Azenta(AZTA) - 2025 Q2 - Quarterly Report

Information Related to Forward-Looking Statements This section outlines the nature of forward-looking statements within the report, emphasizing inherent risks and the Company's non-obligation to update them - The report contains forward-looking statements regarding future revenue, margins, costs, operating expenses, tax expenses, capital expenditures, earnings, profitability, product development, market share, competitiveness, and other business aspects. These statements are based on current expectations and involve risks and uncertainties that could cause actual results to differ materially[11] - Readers are cautioned not to place undue reliance on these statements, which speak only as of the report date. The Company does not undertake any obligation to revise these statements to reflect events or circumstances occurring after the report date[11] Trademarks, Trade Names and Service Marks This section clarifies the inclusion and protection of the Company's trademarks, trade names, and service marks within the report - The report includes the Company's trademarks, trade names, and service marks, which are protected under intellectual property laws. The omission of ®️, ™️, and SM symbols does not indicate a waiver of rights[14] Industry and Other Data This section details the basis for industry and market data, acknowledging its reliance on management estimates and third-party sources, subject to inherent uncertainties - Information regarding the Company's industry and markets is based on management's estimates and research, as well as third-party publications. While believed to be reliable, this data involves assumptions and limitations subject to uncertainty and risk, which could cause future performance to differ from estimates[16] PART I. Financial Information This part presents Azenta, Inc.'s comprehensive financial data, including statements, notes, and management's analysis of operations and financial condition Item 1. Financial Statements This section presents Azenta, Inc.'s unaudited condensed consolidated financial statements for the periods ended March 31, 2025, and September 30, 2024, including balance sheets, statements of operations, comprehensive income (loss), cash flows, and changes in stockholders' equity. It also includes detailed notes explaining the nature of operations, significant accounting policies, discontinued operations, marketable securities, derivative instruments, goodwill and intangible assets, restructuring, supplementary balance sheet information, stockholders' equity, revenue recognition, stock-based compensation, fair value measurements, income taxes, net loss per share, segment and geographic information, and commitments and contingencies Condensed Consolidated Balance Sheets This section presents a snapshot of the Company's financial position, detailing assets, liabilities, and equity at specific reporting dates | Metric | March 31, 2025 (in thousands) | September 30, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | Total Assets | $2,041,925 | $2,100,041 | | Total Liabilities | $340,433 | $331,074 | | Total Stockholders' Equity | $1,701,492 | $1,768,967 | - Total assets decreased by $58.1 million, primarily due to a decrease in current assets, including cash and cash equivalents and short-term marketable securities, partially offset by an increase in long-term marketable securities[19] - Total stockholders' equity decreased by $67.5 million, mainly due to a net loss and accumulated other comprehensive loss[19] Condensed Consolidated Statements of Operations This section details the Company's financial performance over specific periods, including revenue, gross profit, operating loss, and net loss | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Revenue | $143,418 | $136,355 | $290,928 | $278,080 | | Gross Profit | $65,886 | $60,664 | $134,557 | $122,407 | | Operating Loss | $(16,151) | $(24,213) | $(27,504) | $(40,458) | | Loss from Continuing Operations | $(18,185) | $(16,202) | $(27,606) | $(23,394) | | Loss from Discontinued Operations, net of tax | $(22,271) | $(120,678) | $(26,190) | $(129,210) | | Net Loss | $(40,456) | $(136,880) | $(53,796) | $(152,604) | | Basic Net Loss Per Share | $(0.88) | $(2.47) | $(1.18) | $(2.72) | - Total revenue increased by 5.2% for the three months and 4.6% for the six months ended March 31, 2025, compared to the prior year periods[22] - Net loss significantly decreased from $(136.9) million to $(40.5) million for the three months, and from $(152.6) million to $(53.8) million for the six months, primarily due to a substantial reduction in loss from discontinued operations[22] Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the Company's comprehensive income or loss, including net loss and other comprehensive income (loss) components | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Loss | $(40,456) | $(136,880) | $(53,796) | $(152,604) | | Total Other Comprehensive Income (Loss), net of tax | $13,088 | $(14,944) | $(28,685) | $20,698 | | Comprehensive Loss | $(27,368) | $(151,824) | $(82,481) | $(131,906) | - Comprehensive loss decreased significantly for both the three and six months ended March 31, 2025, compared to the prior year, driven by a reduced net loss and a positive shift in other comprehensive income (loss) for the three-month period[23] Condensed Consolidated Statements of Cash Flows This section outlines the Company's cash inflows and outflows from operating, investing, and financing activities over specific periods | Metric (in thousands) | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by operating activities | $44,201 | $22,371 | | Net cash used in investing activities | $(61,586) | $(173,009) | | Net cash used in financing activities | $(10,280) | $(185,542) | | Net decrease in cash, cash equivalents and restricted cash | $(32,124) | $(319,925) | | Cash, cash equivalents and restricted cash, end of period | $288,866 | $364,120 | - Net cash provided by operating activities increased to $44.2 million for the six months ended March 31, 2025, from $22.4 million in the prior year, primarily due to increased revenue and collections, and a U.S. federal tax refund[26][168] - Net cash used in investing activities significantly decreased to $(61.6) million from $(173.0) million, mainly due to lower purchases of marketable securities[26] - Net cash used in financing activities decreased to $(10.3) million from $(185.5) million, largely due to the absence of share repurchases in the current period[26] Condensed Consolidated Statements of Changes in Stockholders' Equity This section details changes in the Company's stockholders' equity, including common stock, retained earnings, and accumulated other comprehensive loss | Metric (in thousands) | March 31, 2025 | September 30, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Stockholders' Equity | $1,701,492 | $1,768,967 | | Common Stock Shares Outstanding | 45,776,018 | 45,570,084 | | Retained Earnings | $1,423,043 | $1,476,839 | | Accumulated Other Comprehensive Loss | $(42,149) | $(13,464) | - Total stockholders' equity decreased by $67.5 million from September 30, 2024, to March 31, 2025, primarily due to a net loss of $53.8 million and an increase in accumulated other comprehensive loss[29][30] - No share repurchases occurred during the six months ended March 31, 2025, compared to $186.8 million in repurchases during the same period in the prior fiscal year[80] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and supplementary information for the condensed consolidated financial statements, clarifying accounting policies and specific accounts 1. Nature of Operations - Azenta, Inc. is a global provider of biological and chemical compound sample exploration and management solutions for the life sciences industry, offering sample management, automated storage, genomic services, and sample consumables[32] - The Company announced a plan to sell its B Medical Systems business in Q1 fiscal year 2025, which has been classified as held for sale and discontinued operations. This divestiture aims to simplify the portfolio and focus on core Sample Management Solutions and Multiomics segments[33][34] 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with GAAP, consolidating all entities with controlling financial interest. Certain information is condensed or omitted compared to annual statements[36][37][38] - The Company revised previously issued Condensed Consolidated Statements of Cash Flows for classification errors, primarily related to exchange rate changes and other immaterial reclassifications, which did not impact net income or total cash[39][40] - Management makes estimates and assumptions for various accounts, including accounts receivable, inventories, goodwill, and deferred income taxes, which are assessed on an ongoing basis[41] - Net foreign currency transaction and remeasurement losses were $1.6 million and $1.1 million for the three and six months ended March 31, 2025, respectively[42] - The Company is evaluating new accounting standards (ASU 2023-07, ASU 2023-09, ASU 2024-03, ASU 2025-01) and SEC climate-related disclosure rules, but does not expect a material impact from OECD Pillar II global minimum tax rules[43][44][45][46][47] 3. Discontinued Operations - Azenta announced its plan to sell the B Medical Systems business in Q1 fiscal year 2025, classifying it as 'held for sale' and 'discontinued operations' as of November 12, 2024. This aims to simplify the portfolio and focus on core life sciences businesses[49][50] - The Company recorded a $24 million loss on assets held for sale during the three months ended March 31, 2025, as the B Medical