Azenta, Inc. (AZTA) is a leading global provider of sample exploration and management solutions for the life sciences industry. The company's comprehensive portfolio of products and services spans the entire sample lifecycle, from procurement and automated storage to genomic services and data management. With a strong focus on innovation and customer-centricity, Azenta has solidified its position as a trusted partner to the world's top pharmaceutical, biotechnology, and academic institutions.
Business Overview and History
Azenta's origins trace back to 1978 when the company, then known as Brooks Automation, was founded and initially specialized in automation and cryogenic equipment for the semiconductor manufacturing industry. In 2011, the company made a strategic shift by expanding into the life sciences market, leveraging its expertise in precision automation and cryogenics to develop solutions for automated ultra-cold storage. This move marked the beginning of the company's transformation into a dedicated life sciences solutions provider.
Over the years, Azenta has undergone a series of acquisitions and strategic investments to expand its capabilities and geographic reach. In 2018, the company divested its semiconductor cryogenics business to focus solely on life sciences, a move that would prove pivotal in shaping its future direction. However, this transition was not without challenges, as Azenta faced customer warranty claims and inventory issues related to the divested semiconductor cryogenics business. The company worked diligently to resolve these issues through negotiations and settlements, enabling it to move forward with its life sciences-focused strategy.
In 2023, Azenta realigned its organizational structure into three principal business segments: Sample Management Solutions (SMS), Multiomics, and B Medical Systems. This restructuring was aimed at enhancing the company's commercial strategy and enabling additional profitability initiatives. The SMS segment provides end-to-end sample management products and services, including automated storage, cryogenic systems, and consumables. The Multiomics segment offers a comprehensive portfolio of genomic and sample analysis services, while B Medical Systems specializes in temperature-controlled storage and transportation solutions.
Financial Performance and Key Metrics
Azenta's financial performance has been marked by a mix of growth and challenges in recent years. In fiscal year 2024, the company reported revenue of $656 million, down 1% year-over-year on a reported basis and 2% on an organic basis. This decline was primarily attributed to lower revenue from the B Medical Systems segment, which contributed $83 million to the top line, a 27% organic decrease.
On a more positive note, Azenta's combined Sample Management Solutions and Multiomics segments delivered 4% organic growth for the full year, highlighting the resilience and potential of the company's core offerings. The SMS segment grew 5% organically, driven by strength in Sample Repository Services and Core Products, while Multiomics registered a 3% organic increase, buoyed by growth in Next Generation Sequencing and Gene Synthesis.
Azenta's profitability has also shown signs of improvement, with the company reporting a non-GAAP diluted earnings per share of $0.41 for fiscal year 2024, a 32% increase from the prior year. This was supported by meaningful margin expansion, as the company's adjusted EBITDA margin reached 7.5%, up approximately 300 basis points compared to fiscal year 2023.
Financials
Azenta's financial performance reflects the company's ongoing transformation and focus on its core life sciences businesses. Key financial metrics for fiscal year 2024 include:
- Revenue: $656 million - Organic revenue growth: -2% - Non-GAAP diluted EPS: $0.41 - Adjusted EBITDA margin: 7.5% - Net income: -$159.19 million - Operating cash flow: $36.58 million - Free cash flow: -$4.80 million
For the most recent quarter (Q4 2024), Azenta reported:
- Revenue: $170 million, down 1% year-over-year - Net income: -$6.58 million - Operating cash flow: $1.79 million - Free cash flow: -$5.80 million
The revenue decrease in Q4 2024 was primarily driven by lower B Medical Systems revenue, partially offset by growth in the Sample Management Solutions and Multiomics segments. Notably, revenue generated outside the United States accounted for 44% of total revenue for fiscal year 2024.
The company's financial strategy aims to balance investments in growth initiatives with operational efficiency improvements to drive long-term profitability and shareholder value.
Liquidity
The company's balance sheet remains robust, with $522 million in cash, cash equivalents, and marketable securities as of June 30, 2024, and no outstanding debt. Azenta's strong liquidity position and cash flow generation capabilities have enabled it to return significant capital to shareholders through a $1.5 billion share repurchase program, which was completed in September 2024.
Key liquidity metrics include:
- Debt/Equity ratio: 0.035 - Current ratio: 4.78 - Quick ratio: 4.21
This solid financial foundation provides Azenta with the flexibility to pursue strategic investments, acquisitions, and ongoing research and development initiatives to drive future growth.
Segment Performance and Outlook
Sample Management Solutions (SMS) The SMS segment has been a consistent performer for Azenta, delivering 5% organic growth in fiscal year 2024. This was driven by the continued strength of the company's Sample Repository Services and Core Products, particularly the Cryogenic Stores and Consumables and Instruments businesses. The segment's non-GAAP gross margin expanded by 160 basis points to 45.2%, showcasing the benefits of Azenta's operational efficiency initiatives.
For the three months ended June 30, 2024, the SMS segment reported revenue of $80.67 million and an operating margin of 3.1%. Adjusted operating margin for the SMS segment was 4.2% for the same period, excluding the impact of amortization, transformation costs, and other adjustments.
