Earnings call transcript Q2 2023

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Operator

Greetings, and welcome to the Azenta Q2 2023 Financial Results. [Operator Instructions].

As a reminder, this conference is being recorded, Tuesday, May 9, 2023.

I will now turn the conference over to Sara Silverman, Head of Investor Relations.

Sara Silverman

Thank you, operator, and good afternoon to everyone on the line today. welcome quarter our of to for conference like second the fiscal would you earnings to call We year XXXX.

earnings market prepared available slides that quarter close remarks in addition website today. second press be supplementary issued investors.azenta.com was Our PowerPoint the after located of at the our used today on is will to and Investor Relations release the during the

section safe forward-looking of titled statements to are Harbor SEC, remind reports cause the of our a with reports of XX-K everyone our such the including course slide I call, those harbor website Form other filings or and like the annual XX-Q. our forward-looking making PowerPoint statements. Act earnings Statement, and we financial to would Safe actual the I the number would many of presentation the differ identified the during the of our within to meaning Securities refer may Private aforementioned on from various on be on will Form that in our results events factors release on Litigation that quarterly There you XXXX.

future We differ update make to statements data presented these that no events or occur from should statements obligation forward-looking the financial today.

the of GAAP to additional even measures, of an our Azenta results in they with refer viewing GAAP. an believe aspects number addition may performance, We of reconciliation when complete with way with provide and a measures, GAAP presented used financial understanding business. more financial of but accordance in considered We and the operations the non-GAAP provide to of conjunction which are non-GAAP results and in the measures

GAAP upon should of exclusion measures not be to the Non-GAAP measures themselves. relied the

on insights of customer constraints may we certain such to demand our deliver. and/or are figures addition, or In estimated demand to applications product based or on regional indicating ability COVID-based impacts. types to estimates These refer

Steve Schwartz; Executive and our me Officer, the Lindon Robertson. President our today with and Financial is call Chief Officer, Chief On

quarter open the will financial call a Steve detailed from second of more third then Lindon with for of the our our quarter fiscal will We provide XXXX. outlook into the remarks results and on highlights look

We your over the With end Schwartz. our would CEO, like remarks. the I that, the take turn of prepared will to questions to at then call Steve

Stephen Schwartz

Sara. you, and joining ourselves period, you Thank established year of we It's of conviction as we sciences this learnings, afternoon, got full one everyone, reinforce a company. many life opportunity. stand-alone Good of Over and right. year for thank optimism since A work and purpose a our us. lot and but about hard X things

edge services keeping continue and customers who stay invest drug this We us on are to forefront field, products, the of to in close to cutting of development. applications the new discovery the and at dynamic

emerging made capability deliver be fast-growing application and valves serve to our will increased Barkey workflow in We We chain, demand. technology on a our B therapy [indiscernible] Medical acquisitions capacity important sample contributors a and enabler for into of unique this market-leading strategic adds X more markets. position critical cold the to that a solutions future. brings us gene cell and to companies

we and development and offerings. and broaden product represent Additionally, efforts. their indeed true do formerly Azenta to to went customers offerings potential reorganized new specialized verification transform services wins, under we customer accounts a the time, their run Azenta in their how same that secured partner key have further the businesses our as brand, scope us our all At sales cemented and teams around our market to this we introduced as

strong areas particularly realized innovative expertise storage area of brands automated the effective genomics Azenta most to and sales our We've like we found complex also in GENEWIZ cryo of systems. time, reinvigorate when framework. the Over were of specific personnel, that within and we the utilizing importance

as Fortunately, seen results. genomics and direct to sales, we've product changes go positive to dedicated back we've made

of the challenging with just environment, sustained didn't serve remain confident actions than facing better came for And part much define We we of today, our portfolio a in addition, on we chute profitability tremendous growth, value need align this time. the mentioned. deliver In left taking prepared macroeconomic because out life now as And we more we're and customers the further promise. of to more growth sciences in which at materialize cost the we this transition I for to meaningful our space. we're in

genomics recovery the our significant this In my for of return our remarks reductions and business, the a a full proposition; the today, actions potential business; I'll that X near support of this four, realignment; come expectations growth cost deliver for particular, including additional of we with synthesis in company investments the our business. as the one, accelerated of critical of reset of three, prepare term and areas: for realignment in growth on focus two, to this

by overall though, for the the I'll start, quarter. summarizing business

were results business in and mixed. track expected. continues was QX Our solid our Performance as services to

especially we the the shortcomings quarter. on in had However, Medical, some side, B product

growth. excluding On excluding on COVID, reported unless the will growth organic my declined Organic impacts in of a be specified. Today, quarter. basis, COVID the growth impacts, X% comments otherwise rates, we revenue, estimated all delivered X% of

witnessed We our expect business to expected. these impacting Looking business, temporary all reports expectations. and the how customers the us declined are softer do little than gives of not quarter slower. X%, various distributors than business the but as channel partners we revenue into be from are range In visibility a think segment, channel initially Products by reflecting destocking lighter at the lower we Consumables the a kept effects long might

quarters. in store's because projects that is flat impact be now, was In QX a stores to facilities coming a revenue QX. story customer the delayed were large the of the said, the installation. for we X by was shortfall ready and consumables automated That will stores, were timing instruments see For their revenue matter and not revenue different impacted revenue as revenue delivered

