Greetings, and welcome to the Azenta Third Quarter 2024 Financial Results. [Operator Instructions]. As a reminder, this conference is being recorded Tuesday, August 6th, 2024. I'll now turn the conference over to Yvonne Perron, Vice President, FP&A, and Investor Relations.

Thank you, operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the third quarter of fiscal year 2024. Our third quarter earnings press release was issued after the close of the market today, and is available on our Investor Relations website located at investors.azenta.com in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the safe harbor slide on the aforementioned PowerPoint presentation on our website and our various filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of the Azenta business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, Steve Schwartz; and our Chief Financial Officer, Herman Cueto. We will open the call with remarks from Steve on the highlights of the third quarter, then Herman will provide a more detailed look into our financial results and our outlook for fiscal year 2024. We will then take your questions at the end of the prepared remarks. And with that, I'd like to turn the call over to our CEO, Steve Schwartz.

Thank you, Yvonne. Good afternoon everyone, and thanks for joining us today. It's great to have the opportunity to report another strong quarter of execution in fulfillment of our long-term growth and profitability objectives. We delivered solid above-market growth and more acceleration of profitability. In a life sciences market environment that's still struggling to find its footing, our unique portfolio of capabilities and our market leading positions in each of our segments leaves us less vulnerable to market slowness. We're in a position to capitalize on the fact that all methods of discovery require high-quality consented samples that can be retrieved, measured, annotated, and stored for future reference and interrogation. As a matter of fact, it's the driving forces of lower cost and faster time to discovery that are moving the markets and attracting customers to Azenta. As we can provide immediate, tangible benefits to customers looking to manage and measure samples with best-in-class capability. We enable breakthroughs faster, and that's the name of the game. Furthermore, in addition to our core business, there's an increasing desire from our customers to have access to rare and valuable samples from human populations that were previously inaccessible. As we expand the breadth of our capabilities to source, manage, and measure samples, we aim to be the provider of a full complement of critical inputs, not just for laboratory discovery, but also as inputs for powerful AI models which are hungry for this information and an important factor in the transformation of life sciences and healthcare. At our Investor Day in March, we outlined a 10-quarter plan to continue to grow revenue faster than the market growth rate, while simultaneously transforming the company to deliver on the profit potential. That comes with this unique capability portfolio. Today, we report strong progress against these…

Thank you, Steve, and good afternoon everyone. Let me start by saying how proud and encouraged I am of the Azenta team on the disciplined execution that enabled us to accelerate the realization of savings into the third quarter, contributing to our margin expansion profitability. In addition to above-market top-line revenue performance, the efforts and initiatives of the Ascend 2026 transformation program are bearing fruit and the results we are reporting today reflect that. As you can see in the financial results we issue today for the third fiscal quarter, we delivered adjusted EBITDA margin of 10.3%, which equates to 260 basis points of expansion year over year and 440 basis points versus the prior quarter. Beyond that, and even more exciting in my mind is that we turn profitable in Q3, delivering an operating profit of $4.6 million a fee we have not seen over the last six quarters. This is the result of a fully engaged organization leading initiatives focused on reshaping the company for long-term success, scale and growth. Let me talk about the actions we've completed as part of Ascend 2026 in the area of portfolio optimization. We've now exited two non-strategic product lines, one in sample management solutions and one in B Medical, which as you know, aims at reshaping the B Medical segment to focus solely on vaccine cold chain products and the related sample acquisition strategy. In our site optimization initiative, we made tremendous progress in Q3, where we impacted another six locations. Within the six was a focus on B Medical's operation in Asia where we were able to exit three of their five locations and reduce the footprint in another. Since we started this journey, we have closed a total of 10 sites and reduced our footprint in another three. At…

[Operator Instructions]. Our first question will come from line of Jacob Johnson from Stephens. Your line is open.

Good afternoon everybody. Congrats on the quarter. Maybe starting in a somewhat random place, but that cryogenic freezer's up 40% in the quarter, that's a pretty striking number. And much better than I think another peer that reported tonight on the freezer side. We're still hearing about some muted capital equipment spend, so I'm just curious, kind of, I'm guessing some of that was off a low base, but what drove the growth in cryo freezers? Is it the differentiated aspect of the offering or anything you'd call out there?

