thank Steve Schwartz for his unyielding commitment and many contributions to the company's success. Thank you, Steve. I also want to thank our almost 3,300 associates at Azenta for the very warm welcome. My first 60 days have been focused on meeting our customers, our teams, traveling to our many global locations, having in-depth working sessions, and reviewing our portfolio. We are already busy identifying and tackling a long list of opportunities with a sense of urgency. I want to briefly discuss two recent announcements. Last week, we announced the appointment to our board of new independent directors, William or Bill Cornog, Quinton Coffey, and Alan Malas. I'm excited about these additions who bring a diverse set of skills that complement our board's existing strengths. We also established a new value creation committee that will assist and advise the board in driving long-term value creation, including through growth, cost, and capital allocation initiatives. Today, we announced the appointment of Lawrence Lin as our new CFO. Lawrence is a tremendous executive who I've known for nearly a decade and work closely with at Danaher and PHC, a KKR company. Most recently, Lawrence was the CFO of private equity-owned Geostabilization International, also a KKR company, where he was part of the management team that returned five times the equity invested by KKR. In addition to his exceptional performance as a CFO, Lawrence is extremely well-versed in the business systems operating model and lean principles we are implementing. He possesses the precise skill set we need as we move into the next phase of Azenta, I'm thrilled that he has agreed to join the team and excited for all to get to know him better. I also want to acknowledge Herman Kudo for the progress he helped us achieve at Azenta. Herman will leave us with a great foundation on which to build and has made many tangible contributions during his time at the company, including most notably his work on developing the Ascend 2026 program, which is already yielding significant margin benefits. I'll take this opportunity to thank him, although he'll be continuing on as an advisor with us for some time to ensure a smooth transition. Moving on to the business, I'm pleased to share Azenta delivered strong results in the quarter and in the year despite a depressed and uncertain life sciences market. Our full year 2024 results were in line with our guidance as we reported revenue of $656 million, down 2% year over year, on an organic basis, excluding Be Medical, the combined sample management solutions and multiomics grew core revenue by 4% for the year. As this is my first opportunity to speak to the investment community, I'm going to briefly touch on Be Medical, and then I'll spend a few minutes discussing my perspectives on our core businesses and the key areas of focus in 2025 and beyond. Herman will then go into more detail about our financial performance. Today we announced our decision to sell B Medical. This action will allow us to refocus our high quality core businesses where we have a tremendous opportunity to accelerate core growth and expand margins. We will provide updates on the sale process as relevant. We'll now turn to my perspective on our core businesses. I was excited to join Azenta because of its attractive and competitively advantaged portfolio of businesses. And after 60 days on the job, I'm even more enthusiastic about our company today. Our sample management solutions business enjoys a significant competitive advantage, long-term outsourcing tailwinds, and highly profitable reoccurring revenue streams from its subscription and services offerings. For customers who want to store on-site, we sell differentiated cold storage and cryogenic products that are customized to the customer's unique requirements. For customers who want to outsource, we offer storage at one of our biorepositories. For both, automation is at the core of our highly efficient and scalable storage management solutions. That automation technology manages the growing number of samples generated and functions as both a library and a warehouse workflow management tool. It enables digital formatting, registration, and retrieval. When coupled with our sample intelligent software solutions, it pinpoints and provides timely access to samples the customer needs to retrieve. We'll invest more in building out our unique automation technology and developing new products like our BioArk Ultra, a revolutionary product enabling large-scale and eco-friendly ultra-cold sample storage. Moving now to our multiomics business, which is renowned for its research expertise and consultative approach to performing genomics analysis and data collection that enables impactful scientific discovery. This business embraces the newest technology and develops product offerings to meet the needs of customers in a rapidly evolving scientific research environment. By way of example, our next-generation sequencing business was among the first to implement the NovaSeq X-Plus platform. While this technology transition brought with it pricing pressure, it has enabled growing customer adoption of our services, which combined with our commercial execution has outpaced the pricing headwind. Funding for capital investments continue to be constrained, driving increased R&D outsourcing to trusted partners like GeneWiz. We expect pricing will continue to stabilize throughout the first half of 2025 and will benefit from capabilities of our new location in Oxford, UK that opened earlier this year. In our gene synthesis business, we are investing in broadening our