Azenta, Inc. (Nasdaq: AZTA) today reported financial results for the fourth quarter and fiscal year ended September 30, 2024.

Fiscal Year 2024 Highlights:

• Q4'24 revenue growth of 6% reported and 5% organic, in combined Sample Management Solutions and Multiomics
• FY'24 Adjusted EBITDA margin expansion of approximately 300 basis points versus last year

Management Comments
"We ended fiscal 2024 strong, delivering core revenue growth in our Sample Management Solutions and Multiomics businesses, and upholding our commitment to meaningfully expand margins," stated John Marotta, President and CEO. "We are proud of the progress that we made in fiscal 2024, particularly in our Transformation Program Ascend 2026, and intend to carry that momentum forward to drive further performance, as proven by our fiscal 2025 guidance, which anticipates core revenue growth in the range of 3% to 5%, with continued margin expansion and a renewed focus on free cash flow."

Mr. Marotta continued, "Azenta offers a unique portfolio of differentiated products and services and occupies a strong position in the marketplace. Our competitively advantaged portfolio of businesses, coupled with the capabilities of the Value Creation Committee, supported by the full Board, will accelerate our goal of delivering profitable growth and long-term shareholder value creation."

Fourth Quarter Fiscal 2024 Results

• Revenue was $170 million, down 1% year over year. Organic revenue declined 2% year over year, which excludes the impact from foreign exchange of less than 1 percentage point. The year-over-year revenue decline was attributable to lower B Medical Systems ("B Medical") revenue. The combined Sample Management Solutions and Multiomics business segments grew 5% on an organic basis.
• Sample Management Solutions revenue was $85 million, up 4% year over year.
  • Organic revenue was up 3%, mainly driven by continued strength in Sample Repository Services and Core Products, particularly in Cryogenic Stores and Consumables and Instruments. This was partially offset by a year-over-year revenue decline in Stores.
• Multiomics revenue was $66 million, up 8% year over year.
  • Organic revenue also grew 8% year over year, primarily driven by growth in Next Generation Sequencing, partially offset by a year-over-year decline in Sanger sequencing revenue.
• B Medical Systems revenue was $19 million, down 35% year over year.
  • Organic revenue also declined 35% year over year, mainly due to lower order volume in the quarter compared to the prior year, primarily attributable to timing of orders.

Summary of GAAP Earnings Results

• Operating loss was $12 million. Operating margin increased 240 basis points year over year.
  • Gross margin was 40.8%, up 130 basis points year over year, driven by favorable product mix, operational efficiencies, and cost reduction initiatives, partially offset by increased amortization and transformation costs.
  • Operating expenses were $82 million, down 300 basis points year over year, primarily driven by lower selling, general and administrative expenses and lower amortization, partially offset by increased restructuring and transformation costs.
• Other income included $6 million of net interest income versus $11 million in the prior year period.
• Diluted EPS from continuing operations was ($0.10) compared to $0.05 one year ago.

Summary of Non-GAAP Earnings Results

• Adjusted operating income was $7 million. Operating margin was 4.1%, an improvement of 460 basis points year over year.
  • Adjusted gross margin was 45.0%, up 220 basis points year over year, primarily driven by favorable product mix, operating efficiencies, and cost reduction initiatives.
  • Adjusted operating expense in the quarter was $69 million, down 700 basis points year over year, primarily driven by the benefit of cost reduction initiatives and lower commissions on cold chain sales in B Medical.
• Adjusted EBITDA was $17 million, and Adjusted EBITDA margin was 10.2 %, up 560 basis points year over year.
• Non-GAAP Diluted EPS was $0.18, compared to $0.13 one year ago.

Full Year Fiscal 2024 Results

• Revenue for fiscal 2024 was $656 million, down 1% year over year. Organic revenue declined 2%, which excludes the impact from foreign exchange of less than 1 percentage point and a nominal contribution from acquisitions. The year-over-year revenue decline was attributable to lower B Medical revenue. The combined Sample Management Solutions and Multiomics business segments grew 4% on an organic basis.
• Sample Management Solutions revenue was $319 million, up 5 % year over year.
  • Organic revenue was up 4%. The year-over-year revenue increase was driven by growth in both, the Sample Repository Services and Core Products businesses.
• Multiomics revenue was $255 million, up 3% year over year.
  • Organic revenue also grew 3% year over year, driven by growth in Next Generation Sequencing and Gene Synthesis services, partially offset by a year-over-year decline in Sanger sequencing revenue.
• B Medical Systems revenue was $83 million, down 27% year over year.
  • Organic revenue was also down 27% year over year, primarily driven by the timing of cold chain equipment orders.