In levels projects second the automated backlog record more teams half and on for but of stores manufacturing the puts is in we number at of slowed as installation pressure ability ship automated ship but at year. cryo and pharma cryo our shipped the delayed and record to stores, large due book companies, uncertainty it our backlog tools. manual remain budget We to secure, which system a more freezers,

and The critical and automated tools are systems cryo of for applications, gene therapy cell commercial systems. the provider only we're

the this of the that's trials is revenue making delayed, although pharma companies. anticipate consistent work timing finalized. customer with of So of we way through believe once this clinical orders We do its are approvals the reprioritization capturing was pause large some

from team The primarily impact of came delivered $XX by was delays considerably our the million record on business. B quarter, opportunities by Medical, in in our results expectations. a the million which revenue of that we're below the lower and largest $XX result QX of generated. revenue cold in predict, the The though impacted chain to pipeline And remains encouraged timing has timing difficult after

from We're enabling Azenta milestones on highly achieve benefits timing admittedly, we is the but value for new business Still, B large expect focused delivering capable markets. Medical this on of the a revenue has upside the to in changed. certain

not just anticipated. was earnings Medical the B the half, accretive first we level at to Importantly, in had

back as the in revenue well in of trajectory. solutions that the solid a and for expected. with genomics high particularly is in a COVID our backdrop performance Against and on decrease quarter. pleased sample of end at in biotech companies, China We're expectations the performed coming genomics we January Services, positive was delivering In repository funding impacts small remarkably

quarter. in the We very had takeaways meaningful X

it's from these back a delivered us are or times we'd confirmed they was the delivery for and exactly sequential doesn't PIs to Gene This make Synthesis pilot our quality we quality remedied suppliers focus back we be I just you've other know the two, sequential salespeople successful competitors times gene from revenue X% for wins. heard essential best-in-class that are our entering of is reason our are This First, key momentum to and several since for XXX synthesis turnaround one, been success from and our turnaround growth increase can't have a served the than indicators teams time that. lower highly combination lost me customers the business. strong or strong we standards; get business. reasons, elements: say been of up China and good for runs finally, facilities account coming are of while this issues solidifies more In as the quarter. a leading to around this in and by in new quality performed a few term long results; quarter, skilled follow-on had notion diminished that dedicated price

targets which we pilots X to pharma the new market, RNA business accounts. offerings, our the therapeutics synthesis circular large add launched To completed first gene fast-growing we being where synthesis with several RNA momentum,

The second lentiviral to packaging solution is screens. high-throughput a editing high-throughput support gene

have gene clear, more position be much we sturdier across about confidence market. in To the our synthesis opportunity and

services, these traction the our the NGS X%, the by throughout customers. samples the performed of existing We're continued In to remainder wins pharma to proposition subsegments value and Round the of of of the with existing of won well growth business GENEWIZ with strength growth a double-digit Sanger offering. our and testament we're a inflow storage. sites to as pleased with storage large poised additional expectation the Azenta-sample grew in continued and seeing driven and are the and business customers, whole as SRS for rest both as and management year. as the We new business, out expected, are the biotech

gone must that addition, second and SRS as ahead in the of we're business of curve the In store store future on continue incorporate front. bio of the that Indianapolis our site live, automated has adding sample convinced our automation, first repository automated we and multimillion a at be process to we're

the increasing competitive investment solutions. sample we're state-of-the-art innovation believe each with make of in We the we management gap

growth us orders for this by than and in genomics systems of X% the CGT XX% automated below business in growth The in quarter. SRS. XX% XX% Cell grew revenue growth therapy cryo and quarter, level kept driven more lower gene

allowing #X As align control supporting and our offer to structure business for our points to We we top my the to in also that have determined line services services and our realignment customers' key largely I is mentioned now higher as and proof growth products and to clear. that remarks, needs. activities sales, to at of is realignment the our return and our of account demand the best was beginning we sales further products executives units issue is our customer

streamline further announced we previously initiatives the profitability. aimed announced the reduction enhance commercial to changes build the changes: today, a cost success commenced optimize increased So business business and months, and over we've initiatives. following expand moved go-to-market to strategy growth of the we've past These our one, on and the the decision-making business. these accelerate assessment, to within and upon realignment marketing realign the X to After thorough genomics

digital business business from both hence, GENEWIZ power analysis, Sanger arrays, to services. business is We're single-cell of we've and offerings separate and vertical for to to Since about and the a our multi-omic many the fast-turning more our scale establishing offer of This synthesis, laboratory and scientific host the we sales years offerings, a expanded and focused, in This this selling next-generation to is apparent sophistication more unit. sequencing dedicated for quickly efficiently is scientists move dedicated now alignment we've enhanced to services sequencing need acquired scientists. all highly and sales bioinformatics a this capable and sales synthesis proteomics, markets. platform metabolomics, including ago, and enable of X genomics our gene even spatial

our products business a of Zhou, multi-omic by capabilities this service demonstrated In decision we're which in each GENEWIZ. and complement sample management organization. services this the maker. We've offering, one led combining that management Dr. XX-year selling unit, continue establishing and process, the engage We're recognition be same also all Ginger well to often veteran customer into other will of expanded sample

on solutions business business SRS our To by as store that have which includes end, the we're Products sample systems This consumables solutions business. cold sample will will sales dedicated and of also This focused with leader as be instruments. business management. well managed unit sample unit, the own things current its management , combining organization all repository business our SRS

believe best portfolio Finally, thereby structure collaboration B enhancing in new to this customers, We offerings its will reorganization, responsiveness. structure. and own will maintain align end Medical the

changes next Over crystallize months, move few past we've will The moving in lines to reporting begun towards this resources the formalizing and direction. new certain to be structure. this leadership

