Azenta's Q3 2025: Contradictions Emerge on NIH Funding, Strategic Pivots, Gene Synthesis, Leadership Changes, Multiomics Guidance, and EBITDA Margin Expansion

Date of Call: August 5, 2025

Financials Results

• Revenue: $144.0M, flat year-over-year (reported), down 2% organic
• EPS: Non-GAAP EPS $0.19 per share
• Gross Margin: Non-GAAP gross margin 48.5%, up 180 basis points year-over-year
• Operating Margin: Adjusted EBITDA margin 12.3% (Adjusted EBITDA $18M), up ~260 basis points year-over-year

Guidance:

• Reaffirming full year FY2025 organic revenue growth guidance of 3% to 5%.
• Segment expectations: Multiomics now expected to grow mid-single digits; SMS now expected to grow low single digits.
• Reaffirming commitment to ~300 basis points of adjusted EBITDA margin expansion year-over-year.
• Expect ~1% headwind in FY2025 revenue from reduced NIH funding; countermeasures in place.
• Continue to monitor tariffs (nominal EBITDA impact) and plan Investor Day later in calendar 2025.

Business Commentary:

* Revenue and Profitability Trends: - Azenta's adjusted EBITDA margin expanded by 260 basis points year-over-year in Q3. - The improvement highlights operational turnaround efforts and increased efficiency, despite ongoing macroeconomic challenges.

• Segment Performance:
• Multiomics segment revenue increased by 4% on a reported basis and 3% on an organic basis, driven by growth in next-generation sequencing.

• Sample Management Solutions (SMS) revenue decreased by 4% year-over-year on a reported basis, primarily due to softer bookings and order timing delays.

• Financial Guidance:

• Azenta reaffirmed its full-year 2025 guidance of 3% to 5% organic revenue growth and 300 basis points adjusted EBITDA margin expansion.

• Management expects increased execution and cost discipline to support these targets.

• M&A Activity and Strategic Focus:

• Azenta's M&A funnel is robust, with a focus on strategic tuck-in opportunities to accelerate revenue growth and profitability.
• The company is prioritizing investments in biorepositories, automation, and R&D to drive innovation and growth within its core business areas.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted margin expansion and execution: "adjusted EBITDA margin expanded by 260 basis points year-over-year"; reaffirmed FY2025 guidance (3%–5% organic) and 300 bps margin expansion; noted strong liquidity: "$550 million in cash" and "no debt"; emphasized improving funnel, stores/NGS momentum and operational turnaround.

Q&A:

• Question from David Saxon (Needham): Outside of easier comps, what gives you confidence in the implied Q4 step-up and any early thoughts on fiscal '26?
  Response: Q4 step-up driven by stores and NGS momentum, sufficient stores backlog and a large C&I order pushed to Q4; FY26 targets align with IR Day LRP of ~5%–8% CAGR to be updated at Investor Day.

• Question from David Saxon (Needham): On SMS core products weakness — are you seeing cancellations or just timing/order pushouts?
  Response: No cancellations — delays are timing-related as pharma pauses some capital equipment purchases, not order losses.

• Question from Mac Etoch (Stephens Inc.): What is causing the Gene Synthesis headwinds from key pharma accounts and when should this improve?
  Response: Softness is timing-related in pharma projects (North America); management sees early green shoots and expects some recovery in Q4.

• Question from Vijay Kumar (Evercore): Can you quantify the Q3 order pushout that supports implied Q4 (~5% organic) and segment dynamics (SMS vs Multiomics)?
  Response: Seasonal Q3→Q4 step plus stores/NGS momentum and a large C&I order explain the gap; funnel strength (C&I funnel ~2.5x revenue) underpins visibility into Q4.

• Question from Vijay Kumar (Evercore): How have leadership changes impacted the business and order book cleanup?
  Response: Regional commercial reorganization and new sales leaders (e.g., Joe, Albert) improved field engagement and execution, producing green shoots in the funnel.

• Question from Vijay Kumar (Evercore): What is the focus of your M&A funnel — product, services, software?
  Response: M&A will be disciplined, focused on core/near-core tuck-ins (biorepositories, automation) with selective Multiomics opportunities that are revenue- and margin-accretive.

• Question from Brendan Smith (TD Cowen): How much visibility do you have in the funnel and which end markets may see stronger spending?
  Response: Strong visibility in capital equipment with no cancellations; delays are timing-driven by pharma capex — funnel conversion depends on execution but is healthy.

• Question from Brendan Smith (TD Cowen): What is the ideal buyer profile and timing update for the B Medical divestiture?
  Response: Buyer set includes private equity and strategics; the process is progressing well and management expects announcements in the coming months.

• Question from Andrew Cooper (Raymond James): For SMS margin improvement, how much is mix vs structural cost-out?
  Response: Majority driven by favorable mix toward consumables plus structural gross-margin improvement from stores execution, restructuring and Azenta Business System-driven cost discipline.

• Question from Andrew Cooper (Raymond James): How comfortable are you with the Q4 step-up in SMS given backlog visibility?
  Response: Management is confident based on seasonal patterns, stores backlog and NGS momentum, but execution and weekly monitoring are required to land Q4.

