Azenta, Inc. (NASDAQ: AZTA) is a leading global provider of sample exploration and management solutions for the life sciences industry. The company has undergone a remarkable transformation, transitioning from a semiconductor capital equipment company to a stand-alone publicly traded pure-play life sciences company. With a focus on delivering outsized shareholder returns and good governance, Azenta has positioned itself as a trusted partner to pharmaceutical, biotechnology, and life sciences research institutions worldwide.

Business Overview

Azenta's portfolio includes a diverse range of product and service offerings, developed both internally and through strategic acquisitions. The company's expertise, global footprint, and leadership positions enable it to be a trusted global partner, addressing the needs of its customers in sample exploration and management, automated storage, multiomics, and cold chain solutions.

The company operates through three principal business segments:

Sample Management Solutions (SMS):

Offers end-to-end sample management products and services, including Sample Repository Solutions and Core Products (Automated Stores, Cryogenic Systems, Automated Sample Tube, and Consumables and Instruments).

Multiomics:

Provides gene sequencing, synthesis, editing, and related services.

B Medical Systems:

Focuses on the manufacturing and distribution of temperature-controlled storage and transportation solutions.

Financials

In the fiscal year ended September 30, 2023, Azenta reported annual revenue of $665,072,000 and a net loss of $14,257,000. The company's annual operating cash flow was $17,490,000, and its annual free cash flow was -$21,946,000. These financial results demonstrate the company's ability to generate revenue and cash flow, despite the challenges faced during the year.

During the second quarter of fiscal year 2024, Azenta reported revenue of $159,134,000, up 7% compared to the same period in the prior year. The company's non-GAAP gross margin was 44.3%, up 310 basis points year-over-year, driven by strong operating efficiencies and non-recurring adjustments. Non-GAAP operating margin was -3.6%, up 530 basis points year-over-year, and adjusted EBITDA margin was 5.9%, up 750 basis points year-over-year.

The Sample Management Solutions segment delivered revenue of $74,137,000, up 4% year-over-year on a reported basis and 3% on an organic basis. This growth was driven by strong performance in large automated stores and Sample Repository Solutions. The Multiomics segment reported revenue of $62,218,000, flat year-over-year, with gene synthesis growing 13% and Next Generation Sequencing up slightly on an organic basis. The B Medical Systems segment generated revenue of $22,779,000, up 51% reported and 49% on an organic basis, primarily due to additional vaccine cold chain orders received during the quarter.

Azenta's geographic diversification is a key strength, with revenue generated outside the United States accounting for 44% of total revenue in the second quarter of fiscal year 2024. The company's performance in China has been particularly strong, with the Multiomics business delivering another quarter of double-digit organic growth.

Outlook

Looking ahead, Azenta has provided guidance for the full fiscal year 2024. The company is reiterating its organic revenue guidance for the Multiomics and SMS segments, but has adjusted the B Medical Systems segment revenue outlook to a range of $80 million to $90 million. This adjustment is due to the unpredictable timing of orders, as the company focuses on the vaccine cold chain product lines and exits the medical refrigeration and blood management product lines.

Despite the adjustment in the B Medical Systems segment, Azenta is raising its full-year non-GAAP EPS guidance to a range of $0.27 to $0.37, driven by operational improvements and higher interest income. The company is also committed to its Ascend 2026 transformation program, which aims to lift EBITDA to the high teens by 2026 and exceed 20% thereafter.

Liquidity

Azenta's strong balance sheet, with $975 million in cash, cash equivalents, and marketable securities as of March 31, 2024, provides the company with ample financial flexibility to pursue strategic initiatives and create long-term value for shareholders. During the second quarter, the company returned $74 million of capital to shareholders through the repurchase of 1.2 million shares of Azenta stock, as part of its $1.5 billion share repurchase program.

Recent Developments

The company's leadership transition is also noteworthy, as President and Chief Executive Officer Stephen Schwartz has announced his retirement after more than 14 years of service. The Azenta Board of Directors has initiated a search to identify Schwartz's successor, with the goal of ensuring a smooth transition and continued execution of the company's strategic vision.

Conclusion

Azenta's transformation from a semiconductor capital equipment company to a leading life sciences solutions provider has been a remarkable journey. The company's innovative products, global reach, and strong financial position position it well to capitalize on the growing demand for sample exploration and management solutions in the life sciences industry. As Azenta navigates the next phase of its growth, investors will be closely watching the company's ability to execute on its strategic initiatives and deliver sustainable long-term value.