Summary of GAAP Results

• Operating loss was $201 million. Operating margin decreased 19.6% year over year.
  • Gross margin was 40.1%, up 60 basis points year over year, primarily driven by favorable product mix, operating efficiencies and cost reduction initiatives, as well as purchase accounting impacts on inventory in the prior year which did not reoccur, partially offset by increased amortization and transformation costs.
  • Operating expense was $464 million, up 38% year over year due to a $116 million non-cash impairment of goodwill and intangible assets, increased transformation and restructuring charges, and a benefit of $18.5 million of fair value contingent consideration adjustments related to B Medical recognized in the prior fiscal year that did not reoccur; these increases were partially offset by lower M&A costs and the benefit of our cost reduction initiatives.
• Other income included $33 million of net interest income versus $44 million in the prior year period.
• Diluted EPS from continuing operations was ($3.09) compared to ($0.19) in fiscal 2023.

Summary of Non-GAAP Results

• Adjusted operating loss was $3 million and operating margin was (0.4%), an improvement of 190 basis points year over year.
  • Adjusted gross margin was 44.5%, up 70 basis points year over year, primarily driven by favorable product mix, operating efficiencies and cost reduction initiatives, partially offset by margin pressure from lower revenue in the B Medical segment.
  • Adjusted operating expense was $295 million, down 400 basis points year over year, primarily driven by the benefit of cost reduction initiatives and lower commissions on cold chain sales in B Medical.
• Adjusted EBITDA was $49 million, and Adjusted EBITDA margin was 7.5%, an improvement of about 300 basis points year over year.
• Non-GAAP Diluted EPS for fiscal 2024 was $0.41, compared to $0.31 in fiscal 2023.

Cash and Liquidity as of September 30, 2024

• The Company ended fiscal year 2024 with a total balance of cash, cash equivalents, restricted cash, and marketable securities of $522 million.
• Capital expenditures were $13 million in the quarter and $38 million for the full year.

Share Repurchase Program Update

• In the fourth quarter, the Company repurchased approximately 4.9 million shares for approximately $249 million under a 10b5-1 trading program.
• The Company completed the repurchases of its common stock under the 2022 Repurchase Authorization in September 2024. As of September 30, 2024, we have repurchased and retired 30.0 million shares of common stock for the full $1.5 billion approved.

Review of Statements of Cash Flows
As part of the year end closing process, the Company is currently reviewing the classification of amounts, primarily between the line items "effects of exchange rate changes on cash and cash equivalents" and "cash provided by operating activities in the Company's consolidated statements of cash flows that could potentially impact those line items in our previously issued statements of cash flows for fiscal year ended September 30, 2023 and fiscal 2024 quarterly periods. As a result, the Company has not included statements of cash flows in this release. The Company's consolidated balance sheets and statements of operations are not impacted by any reclassification of these cash flow items for any period. The Company expects to reflect any changes to the previously issued statements of cash flows in its Annual Report of Form 10-K for the fiscal year ended September 30, 2024.

Guidance for Continuing Operations for Full Year Fiscal 2025 Excluding B Medical Systems

• Total organic revenue is expected to grow in the range of 3% to 5% relative to fiscal 2024.
• Adjusted EBITDA margin expansion is expected to be approximately 300 basis points relative to fiscal 2024.

Azenta does not provide forward-looking guidance on a GAAP basis for the measures on which it provides forward-looking non-GAAP guidance as the Company is unable to provide a quantitative reconciliation of forward-looking non-GAAP measures to the most directly comparable forward-looking GAAP measure, without unreasonable effort, because of the inherent difficulty in accurately forecasting the occurrence and financial impact of the various adjusting items necessary for such reconciliations that have not yet occurred, are dependent on various factors, are out of the company's control, or cannot be reasonably predicted. Such adjustments include, but are not limited to, transformation costs, restructuring charges, costs related to acquisitions and divestitures costs, governance-related matters, goodwill and intangible impairments, and other gains and charges that are not representative of the normal operations of the business.

Pursuing Sale of B Medical Systems Segment
Azenta has announced it is pursuing a sale of its B Medical Systems segment, a manufacturer and global distributor of medical refrigeration devices based in Luxembourg. This action will simplify Azenta's portfolio and allow management to focus on driving revenue growth and profitability in its core businesses. The decision follows work by the Board of Directors to evaluate strategic, operational and financial opportunities to maximize value.

