Azenta(AZTA) - 2024 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements The unaudited financial statements for June 30, 2024, reflect decreased total assets and stockholders' equity, a $159.2 million net loss, and a $116.0 million goodwill impairment charge Condensed Consolidated Balance Sheets As of June 30, 2024, total assets decreased to $2.32 billion from $2.89 billion, while stockholders' equity fell to $1.99 billion, primarily due to share repurchases and net loss | Balance Sheet Item | June 30, 2024 (in thousands) | September 30, 2023 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $967,658 | $1,418,956 | | Cash and cash equivalents | $336,543 | $678,910 | | Goodwill | $679,691 | $784,339 | | Total Assets | $2,323,295 | $2,885,720 | | Total Liabilities | $332,897 | $351,220 | | Total Stockholders' Equity | $1,990,398 | $2,534,500 | Condensed Consolidated Statements of Operations For the nine months ended June 30, 2024, revenue slightly decreased to $486.3 million, leading to a $188.4 million operating loss and a $159.2 million net loss, primarily due to a $116.0 million impairment charge | Metric (in thousands, except EPS) | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenue | $486,260 | $492,715 | | Gross Profit | $193,953 | $195,106 | | Impairment of goodwill and intangible assets | $115,975 | $0 | | Operating Loss | ($188,386) | ($56,498) | | Loss from continuing operations | ($159,186) | ($15,689) | | Diluted Net Loss Per Share | ($2.90) | ($0.26) | | Metric (in thousands, except EPS) | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | | :--- | :--- | :--- | | Total Revenue | $172,809 | $165,948 | | Gross Profit | $69,056 | $68,005 | | Operating Loss | ($14,754) | ($15,836) | | Net Loss | ($6,582) | ($1,470) | | Diluted Net Loss Per Share | ($0.12) | ($0.02) | Condensed Consolidated Statements of Cash Flows For the nine months ended June 30, 2024, operating activities provided $36.6 million in cash, while $411.7 million was used in financing, primarily for share repurchases, resulting in a $337.2 million net cash decrease | Cash Flow Activity (in thousands) | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $36,578 | ($22,422) | | Net cash provided by investing activities | $29,406 | $328,897 | | Net cash used in financing activities | ($411,661) | ($677,221) | | Net decrease in cash, cash equivalents and restricted cash | ($337,182) | ($305,136) | - Share repurchases were the primary use of cash in financing activities, totaling $412.8 million for the nine months ended June 30, 2024[23] Notes to Condensed Consolidated Financial Statements Key notes detail a segment realignment, a $111.3 million goodwill impairment for B Medical Systems, a $10.5 million restructuring charge, and $412.6 million in share repurchases for 7.7 million shares - Effective October 1, 2023, the company realigned its organizational structure into three principal business segments: Sample Management Solutions (SMS), Multiomics, and B Medical Systems[31] - A non-cash goodwill impairment charge of $111.3 million was recorded for the B Medical Systems reporting unit as of March 31, 2024, due to reduced anticipated revenue growth rates[69][71] - In Q2 2024, the company launched a restructuring plan to improve profitability through facilities consolidation, portfolio optimization, and organizational simplification, expecting completion by the end of fiscal 2026. This resulted in $10.5 million in restructuring charges for the nine months ended June 30, 2024[78][82] - During the nine months ended June 30, 2024, the company repurchased 7.7 million shares of common stock for $412.6 million under its 2022 share repurchase authorization[89] | Revenue by Business Line (in thousands) | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Multiomics | $188,556 | $187,172 | | Core Products | $143,170 | $139,386 | | Sample Repository Solutions | $90,646 | $82,452 | | B Medical Systems | $63,888 | $83,705 | | Total Revenue | $486,260 | $492,715 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 1% revenue decrease to a 24% decline in B Medical Systems, with the $159.2 million net loss primarily due to a $116.0 million impairment charge, while liquidity remains strong despite share repurchases Results of Operations For the nine months ended June 30, 2024, revenue decreased 1.3% to $486.3 million, driven by a 23.7% decline in B Medical Systems, while operating expenses surged due to a $116.0 million impairment charge and increased restructuring costs | Revenue by Segment (in thousands) | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | % Change | | :--- | :--- | :--- | :--- | | Sample Management Solutions | $233,816 | $221,838 | 5.4% | | Multiomics | $188,556 | $187,172 | 0.7% | | B Medical Systems | $63,888 | $83,705 | (23.7)% | | Total Revenue | $486,260 | $492,715 | (1.3)% | - The B Medical Systems segment's revenue decline was primarily due to the timing of orders for cold chain equipment[174] | Adjusted Operating Income (Loss) by Segment (in thousands) | Nine Months Ended June 30, 2024 | Nine Months Ended June 30, 2023 | | :--- | :--- | :--- | | Sample Management Solutions | $981 | ($8,261) | | Multiomics | ($7,147) | ($10,487) | | B Medical Systems | ($3,654) | $4,456 | | Total Segment Adjusted Operating Loss | ($9,820) | ($14,292) | - Restructuring charges increased to $10.5 million for the nine months ended June 30, 2024, up from $3.8 million in the prior year, driven by new initiatives launched in fiscal 2024[209] Liquidity and Capital Resources As of June 30, 2024, liquidity decreased to $754.2 million from $1.13 billion, primarily due to $412.8 million in share repurchases, with $249 million remaining under the repurchase authorization | Liquidity (in thousands) | June 30, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $336,543 | $678,910 | | Marketable securities (Short & Long-term) | $407,382 | $450,211 | | Total Cash, Equivalents, & Securities | $754,245 | $1,134,256 | - Under the $1.5 billion 2022 Share Repurchase Authorization, the company has repurchased 25.1 million shares for $1.25 billion as of June 30, 2024, with $249 million remaining[221][222] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on its $407.4 million investment portfolio and currency risk from foreign transactions, with foreign sales comprising 25% of total sales for the nine months ended June 30, 2024 - A hypothetical 100 basis point change in interest rates would impact interest income by approximately $6.1 million for the nine months ended June 30, 2024[225] - Sales in foreign currencies were approximately 25% of total sales for the nine months ended June 30, 2024. The company incurred foreign currency losses of $1.7 million during this period[226][227] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2024, with no material changes to internal control over financial reporting during the quarter - Based on an evaluation as of June 30, 2024, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective[228] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is subject to various legal proceedings arising in the ordinary course of business but does not believe any current claims will have a material adverse effect on its financial condition or results of operations - The company states that it is subject to various legal proceedings but does not expect them to have a material adverse effect on its consolidated financial condition or results of operations[229] Item 1A. Risk Factors No material changes have occurred to the risk factors disclosed in the 2023 Annual Report on Form 10-K or the prior quarterly report - No material changes have occurred to the risk factors disclosed in the 2023 Annual Report on Form 10-K or the prior quarterly report[230] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended June 30, 2024, the company repurchased a total of 4,225,825 shares of its common stock at an average price of $53.45 per share under its publicly announced repurchase program | Period (2024) | Total Shares Purchased | Average Price Paid ($) | | :--- | :--- | :--- | | April | 1,275,309 | $54.91 | | May | 1,594,243 | $52.00 | | June | 1,356,273 | $53.78 | | Total Q3 FY24 | 4,225,825 | $53.45 |