Systems segment was measured at the lower of carrying value or fair value less cost to sell[51] B Medical Systems Segment Financial Results (Discontinued Operations, in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Revenue | $17,206 | $22,779 | $34,797 | $35,371 | | Gross Profit | $5,673 | $2,722 | $8,536 | $2,490 | | Operating Loss | $(27,808) | $(122,741) | $(33,081) | $(133,174) | | Loss from Discontinued Operations, net of tax | $(21,891) | $(120,678) | $(25,810) | $(129,210) | - The Company accrued an additional $0.4 million liability for the 2020 Claim related to the semiconductor cryogenics business sale, resulting in a total accrual of $2.1 million as of March 31, 2025[55] 4. Marketable Securities - Sales and maturities of marketable securities were $59.0 million and $184.6 million for the three and six months ended March 31, 2025, respectively, with immaterial realized gains or losses[59] Marketable Securities Summary (in thousands) | Category | March 31, 2025 Fair Value | September 30, 2024 Fair Value | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | U.S. Treasury securities and obligations of U.S. government agencies | $214,959 | $118,091 | | Bank certificates of deposit | $1,973 | $5,200 | | Corporate securities | $25,223 | $77,325 | | Municipal securities | $9,323 | N/A | | Total Marketable Securities | $251,478 | $200,616 | - The Company's marketable securities portfolio increased to $251.5 million as of March 31, 2025, from $200.6 million as of September 30, 2024, with a significant shift towards U.S. Treasury securities[60] 5. Derivative Instruments - The Company uses foreign exchange contracts to reduce exposure to currency fluctuations, primarily in Germany, the UK, and China. Realized losses on undesignated derivatives were $(1.4) million and $(0.2) million for the three and six months ended March 31, 2025, respectively[62] Notional Amounts of Derivative Instruments (in thousands) | Hedge Designation | March 31, 2025 | September 30, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Investment Hedge (Cross-currency swap) | $260,025 | $75,978 | | Undesignated (Foreign exchange contracts) | $58,920 | $60,101 | - On February 3, 2025, the Company entered into a new cross-currency swap agreement to hedge $260.0 million for €250.0 million, maturing on February 2, 2026, designated as a hedge of net investments[65] 6. Goodwill and Intangible Assets Goodwill by Segment (in thousands) | Segment | October 1, 2024 Balance | Currency Translation Adjustments | March 31, 2025 Balance | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions | $494,649 | $(8,454) | $486,195 | | Multiomics | $196,760 | — | $196,760 | | Total Goodwill | $691,409 | $(8,454) | $682,955 | - Goodwill decreased by $8.5 million from September 30, 2024, to March 31, 2025, primarily due to currency translation adjustments in the Sample Management Solutions segment[71] Identifiable Intangible Assets (Net Book Value, in thousands) | Category | March 31, 2025 | September 30, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Completed technology | $49,817 | $54,758 | | Trademarks and trade names | $475 | $531 | | Customer relationships | $60,910 | $69,753 | | Total Intangible Assets, Net | $111,202 | $125,042 | - Net intangible assets decreased by $13.8 million from September 30, 2024, to March 31, 2025, mainly due to amortization expenses[72] 7. Restructuring - The Company initiated a 2024 Restructuring Plan to optimize resources, improve efficiency, and enhance profitability through facilities consolidation, portfolio optimization, and organizational simplification, with activities expected to complete by the end of fiscal year 2025[74] Restructuring Charges (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Severance and related costs | $3,449 | $1,987 | $3,769 | $2,773 | | Right of use asset abandonment | — | $901 | — | $901 | | Other | $131 | $540 | $242 | $540 | | Total Restructuring Charges | $3,580 | $3,428 | $4,011 | $4,214 | - Restructuring charges for the six months ended March 31, 2025, were $4.0 million, primarily for severance and related costs, allocated across the SMS segment ($1.6M), Multiomics segment ($1.6M), and Corporate ($0.8M)[75][77] 8. Supplementary Balance Sheet Information Inventories (in thousands) | Category | March 31, 2025 | September 30, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Raw materials and purchased parts | $40,693 | $34,134 | | Work-in-process | $10,127 | $8,402 | | Finished goods | $32,501 | $36,387 | | Total Inventories | $83,321 | $78,923 | | Inventory reserves | $9,400 | $6,100 | - Total inventories increased by $4.4 million from September 30, 2024, to March 31, 2025, with a notable increase in raw materials and purchased parts[78] Warranty and Retrofit Costs (in thousands) | Metric | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Balance