Azenta, Inc. Q4 FY2025 earnings call

• Restructured the organization to empower operating companies with clearer accountability and greater agility.
• Implemented the Azenta business system (ABS) to drive operational excellence, improving quality, on-time delivery, and productivity.
• Reinvested savings in innovation, sales, marketing, and product management.
• Strong balance sheet with over $500 million in cash, cash equivalents, and marketable securities for flexibility in growth, M&A, and share repurchases.
• Fiscal 2025 achieved 3% core growth and 310 basis points margin expansion despite a challenging macro environment.

Sample Management Solutions (SMS): Q4 revenue was $86 million, up 2% reported and flat organically. Softness in cryogenic stores due to customer budget constraints, but consumables and instruments performed well. Non-GAAP gross margin was 49.3%, up 180 basis points year over year. Multiomics: Record revenue of $73 million in Q4, up 11% reported and 10% organic. Strength in next-generation sequencing, gene synthesis, but Sanger sequencing declined. Non-GAAP gross margin was 43.7%, down 260 basis points year over year.

• Fiscal 2026 organic revenue growth expected in the range of 3% to 5%.
• Adjusted EBITDA margin expansion of approximately 300 basis points expected.
• First quarter revenue anticipated to decline approximately 1% to 2% due to macro slowdown in CapEx and government shutdown impact.
• Investor Day in December to outline multiyear growth strategy, financial framework, and capital deployment priorities.

• Macro-economic uncertainty affecting capital expenditures and government funding.
• Geopolitical uncertainty impacting customer spending and project timelines.
• Volatility in biopharma priorities leading to customer reprioritization of projects.

Q: Great. Good morning, John and Laurence. Congrats on the quarter. So maybe I'll start with guidance. So 3% to 5% growth, I guess, you know, what do you think the market's going at this point? And then the decline in fiscal first quarter down 1% to 2%, what's driving that across businesses or even, you know, product categories? And then I think you'll lap the NIH funding dynamics in the fiscal first half. So would love to hear what's baked into guidance in terms of that impact. And then I'll have a follow-up.

A: Sure. You bet, David. Good to be with you, and thank you for the questions. Let's talk about the macro, and then I'll hand it over to Laurence to get into the numbers. But a lot of what we're seeing is this slowdown on capital expenditures. That's continued to impact our stores in cryo. And we're seeing some green shoots around that, particularly in the EU, and seeing less traction in the U.S. right now. There's some booking softness, of course, the government shutdown from last month is really weighing on some of the guidance. The way to think about it is that midpoint is four, and that contemplates some deterioration in the macro on the low end. On the upper side, it's just a slow gradual improvement over the year. Regarding what we think the market is doing, we think the market is 1% to 2%. We're still an outgrowth story. And that's kind of how our view of this is shaping up for 2026. One thing to note is we're not focused on the first quarter, the first half. We're focused on delivering the year like we were this year. And that's really what the teams are laser-focused on.

Q: Okay. That's super helpful. Thanks for that. And then the follow-up, I guess, is just on SMS growth for the year. So mid-single digits, you just talked about some weakness in stores and cryos. So I guess last quarter, talked about the C and I backlog was like 2.5x annual sales. So, you know, maybe if you could, can we get an update there? Like, how much of that is driving your confidence in the mid-single-digit growth? And then, you know, how are you thinking about SRS for the year? Thanks so much.

A: Yeah. Look, I think we've for C and I, we feel really good about where we are. Some of the things that you'll see that inform why our SMS is mid-single digit is, and John and I talked a bit about really reinvesting in commercial. In fiscal 2025, we did that in GENEWIZ. What you're seeing in fiscal 2026 is we've put in a commercial engine, new leadership, and right now, they're putting investments to work on feet on the street. That's one. So that's going to read through across all our SMS business lines. Now to talk a little bit about SRS, you know, we expect robust growth in SRS. Really through two things, right? You'll see that our commercial engine really starts to move. We just put a new leader in place. Additionally, there is, and we talked a bit about this, we have an initiative in SRS particularly to optimize our price, and that's going to read through starting at the end of fiscal, sorry, at the end of the first quarter. So those are two major components. And why we feel really good about SRS is really we've seen actually recently our commercial leaders close two meaningful big deals in the areas of manufactured and bulk compounds.