$XX will early in directly to this this of to restructuring million This the in QX. us allow fully an end addition units reductions of calendar cost bringing In focus addition of to deliver we the is needed initiated year. business incremental aligned the through EBITDA to customers, sales by

are long-term Day initiatives which of objective XXXX. at restore delayed out our already but growth and Our delivery into committed positive begun we to Analyst our the changes, it. and toward We've set completely goals achieving profitability in we're that deliver QX performance, momentum will aligned We're in XXXX. implementing the to

the to million confidence program million in shares, position company. represents shares capital our approximately the $X.X cash $XXX sheet. quarter with strong. XX% which of repurchase in share a XX the prospects active ended of our We nearly outstanding than our since on started the more November in reflection the repurchase and Finally, of balance we more program, we've for spent long-term already than remains We remain billion

roughly in for commitment share our have $X investments. after Even strategic billion we'll fiscal available XXXX, cash for repurchase

As as initiatives we promise developments as take right of profitability. are of progress growth capabilities. with all breakthroughs support space. Azenta. also and we for enable believe and provide We're our faster. investing our just sciences The my at This enhancement. market-leading innovation proposition and about what the shareholder increase in in are results, in long-term life tremendous value and there remarks bullish positive well more to to to best-in-class value. profitability that described the uniquely services doing is satisfied I've deliver We performance trusted period heart time, today, prospects, a of We're the a but not should and in growth portfolio indicators many These but steps products investments

And we That use to forward value and customers your next look you for the expectations said, call thank time Lindon. we deliver interest updating you to we the turn this to and for shareholders. as now our recalibrate support our to quarters. We and to progress, on over I'll work

Lindon Robertson

website. you, back now the I Steve. you our Thank refer slide deck to available on

Slide some for highlights. X to Turning

$XXX organic within but was the still million, side, light quarter we was Second as revenue year-over-year. little a revenue guidance. base total, product The up on the range X% in provided

Steve As portion possible of lay see so will as business we predictability the what the as medical to the having are difficulty increased us with we revenue, of you commented, this B out see. with transparency clearly

the go Give me each business. a then through a top we hit few area to moment will highlights, and of

for to genomics like First, logistics X% made experienced I expanded win highlight with We business the and as progress the business prior applied immediate the customers. synthesis same to gene months would had marketing quarter-to-quarter. to applied sales it the some the in in concerns and fixes X back a at those turnaround time, disruptions over the and

accumulate. as business the This SRS to was COVID. year-over-year growth, by deliver led to continue samples X% the growth on excluding Second, basis, up in storage continues double-digit organic

and of enhancement to some Next, investments net the million annual in we combined approximately cost confirm in the X sales, of reflects enhance and expense by reduction removing margin cost $XX structure which $XX previously EBITDA. second were will points taken announced annual to actions the half. This to EBITDA million adjusted making

benefited The the $X by million. second approximately by quarter reductions

through million structural we to we As and product XXXX, of integration into reduce look $XX the expect our of another acquired rationalization businesses. costs

very prepared over we with the ASR that capital deployment. program. April, progress just is Under In million completed described previously and program a balance on high That the of billion million repurchase regarding us repurchases next us commenced And a on market. track last a repurchased of we by returns. approximately of million in we holding were will announced the end $XXX Finally, with immediately year $X of leave shares strong in debt November. ASR, this $XXX total. in shareholder accelerated million with and sheet shares additional underway This repurchase as no total continue share XX upon our XXbX-X the the early cash completion keeps a to path calendar open to $XXX

at our to X a take for to quarter. over the Slide turn look Let's results

This already sequential driven substantial impact a down the was has of $XX Be was year-over-year of million, our the and X% revenue million mentioned, details XX% profit As profile. million quarter-over-quarter. up decline revenue by Medical. on total $XX $XXX

of reported see was rates the over ex-COVID and made metric. right of the page. will each estimated by effects growth After you of and COVID year-over-year. the you to the was organic exclude estimated business X% growth of this total driven the down the foreign year-over-year decline acquisitions, the can X% and X% The same segment show exchange revenue year to bridge acquisitions over side impacts, on past the the Each

the than light are for as some and in projects. slightly was interesting The in business puts large quarter, consumables better system Services are an positives The segments. segment just business delay largely to what to there Products both and takes in each we performed understand the expected due underrunning and

in will get details those We to a moment.

GAAP P&L on with from related year-over-year, a year, businesses Medical. reduction over million offset B by past were the expenses contingent This for in primarily consideration SG&A $XX operating lower Looking to was at added the the the quarter-to-quarter the accrual driven we acquired. side, and left the structure partially

continued Below quarter, generated accrual you'll GAAP earnings the loss to largely from share Medical. quarter-to-quarter operations the contingent income interest is a for for the change and per the improvement QX. $X.XX this line, of see consideration in $X.XX the million driven $XX another B was by in similar we

margin was on was quarter. at our which Each lower non-GAAP saw margins. Looking first gross segment basis continued versus XXX pressure by Gross XX.X%, results. points

a decline of quarter-to-quarter. of on revenue points to X.X the performance, gross B B margin, the points of non-GAAP basis, X.X margin impact which gross Medical Medical dropped on margins. the note For the it lower our clarity to XX XX% significant drove is had important

pressures in declined Medical, and X.X Excluding the similar Products with both Services. B points business quarter-to-quarter

million The change do I clarify million, maintains $X reduction reflects accrued with the commissions million quarter-to-quarter. lower contingent commission primarily side for you our in decline year. GAAP substantive in from was which expense consideration, driven of variable excluded by $XX were a see fiscal down this commissions compensation reduction lower that by should to expenses non-GAAP. reduction compared a remaining B Operating is The in the a performance $X.X and as expectations structure the shows operating nicely the the the side non-GAAP revenue variable had quarter Medical first to driven the quarter.

small benefit headcount a had also previously We OpEx announced the reductions. to from

On $XX was the $XX were the year-over-year business, lower of million in to million was year-over-year up million. B the partially by increased offset basis, of expenses The accrual a and by $XX quarter. acquisitions Roughly the remainder driven operating the compensation organic-based headcount in increase performance-based related Barkey. Medical