• Question from Matthew Stanton (Jefferies): Can you put a finer point on NGS high double-digit growth and durability of outsourcing tailwinds from A&G funding shifts?
  Response: NGS growth driven by commercial execution with stable pricing and double-digit volume; outsourced opportunities in academic/government and pharma (seeking on-time delivery/quality) support durable demand despite NIH headwinds.

• Question from Matthew Stanton (Jefferies): Update on innovation/R&D pipeline cadence — when will new products contribute to revenue (2026 or later)?
  Response: R&D and product-management investments are ramping now and into 2026; management expects to see contribution beginning in 2026 as new NPI efforts scale.

• Question from Matthew Stanton (Jefferies): How large was the C&I order pushout that shipped in July?
  Response: It was a small amount — a couple of million dollars — and it shipped in July.

• Question from Matthew Parisi (KeyBanc): Given recent appropriation news, could the NIH headwind be smaller than the ~1% you estimated?
  Response: Recent Senate appropriations (late July) are positive and management is bullish that NIH funding may improve next year; company is positioned to benefit and can pivot across pharma and academic demand.

Contradiction Point 1

NIH Funding Impact and Strategic Pivot

It involves the company's response to the 1% headwind from NIH funding and their strategic pivot to mitigate its impact, which is crucial for understanding the company's growth strategy and revenue assumptions.

What supports confidence in the Q4 step-up given current guidance, and what guidance do you expect for fiscal '26? - David Saxon (Needham)

2025Q3: We have confidence in achieving our fiscal year 2025 goals, despite a difficult third quarter, which was largely due to timing-related dynamics in several areas. - John P. Marotta(CEO)

What are the assumptions behind the 1% headwind from NIH and where is the offset coming from? - Vijay Kumar (Evercore)

2025Q2: We have countermeasures in place for the 1% headwind from NIH. Approximately 20% of our global revenue comes from the academic end market, and we've pivoted to focus on pharma and biotech to offset this. - John Marotta(CEO)

Contradiction Point 2

Growth Trends in Gene Synthesis

It concerns the growth trends in Gene Synthesis and the reasons behind any softness in this area, which is important for understanding the company's product performance and market positioning.

What is causing the softness in Gene Synthesis, and will timing issues resolve? - Hannah Hefley (Stephens Inc.)

2025Q3: Softness in Gene Synthesis due to project delays and resource alignment. Seeing green shoots in projects expected in Q4. Timing issues primarily impact North America. - John P. Marotta(CEO)

Can you discuss trends in Gene Synthesis and the impact of tariffs? - Matt Stanton (Jefferies Group LLC)

2025Q2: In GENEWIZ, there was a pause in large pharma programs due to restructuring, but we're seeing green shoots now, with April bookings looking good. There's no change in our view of Multiomics overall. - John Marotta(CEO)

Contradiction Point 3

Leadership Changes and Impact

It involves the impact of leadership changes on the business, which is important for understanding the company's organizational effectiveness and growth prospects.

How have recent leadership changes impacted the business? - Vijay Kumar (Evercore)

2025Q3: New commercial leadership in North America and SRS has brought positive changes, with new sales leaders in the field and existing leaders taking on new roles, driving improved customer interaction. - John P. Marotta(CEO)

Are you satisfied with the salesforce structure for the Azenta Business System rollout? - Paul Knight (KeyBanc Capital Markets Inc.)

2025Q2: I think the salesforce structure is set. We've aligned the organization regionally now, which has been beneficial. - John Marotta(CEO)

Contradiction Point 4

Multiomics Growth and Guidance

It involves differing expectations for the growth and phasing of the Multiomics segment, which is crucial for understanding the company's financial performance and strategic direction.

What gives you confidence in achieving Q4 growth based on current guidance, and how should investors assess fiscal 2026 guidance? - David Saxon (Needham)

2025Q3: Multiomics continued to grow 10% in the third quarter, reaching $517 million. Performance was driven by a 13% increase in Sample Management Solutions and high double-digit growth in Next Generation Sequencing. - John P. Marotta(CEO)

Why is Multiomics' 6% growth not reflected in updated guidance? What's causing the projected slowdown in the second half? - David Saxon (Needham)

2025Q1: Our growth in NGS was solid at 11%. Timing is the main factor affecting the phasing of growth. As we move towards our Investor Day, we'll provide more details. - Lawrence Lin(CFO)

Contradiction Point 5

EBITDA Margin Expansion Expectations

It involves differing expectations for EBITDA margin expansion, which is a critical indicator of the company's operational efficiency and financial health.

What portion of the SMS margin improvement is attributed to mix and structural cost reductions? - Andrew Cooper (Raymond James)

2025Q3: We're on track to deliver the 300 basis point margin expansion. Favorable mix towards consumables contributed significantly to our margin improvement. - Lawrence Lin(CFO)

Can you explain the EBITDA margin guidance for fiscal 2025, especially with the exit of B Medical? - David Saxon (Needham)

2024Q4: We aim for 300 basis points of EBITDA margin expansion each year, and we expect to hit 15% to 17% by fiscal '26. - Herman Cueto(CFO)