Azenta(AZTA) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Organic revenue grew by 6% year over year, with adjusted EBITDA margin expanding by 400 basis points [7][26][28] - Total revenue for the second quarter was $143 million, reflecting a 5% year over year increase on a reported basis and 6% on an organic basis [27][29] - Non-GAAP EPS for the quarter was $0.05, with adjusted EBITDA margin at 10% [28][29] Business Line Data and Key Metrics Changes - Sample Management Solutions (SMS) revenue was $80 million, up 8% year over year, driven by strong performance in sample repository solutions and core products [30] - Multiomics revenue was $64 million, with a growth of 2% on a reported basis and 3% on an organic basis, primarily driven by next-generation sequencing [31][32] Market Data and Key Metrics Changes - North America experienced a general slowdown, particularly in Sanger sequencing, which saw an 18% year over year decline [34] - China showed strength with 5% organic revenue growth, despite geopolitical tensions [32][71] Company Strategy and Development Direction - The company is focused on operational excellence and reducing complexity through the Azenta Business System [12][13] - Plans for potential tuck-in acquisitions are being evaluated to accelerate revenue growth and margin expansion [11][12] - The company aims to maintain a high bar for capital deployment, including potential stock buybacks if valuation disconnects persist [12][88] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the uncertain macro environment, including NIH funding cuts and tariffs, but expressed confidence in countermeasures to mitigate impacts [9][10][58] - The company remains committed to its full-year guidance of organic revenue growth between 3% and 5% and adjusted EBITDA margin expansion of 300 basis points [8][36] Other Important Information - The sale process for B Medical Systems is ongoing, with expectations for an announcement in the second half of fiscal year 2025 [8][25] - The company ended the quarter with $540 million in cash and no debt outstanding [28][36] Q&A Session Summary Question: Guidance and Growth Cadence - Analyst inquired about the growth cadence in the second half of the year and the impact of NIH funding on guidance [40] - Management confirmed that the guidance remains unchanged and expects the revenue profile to align with prior years [44][45] Question: Leadership Transition in SMS - Analyst asked about the leadership transition in SMS and future leadership plans [46] - Management indicated that the CEO is directly involved in running the SMS business during the transition [47][48] Question: NIH Funding Headwind - Analyst sought clarification on the assumptions behind the 1% headwind from NIH funding [52] - Management explained that they have countermeasures in place and are actively engaging with academic customers to mitigate risks [53][58] Question: Free Cash Flow and Margins - Analyst questioned the sustainability of free cash flow performance and margin expectations [59] - Management expressed confidence in achieving the long-term target of $100 million in free cash flow [60][62] Question: Sales Force Structure and ABS - Analyst inquired about the sales force structure under the Azenta Business System [67] - Management confirmed that a regional go-to-market model has been established and investments in sales are ongoing [68] Question: Gene Synthesis Trends - Analyst asked for insights on gene synthesis trends and customer dynamics [78] - Management noted a temporary pause in large pharma programs but indicated positive trends in recent bookings [80][81] Question: Capital Deployment Strategy - Analyst sought clarity on the balance between buybacks and M&A opportunities [83] - Management emphasized a holistic approach to capital deployment, focusing on long-term shareholder value [86][88] Question: Customer Insights and Order Trends - Analyst asked about potential order pull-forward due to tariffs and NGS ordering trends [93] - Management highlighted increased outsourcing opportunities and positive customer feedback on quality and delivery [98][100]