at beginning of period | $5,213 | $3,974 | | Accruals for warranties during the period | $698 | $1,371 | | Costs incurred during the period | $(674) | $(650) | | Balance at end of period | $5,237 | $4,695 | 9. Stockholders' Equity - No shares were repurchased during the six months ended March 31, 2025, as the $1.5 billion 2022 Repurchase Authorization was fully utilized by September 30, 2024[80] - The Company paid $11.4 million in excise tax related to share repurchases under the 2022 Repurchase Authorization during the six months ended March 31, 2025[81] Accumulated Other Comprehensive Income (Loss) (in thousands) | Component | Balance at September 30, 2024 | Other comprehensive income (loss) before reclassifications (6 months ended March 31, 2025) | Amounts reclassified from accumulated other comprehensive loss (6 months ended March 31, 2025) | Balance at March 31, 2025 | | :-------------------------------- | :-------------------------------- | :------------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------ | :-------------------------------- | | Currency Translation Adjustments | $(34,170) | $(23,860) | — | $(58,030) | | Unrealized Gains (Losses) on Available-for-Sale Securities, Net of tax | $(263) | $363 | — | $100 | | Gains (Losses) on Derivative, Net of tax | $21,468 | $(5,088) | — | $16,380 | | Pension Liability Adjustments, Net of tax | $(499) | $(136) | $36 | $(599) | | Total | $(13,464) | $(28,721) | $36 | $(42,149) | 10. Revenue from Contracts with Customers Revenue by Significant Business Line (in thousands) | Business Line | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Multiomics | $63,522 | $62,218 | $129,820 | $124,938 | | Core Products | $47,969 | $44,844 | $97,668 | $93,730 | | Sample Repository Services | $31,927 | $29,293 | $63,440 | $59,412 | | Total Revenue | $143,418 | $136,355 | $290,928 | $278,080 | - Total revenue increased by 5.2% for the three months and 4.6% for the six months ended March 31, 2025, driven by growth across all significant business lines[84] - Contract liabilities (deferred revenue) increased to $41.6 million at March 31, 2025, from $30.5 million at September 30, 2024[87] - Remaining performance obligations as of March 31, 2025, totaled $83.8 million, with $54.9 million expected to be recognized within one year[88] 11. Stock-Based Compensation Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Restricted stock units | $7,820 | $5,092 | $12,435 | $7,741 | | Employee stock purchase plan | $211 | $318 | $469 | $670 | | Total Stock-Based Compensation Expense | $8,031 | $5,410 | $12,904 | $8,411 | - Total stock-based compensation expense for continuing operations increased by $2.6 million for the three months and $4.5 million for the six months ended March 31, 2025, primarily due to restricted stock units[90] - As of March 31, 2025, unrecognized stock-based compensation expense related to restricted stock units is $32.2 million, expected to be recognized over an average of 1.8 years[92] - The Company amended performance goals for previously issued performance-based restricted stock units in October 2023, resulting in a total potential maximum compensation cost of $3.8 million recognized through November 2025[97] 12. Fair Value Measurements Financial Assets and Liabilities Measured at Fair Value (in thousands) | Category | March 31, 2025 Total Fair Value | September 30, 2024 Total Fair Value | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Assets: | | | | Cash equivalents | $120,491 | $157,990 | | Available-for-sale securities | $251,478 | $198,616 | | Investment in equity securities (Level 3) | $2,100 | N/A | | Foreign exchange contracts | N/A | $9 | | Liabilities: | | | | Net investment hedge | $10,500 | $1,915 | | Foreign exchange contracts | $340 | $213 | - Cash equivalents are primarily Level 1 (money market funds, U.S. government backed securities) and Level 2 (debt securities, bank certificates of deposit). Available-for-sale securities are also classified as Level 1 and Level 2[102][103] - The Company converted convertible notes into $2.1 million of preferred stock of a private company during Q1 fiscal year 2025, which is measured at fair value using unobservable inputs (Level 3)[105][106] 13. Income Taxes Income Tax Expense (in thousands) | Period | Income Tax Expense | | :-------------------------------- | :-------------------------------- | | Three Months Ended March 31, 2025 | $7,700 | | Six Months Ended March 31, 2025 | $11,200 | | Three Months Ended March 31, 2024 | $1,200 | | Six Months Ended March 31, 2024 | $2,600 | - Income tax expense for the three and six months ended March 31, 2025, was primarily driven by a $6.6 million tax expense related to a change in the indefinite reinvestment assertion for a China subsidiary and profits in foreign jurisdictions[110][114] - The Company expects a $16 million