Azenta, Inc. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• The company is undergoing structural realignment to operate more effectively, reduce G&A costs, and redeploy resources to operating companies.
• Key growth priorities include strengthening commercial excellence, funding product management for innovation, and investing in R&D.
• In fiscal Q3, there were pockets of strength in next-gen sequencing, sample storage, and product services, but core products revenue was weak due to funding and macro uncertainties.
• Adjusted EBITDA margin expanded by 260 basis points year-over-year, demonstrating execution and cost discipline.
• A customer outreach initiative gathers feedback to adjust strategies in real time.
• The geopolitical war room assesses and responds to external developments.
• The company reaffirmed full-year 2025 guidance of organic revenue growth 3%-5% and adjusted EBITDA margin expansion of 300 basis points.

Segment Performance

• Sample Management Solutions (SMS): Revenue was $78 million in the third quarter, down 4% year-over-year on a reported basis and 6% on an organic basis. This was due to softer bookings for cryo and timing delays in the automated stores product line. However, it was supported by growth in sample storage, product services, and clinical biostores. SMS non-GAAP gross margin was 53.6%, up 760 basis points year-over-year, reflecting a favorable product mix and improved operational execution.
• Multiomics: Generated revenue of $66 million, up 4% on a reported basis and 3% on an organic basis. Growth was led by next-generation sequencing with double-digit volume growth. However, gene synthesis revenue declined due to softness in key pharma accounts, and sanger sequencing revenue declined as the industry transitioned to newer technologies. Multiomics non-GAAP gross margin was 42.6%, down approximately 500 basis points year-over-year, primarily due to product mix, lower volume in certain segments, and nonrecurring items.

Guidance

• Reaffirmed full-year 2025 organic revenue growth guidance of 3%-5% and adjusted EBITDA margin expansion of 300 basis points.
• Anticipate a step-up in Q4 revenue driven by momentum in next-gen sequencing (NGS), stores backlog, and order shifts.
• Outlook for fiscal 2026 includes 5%-8% CAGR as per Investor Day plans later in 2025.

Risks

• Approximately 1% headwind to 2025 revenue due to reductions in NIH funding levels.
• Turbulent tariff landscape with nominal impact on adjusted EBITDA, requiring seeking alternative supply chain sources.
• Macro and geopolitical uncertainties affecting customer spending and investment decisions.

Question and Answer

• Q: David Saxon asked about Q4 confidence and fiscal '26 outlook.

A: Lawrence Lin discussed Q4 momentum from NGS, stores backlog, and order shifts; 2026 outlook tied to Investor Day plans.

• Q: Hannah Webb Hefley asked about Gene Synthesis softness.

A: John Marotta said it's a timing issue with green shoots in Q4.

• Q: Vijay Kumar asked about Q4 visibility and segment performance.

A: Lawrence Lin discussed seasonality and funnel strength; John Marotta talked about leadership changes aiding business.

• Q: Brendan Smith asked about spending trends.

A: John Marotta discussed funnel visibility and B Med divestiture timing.

• Q: Andrew Cooper asked about SMS margin dynamics.

A: Lawrence Lin and John Marotta talked about mix and Azenta Business System impact.

• Q: Matthew Stanton asked about NGS trends and innovation.

A: John Marotta discussed NGS sales execution and innovation pipeline.

• Q: Matthew Parisi asked about NIH funding impact.

A: John Marotta talked about NIH step-up and business positioning.