It's automated systems are the driver here. Jacob, for the first time in several quarters now, we had some multiple system orders for customers who have converted to automation. And so, they had these systems in place. They spent the last few quarters verifying that was the way they were going to go and we had multiple system orders. And so that's a good boost for us. We haven't seen the constraints because these are not huge ticket items. These are in the 150 K to 250 K. So, it's not multimillion kind of things like the large automated stores. And so, we haven't seen any reluctance from customers to keep purchasing. But the by and large -- although we have manual cryogenic freezers as well but by and large, the trend that we see is for the automated systems.

And then maybe for my follow-up, Herman, I guess on B Medical, just kind of high level as you think about strategic planning and right sizing costs, obviously, it's a business that's going to be down 29% this year. I imagine if DRC comes back maybe it could be something better than next year. I’ll let you wait to opine on 2025 B Medical trends, but I'm just kind of curious how you think about managing resources for that business given some of the variability in the revenue streams there?

Thanks, Jacob. Listen, what we set at Investor Day is that we're going to build B Medical to be an accretive EBITDA margin business for the long haul. We continue to see value in the sample acquisition strategy, so we're going to continue to go after that. But when you look at where they're coming in what they did this quarter, if they had an above Azenta overall EBITDA margin all of the things that we're doing around Ascend 2026 to rightsize that business, they're starting to bear fruit. So, we're going to rotate resources to the places that are growing, of course. But the things we're doing will give us the runway to explore things in a profitable way.

Our next question line Vijay Kumar from Evercore ISI. Your line is open.

This is Sophia Knopp on for Vijay. I just had a quick question on the EBITDA margin. So, the current guide implies about a 250 bips sequential step up into 4Q and I was wondering if you could just talk about the factors that go into that step up and then kind of going off that, what is the right jump-off point as we start to think about fiscal ‘25 from a margin standpoint?

Hi, Sophia, its Herman. I won't talk about fiscal year ‘25, but I actually don't think it's a step up from Q3 to Q4 to hit the overall guide. Maybe it’s flat to down a little bit from Q3 to Q4. Maybe we could talk offline on the modeling.

Our next question will come line of Andrew Cooper from Raymond James. Your line is open.

This is Noah Lewis on for Andrew. I just had a quick question. So, C&I, I think you said grew 17%, and I just wanted to see like what you’re seeing in those end markets there. and maybe even also within SMS what you're hearing from customers? And is that purely just a timing thing on the guidance change? Or is there anything else going into that?

Noah, its Herman. So, in the third quarter, C&I grew 17% within instruments as we've seen in prior quarters bookings in the quarter were soft as we saw capital spending continue to be somewhat constrained. However, the pipeline continues to look strong indicating that demand remains healthy and it's tied to spending delays. However, we did see revenue growth in instruments quarter to quarter, which we viewed as a positive. And on the consumable side, revenue growth was very strong. We saw significant double-digit sequential in year-over-year increases. So, related to SMS, it's certainly just a timing thing. Maybe if I talk for a minute about the change in the guide. If I were to start with B Medical at this point in the quarter, as we talked about in the prepared remarks, we're holding about 16 million firm orders. Through nine months, B Medical's delivered $64 million of revenue, and that takes us to about $80 million. The midpoint of the last guide was about $85 million, so $5 million of the change was driven by that. And then the remaining five is related to our OEM product line. We make an automated store for a customer that goes into a lab automation system, and we're working with that customer to shift some of the volume from the second half of ‘24 into Q1 of ‘25. It's not lost volume at all. It’s just a movement of revenue from in our case one fiscal year to the next.

And our next question on come line of Matt Stanton from Jefferies. Your line is open.

Maybe one on the NGS side, it sounds like you're -- things are maybe getting a bit better. Maybe we have brighter days ahead. You talked about demand elasticity this time around versus prior cycles, maybe driving more outsourced demand. Maybe just kind of talk a bit more about why this time might be different. We might see that. And then you talked about 700 new customers. Anyway, your kind to level set us on what a normal quarter is, or what last year was just to kind of get the magnitude of the activity on in the quarter year.

A couple things. One, it seems like compared to other cycles when there's been a transition like this. It feels like our end customers who used to do their own sequencing maybe have delayed some of the tool purchases and they're sending their work to us. So, it's what we envisioned might be the case. And it's kind of what's proven to be happening here over the last quarters. We went over 700 new customers this quarter. That was an increase of a hundred from the prior quarter. Just to give you an idea. So, it feels like there's a pretty significant momentum build and we -- as I mentioned, we had a record in quote activity, both in the number of quotes and the dollar volume on quotes. And it feels to us right now as though customers want to take advantage of a significant opportunity to have a reduced price. Because of our cost structure, and our outsourcing more of the NGS work. So again, we will report on that as we go forward in quarters, but that's been our observation here over the three quarters. Pricing seems to have stabilized; volume continues to grow fifth consecutive quarter-over-quarter growth of 20% growth in terms of volume and we'll see what happens from here. But right now, I think there are just not as many tools installed and we've got a lot of capacity in place ready to take customer business and turn it fast.

