Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended: December 31, 2022 OR ☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from __________ to _________ Commission File Number 000-25434 AZENTA, INC. (Exact name of registrant as specified in its charter) Delaware 04 ...

Azenta, Inc. (NASDAQ:AZTA) Q4 2022 Earnings Conference Call November 14, 2022 4:30 PM ET Company Participants Sara Silverman - Head, IR Stephen Schwartz - CEO, President & Director Lindon Robertson - EVP & CFO Conference Call Participants Vijay Kumar - Evercore ISI David Saxon - Needham & Company Jacob Johnson - Stephens Inc. Yuan Zhi - B. Riley Securities Operator Greetings, and welcome to the Azenta Q4 2022 Financial Results. [Operator Instructions]. As a reminder, this conference is being recorded Monday ...

PART I. FINANCIAL INFORMATION [Item 1. Consolidated Financial Statements](index=4&type=section&id=Item%201%2E%20Consolidated%20Financial%20Statements) The consolidated financial statements present Azenta's financial position and performance, restated to reflect the semiconductor automation business as a discontinued operation, showing increased cash and a substantial net income for the nine-month period driven by divestiture gains Financial Statement Summary | Financial Statement | Period | Key Figure (in thousands) | | :--- | :--- | :--- | | **Balance Sheet** | As of June 30, 2022 | Total Assets: $3,722,717 | | | | Total Liabilities: $294,931 | | | | Total Stockholders' Equity: $3,427,786 | | **Statement of Operations** | Three months ended June 30, 2022 | Total Revenue: $132,735 | | | | Loss from continuing operations: $(7,015) | | | | Net (Loss) Income: $(9,570) | | **Statement of Operations** | Nine months ended June 30, 2022 | Total Revenue: $417,931 | | | | Loss from continuing operations: $(5,973) | | | | Net Income: $2,153,624 | | **Statement of Cash Flows** | Nine months ended June 30, 2022 | Net cash (used in) operating activities: $(475,680) | | | | Net cash provided by investing activities: $1,840,068 | | | | Net cash used in financing activities: $(64,513) | [Note 1. Nature of Operation](index=11&type=section&id=1%2E%20Nature%20of%20Operation) Azenta operates as a global provider of life science sample exploration and management solutions, having divested its semiconductor automation business for $2.9 billion - The company is a global provider of life science sample exploration and management solutions, supporting customers from research to clinical development[22](index=22&type=chunk) - On February 1, 2022, the company completed the sale of its semiconductor automation business for **$2.9 billion** in cash, with expected net proceeds of **$2.5 billion** after taxes and costs, now classified as a discontinued operation[23](index=23&type=chunk)[24](index=24&type=chunk) - The COVID-19 pandemic has not had a substantial negative impact on financial results, partly mitigated by realignment of resources to support virus research and vaccine development[26](index=26&type=chunk) [Note 3. Discontinued Operations](index=20&type=section&id=3%2E%20Discontinued%20Operations) The company completed the sale of its semiconductor automation business for $2.9 billion, resulting in a pre-tax gain of $2.6 billion included in net income from discontinued operations - The sale of the semiconductor automation business was completed on February 1, 2022, for **$2.9 billion** in cash, with expected net proceeds of **$2.5 billion** after taxes[56](index=56&type=chunk) Discontinued Operations (Semiconductor) | Discontinued Operations (Semiconductor) | Nine Months Ended June 30, 2022 (in thousands) | Nine Months Ended June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $264,430 | $474,674 | | (Loss) gain on divestiture | $2,560,384 | $0 | | Net income from discontinued operations | $2,159,597 | $95,414 | [Note 5. Acquisitions](index=25&type=section&id=5%2E%20Acquisitions) The company completed two acquisitions in fiscal 2021, Abeyatech LLC for $9.9 million and Trans-Hit Biomarkers Inc. for $15.1 million, to enhance its life sciences offerings - Acquired Abeyatech LLC on April 2, 2021, for **$9.9 million** cash and **$9.4 million** in contingent consideration to enhance the Life Sciences Products segment[76](index=76&type=chunk) - Acquired Trans-Hit Biomarkers Inc. on December 3, 2020, for approximately **$15.1 million** cash to expand the Life Sciences Services segment[78](index=78&type=chunk) [Note 7. Debt and Line of Credit](index=29&type=section&id=7%2E%20Debt%20and%20Line%20of%20Credit) Following the sale of its semiconductor automation business, Azenta used $49.7 million to extinguish its term loan and terminated its revolving line of credit, resulting in a $0.6 million loss on debt extinguishment - On February 1, 2022, the company used **$49.7 