valuation allowance against its U.S. net deferred tax assets for fiscal year 2025 due to U.S. pre-tax losses[113] 14. Net Loss per Share Net Loss Per Share (in thousands, except per share data) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net Loss | $(40,456) | $(136,880) | $(53,796) | $(152,604) | | Basic Net Loss Per Share | $(0.88) | $(2.47) | $(1.18) | $(2.72) | | Diluted Net Loss Per Share | $(0.88) | $(2.47) | $(1.18) | $(2.72) | | Weighted Average Shares Outstanding (Basic & Diluted) | 45,732 | 55,440 | 45,658 | 56,078 | - Basic and diluted net loss per share improved significantly for both the three and six months ended March 31, 2025, primarily due to a reduced net loss[119] - Potentially dilutive common stock equivalents were excluded from diluted EPS calculations due to the net loss from continuing operations, making their effect antidilutive[119] 15. Segment and Geographic Information - The Company's continuing operations consist of two operating and reportable segments: Sample Management Solutions (SMS) and Multiomics. Adjusted operating income (loss) is the primary performance metric for evaluating segments[123][126] Revenue by Segment (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions | $79,896 | $74,137 | $161,108 | $153,142 | | Multiomics | $63,522 | $62,218 | $129,820 | $124,938 | | Total Revenue | $143,418 | $136,355 | $290,928 | $278,080 | Adjusted Operating Income (Loss) by Segment (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions Operating Income (Loss) | $4,613 | $(1,457) | $6,930 | $(2,073) | | Multiomics Operating Income (Loss) | $(5,296) | $(2,880) | $(7,796) | $(6,144) | | Segment Adjusted Operating Loss | $(683) | $(4,337) | $(866) | $(8,217) | Revenue by Geographic Location (in thousands) | Geographic Location | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | United States | $89,943 | $87,735 | $183,412 | $177,861 | | China | $12,739 | $13,646 | $27,626 | $28,544 | | United Kingdom | $8,083 | $5,625 | $15,881 | $11,301 | | Rest of Europe | $25,259 | $22,393 | $49,578 | $45,123 | | Asia Pacific/Other | $7,394 | $6,956 | $14,431 | $15,251 | | Total Revenue | $143,418 | $136,355 | $290,928 | $278,080 | 16. Commitments and Contingencies - The Company is involved in various legal proceedings but believes no material provision for liability or disclosure is required, except for claims related to Edwards (disclosed in Note 3)[129] - In July 2024, the Company paid approximately $2.5 million in tariffs and interest related to imports from its GENEWIZ business into the U.S. for the period from December 2021 to July 2024, with no anticipated penalties[130] - As of March 31, 2025, non-cancellable commitments totaled $57.2 million, including $44.2 million for inventory purchase orders and $13.0 million for other operating expenses[131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides a detailed discussion and analysis of Azenta, Inc.'s financial condition and results of operations for the three and six months ended March 31, 2025, compared to the corresponding periods in the prior fiscal year. It covers the Company's strategic decision to sell the B Medical Systems business, an overview of its core life sciences segments (Sample Management Solutions and Multiomics), key financial performance metrics, critical accounting policies, and an analysis of revenue, operating expenses, non-operating income, and liquidity and capital resources. The discussion focuses solely on continuing operations unless otherwise noted Plan to Sell B Medical Systems Business - The Company is pursuing the sale of its B Medical Systems business to simplify its portfolio and focus on core Sample Management Solutions and Multiomics segments, with the segment classified as held for sale and a discontinued operation[133] Overview - Azenta is a leading global provider of biological and chemical compound sample exploration and management solutions for the life sciences industry, supporting customers from research to commercialization with sample management, automated storage, and genomic services[134] - The Company employs approximately 3,000 full-time employees, part-time employees, and contingent workers worldwide, with sales in about 86 countries and operations in North America, Asia, and Europe[134] Segments - The Sample Management Solutions (SMS) segment offers end-to-end sample management products and services, including Sample Repository Services and Core Products (Automated Stores, Cryogenic Systems, Automated Sample Tube, Consumables and Instruments, and Controlled Rate Thawing Devices)[137] - The Multiomics segment provides genomic and other sample analysis services, such as gene sequencing, synthesis, and editing, with a comprehensive global portfolio for the life sciences industry[138] Business and Financial Performance | Metric (in