Altogether, of variable is a drove EBITDA We The more emphasize an me factors dynamic dropped this margin a $XX so X.X%. in a see lower expense to which new EBITDA $XX of line than the gross million. timing, profile negative quarter-to-quarter, with point. to as operating Azenta, Medical B margin, the the on but adjusted brings weakness the this it adjusted combined line produced million of

quarter remain orders to delivered degree with larger experienced degree line in revenue the review but a turn was time the by a to for our received quarter, X The a Life the this Slide these the fiscal issue was which million. in to and delayed delay Now over than Medical as to reliability. driven of the let's first total predict segment much segment year-over-year, for business pipeline due to $XX XX% orders. believe quarter. $XX and smaller which Sciences contributed of this million, million expected $XX Products acquisitions, lower We anticipated B cannot be up was results. revenue We

not being the the to a to and have but and governments simply agencies. decision-making that a shortcoming it's We the learn of business of in of understanding subject nature is business funding come this

form You to a predict can imagine, we to lines time have attempted model demand. of

need Our beyond message is load with conclusion that clear full revenue forward, unpredictable. transparency to a that of is we additional you that and going order provide

the will We of value scheduled and an of deals worked. give indication orders you being

back expected B revenue. delivered early it did more quarter. compares by $XX February to of come confirmed of million. end in but the to million $XX orders In materialize The in, not team this quarter, the Medical This of

For hand team million $XX our orders be QX, to in the expected has delivered. of B Medical

possible While $XX other it's we guidance our QX at leave million. will come projects may expectation in,

The of significant. P&L are consequences result $XX million the

of by factor view, Medical a You positive full the reflecting a fixed lower mix. payout, and million. highly hope in the brought down On team $X our this can product clear provide see to With of understanding gross weaker has more margin B a cost operating the absorption Medical note, we business. which variable B less commission expense

organic-based was the When XXXX, Product of in demand second revenue consumables declined segment The last COVID XX%. the estimated COVID-related driven the business the was organic exchange the fiscal impacts, with impact. demand consumables COVID acquisition X% quarters quarter removes based revenue headwinds year-over-year, decline in the estimated significant foreign This all by excluding and of and in significant Azenta. down for business. further the instruments

We elevated weakness. this driver positions of as stocking customer the see

messaging similar This The to will take grew X% we back a organic the see on delays surfaced of gives we this coming growth translate the as into to confidence X% basis, store to due industry, As quarter. in basis. a now which give normal was time customer reported an us revenue revenue have the we on the some delivered perhaps quarters. and year-over-year XXXX. reflective large in consistent which a demand across estimate backlog, in seeing and our revenue facility as systems readiness, this is of the on this deceleration orders issue not This in

further and in working around proceeding quarter issues customer team onwards. other fourth and expect improvement some systems with and fiscal fiscal projects, third readiness in The we improvement the the is quarter

resulted negative lower the the product EBITDA expenses. in pressures gross weaker margin removed the of primarily was mix. Product decline Lower Medical, of operating points an to was segment margin X%. gross variable sequentially. for sequential helped down expenses X.X products commissions compensation quarter B with second down XX.X%, X we items When adjusted XX-point and These due margin Products' the the to points, mitigate

Medical you driven the in As balance the decline sequentially B million see, C&I. was systems can by and $XX the by and substantively revenue softer

quarter, X%, please turn excluding a million, growth and organic X with by was revenue Slide store. a segment down Services revenue COVID, results. generated quarter-over-quarter. solutions down accumulate to review and led decrease for Next, our The X% increase of of quarter of Services second $XX of an year-over-year for segment X% genomics X% continue growth X%, core with we in repository the storage double-digit a sample to sample of as

Genomics pickup business quarter. sequential X% slowly a sequencing, showed and census of compared Genomics us. into March. X% and first sequential growth the with growing indicator picked progress notable both improvement key the Sanger in started The quarter a gene relatively up to of fiscal for is

are pleased market given continue the the near with customers pace progress term. point the which and the to backdrop macroeconomic ongoing We pressures in the in of slowing challenging down [indiscernible] especially to quarter in prioritization

from business from In a commercial competitive and this improvement reinvigorate efforts perspective about turnaround operational increasingly wins recent and the the to seeing here. us our results synthesis, both in makes we're sequential optimistic

was quarterly solid, well with become to we QX. from Sanger stability the to growth have as Sanger annual accustomed and as QX expansion demonstrating typical

expectations. slightly sequential seasonal trend unusual NGS modestly was deliver March basis, to our above quarter not We December versus quarter. which is the saw actually on an NGS down in a

demands and capabilities advanced upward. Technology trend to continue for

and service among offering first the now proteomics is continue service. we remains in to to expand this and we reach the our for were capabilities which Our and receive strong, geographic technical

and down gross quarter-over-quarter. pressure well X.X facility Margins points delivered margin, business weaker as Services The from expansion slightly XX% mix. as saw labor

was Second sequentially. X% quarter and improved margin adjusted for EBITDA Services

Now let's review on X. balance Azenta's sheet Slide

short securities, $X.X marketable restricted we and As cash, of of XX, March billion long and term. cash both had

outstanding, $XXX million and roughly debt opportunities additional our We have organic strong remains sheet M&A no for with of available cash balance investment.

repurchase indicated repurchases the billion to I program completion open before we XXXX. shares remain commenced of in a share under ASR, total calendar year a market and end of $X my on the of XXbX-X As by of following remarks, track

$X cash to page negative flow. sale on to from related see payments Automation $X driven X company. quarter the was Slide cash the largely expenditures tax was flow Adjusted flow free to over Semiconductor turn in operations The for address the you were quarter. cash the million Capital the of by Let's million.