product portfolio to include more downstream workflows, and we intend to expand our synthesis capacity in the U.S. to satisfy growing demand. In our Sanger business, we have met the ongoing technology shift in traditional Sanger sequencing market with our ONT product called Plasmid EZ. We have seen excellent adoption of the offering since its launch in 2023 and will continue to close the gap created by Sanger Market Headwinds. Importantly, the growth investments I've mentioned are relatively small in absolute dollars, offer very attractive returns, and can be made even as we expand margins and increase cash flow thanks to the tremendous efficiency opportunities we have available to us. Next, I'll spend a few minutes talking about key areas in which we are focused for 2025 and beyond. These include portfolio optimization, operational excellence, and value-enhancing capital allocation. We've talked about portfolio optimization with the ongoing sale of B Medical. In terms of operational excellence, we have identified key priorities to build on our strong foundation and reduce complexity. In my time at other high-performance organizations, I've experienced firsthand the positive impact that business system operating models and the use of lean principles had in driving exceptional performance. I expect implementing these tools at Azenta will have an outsized impact to helping us achieve our ambitious performance goals. Continuous improvement and simplification will become the way we work, with the help of a business system model to drive our performance and unify our culture. Operational excellence begins with identifying key performance indicators that will align our daily operating decisions with our strategy. These KPIs are broadly focused on revenue growth and profitability. We will enable revenue growth by Salesforce optimization, geographic expansion, and continued innovation. We'll achieve profitability improvement by gross margin expansion and corporate cost structure optimization. Other KPIs include working capital and cash management metrics, customer-facing metrics like quality and on-time delivery, and employee metrics like turnover and internal advancement. The first step in our simplification process is addressing our incentive compensation programs. We have consolidated from eight plans down to one. This new compensation structure aligns directly with our KPIs. Each of our businesses will be compensated on core revenue growth, adjusted EBITDA or operating profit, and free cash flow or working capital. This structure will help us align our organization with our strategic objectives, drive improved performance, and make it clear to our team members how we win for our customers and our shareholders. There is much more to come on simplification because Azenta today is very complex. It was built through 15 legacy acquisitions, and as a result, had 13 IT systems, 45 physical sites, and nearly 40 legal entities. In 2024, we benefited from substantial progress under Ascend 2026. In the next phase of our transformation, we will turn our attention to investing and growth for our future and further expanding margins. This means right-sizing our cost structure and reallocating resources to high-impact growth investments in sales, marketing, and R&D. Simplification around corporate and operating company functions will provide clarity and accountability while empowering our employees who are closest to the customer to make the right commercial decisions. Indirect expenses will be deployed judiciously. Improved procurement process will drive direct material savings, optimize inventory, and streamline our supply chain. Enhanced information systems will provide better and more timely insights across the organization, supporting continuous improvement and prioritization of our key focus areas. Finally, I'd like to make it clear on how we think about capital allocation. We will make our capital allocation decisions through a consistent, robust, and returns-based process. We will be accountable for our outcomes. We expect to evaluate potential investments that will improve productivity, expand gross margin, support profitable growth by increasing capacity or developing new organic offerings, and drive inorganic growth through logical tuck-in M&A. We will always compare the returns for these investments with repurchasing our stock. In summary, we will be competing for resources internally. I'm actively working with our senior management and the board value creation committee to further refine our view of Azenta's full potential and how we can achieve it. We'll plan to host an analyst day in mid-2025 to share our findings in more detail with the investment community. Finally, I'd like to offer a few thoughts on the near term. While Azenta has tremendous opportunities and momentum entering in 2025, we are just getting started. Our guidance is based on the continuation of positive indicators from our last several quarters, with the opportunity for upside as the market recovers and as we execute on the initiatives we've laid out today. We have confidence in the full-year profile given our attractive recurring revenues, CNI, and NGS recovering in the second half of 2024, and the store's backlog secured to date. After covering a lot of ground today, I want to leave you with a message that I'm excited about Azenta's potential, and I'm confident in our ability to deliver long-term, sustainable value to our customers, our employees, and our shareholders. I look forward to keeping you updated on our progress. With that, I'm pleased to turn the call over to Herman. Thank you.