thousands) | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Total Revenue | $143,418 | $136,355 | $290,928 | $278,080 | | Gross Profit | $65,886 | $60,664 | $134,557 | $122,407 | | Operating Loss | $(16,151) | $(24,213) | $(27,504) | $(40,458) | | Net Loss | $(40,456) | $(136,880) | $(53,796) | $(152,604) | - Revenue increased 5% for both the three and six months ended March 31, 2025, driven by growth in both Sample Management Solutions and Multiomics segments[141] - Gross margin improved to 46% for both periods, up from 44% in the prior year, due to higher revenue, operational efficiencies, and sales mix[141] - Net loss significantly decreased due to a reduced loss from discontinued operations, despite an increased loss from continuing operations[141] Critical Accounting Policies and Estimates - The preparation of financial statements requires management to make estimates and judgments, which are evaluated based on historical experience and current economic conditions[142] - There have been no material changes to the Company's critical accounting policies or estimates from those disclosed in the 2024 Annual Report on Form 10-K[143] Results of Operations Revenue Revenue by Segment (in thousands, except percentages) | Segment | Three Months Ended March 31, 2025 | % Change (YoY) | Six Months Ended March 31, 2025 | % Change (YoY) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions | $79,896 | 7.8% | $161,108 | 5.2% | | Multiomics | $63,522 | 2.1% | $129,820 | 3.9% | | Total Revenue | $143,418 | 5.2% | $290,928 | 4.6% | - Sample Management Solutions revenue growth was driven by Sample Repository Services and Core Products, particularly Consumables and Instruments and Clinical Stores Systems[141][146] - Multiomics segment revenue growth was primarily driven by Next Generation Sequencing services, partially offset by declines in Sanger sequencing and Gene Synthesis services[141][147] - Revenue generated outside the United States accounted for 37.3% and 37.0% of total revenue for the three and six months ended March 31, 2025, respectively[148] Operating Income (Loss) Operating Income (Loss) by Segment (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions Operating Income (Loss) | $567 | $(2,894) | $2,129 | $(4,380) | | Multiomics Operating Income (Loss) | $(6,132) | $(3,920) | $(9,519) | $(8,223) | | Total Operating Loss | $(16,151) | $(24,213) | $(27,504) | $(40,458) | - Sample Management Solutions segment operating income improved significantly, driven by higher revenue and gross margin expansion, partially offset by increased transformation costs[153] - Multiomics segment operating loss increased, primarily due to lower revenue for Gene Synthesis and Sanger sequencing services, despite higher revenue and gross margin expansion for Next Generation Sequencing services[154] Gross Margin Gross Margin by Segment (in percentages) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions Gross Margin | 47.9% | 44.4% | 47.4% | 43.2% | | Multiomics Gross Margin | 43.5% | 44.6% | 44.8% | 45.0% | | Azenta Total Gross Margin | 45.9% | 44.5% | 46.3% | 44.0% | - Sample Management Solutions gross margin increased due to higher revenue, operational efficiencies, sales mix, and the impact of certain non-recurring items in the prior year[156] - Multiomics gross margin decreased, primarily driven by lower revenue for Gene Synthesis and Sanger sequencing services, partially offset by higher revenue and operational efficiency for Next Generation Sequencing services[157] Research and Development Expenses Research and Development Expenses (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions | $4,102 | $4,609 | $7,885 | $8,996 | | Multiomics | $2,767 | $3,124 | $5,364 | $6,050 | | Total R&D Expense | $6,869 | $7,733 | $13,249 | $15,046 | - Total R&D expenses decreased by $0.9 million and $1.8 million for the three and six months ended March 31, 2025, respectively, primarily due to cost reduction initiatives and decreased compensation and benefits expense[158] Selling, General and Administrative Expenses Selling, General and Administrative Expenses (in thousands) | Segment | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Sample Management Solutions | $33,581 | $31,230 | $66,351 | $61,599 | | Multiomics | $31,022 | $28,516 | $62,348 | $58,635 | | Corporate | $6,985 | $9,312 | $16,102 | $18,713 | | Total SG&A Expense | $71,588 | $69,058 | $144,801 | $138,947 | - Total SG&A expenses increased by $2.5 million and $5.9 million for the three and six months ended March 31, 2025, respectively, primarily due to higher stock-based compensation and one-time costs related to leadership changes, partially offset by decreased compensation and benefits[159] Restructuring Charges - Restructuring charges were $3.6 million for the three months ended March 31, 2025 (up $0.2 million YoY) and $4.0 million for the six