You balance until first from beginning fiscal fiscal the accelerated may the inside fiscal quarter. due related was quarter were and we was into the quarter, share sheet simply third second cash finishing the but the share this repurchase no repurchases that not notice in consumed to to

Let's turn to final guidance. slide our the for

First, a comment regarding COVID impacts.

beginning not QX, to so on the amount We forward, is or a Going as with report year and prior intend go-forward project do to a long basis. we revenue COVID nominal impact it estimated COVID amounts our be the of with believe of the quarters world COVID-related reflective on an X and in for they that revenue have past ongoing lives basis. been business will nominal a as are

the third be as $XXX with million $XXX quarter range a we in million If growth something million to of from past. to expected at XX revenue in acquisitions to the implies growth. XX% approximately X% the of of the be growth This tailwind estimate organic supporting of point revenue an will that a or said, information is have $XX of approximately a headwind in be foreign rate year-over-year. approximately exchange changes We and impact With to X of this points regard, of provide course, midpoint. midpoint we the

This million. B from Medical of approximately includes revenue $XX

just to point. landing for estimate Medical, revenue, given proven it final us B of the be challenging timing For has a to unpredictable

quarter. believe planned heavily business. to hand this reliable provides to So in our more external for and view guidance business of ship We the this shipped date this a orders orders around centered is

be million million. $XX expect of Including B $XX segment range to million. We of Medical, Products revenue, excluding is revenue to expected $XX B be to $XX total in the the to range Medical, Product million in

$X a million Services expect range adjusted of $X EBITDA negative be in million, to is million. to and anticipated positive be to $XX to approximately a We million the $XX revenue

quarter Non-GAAP these to $X.XX per of is we in starting between range to announced last that and of on per initiative realize expect net negative $X.X share $X.XX. expected track, remains a million earnings positive result to benefit as a actions. quarter a cost we QX savings The

our year, likely we to B our will the are our organic it of Much growth on initial that As shortfall businesses. a short expectations also we full slower timing fall ramp of is clear in for Medical, up the of in comes our look the results guidance. but

expectation revenue of Medical B mentioned forward, includes expect hand. approximately note you a as to $XXX when million we million We we from on will guidance now in at this Medical provide on order our earlier, going in should which based A actual the update in quarterly full to range based but orders guidance, time, quarter. this provide get B to I $XXX QX B anticipate $XXX book a the Medical. rough estimate on year We million us next the as number

With as line taken, quarter, the adjusted setting anticipate the improvement EBITDA we actions improvement XXXX. cost margin expectations fiscal in we for the additional us fiscal modest lower up and top exit in fourth

like revenue believe will our I call ultimately commercial Q&A alignment our improvement. further growth discuss topic goals The of new realignment the last to initiative. business and the strategy, would profitability We is before accelerate turning over the to drive

reductions we through this carry realize of SRS structure with directly will will will rationalization foresee structures XXXX, the assess management cost the to related the fiscal further As sample and come have acquired and some additional $XX realignment, combine solutions. management we guidance, business for will we expense come and approximately in leaner million enhance of Much through we More reporting. together when base the of the and we products we enter conjunction we segment will integration EBITDA. to

not seeing In change ahead the Azenta. in long-term closing, the are headwinds we do opportunity of business the sizable

executing and in to value sustainable improvement shareholders. a to remain are deliver to levels for committed at have all we and clear continuous that place, long-term plan. We our strategy We

I questions. over turn will the for the now to operator call

Operator

[Operator Instructions]. And from Paul your with KeyBanc. first question line the of comes Knight

Paul Knight

margins. Is QX around rate you would but growth you're first targeting I a Analyst -- that, doesn't you like think, roughly you're sound were to right? guiding going much, Steve, mentioned you your a EBITDA to that and that that in 'XX, back remains XX% goal. pretty It the, Day XX%

Stephen Schwartz

but fundamentals it, us the exist to Yes, to Paul, back for we're certainly get not there. guiding

So with growth the the us to opportunities it's there. the all is quarter-on-quarter, there, time to continue a of in little bit still rate going the to increase company all potential but take

our haven't realistic objectives at time, we remains a the that's because that for of our So We're they're objective. business period but hand. by those -- delayed

Paul Knight

And the more then -- thought Medical? at FY you B it? anticipated 'XX. down broken than Is you it that what's know I COVID or what million there on $XXX caused would

Now the we're there? at gap million, what's $XXX

Stephen Schwartz

Yes.

this Paul, So business. learning on we're

I projects think place. all in still the are

project when a the land it's that was in little opportunities be particularly that forecasting moment. this So changed. the that contracts get at moment. volatility level, it ability fact is to a getting aren't volatility the closed, that's matter to types sites, the the is there's at business, so we've we at unusual exist, of ultimately know hit bit it. well. that watch can though our the the It's watch fundamental we'd see But shipped. that we we a is at nothing continuing business, And generally look product extreme part of them have pipeline -- competitive won. we've the feels issues we And historically not We finally, the really tough we we -- to the capability, These little get bit if approved this see a served

of continue say terms from But was, what different without So certainly anything I I of it's that ahead. well. And any linearity, history maybe it plow won't Lindon laid us. to in the kind really for we're going new it's think to out visibility

are we where the rest we've given that of quarter. for this that's we can guide as this on what you time really that's telling and at the quarter count the in We're

everybody of that Of like get projects there's have another know course, we we we we a are to remains closed, in but status want can a there upside where so Medical QX. standpoint quarter on just B where had surprise from exactly don't

Paul Knight

September side on EBITDA period. we more Lindon, but on fiscal any my on give improved, June margin you and guess, be an the granularity you on lastly, 'XX? direction said can then And EBITDA would exit as I the sequentially it the margin here