million** of proceeds from the semiconductor business sale to extinguish its outstanding term loan[89](index=89&type=chunk) - The company terminated its revolving line of credit, which had no borrowings outstanding, and recorded a loss on debt extinguishment of **$0.6 million**[89](index=89&type=chunk) [Note 12. Earnings per Share](index=41&type=section&id=12%2E%20Earnings%20per%20Share) For the nine months ended June 30, 2022, the company reported a diluted net income per share of $28.76, primarily driven by a significant gain from the sale of the semiconductor business Earnings Per Share (Diluted) | Earnings Per Share (Diluted) | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Loss from continuing operations | $(0.08) | $(0.09) | | Income from discontinued operations | $28.84 | $1.29 | | **Diluted net income per share** | **$28.76** | **$1.20** | [Note 13. Revenue from Contracts with Customers](index=41&type=section&id=13%2E%20Revenue%20from%20Contracts%20with%20Customers) The company disaggregates its revenue into Life Sciences Products, Sample Repository Solutions, and Genomic Services, with total revenue of $417.9 million for the nine months ended June 30, 2022, and $63.7 million in remaining performance obligations Revenue by Business Line | Revenue by Business Line (in thousands) | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Life Sciences Products | $150,861 | $146,490 | | Sample Repository Solutions | $78,806 | $64,496 | | Genomic Services | $188,264 | $165,778 | | **Total** | **$417,931** | **$376,764** | - As of June 30, 2022, remaining performance obligations totaled **$63.7 million**, with **$35.7 million** expected to be recognized as revenue within one year[135](index=135&type=chunk)[137](index=137&type=chunk) [Note 14. Segment and Geographic Information](index=45&type=section&id=14%2E%20Segment%20and%20Geographic%20Information) Azenta operates in Life Sciences Products and Services segments, with the Services segment generating $267.1 million and the Products segment $150.9 million in revenue for the nine months ended June 30, 2022, primarily from North America Segment Revenue | Segment Revenue (in thousands) | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | Life Sciences Products | $150,861 | $146,520 | | Life Sciences Services | $267,070 | $230,244 | | **Total Revenue** | **$417,931** | **$376,764** | Revenue by Geography | Revenue by Geography (in thousands) | Nine Months Ended June 30, 2022 | Nine Months Ended June 30, 2021 | | :--- | :--- | :--- | | North America | $285,283 | $236,939 | | Europe | $75,863 | $82,412 | | China | $33,936 | $33,869 | | Asia Pacific/ Other | $22,849 | $23,544 | | **Total** | **$417,931** | **$376,764** | [Note 18. Subsequent Event](index=52&type=section&id=18%2E%20Subsequent%20Event) After the quarter ended, Azenta continued its acquisition strategy by acquiring Barkey Holding GmbH for approximately €80.0 million and agreeing to acquire B Medical Systems S.a.r.l for approximately €410 million plus contingent payments - On July 1, 2022, the company acquired Barkey Holding GmbH, a provider of controlled rate thawing devices, for approximately **€80.0 million**[170](index=170&type=chunk) - On August 8, 2022, the company agreed to acquire B Medical Systems, a leader in temperature-controlled storage and transportation, for approximately **€410 million**, plus up to **€50 million** in contingent payments[171](index=171&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202%2E%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's discussion centers on the company's transformation into a pure-play life sciences entity following the $2.9 billion sale of its semiconductor automation business, significantly boosting liquidity and funding strategic acquisitions [Overview](index=57&type=section&id=Overview) Azenta is now a leading global provider of life science sample exploration and management solutions, with a strategy combining internal development and strategic acquisitions to build a comprehensive portfolio - The company is a leading global provider of life science sample exploration and management solutions, supporting customers from research to clinical development[183](index=183&type=chunk) - Azenta's strategy combines internal R&D with acquisitions to accelerate time-to-market for its comprehensive sample-based service offerings[185](index=185&type=chunk) [Results of Operations](index=60&type=section&id=Results%20of%20Operations) For Q3 fiscal 2022, revenue increased 3% to $132.7 million, but gross margin declined to 44.9%, leading to an operating loss of $5.1 million, while nine-month revenue grew 11% to $417.9 million with a $10.1 million operating loss Revenue by Segment | Revenue by Segment (in thousands) | Q3 2022 | Q3 2021 | % Change | | :--- | :--- | :--- | :--- | | Life