Azenta, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• John Marotta started by noting a solid second quarter with 6% organic revenue growth and adjusted EBITDA margin expansion of 400 basis points. Discussed macro challenges like NIH funding and tariffs, with countermeasures in place.
• Announced Will Simmons joined as VP of Azenta Business Systems to lead development of ABS. Conducted daily management boot camps and ABS awareness sessions globally.
• Structured organizational realignments, restructuring nearly 10% of workforce and reinvesting in R&D, sales, etc. for growth.
• Highlighted Kaizen initiatives: in manufacturing to reduce quote-to-delivery cycle time, in sample repository to simplify order-to-cash process, and in GENEWIZ to address order-to-cash inefficiencies.

Segment Performance

• Sample Management Solutions (SMS): Revenue was $80 million for the quarter, up 8% year-over-year on both reported and organic bases. Growth was driven by Sample Repository Solutions and Core Products, including Consumables, Instruments, Product Services, Clinical BioStores, and Sample Storage. Partially offset by declines in automated stores and cryostores. Non-GAAP gross margin was 49.7%, up 340 basis points year-over-year.
• Multiomics: Delivered revenue of $64 million, with 3% organic growth. Driven by Next Generation Sequencing (NGS) at 20% year-over-year growth (price stabilization for 4th consecutive quarter and double-digit volume growth), but Gene Synthesis declined 10% year-over-year (tough comp vs Q2 2024), Sanger Sequencing declined 18% (transition to newer tech). Plasmid-EZ revenue more than doubled. Non-GAAP gross margin was 44.9%, down 140 basis points year-over-year.

Guidance

• Reiterated full-year 2025 guidance: organic revenue growth 3%-5%, adjusted EBITDA margin expansion of 300 basis points. Multiomics to grow low-single-digits, Sample Management Solutions to grow mid-single-digits. Reaffirmed guidance despite macro headwinds, with countermeasures in place for NIH and tariff impacts.

Risks

• Macro environment uncertainties including NIH funding reductions (1% revenue headwind), tariffs, and geopolitical tensions. Impact of macro on academic research funding and pharma R&D pausing.

Question and Answer

• Q: David Saxon asked about guidance cadence, SMS leadership transition **A: John Marotta and Lawrence Lin discussed guidance profile, noting quarterly revenue profiles shouldn't be significantly different than prior years, and John Marotta mentioned he's directly leading the SMS business following the leadership transition.
• Q: Vijay Kumar asked about NIH 1% headwind, free cash flow, margins **A: John Marotta and Lawrence Lin explained countermeasures for NIH funding impact, free cash flow driven by working capital improvements, and adjusted EBITDA margin expansion guidance with consideration of tariff impacts.
• Q: Paul Knight asked about Azenta Business System, SRS growth potential, China market **A: John Marotta talked about ABS progress, SRS growth potential with plans to detail in Investor Day, and China market strength with 5% organic revenue growth.
• Q: Matthew Stanton asked about Gene Synthesis trends, capital deployment **A: John Marotta discussed Gene Synthesis trends related to pharma R&D pausing, and capital deployment focus on M&A, growth initiatives, and balanced approach to buybacks.
• Q: Brendan Smith asked about tariffs, NGS trends A: John Marotta talked about customer insights on outsourcing opportunities due to macro, and NGS market outlook with focus on quality, delivery, and cost for competitive advantage