Lindon Robertson

Yes. little gain incremental a a of we'll revenue the previously, we we've well albeit than cost With were some little that improvement. as still bit actions projecting taken as lower of

but fourth So won't we quarter, I'm as improvement we looking the anticipate. at exit for we don't the be modest level, XX%

we in we're single and the we'll looking in do improvement QX digits. for then be again as but modest QX, So in

Operator

Your next question Evercore Vijay ISI. comes with Kumar from the of line

Vijay Kumar

one maybe in Steve, on this guidance. back half

I double math I cetera. couple what guidance upon is acceleration implies correctly, organic think you it et think Medical, this customers half? low QX maybe did singles. And out the that half. B pushing I math ex business base back a XQ Destocking, And single-digit the and correct? the orders, business low the is If talk I'm up things. touched digits base about up for think drives back declines in what XQ. of think for But doing I drives

Lindon Robertson

quite Yes. degree you anticipating. move you accelerating the give but color is on organic It to I'll little COVID you're a growth. through, the that ex not as

just an our not So QX. we're we organic points, up the by midpoint about in on there's the up period, at comparative because roughly QX there down growth points and either but much only adjusting X way, see X% for our about midpoint -- were in whereas organic see we not X% in ex-COVID, ex-COVID, and X we not

in SRS we've as and would reflected SRS. genomics. well seeing in gone momentum And so then, this, realignment we've the traction support. on we continuation as I of genomics, but good seeing we calling the further year-over-year on highlight, pretty will think we're through into as April seen improvement the and a you're track, of We're And actions the as on course, go a both month we XXXX, And improvement modest basis. in that

large systems we half. the Products, from growth in see the On second do supported

had As second We some rescheduling expect in don't here that said, repeat. the to we quarter. we

is very installed team on sure as labor half. projects our fact, In the focused second reslot the be to the in completed as on the production making we well

growth will some in the help half well. that as second So support

highlight, in revenue amount would we something whether or of not. substantial as just have a quarter, we still Vijay, the couldn't space, we said last finished Product would I that, see in destocking is be the C&I. just this And

I've well. was in seen seen a and players as seen disappointment. that across it we've industry This they've quarter other the it, And

say may C&I take longer that would to back. we So get

softer counting that, not space. from the that's of on the call here growth we're So C&I is and in part

Vijay Kumar

gross just sequential that base? quarter, data. went lower And margins big a line? there this one was Understood. here like basis follow-up. in the it on, revenue Was just XXX on it's all a Or seems points, given anything Gross just the else margin manufacturing the variance just

Lindon Robertson

Yes.

So the away like on on for the Product we the side, out, on the biggest was by impact. impact called sure, B margin, lower production and Medical bigger far gross

more both Services you once Medical, of Products business down the well -- points. as B X both the as the remove However, than rest was

the cost lower services put On and a was some Product bit side, revenue But that side. system out. on actually quarter-to-quarter We modest systems with I on we definitely, weighed had the products. our and business we side, saw of in the C&I impact improvement the that what

SRS our the realignment, well. disclosed. previously I'll we to investors those businesses investor the current we On genomics deck, SRS earnings and has announced the we not back because on and highlight gross base, side, provide our genomics as And our in in captured Sara see for data data we pressures quarter which and historical some had the Services did margins of did good

of pressure and X really in a And you'll points see data So on clear SRS of quarter-to-quarter there. you'll about genomics. couple points see

we itself. the repeat With unusual memo our but for put a through. And was event that well, it that SRS credit margin, out that as said, revenue tarnish It a see have gross won't small business, that we us. put on an just our did on dropped in was

strong in SRS. still said, So with momentum that seeing I'm

up it'll we'll could but well, come SRS is enhancement on in in touch of a I the businesses. then genomics. we And think margins Expansion will come keep that's back QX, in capital see -- a growth. there some. also put both back in QX We there to little and as support

cetera. kind into we is So we there those for depreciation, But et always second on momentum half. of go perturbations have enhancement the as

Operator

comes question next of line Needham. David from with the Your Saxon

David Saxon

guidance on start now XX% the X-year guide, of Maybe expecting to prior versus XX%.

maybe and reduction that's about reduction the for split Medical think of in B I between X-point organic side kind a evenly business. the the of

break can these how reduction synthesis of at of you'd For you these timing some being store destocking terms order the out that being factors the large is organic recovery call out? and consumable auto the dynamics, pushed caused side, other by in much any

Lindon Robertson

Yes. my I'm going do to best.

is about -- close that we -- of million of XX the B of of out and of -- business. the I $XX million Product to projection rest seeing of out XX in the from growth $XX probably in let that's Products, the quarter short we're it's in the in of You're that that the differently ballpark, is A X to that the out -- gave about out is and business, say half half just right it in in we that and the midpoint. the the we in down were half me of that took roughly And -- about you, point just in million on $XX the base portion Products. of would the Medical

that the also we year factored on into the rest so of And C&I.

on a Steve cryo little be as we're to slower right well. the want we bit highlighted now that than business

half see the excluding Medical, can of So to be about product you the of side on in B just the that business, base.

little still The but of for we're slower in the terms other the in traction, momentum a genomics half, seeing build.

is we expand. that anticipate to so the then do continue And pieces will SRS. smaller And

-- guide SRS the into gaining steam than is as the progression past been it year stable X XXXX. we're XXX XX% higher sorry, I'm through most terms projection. but has the and Genomics, probably the of lower transactional in base, year in in growth our but over the continued or

David Saxon

helpful. it. a low could be sequential Got the there fiscal third end implies guidance, quarter that the super Okay. for on That's then And specifically contraction. services,

sounds gave, not is that. Just it like based you comments SRS just off the driving