Sciences Products | $47,369 | $48,625 | (3)% | | Life Sciences Services | $85,366 | $80,462 | 6% | | **Total Revenue** | **$132,735** | **$129,087** | **3%** | Key Metrics | Key Metrics | Q3 2022 | Q3 2021 | | :--- | :--- | :--- | | Gross Margin | 44.9% | 48.4% | | Operating Loss (in thousands) | $(5,073) | $(883) | - For the nine months ended June 30, 2022, revenue increased **11%** to **$417.9 million**, while operating loss was **$10.1 million** compared to **$9.8 million** in the prior year period[191](index=191&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity significantly strengthened to $2.5 billion in cash and marketable securities at June 30, 2022, primarily due to $2.9 billion in divestiture proceeds used to extinguish all outstanding debt and fund operations Liquidity | Liquidity (in thousands) | June 30, 2022 | September 30, 2021 | | :--- | :--- | :--- | | Cash and cash equivalents | $1,474,189 | $227,427 | | Marketable securities | $1,021,090 | $3,679 | | **Total Cash & Marketable Securities** | **$2,495,279** | **$231,106** | - On February 1, 2022, the company used **$49.7 million** of proceeds from its divestiture to extinguish all outstanding debt and terminated its revolving line of credit[239](index=239&type=chunk) - Cash outflows from operating activities for the nine months ended June 30, 2022 were **$475.7 million**, which included **$431.6 million** in cash taxes paid related to the semiconductor business sale[241](index=241&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=78&type=section&id=Item%203%2E%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate and foreign currency fluctuations, with a hypothetical 100 basis point interest rate change impacting interest income by approximately $8 million on its $1 billion investment portfolio, and uses forward contracts to mitigate foreign currency risk on 37% of sales - A hypothetical **100 basis point** change in interest rates would result in an approximate **$8 million** change in interest income on the company's **$1 billion** investment portfolio[253](index=253&type=chunk) - Sales in currencies other than the U.S. dollar were approximately **37%** of total sales for the nine months ended June 30, 2022, and the company utilizes forward contracts to mitigate currency risk[255](index=255&type=chunk)[256](index=256&type=chunk) [Item 4. Controls and Procedures](index=79&type=section&id=Item%204%2E%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures are effective, with no material changes in internal control over financial reporting during the most recent fiscal quarter - Management, including the CEO and CFO, has concluded that the company's disclosure controls and procedures are effective as of June 30, 2022[257](index=257&type=chunk) - No material changes occurred in internal control over financial reporting during the third fiscal quarter[257](index=257&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=80&type=section&id=Item%201%2E%20Legal%20Proceedings) The company is subject to various legal proceedings in the ordinary course of business, none of which management believes will have a material adverse effect on its financial condition or results of operations - The company is subject to ordinary course legal proceedings but does not believe any will have a material adverse effect on its financial condition or results of operations[262](index=262&type=chunk) [Item 1A. Risk Factors](index=80&type=section&id=Item%201A%2E%20Risk%20Factors) There have been no material changes from the risk factors previously disclosed in the company's 2021 Annual Report on Form 10-K and subsequent quarterly reports - There have been no material changes from the risk factors disclosed in the 2021 Annual Report on Form 10-K and subsequent quarterly filings[263](index=263&type=chunk) [Item 6. Exhibits](index=80&type=section&id=Item%206%2E%20Exhibits) This section lists the exhibits filed with the quarterly report, including the certifications by the CEO and CFO as required by the Sarbanes-Oxley Act of 2002 and the Interactive Data File (iXBRL) - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[264](index=264&type=chunk)

