Azenta, Inc. (AZTA) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a positive outlook with strong financial metrics, optimistic guidance, and strategic growth initiatives. Despite some uncertainties in specific segments like Sanger, the overall sentiment is buoyed by successful bundling, regionalization efforts, and positive momentum in key markets. The company's focus on capital deployment and margin improvements further supports a positive stock price movement. Given the market cap, the stock is likely to experience a moderate positive reaction over the next two weeks.
Key Financial Performance
Total Revenue $149 million, up 1% reported and down 1% organically with a 2% headwind from foreign exchange. Reasons for change: Mixed performance across the portfolio with strong growth in biorepositories and next-generation sequencing, partially offset by softness in capital-intensive businesses.
Non-GAAP EPS $0.09. Reasons for change: Impacted by pressures in gross margin.
Adjusted EBITDA Margin 8.5%, down approximately 230 basis points year-over-year. Reasons for change: Pressures in gross margin and higher costs in automated stores on late-stage projects related to quality issues.
Free Cash Flow $15 million for the quarter. Reasons for change: Driven by increased customer deposits and deferred revenue, partially offset by usage in working capital.
Cash, Cash Equivalents, and Marketable Securities $571 million, an increase of $25 million quarter-to-quarter. Reasons for change: Strong financial position providing flexibility for capital deployment.
Gross Margin 44.1% for the quarter, down 360 basis points versus the prior year. Reasons for change: Underutilized lab capacity driven by lower North America volumes and additional costs related to rework on automated storage projects.
Sample Management Solutions Revenue $81 million for the quarter, flat on a reported basis and down 2% organically. Reasons for change: Growth in biorepositories offset by softness in automated stores and cryo due to slower bookings from macro-driven budget constraints.
Multiomics Revenue $67 million, up 1% on a reported basis and flat organically. Reasons for change: Growth in next-generation sequencing and gene synthesis offset by weakness in Sanger sequencing and macro-driven budget constraints in North America.
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Operating Highlights
Next-generation sequencing and gene synthesis: Showed growth, reflecting continued customer demand for advanced workflows and the value of differentiated solutions.
Biorepositories: Demonstrated strong execution and sustained customer adoption.
Geographical performance: Europe and Asia performed strongly, supported by commercial initiatives and improved execution. China showed 26% organic growth, while North America was softer due to macro-driven budget constraints and temporary disruption from the government shutdown.
Operational excellence: The Azenta Business System (ABS) is driving measurable improvements in on-time delivery, quality, and productivity across operations, commercial, and support functions.
Simplified and decentralized operating model: Supports faster decision-making and more disciplined execution, with productivity gains reinvested in commercial excellence, innovation, and customer-facing capabilities.
Sale of B Medical Systems: Expected to close by March 31, 2026, sharpening focus on core portfolio and enhancing financial flexibility.
Share repurchase authorization: $250 million share repurchase authorization announced, reflecting commitment to delivering shareholder value.
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Risk or Challenges
Macro Conditions: Mixed macroeconomic conditions are causing uncertainty, particularly around capital spending in academia and government funding. This has led to cautious decision-making and uneven market conditions, impacting revenue and bookings.
Capital Spending: Weak capital spending, especially in the U.S., and delays in government and academic funding are causing timing shifts in orders, which may affect revenue recognition in the short term.
Automated Stores Quality Issues: Higher costs were incurred due to quality issues in automated stores projects, leading to rework and impacting gross margins. These issues are expected to persist until the second quarter.
Regional Mix Dynamics: Softness in North America, particularly in multiomics, has led to lab inefficiencies and lower gross margins. This is compounded by macro-driven budget constraints and temporary disruptions like the government shutdown.
Gross Margin Pressures: Gross margins have declined due to underutilized lab capacity, higher rework costs, and regional mix dynamics. These pressures are affecting profitability.
Budget Constraints: Macro-driven budget constraints are impacting capital-intensive businesses, particularly automated stores and cryo, leading to slower bookings and revenue declines.
Government Shutdown: The temporary government shutdown disrupted customer activity and bookings, particularly in North America, adding to the challenges in revenue generation.
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Guidance & Outlook
Revenue Growth: The company reaffirms its guidance for fiscal 2026 with organic revenue growth expected in the range of 3% to 5%. Multiomics is projected to deliver low single-digit growth, while Sample Management Solutions is anticipated to contribute mid-single-digit growth.