Azenta does not intend to comment further on the process unless and until the Company has determined a specific course of action or otherwise determined that further disclosure is appropriate or required by law.

Names Lawrence Lin Chief Financial Officer
The Company has also named Lawrence Y. Lin as Chief Financial Officer, succeeding Herman Cueto, effective after the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2024 is filed with the Securities and Exchange Commission. Mr. Cueto will remain as an advisor for a period of time to help facilitate a seamless transition.

Mr. Lin joins Azenta from GeoStabilization International LLC ("GSI"), a privately held industrial company, and brings over twenty years of finance experience, including previously holding senior finance roles at PHC Holdings and Danaher.

Mr. Marotta commented, "We're excited to have Lawrence join the Azenta team. Lawrence is an accomplished finance executive with a proven track record and a skillset that aligns perfectly with Azenta's needs for its next phase of transformation."

Mr. Marotta continued, "We will benefit from the many significant contributions Herman made during his time at Azenta, including notably, the development of Ascend 2026, which is already driving considerable margin expansion. He played a key role in laying a terrific foundation on which to build. We wish him the best going forward."

Before joining GSI, Mr. Lin was Senior Vice President of Finance Operations at PHC Holdings Corporation, a leading diversified diagnostic, life sciences and medical device company based in Japan. Prior roles include Vice President of Finance for North America (CFO) and Global Functions at LivaNova, a global medical technology company, and Vice President of Finance Operations at KaVo Kerr, previously part of Danaher, which was spun off as an independent public company named Envista in 2019. Mr. Lin holds a bachelor's degree in finance from California State University, Fullerton.

Conference Call and Webcast
Azenta management will webcast its fourth quarter and full year fiscal 2024 earnings conference call today at 4:30 p.m. Eastern Time. During the call, Company management will respond to questions concerning, but not limited to, the Company's financial performance, business conditions and industry outlook. Management's responses could contain information that has not been previously disclosed.

The call will be broadcast live over the Internet and, together with presentation materials referenced on the call, will be hosted at the Investor Relations section of Azenta's website at https://investors.azenta.com/events and will be archived online on this website for convenient on-demand replay.

Regulation G – Use of Non-GAAP financial Measures
The Company supplements its GAAP financial measures with certain non-GAAP financial measures to provide investors a better perspective on the results of business operations, which the Company believes is more comparable to the similar analyses provided by its peers. These measures are not presented in accordance with, nor are they a substitute for, U.S. generally accepted accounting principles, or GAAP. These measures should always be considered in conjunction with appropriate GAAP measures. A reconciliation of non-GAAP measures to the most nearly comparable GAAP measures is included at the end of this release following the consolidated balance sheets and statements of operations. Certain amounts in the tables that supplement the consolidated financial statements may not sum due to rounding. All percentages are calculated using unrounded amounts.

"Safe Harbor Statement" under Section 21E of the Securities Exchange Act of 1934
Some statements in this release are forward-looking statements made under Section 21E of the Securities Exchange Act of 1934. These statements are neither promises nor guarantees but involve risks and uncertainties, both known and unknown, that could cause Azenta's financial and business results to differ materially from our expectations. They are based on the facts known to management at the time they are made. Forward-looking statements include but are not limited to statements about our revenue and earnings expectations, the potential impact of the review of our statements of cash flows on our previously issued statements of cash flows for the fiscal year ended September 30, 2023 and fiscal 2024 quarterly periods, our ability to realize margin improvement from cost reductions, and our ability to deliver financial success in the future and otherwise related to future operating or financial performance and opportunities. Factors that could cause results to differ from our expectations include the following: our ability to reduce costs effectively; the volatility of the life sciences markets the Company serves; our possible inability to meet demand for our products due to difficulties in obtaining components and materials from our suppliers in required quantities and of required quality; the inability of customers to make payments to us when due; price competition; disputes concerning intellectual property; uncertainties in global political and economic conditions; and other factors and other risks, including those that we have described in our filings with the Securities and Exchange Commission, including but not limited to our Annual Report on Form 10-K, Current Reports on Form 8-K and our Quarterly Reports on Form 10-Q. As a result, we can provide no assurance that our future results will not be materially different from those projected. Azenta expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in our expectations or any change in events, conditions, or circumstances on which any such statement is based. Azenta undertakes no obligation to update the information contained in this press release.