So mentioned picking up genomics -- was your but into I March. remarks, prepared you thought in

ask, with So have decline continued recovery? third quarter? sequential be would just the the And around really then into low to I those the end, synthesis wanted implied fiscal that by the trends

Lindon Robertson

clarifying. that question Yes. appreciate No, I for

QX. QX expand to the bit in from Services So a seeing guidance business overall, we're our

a credit had and accumulation and memos that we pick some there. we're in we'll up small building mentioned, I SRS, issue As samples

ago both $X quarter-to-quarter pickup long million supported momentum with what to SRS at looking it's we seeing I the so we're we believe really every in to we're But $X quarter. that the When go progression on typical really up -- million genomics, guide, of is of to see in genomic our would we where million midpoint see. this just expand in $X X we're be and continues that, well, all not where So about say in some businesses. to this of a starting quarter what substantial in been modest expansion to side, used

second you $X And second would we the get quarter. in X, quarter. investors, the million feel we lower in so we're we In that the quarter, typically, momentum. synthesis all see seasonally the I genomics fiscal And fiscal gene Sanger NGS to quarter in highlight on should genomics the -- the to is in than NGS. in third seeing it saw But including highlight typically good the it I business, December the would million. $X And

takes expansion X then quarter, quarters, momentum on year-over-year $X that to X% of over starting aiming on And you're just quarter-over-quarter. double-digit the into we're a kind territory a a push you're million XX% is a this basis. It you're If at at. what

actions in last quarter put And expected be that this we place we this be As on to we that us going track. back repair low would the forward, the said point. had

that and across move place. quarter-to-quarter just we But to watch next so guidance, good. some I traction And we in continued still building in contemplated We on sales the as and that's path the we're point fully get resources. is is not in And think still these traction. investments put the X think quarters, we're all here there

Stephen Schwartz

what call it, by bit generating still Lindon about will direct skilled but it's between because a customers. we the say, I to we feel little David, this in We're on Steve. We as and the hiring I'll a people Lindon on mentioned, movement mentioned. there's pleased what add the is behind have, the good correlation focus we're genomics. know

So are the existing have that we for from most customers the improvements part.

the a always generated who've our past, So receiving customers customers, also recall tremendous I the accounts from number a we on help us standpoint, our we're more new that past, quarterly you capable the in growth help -- been business selling we a we company. people of to who it basis. for generated we'll as think if get long-term are from will back and And account that add

results particularly takes So we're be to to of to well. but because really continue It's add we're lot slow serve organization keen products, the to to encouraged skill the these a going be is date. by resources represent it going new here. us able We to to structure think

continued And you the March has had more we that asked momentum into one about question the April. momentum. Indeed,

So it here going how about business the into we're outlook makes and us seeing positive the QX.

David Saxon

it. the Got Okay. around year, is tracking million? just If for that the contribution In Barkey I $XX could a one. quick squeeze

Lindon Robertson

to big of market but a the in the million million with were space little and $X to below looking saw synergies instead squeezed our plus -- revenue $X million a them that $X two. trajectory off. noted seen cryo cell cryo been a to typically is to being have opportunities number similar we've the product this far it, quarterly of -- similar million this we've with $X what we we've between opportunities quarter what see while product, with $X And bit. gain between and we continue it's modestly at. do million we been what seeing gene we just them. And But And -- we disclosed haven't therapy cryo We our you're the from not with

Operator

of the next from comes Jacob with Stephens. question Johnson line Your

Jacob Johnson

Steve or Lindon. for Maybe for

a of Just question. kind higher-level

announced realignment. this You

term the efforts or it kind You've going on just talk near but to from lot a Medical whether B outside B Could the Medical not? makes the got maybe difficult realignment that's more sales a seems that that on. focus the and strategy least could to in around you some not going capacity distraction at the be maybe or about and of

Stephen Schwartz

Yes.

we the standpoint standing way the think, as They disturbing lumpiness is are the give Lindon to Medical most can it business alone a that guidance to obviously, presented we reiterate company. you. So way, Jacob, straightforward present of the from any B is the of so I'll

from not standpoint. that distraction it's So a

attention now, not there's There promise pay penetration use we I markets. earnout where how for for are the building need is but for make to the think opportunities some you'll but these booking opportunity who of some particular it distraction it's we in to to of a business have additional other the an period the company. recall they for here Azenta's us fulfill based capability are we that the on a chance payment sure they're do

a continues it's standpoint, really the limited. longer-term as effort. initiative, ongoing management It's So distraction it's The they business a from run an have. but to team

Jacob Johnson

of to wanted then check. a maybe X fronts. kind question just kind And of on I Steve, just macro

calling and on heard that probably just and of China. from you a some have anything it talk also challenging impact softness touch headwind impact you relates. maybe We've You of any as bit to have more then seeing for Can a there. the others most mentioned about kind region, on It saw strength just any macro. cryo there. also you're seems others of opportunity like potential large stores there give out of Is but

market I'm in So well. that you're as end what seeing curious just

Stephen Schwartz

Sure.

So Jacob, here. the Lindon and share I'll reply

Let me few. give you a

cryo reevaluate some units to particular of manufacturing process, on drug. companies particular had a I related a we when for pharma certainly macro think cryo their spend, larger the because numbers impact environment an that's maybe get of to to causing it's go

of that's those we're finally also capability shipping be get likely product of to we'll but that some solidified, think So when because decisions provider only it, the we them.

that's one seen. of we've that So the I things think

On worth we large stores, backlog. months' the have of than XX more

that ability our and we take can the the there mostly sure that's make delivery. So priority to reshuffle

if So product, aren't to ability ought shifting there we customers or spending a impact to able their who even XX% on of to be was take an accommodate.