PART I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Brooks Automation, a global life science sample management provider, is rebranding as Azenta Life Sciences following the planned $3.0 billion sale of its semiconductor automation business - The company is a leading global provider of life science sample exploration and management solutions, serving pharmaceutical, biotechnology, and research institutions[7](index=7&type=chunk) - In Q4 of fiscal year 2021, the company agreed to sell its semiconductor automation business to Thomas H. Lee Partners, L.P. (THL) for approximately **$3.0 billion** in cash, now treated as discontinued operations[10](index=10&type=chunk) - The remaining life sciences business, comprising Life Sciences Products and Life Sciences Services segments, will be rebranded as Azenta Life Sciences in the first half of fiscal year 2022[10](index=10&type=chunk) - The business is organized into two reportable segments: Life Sciences Products (automated ultra-cold storage, consumables, instruments) and Life Sciences Services (genomic analysis, sample repository solutions, informatics)[14](index=14&type=chunk)[15](index=15&type=chunk)[19](index=19&type=chunk) - As of September 30, 2021, the company employed approximately **2,800 people** and utilized **80 contingent associates**, with approximately **48% of employees being gender diverse** and **41% of U.S.-based employees identifying as racially diverse**[34](index=34&type=chunk)[35](index=35&type=chunk) [Item 1A. Risk Factors](index=16&type=section&id=Item%201A.%20Risk%20Factors) The company faces risks from the COVID-19 pandemic, the pending semiconductor business sale, operational fluctuations, international complexities, and reliance on key suppliers and customers - The COVID-19 pandemic could adversely affect financial conditions through supply chain disruptions, logistics issues, and reduced customer demand[43](index=43&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk) - The pending sale of the semiconductor automation business poses risks, including potential disruption, management distraction, and negative impacts on stock price and business prospects if the sale is not completed[50](index=50&type=chunk)[52](index=52&type=chunk) - Operating results are subject to significant fluctuation due to factors like order timing, product mix, new product acceptance, and competitive pressures[53](index=53&type=chunk) - International operations, which accounted for **38% of revenue in FY2021**, expose the company to risks such as tariffs, currency fluctuations, and political instability[57](index=57&type=chunk) - The company relies on a limited number of customers, with the **ten largest accounting for approximately 19% of total revenue in fiscal year 2021**[97](index=97&type=chunk) - The company's stock price is volatile, having fluctuated between a high of **$109.17** and a low of **$46.70 per share** from the beginning of fiscal year 2020 through the end of fiscal year 2021[101](index=101&type=chunk) [Item 1B. Unresolved Staff Comments](index=39&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[109](index=109&type=chunk) [Item 2. Properties](index=39&type=section&id=Item%202.%20Properties) The company's primary facilities include an owned 298,000 sq. ft. headquarters in Chelmsford, MA, which is part of the planned semiconductor business sale, and leased sites in Indianapolis and Suzhou Principal Facilities as of September 30, 2021 | Location | Functions | Square Footage (Approx.) | Ownership Status/Lease Expiration | | :--- | :--- | :--- | :--- | | Chelmsford, Massachusetts | Corporate headquarters, training, manufacturing, R&D and sales & support | 298,000 | Owned | | Indianapolis, Indiana | Sample storage, sales & support | 116,700 | September 2038 | | Suzhou, China | Laboratory & office | 116,800 | June 2022 | - The Chelmsford, MA facility will be included in the sale of the semiconductor automation business, after which the company will lease space there temporarily while transitioning to a new corporate headquarters[110](index=110&type=chunk) [Item 3. Legal Proceedings](index=39&type=section&id=Item%203.%20Legal%20Proceedings) The company is subject to various legal proceedings arising in the ordinary course of business but believes that none of these claims will have a material adverse effect on its consolidated financial condition or results of operations as of the report date - The company is subject to various legal proceedings from the ordinary course of business but does not expect any to have a material adverse effect on its financial condition or operations[112](index=112&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[113](index=113&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=40&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock symbol will change to "AZTA" on December 1, 2021, with quarterly dividends ceasing post-semiconductor business sale, and no share repurchases in fiscal year 2021 - The company's stock trading symbol will change from "BRKS" to "**AZTA**" on **December 1, 2021**[114](index=114&type=chunk) - The company intends to discontinue its quarterly dividend upon the completion of the sale of its semiconductor automation business[116](index=116&type=chunk) Comparative 5-Year Cumulative Total Shareholder Return | | 9/30/2016 | 9/30/2017 | 9/30/2018 | 9/30/2019 | 9/30/2020 | 9/30/2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Brooks