And Herman, maybe one for you on the margin. So still guiding for up 300 bips for the year, despite the lower top line, is that just mixed dynamics or are there other kind of cost levers you're pulling maybe faster to protect that 300 basis points? You laid out quite a hefty list of improvements around the Ascend 26 for the year. So just kind of curious on what's kind of underpinning the ability to drive that large expansion still.

The Ascend 2026 program is bearing fruit and things are coming online faster. Maybe then we would've committed to, so we're always planning ahead and there's always things in the pipeline. Things fall off and then things come on faster and we're just experiencing that. So, we talked about in the prepared remarks that we've already, for example, optimized closed 10 sites. We've right sized another three. That's finding its way into the P&L. It's a combination of things. So, there are cost actions related to Ascend 2026. That's helping us reach these targets. And we still feel good about the fiscal year ‘26 commitment.

[Operator Instructions]. Our next question will comes from the line of Lucas Baranowski from KeyBanc Capital. Your line is open.

This is Lucas on for Paul Knight at KeyBanc. Last quarter, I believe you mentioned that you had two more sites that were expected to close over the near term. It sounds like those have occurred now, but are there any further closures that you're expecting in the coming quarters? Thanks.

We do have a couple others that we are currently working on. I don't want to disclose whether they'll happen in the fourth quarter or next year, but we do have a few things in flight right now.

And then switching over to the Multiomics business, I believe you had some sites where revenue was expected to be flat sequentially as you transitioned over to the new NovaSeq X Plus. Has that transition finished at this point and are you starting to see a step up in revenue?

It's actually an interesting dynamic Lucas. And we've said this in the past, where we're seeing price losses, it's actually being offset by volume gains. We've been able to maintain the margins in the business because the new technology actually enables us to use less raw material, less labor. And on top of that, we're able to leverage our fixed overhead structure. And it's the combination of those three things that have contributed to the margin stabilization. Over, I would say the last two quarters, the ASPs have stabilized and we're beginning to get to the point where we're lapping these tougher compares. So NGS in the quarter growing 3% is the largest quarter growth that we've seen in the past year. So, it's a positive sign for this business for sure.

To the last part of your question, almost all the data that we generate today and the measurement we make is on the X Plus tools. So, we've made that conversion already prior to the last quarter.

Looks like we have a follow-up question from the line of Jacob Johnson from Stephens. Your line is now open.

Two follow ups. I guess first, just following-up on that last line of questioning NGS 3%, Steve, I think I heard you say volume was up 20% as we near the end of some of these pricing headwinds. Is that volume growth a proxy for how we -- what we could see from NGS or any caveats there as we think about NGS growth as pricing comps normalize?

We hope so, let me start with two things. We hope so. We think the volumes are good. Yeah. The other thing I'll say is on -- when we look at the last three conversion cycles, when there were appreciable decreases in the cost of sequencing, we're at or a little bit ahead performance-wise compared to where we were before. But I think that's customer behavior. I think more people are outsourcing. So, we anticipate we'll see continued progress here. Now we got work to do and proofs to do, but there's nothing that says that we wouldn't have a chance then on the more solid, like Herman says year over year compares that that wouldn't be a lot more solid business. So, we anticipate that's the case. We'll wait and see, but the customer volume and customer activity has been really strong.

And then just one other follow-up on Multiomics just on synthesis, it's been topical for customer or for investors. You guys have mentioned the potential to add US manufacturing for synthesis if customers are asking for it. I'm just curious, have you heard any of that from customers?

I'll share this one. So, customers ask from a risk mitigation standpoint, and we're prepared. So, we have -- we already do manufacturing synthesis in North America, customers ask because they want to know that in the event that we couldn't supply from our China facility for example could we, and the answer of course is yes, but there's no push for it and no customers have gone away from us as a result of the way that we're structured today. So indeed, it's a question but only a question and it's mostly for their risk mitigation strategy. But we're prepared if we needed to, we'd be prepared to move more manufacturing to North America.

Now I want to turn it back over to Herman Cueto for any closing remarks.

Thank you everybody for joining us today. I would like to thank our 3000 pluses and employees worldwide for their hard work and dedication. That concludes our call for today. Thank you everybody.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.