So see to customers. stage with burn facilities weren't near-term different But the maybe to different like we ability or opportunity have impacts get completed. we to to that we and ship for products saw will down do projects backlog

the back half, of outside slow we stores ability the any to environment, in And so our it revenue shouldn't build us macro that's particular with large but the quarters. of the here next when would Lindon think it the on talks backlog increase perhaps, impact about over

back. a China, in we January, start the with came team on finally, but roaring had obviously, COVID then really And slower

in in performed even they more February March. and well particularly so So

So China. a lot in good of momentum there

on The quality where -- for most particularly is and we're and Asia, after the China are for the in teams So extremely well seems synthesis delivery China performing ledger China aggressively of side in from be they're source going they're work, of a our to business well standpoint. positive obviously, ramping us. a the it's on-time for

So vibrant. the pretty China active. for are And we're activities really us,

Operator

last from B. come Zhi your will And the of line Riley. question with Yuan

Yuan Zhi

the the the in remind agreement us B in only million incentive the delivering related case or firstly, revenue payment $XXX part. revenue, to to Maybe Medical of or can the milestone you acquisition linked

Lindon Robertson

reduce did the that target the an value the to we clear. struck had noted, and $XX Yes. as real a It's When deal made highlighted you of put million don't I'll good We earn-out. for but included accrual in deal, -- question. make the the gap, have the out, I it price opportunity we

achievable. had middle because didn't We accrued, thought also target. an accrue the team opportunity we gave some was the expectation that we that we that achieve portion in we that that entire to disclosed felt we the We the amount was of

gave them above premium what thought some reasonable. also was we We

off out we of had So the what accrued, accrued. that about We we originally earn-out initially. bit million of they've fallen $XX what a of million $XX.X took

down And back. opportunity they accrual to roaring have current the and with X so they're not way all bottom to the earn-out still in our come

not they roaring there more -- I I any quarter. than $XX be come think When don't overly opportunity have conservative. expect we million being put it I want this indication say that don't to to to back, We're

As this quarter. I highlighted quarter, they of the last didn't orders beyond point lot up a in pick

same as cautious and amount $XX that. about the it. that. time, quarter, this the to and And fourth we It $XXX would get million to that about that so tune million, we feel I've we'll the you But quarter on be on counts I highlight same got good the to at

the in that have projects mix. delayed still are But been the

more to But period. and down, hit numbers, that really And course. by it would get end up of the don't regrets We assessed the through have may now, of those have so X-year we paying we've be And predictability. the right -- to Yuan. paying of out no that out end accruing we time we about we if

a We're not year now, out think mostly. I So highlighted down fully of you've good metric the there. but

Yuan Zhi

you please different Lindon, it. clarify addition this, can Got that, to reason maybe, business margin but across have Medical, Yes. on the may you B segments. in And covered decrease for following

think we've already the segments Medical I business clarify but B other can part, covered as you the well?

Lindon Robertson

Yes.

So a one the other this I of bit covered of questions. in

So let be me more concise. try to

pull systems drop a have bit and good Products. -- On the we quarter-to-quarter then on bit the C&I degradation consumables Product the and hurt on with modest was driven side, system, But of more had a systems a the in it I products. because that fiscal that second quarter highlighted large through, mix services little inside us does a pullback. on And back improvement

third Products. in see the do quarter margin fiscal We of return some margin in on

our And so that we in have guidance. called

I points Services SRS. breakout X.X and did some In And had margin we side, that or about decline. points mentioned give the X.X genomics -- quarter-to-quarter we between

about a quarter sequential in about in the basis. second X X-point see SRS on I'm a and You'll fiscal drop sequentially, genomics points in

mix bit genomics be did by nice our add got But coming we quarter, a and little mix, significantly cost the increase back revenue, through. this it's a the in for the margin of And little take and be so genomics, little a points quarter and on do a the that But and next plan, will a labor. capacity implement, of in when bit business. service-based see a way, we in of that into on X headwind going salary to -- you bit drop

X credit did mentioned, it had In the in that memo impact points, SRS, SRS. a as I

to a don't for us. revenue the had back you're memo, are we credit bit QX, gross expect Again, margin really also on -- back some And when come expect those facility. unusual and going we We little in see bounce of expansion we there. of

Yuan, clear counting a So enhancement little of Medical, that on a Services and haven't follow-up on business, little excluding -- there. made but we're the guide, we margin our if sides a and anyway, in both see Products, B pressure QX but I

Operator

question-and-answer the turn you. Thank concludes the remarks. for that call Lindon session. And to back will I closing

Lindon Robertson

you. know the that we very just value, for opportunity also and time, that we At in set. know appreciate and but is this that disappointment versus Yes, We we was the what serving today, the investors us thank in past. serve we really expectations of future. we ahead in the in the expect right shareholder the we it's a quarter support And significant felt same be significant significant of not terms to what the

we growth. So see

taking We reinforce that. actions to we're see also and profitability,

another that $XX executed we've already million of cost EBITDA actions and -- by end the of previously for highlighted committed enhancement we on to year. be the We that had ready this calendar

successful. out little traction different to that of go removed bit hand, to across look growth the take work will on and that a a have quarter-to-quarter B the And the you And those of and that. that have taken taking on update visibility we quarters. We the More growth the variations business premise initiative for importantly the hopefully, traction. see and of being guess Medical But as volatility. And we giving that. we'll initiatives initiatives guidance, move by we that we in X next that direct surprise do to are orders out of as have to that we we'll is reporting some forward further us be the realignment you

next following through with to we you. as go you we you and quarter. tuning the we us, you with Thank forward in So look up appreciate

Operator

participation please call for you you your That that and today, your does line. for we conclude disconnect the thank conference ask

Azenta (AZTA) 9 May 232023 Q2 Earnings call transcript