Looking ahead, the company expects the SMS segment to grow in the mid-single digits on an organic basis in fiscal year 2025, supported by a robust backlog and ongoing investments in automation and technology. Azenta's focus on enhancing its sample management capabilities, including the development of the revolutionary BioArc Ultra system for large-scale and eco-friendly ultra-cold sample storage, positions the company well to capture the growing demand for outsourced sample management solutions.
Multiomics Azenta's Multiomics segment demonstrated resilience in fiscal year 2024, with 3% organic growth. This performance was primarily driven by the continued expansion of the company's Next Generation Sequencing and Gene Synthesis services, which offset a decline in traditional Sanger sequencing. The segment's non-GAAP gross margin improved by 63 basis points to 46.9%, reflecting the benefits of operational efficiencies and productivity gains.
For the three months ended June 30, 2024, the Multiomics segment reported revenue of $63.62 million and an operating margin of 2.8%. Adjusted operating margin for the Multiomics segment was 1.1% for the same period, excluding the impact of amortization.
Looking ahead, the Multiomics segment is expected to grow in the low-single digits organically in fiscal year 2025. Azenta remains focused on enhancing its genomic service offerings, including the recent launch of a long-read Whole Genome Sequencing test for clinical applications, which has the potential to unlock new opportunities in rare disease research and diagnostics.
B Medical Systems The B Medical Systems segment, which provides temperature-controlled storage and transportation solutions, faced challenges in fiscal year 2024, with a 27% organic revenue decline. This was primarily due to the timing of orders for cold chain equipment. The segment's non-GAAP gross margin declined by 722 basis points to 33.7%, reflecting the impact of lower volumes and product mix.
For the three months ended June 30, 2024, the B Medical Systems segment reported revenue of $28.52 million and an operating margin of 18.0%. Adjusted operating margin for the B Medical Systems segment was 6.7% for the same period, excluding the impact of amortization, transformation costs, and purchase accounting adjustments.
In September 2024, Azenta announced its intention to sell the B Medical Systems segment, a move that will allow the company to focus on driving growth and profitability in its core Sample Management Solutions and Multiomics businesses. The divestiture is expected to close in the first half of fiscal year 2025.
Guidance and Outlook For fiscal year 2025, Azenta is guiding for organic revenue growth in the range of 3% to 5%, with expected adjusted EBITDA margin expansion of approximately 300 basis points compared to fiscal year 2024. This guidance excludes the contribution from the B Medical Systems segment, which will be reported as discontinued operations going forward.
The company expects Multiomics to grow low-single-digits and Sample Management Solutions to grow mid-single-digits in fiscal year 2025. This guidance is based on the continuation of positive indicators from the last several quarters, with the opportunity for upside as the market recovers and as Azenta executes on its initiatives.
The company's outlook reflects its confidence in the continued momentum of its core business segments, as well as the benefits of its ongoing transformation initiatives, including cost reduction, portfolio optimization, and operational excellence programs.
Risks and Challenges
Azenta operates in a dynamic and competitive life sciences market, which presents several risks and challenges that investors should consider:
1. Macroeconomic and industry volatility: The life sciences industry can be susceptible to fluctuations in funding, regulatory changes, and shifts in customer spending patterns, which could impact Azenta's financial performance.
2. Supply chain disruptions: Azenta's ability to meet customer demand may be affected by difficulties in obtaining components and materials from suppliers in the required quantities and quality.
3. Intellectual property disputes: As a technology-driven company, Azenta is exposed to the risk of intellectual property-related litigation, which could result in financial and operational disruptions.
4. Integrating acquired businesses: The company's growth strategy involves strategic acquisitions, which carry inherent integration risks that could impact synergies and financial performance.
5. Regulatory compliance: Azenta's operations are subject to various regulatory requirements, and failure to comply could lead to fines, penalties, or reputational damage.
Conclusion
Azenta has evolved from a diversified automation company to a dedicated life sciences solutions provider, solidifying its position as a trusted partner to the world's leading pharmaceutical, biotechnology, and academic institutions. The company's comprehensive portfolio of sample management, multiomics, and cold chain solutions positions it well to capitalize on the growing demand for outsourced life sciences services.
Despite facing headwinds in fiscal year 2024, Azenta's core Sample Management Solutions and Multiomics segments have demonstrated resilience and the potential for sustained growth. The company's decision to divest the B Medical Systems segment will allow it to sharpen its focus on these high-margin, recurring revenue streams, positioning Azenta for improved profitability and shareholder value creation in the years ahead.
As Azenta continues to invest in innovation, operational excellence, and strategic initiatives, the company's ability to enable impactful breakthroughs and therapies to market faster will be a key driver of its long-term success. With a strong financial foundation, a clear strategic focus, and a commitment to driving organic growth and margin expansion, Azenta is well-positioned to navigate the challenges and opportunities in the dynamic life sciences market.