Profitability: The company targets approximately 300 basis points of year-over-year adjusted EBITDA margin expansion, driven by operational efficiencies, disciplined cost management, and scalable operating leverage.
Free Cash Flow: Over 30% year-over-year improvement in free cash flow generation is expected for fiscal 2026.
Second Half Acceleration: The company anticipates acceleration in the second half of 2026 as delayed approvals are processed, capital investment ramps, and growth investments begin to take hold.
Macro Environment Impact: While macro conditions remain mixed, the company expects greater clarity around government and academic funding in the coming months, which is anticipated to offer greater stability across end markets.
Operational Improvements: The company continues to focus on operational excellence, including the Azenta Business System (ABS), which is expected to drive measurable improvements in on-time delivery, quality, and productivity.
Capital Deployment: The company emphasizes disciplined strategic capital deployment, including a $250 million share repurchase authorization and investments in automation, capacity expansion, and technology to support scalable growth.
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Shareholder Return Plan
Share Repurchase Authorization: In December 2025, the Board approved a $250 million share repurchase authorization. This reflects the company's commitment to delivering value to shareholders while maintaining financial flexibility for strategic capital deployment.
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Key Q&A
Q:Can you talk about your level of confidence in getting the SMS margins back to where you want them to be? What's in your control versus impacted by customer dynamics?
A:John Marotta explained that product mix and geo mix are causing margin headwinds, but the portfolio met expectations. Quality issues in 18 stores are being addressed, with most resolved by the end of Q2. North America lags in rebooting commercially compared to Europe and APAC. Despite challenges, they are confident in achieving their guidance for the year.
Q:What is your level of confidence that the GM OM mix will be 200 and 100 basis points? Does OpEx drive more of the 300 basis points this year?
A:Lawrence Lin stated that adjusted EBITDA was $12.7 million in Q1, with a decline due to $2 million in storage quality issues, $1 million in lab inefficiencies, and $700,000 in nonrecurring charges. They remain confident in achieving 200 basis points in gross profit and 100 basis points in OpEx improvement, driven by sales volume, lean productivity, and pricing initiatives.
Q:Can you characterize the conversations you've had with customers in the academic and government segments during the quarter?
A:John Marotta mentioned positive momentum in Europe and the Middle East, with green shoots in North America. Conversations with academic and government customers are confirmatory, and they remain bullish on the back half of the year.
Q:Can you talk about the level of comfort or visibility into the key drivers for the second half ramp?
A:John Marotta expressed confidence in North America's recovery in the second half, driven by capital spending ramp, growth investments, and improved approval processes. Lawrence Lin added that the ramp is supported by sales volume, ABS productivity, and pricing initiatives, with new sales reps expected to contribute after a 3-6 month ramp-up period.
Q:What are your expectations for top-line performance in Q2 and the cadence from Q2 to Q3?
A:Lawrence Lin stated they are not guiding quarterly but expect an uplift in Q2 compared to Q1, with significant growth weighted in the second half. John Marotta emphasized a long-term view, focusing on growth investments in sales, marketing, and R&D.
Q:How are you thinking about performance in the U.S. academic market given flat NIH budgets in 2026?
A:John Marotta noted a shift in NIH funding towards larger projects and emphasized their focus on supporting academic customers through productivity improvements in core labs. They see opportunities in multiomics to support research and data generation.
Q:What are you seeing from pharma and biotech end markets?
A:John Marotta observed more clarity in pharma and biotech markets compared to last year, with customers focusing on specific programs and investments. Positive sentiment is evident, and they expect continued growth in these segments.
Q:Where do you think you can find offsets to achieve the 300 basis point expansion despite gross margin challenges?
A:Lawrence Lin highlighted levers such as improved mix from North America, ABS productivity, automation in biorepositories, fixed cost reductions in Sanger, and indirect cost savings. They are accelerating these initiatives to address quality issues and optimize margins.
Q:Can you provide an update on bundling and cross-selling within segments?
A:John Marotta reported success in bundling within segments, such as multiomics and C&I businesses, with high attachment rates for consumables and services. Investments in UX/UI and e-commerce are enhancing customer experience, and they are focused on segment-specific bundling rather than cross-segment.