months ended March 31, 2025 (down $0.2 million YoY)[160] Non-Operating Income Interest Income, Net (in thousands) | Period | Interest Income, Net | | :-------------------------------- | :-------------------------------- | | Three Months Ended March 31, 2025 | $4,489 | | Six Months Ended March 31, 2025 | $8,787 | | Three Months Ended March 31, 2024 | $9,479 | | Six Months Ended March 31, 2024 | $19,434 | - Interest income decreased year-over-year due to decreased investments in marketable securities[161] Other Income (Expense), Net (in thousands) | Period | Other Income (Expense), Net | | :-------------------------------- | :-------------------------------- | | Three Months Ended March 31, 2025 | $1,157 | | Six Months Ended March 31, 2025 | $2,360 | | Three Months Ended March 31, 2024 | $(268) | | Six Months Ended March 31, 2024 | $250 | - The increase in other income was primarily due to foreign exchange gains and a $2.1 million gain from cash proceeds received from a cost method investment[162] Income Tax Expense - Income tax expense for the three and six months ended March 31, 2025, was $7.7 million and $11.2 million, respectively, primarily driven by a $6.6 million tax expense related to a change in indefinite reinvestment assertion for a China subsidiary[163] - Tax expense is also influenced by profits in foreign jurisdictions and current state income taxes, and the Company does not benefit from U.S. tax losses due to a valuation allowance against U.S. deferred tax assets[163] Discontinued Operations Discontinued Operations Financials (in thousands) | Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $17,200 | $22,800 | $34,800 | $35,400 | | Loss from Discontinued Operations, net of tax | $22,300 | $120,700 | $26,200 | $129,200 | - Loss from discontinued operations significantly decreased year-over-year, reflecting the impact of the B Medical Systems business being classified as discontinued[165] Liquidity and Capital Resources Cash Flows and Liquidity Cash, Cash Equivalents, Restricted Cash, and Marketable Securities (in thousands) | Category | March 31, 2025 | September 30, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Cash and cash equivalents | $253,642 | $280,030 | | Restricted cash | $8,199 | $10,061 | | Short-term marketable securities | $74,697 | $151,162 | | Long-term marketable securities | $176,781 | $49,454 | | Total | $513,319 | $490,707 | - The Company had $513.3 million in cash, cash equivalents, restricted cash, and marketable securities as of March 31, 2025, an increase from $490.7 million at September 30, 2024[167] - Cash inflows from operating activities for the six months ended March 31, 2025, were $44.2 million, primarily due to increased revenue and collections and a $11.5 million U.S. federal tax refund[168] - The Company had approximately $52 million of cash in China as of March 31, 2025, and began repatriating cash to the United States during Q3 fiscal year 2025, providing for $6.6 million in deferred income taxes[167] Capital Resources - As of March 31, 2025, the Company had no outstanding debt on its balance sheet[169] - Non-cancellable commitments totaled $57.2 million, comprising $44.2 million for inventory purchase orders and $13.0 million for other operating expense commitments[170] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines Azenta, Inc.'s exposure to various market risks, including interest rate fluctuations affecting investments and foreign currency exchange rate changes impacting transactions and balances in non-functional currencies. The Company employs strategies such as timely settlement of intercompany advances and forward contracts to mitigate these risks Interest Rate Exposure - The Company's cash, cash equivalents, and investments are subject to interest rate risk. A hypothetical 100 basis point change in interest rates would result in a $2.0 million and $4.8 million change in interest income for the six months ended March 31, 2025 and 2024, respectively[172] Currency Rate Exposure - The Company is exposed to foreign exchange risk, primarily in Germany, the United Kingdom, and China, with sales in non-U.S. dollar currencies representing approximately 34% and 30% of total sales for the six months ended March 31, 2025 and 2024, respectively[173] - Foreign currency losses were $1.1 million and $1.0 million for the six months ended March 31, 2025 and 2024, respectively. A hypothetical 10% change in foreign exchange rates would result in an approximate $0.4 million change in net loss for the six months ended March 31, 2025[174] Item 4. Controls and Procedures This section details Azenta, Inc.'s evaluation of its disclosure controls and procedures and internal control over financial reporting. It identifies material weaknesses related to cash flow statement review and account reconciliations, which led to the conclusion