Yahoo Finance Azenta Inc (AZTA) Q2 2024 Earnings Call Transcript Highlights: Strategic Growth and Operational ...
Annual Revenue: Nearly $700 million.
Q2 Revenue: $159 million, up 7% year-over-year.
Net Income: Not explicitly mentioned, focus on EBITDA and EPS instead.
EBITDA: Ascend program aims for high teens by 2026, exceeding 20% thereafter.
EPS: Non-GAAP EPS of $0.05 in Q2.
Free Cash Flow: Positive at $2 million for the fourth consecutive quarter.
Sample Management Solutions (SMS) Revenue: $74 million, up 4% year-over-year.
Multiomics Segment Revenue: $62 million, flat year-over-year.
B Medical Segment Revenue: $23 million, up 51% reported and 49% organic.
Gross Margin: Non-GAAP gross margin was 44.3%, up 310 basis points year-over-year.
Operational Efficiency: Annual expense reduction by more than $25 million.
Market Capitalization: Not directly mentioned, focus on financial health and operational metrics.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Azenta Inc reported a solid Q2 with revenue of $159 million, marking a 7% year-over-year increase.
The company achieved organic growth in all three business segments despite a downmarket, highlighting strong operational execution.
Significant cost reductions and operational efficiencies have been implemented, reducing annual expenses by more than $25 million.
Azenta Inc is on track with its Ascend 2026 plan aiming to lift EBITDA to high teens by 2026, with innovative products launched in each segment.
The company's Sample Management Solutions (SMS) segment saw a revenue increase of 3% year-over-year, with strategic investments yielding positive results.
Negative Points
CEO Stephen Schwartz announced his retirement, initiating a search for a successor which could bring uncertainty during the transition period.
The B Medical segment faces challenges with unpredictable timing of purchase orders, impacting revenue forecasting accuracy.
Revenue from the Life Sciences Services market continues to face headwinds, although Multiomics segment revenue increased slightly.
The company recorded a $111 million noncash goodwill impairment charge related to the B Medical segment.
Adjustments to B Medical revenue expectations were made, lowering the forecast for the fourth quarter to approximately $25 million to $30 million.
Q & A Highlights
Q: In terms of questions, maybe just 2 from me. Maybe I'll start probably for Herman. Just on the B Medical guidance, you're bringing that down. I just want to understand how much of that is driven by the DRC contract? Maybe getting pushed out to fiscal '25 and kind of how much of that is driven by just the rest of the pipeline and timing in that part of the pipeline? A: Yes, David, thank you for the question. It's a combination of things. The DRC is certainly a part of the takedown. If you recall back to the Q4 call, in November, I explained that DRC was already in the pipeline, but not at the magnitude of $60 million. That size, that $60 million certainly bolstered the pipeline up. But the fact of the matter is we removed DRC from our current guide. We still feel good about the order, but unsure about the timing. In fact, we continue to work closely with the DRC as part of our sample acquisition strategy. So talks are progressing, but the timing of the $60 million is still an open item. The exit from the U.S. non-VCC market is also a factor. And I would say, the combination of DRC and the exit of the U.S. market in non-VCC are key contributors to the takedown.
Q: So for SMS, one of the questions I get from investors is about the large stores growth. And how much of that is being driven by just working down the backlog? So can you talk about the backlog and the order pipeline there? And what you're seeing that gives you confidence that the backlog can continue to grow or at least be replenished? And I know it's early in the BioArc Ultra launch, but how significant could that be to the backlog and the durability of large stores revenue growth? A: Yes, you bet. Thanks, David. Yes, it's really an interesting period for us. And every quarter, we're stop being surprised by the magnitude of the orders that are coming. So the backlog continues to build even as the revenue growth. So we're -- we think we're in a good position from that standpoint. Actually, the large stores revenue year-over-year grew 50% in the quarter. So it was particularly strong and the backlog continues to grow.
Q: It's actually Hannah on for Jacob. First, you all have done a really good job guiding quarterly for B Medical. Is there anything you can do to better forecast B Medical revenue over longer periods of time? A: Let me -- this is Steve. Let me try it a couple of ways. We look at a number of things, including the sources of funding, which actually -- this is Gavi (inaudible) and the various funding organizations who do put out their projections for how much they're going to invest in some of these. And that represents about half of the business. So we get a pretty good idea in the -- with the 12 months' notice as to what we think is going. Of course, we have to win our share of that business, but we're -- we have high market share. So we're pretty steady there.
Q: Steve, you'll be missed. Wishing you all the best. It's been quite a journey. A: Vijay, we had conversations a long ago. So yes, it's been a long time at it.
Q: Maybe one on China. Mid-teens growth in Multiomics was nice to see. Clearly, it's been a challenging market for the broader tool space. Can you just unpack a bit more what you're seeing in China, what's kind of underpinning that demand and then what you're penciling in, in China for the year? A: Yes. So Matt, this is Steve. When we look at China, there's been really outperformance for the past 4 quarters. We've been in double digits growth in China when the market has been down significantly each of the last 4 quarters. I'll give you a couple of things. One, being in China is serving Chinese customers is a big deal. We're right in the middle of Suzhou and there are hundreds, if not 1,000 life sciences companies close by. We're staffed with really outstanding scientists and really aggressive sales teams who serve the customers particularly well.
Q: Maybe a couple of questions from us. Just a clarification for the lower guidance. Herman, was it mainly coming from the lower revenue guidance from B Medical? Or were there some other factors in this aspect? A: No, it was B Medical. We reiterated the full year guide for both Multiomics and SMS.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