Q:What is the actionability of the M&A funnel and any shift in appetite around share repurchases?
A:John Marotta stated they are actively pursuing M&A opportunities and will pull all four levers of capital deployment: gross margin productivity, growth, M&A, and share repurchase. They aim to be thoughtful capital allocators while balancing these priorities.
Q:Are the fixes for the automated stores QC issues permanent?
A:John Marotta confirmed that permanent fixes have been implemented, including restructuring R&D teams and addressing design issues. They are meeting customer needs and lapping the quality issues, with clear line of sight for resolution.
Q:What was the growth of NextGen, and is it impacting Sanger's decline?
A:John Marotta stated that NextGen Plasmid-EZ is growing at mid-single digits, doubling its size. Sanger is declining but remains relevant, and they are rightsizing the cost structure while focusing on growth in NextGen to offset Sanger's decline.
Q:How should we think about the impact of regionalization of multiomics and NGS services on margins?
A:John Marotta and Lawrence Lin explained that regionalization, particularly in China, supports margin improvement through automation and technology investments. North America's recovery in the second half is expected to enhance gross margins further.
Q:What is driving the 26% organic growth in NGS in China?
A:John Marotta attributed the growth to strong performance in pharma and biotech, supported by a well-positioned team and investments in life sciences and biotech. China's focus on these sectors is driving momentum.
Q:What are your plans for capital deployment post-B Medical acquisition?
A:John Marotta reiterated their focus on all four levers of capital deployment, including M&A and share repurchase. They are actively pursuing opportunities and aim to balance operational excellence with thoughtful capital allocation.
Q:Review of Unclear Management Responses
A:Management avoided providing specific guidance for Q2 and Q3 top-line performance, emphasizing a long-term view instead. They also did not clearly address the bottom for Sanger's decline, stating uncertainty about its trajectory.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ABS deployment
ABS set
Act release
America lab
Azenta challenge
Azenta commitment
Azenta excellence
Azenta market
Azenta resource
Azenta turnaround
Bookings capital
Capital spending
Day action
Europe improvement
Productivity gain
Relations factor
Solutions biorepositories
System improvement
Teams
accountability
capital spending
condition
decision
discipline
effort
engine
gene synthesis
government funding
life science
multiomics
partner
pressure
priority excellence
sector
traction
workflow
AZTA Transcript
Azenta, Inc. (AZTA) Q1 2026 Earnings Call Transcript
Positive2-4
The earnings call presents a positive outlook with strong financial metrics, optimistic guidance, and strategic growth initiatives. Despite some uncertainties in specific segments like Sanger, the overall sentiment is buoyed by successful bundling, regionalization efforts, and positive momentum in key markets. The company's focus on capital deployment and margin improvements further supports a positive stock price movement. Given the market cap, the stock is likely to experience a moderate positive reaction over the next two weeks.
Azenta, Inc. (AZTA) Q4 2025 Earnings Call Transcript
Unknown11-21
The earnings call presented mixed signals: strong cash flow improvement and record Multiomics revenue are positives, but declining gross margins and unclear EPS guidance are concerns. The Q&A highlighted growth challenges due to macroeconomic factors and government funding issues, yet management's optimism for H2 growth and strategic investments provide some reassurance. With a market cap of $2.8 billion, the stock's reaction is likely to be moderate, hence a neutral prediction.
Azenta, Inc. (AZTA) Q3 2025 Earnings Call Transcript
Unknown8-5
The earnings call presents mixed signals: strong SMS margin improvements and positive Q4 growth outlook are offset by declines in organic revenue and Multiomics margins. The Q&A reveals confidence in future guidance and no cancellations, but also highlights timing issues and lack of clarity on innovation pipeline contributions. The market cap suggests moderate stock reaction, supporting a neutral prediction.
Azenta, Inc. (AZTA) Q2 2025 Earnings Call Transcript
Unknown5-7
The earnings call presents a mixed outlook. Financial performance shows stable growth and strong financial health, but macroeconomic risks like NIH funding cuts and tariffs pose challenges. Positive elements include solid revenue growth, margin expansion, and a potential share buyback. However, management's vague responses in the Q&A raise concerns about transparency. With a market cap of $2.8 billion, the stock is likely to experience limited short-term movement, resulting in a neutral prediction (-2% to 2%).
AZTA Slides
AZTA Report
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