that disclosure controls were not effective as of March 31, 2025. The Company is actively implementing remediation plans to address these weaknesses Evaluation of Disclosure Controls and Procedures - The Company's management concluded that its disclosure controls and procedures were not effective as of March 31, 2025, due to identified material weaknesses[175] - Despite the material weaknesses, the CEO and CFO concluded that the unaudited Condensed Consolidated Financial Statements are fairly stated in all material respects[175] Material Weaknesses in Internal Control over Financial Reporting - A material weakness in controls related to the review of the cash flow statement, previously disclosed in the 2024 Annual Report on Form 10-K, continues to exist as of March 31, 2025[177] - An additional material weakness was identified during Q2 fiscal year 2025, related to the design and maintenance of effective controls over the preparation and review of account reconciliations[178] - These material weaknesses resulted in immaterial misstatements in consolidated financial statements and could lead to material misstatements not prevented or detected on a timely basis[177][178][179] Remediation Plans - For cash flow statement weaknesses, the Company implemented a new reporting tool and enhanced processes and controls, but they have not operated for a sufficient period to assert remediation as of March 31, 2025[180] - For account reconciliations, management is forming a plan to design and implement enhanced controls, redesign the reconciliation policy, and engage outside consultants[181] Changes in Internal Control over Financial Reporting - Other than the material weakness related to account reconciliations, there were no other changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[182] PART II. Other Information This part provides additional disclosures beyond financial statements, covering legal proceedings, risk factors, other information, and exhibits Item 1. Legal Proceedings This section addresses Azenta, Inc.'s involvement in various legal proceedings. The Company assesses potential losses quarterly and believes that, apart from claims related to Edwards (detailed in Note 3), no material provision for liability or disclosure is required for continuing operations. However, unexpected developments could still have a material adverse effect on financial condition or results of operations - The Company is subject to various legal proceedings but believes none will have a material adverse effect on its consolidated financial condition or results of operations for continuing operations, except for claims related to Edwards[184] Item 1A. Risk Factors This section updates the risk factors previously disclosed in the 2024 Annual Report on Form 10-K, highlighting new or materially changed risks. Key risks include the potential impact of international trade disputes, tariffs, and export controls, particularly concerning China, and the ongoing material weaknesses in the Company's internal control over financial reporting - International trade disputes, including recently announced tariffs on imports from China, could materially impact the Company's business by affecting customer demand, increasing manufacturing costs, decreasing margins, or inhibiting product sales and supply chain[187] - The BIOSECURE Act, if enacted, could impact the supply of products and services manufactured or provided by third parties in China, potentially causing delays and adverse effects on business operations[188] - The Company's identified material weaknesses in internal control over financial reporting (cash flow statement review and account reconciliations) could adversely affect financial results, stock price, and investor confidence, and may result in material misstatements[189][190][191] Item 5. Other Information This section reports on Rule 10b5-1 trading arrangements. During the three months ended March 31, 2025, no director or officer of the Company adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement during the three months ended March 31, 2025[195] Item 6. Exhibits This section lists the exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications from the Chief Executive Officer and Chief Financial Officer (pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002) and the iXBRL formatted financial statements - The report includes certifications from the CEO and CFO (Exhibits 31.01, 31.02, 32) and iXBRL formatted financial statements (Exhibit 101, 104)[196] Signatures This section formally attests to the accuracy and completeness of the report through authorized signatures - The report is duly signed on behalf of Azenta, Inc. by Lawrence Lin, Executive Vice President and Chief Financial Officer, and Violetta A. Hughes, Vice President and Chief Accounting Officer, on May 9, 2025[199][200]