Automation, Inc. | $100.00 | $227.15 | $265.67 | $284.25 | $358.55 | $797.18 | | Nasdaq/NYSE American/NYSE | $100.00 | $120.08 | $136.91 | $139.19 | $159.63 | $199.90 | | Peer Group | $100.00 | $162.43 | $174.41 | $205.33 | $233.59 | $359.77 | - No shares were repurchased under the company's **$50.0 million** share repurchase program during the fiscal year ended September 30, 2021[121](index=121&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes the financial condition and operating results of the continuing Life Sciences business, detailing revenue growth, margin expansion, and liquidity, while noting the planned semiconductor business sale and rebranding [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=76&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from interest rate fluctuations on its variable-rate term loan and foreign currency exposure from non-U.S. dollar sales, partially mitigated by forward contracts - The company is exposed to interest rate risk on its variable-rate term loan; a hypothetical **100 basis point** change in interest rates would result in a **$0.5 million** change in annual interest expense[251](index=251&type=chunk) - Sales in currencies other than the U.S. dollar constituted **37% of total sales in fiscal year 2021**, and the company utilizes forward contracts to mitigate currency exposure[253](index=253&type=chunk)[254](index=254&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=77&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the audited consolidated financial statements for fiscal years 2019-2021, restated to reflect the semiconductor automation business as a discontinued operation [Item 9. Changes in and Disagreements with Accountants on Financial Accounting and Financial Disclosure](index=153&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Financial%20Accounting%20and%20Financial%20Disclosure) This item is not applicable to the company - Not applicable[534](index=534&type=chunk) [Item 9A. Controls and Procedures](index=153&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management and the independent auditor concluded that the company's disclosure controls and internal control over financial reporting were effective as of September 30, 2021 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021[535](index=535&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of September 30, 2021, based on the COSO framework[537](index=537&type=chunk) [Item 9B. Other Information](index=154&type=section&id=Item%209B.%20Other%20Information) There is no other information to report for this item - None[539](index=539&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=154&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2022 annual meeting of stockholders - Information is incorporated by reference from the registrant's Proxy Statement[540](index=540&type=chunk) [Item 11. Executive Compensation](index=154&type=section&id=Item%2011.%20Executive%20Compensation) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2022 annual meeting of stockholders - Information is incorporated by reference from the registrant's Proxy Statement[541](index=541&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=154&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2022 annual meeting of stockholders - Information is incorporated by reference from the registrant's Proxy Statement[541](index=541&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=154&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2022 annual meeting of stockholders - Information is incorporated by reference from the registrant's Proxy Statement[542](index=542&type=chunk) [Item 14. Principal Accountant Fees and Services](index=154&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) The information required for this item is incorporated by reference from the company's definitive proxy statement for its 2022 annual meeting of stockholders - Information is incorporated by reference from the registrant's Proxy Statement[543](index=543&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=155&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists financial statements and comprehensive exhibits filed with the Form 10-K, including key agreements and compensation plans - The Consolidated Financial Statements are included under Part II, Item 8 of the Form 10-K[544](index=544&type=chunk) - Key exhibits filed include the Equity Interest Purchase Agreement for the sale of the semiconductor business, credit agreements, and various executive compensation and equity incentive plan documents[545](index=545&type=chunk)[546](index=546&type=chunk)[547](index=547&type=chunk) [Item 16. Form 10-K Summary](index=159&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided - None[549](index=549&type=chunk)