Azenta Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 8 speakers on the call.

Operator

Greetings, and welcome to the Aventa Q3 2023 Financial Results. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. As a reminder, this conference is being recorded Tuesday, August 8, 2023. I will now turn the conference over to Sarah Silverman, Head of Investor Relations.

Speaker 1

Thank you, operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for Q3 of fiscal year 2023. Our Q3 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.

Speaker 1

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 ks and our quarterly reports on Form 10 Q. We make no obligation to update these statements 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 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, Lindon Robertson. We will open the call with remarks from Steve on highlights of the Q3.

Speaker 1

Then Linden will provide a more detailed look into our financial results and our outlook for the 4th fiscal quarter of 2023. We will then take your questions at the end of the prepared remarks. With that, I would like to turn the call over to our CEO, Steve Short.

Speaker 2

Thank you, Sarah. Good afternoon, everyone, and thank you for joining us. We're pleased to report on a solid Q3 with results that show a to reinvigorate growth in revenue and profitability. And today, we're pleased to report meaningful results and evidence of strong traction. We can say unequivocally that the steps we've taken were the right ones.

Speaker 2

We restructured our go to market approach to align sales with customer decision makers and purchasing patterns. We've recruited more incredible talent to our sales team and we're seeing results wherever we've added these targeted resources. We're substantially aligned to implement a new reporting structure beginning October 1, which we expect will significantly improve our operating efficiency, One is complete and the other is on track to meet our committed objectives over the next three quarters. These actions are improving our operating leverage while bolstering operations capability The combination of a return to growth and our cost reductions allowed us to demonstrate positive free cash flow for the first time as a standalone life sciences company. We're proud of this accomplishment and recognize it as an important milestone in our growth trajectory.

Speaker 2

Now let's look at the business by segment. In services, we delivered strong organic growth of 8% year over year. Genomics was up 8%, led by strength in next generation sequencing as well as continued Strong growth in gene synthesis. We're pleased by the performance of this business, especially in what's become a more challenging macro environment. We've added roughly 20 new sales specialists who are rapidly coming up to speed on our Azenta offerings and we'll continue to make targeted investments in the business where we see opportunities for growth.

Speaker 2

Gene Synthesis delivered a 2nd consecutive quarter of sequential improvement with 9% growth. We're winning because of our ability to manufacture all manner of complex constructs and deliver with exceptional speed. We're confident that we're back to a sustainable growth pattern in our Synthesis business. And though we don't necessarily expect a linear path of growth from here, We do believe we've taken the right actions building a business for growth over the long term. Our next generation sequencing business grew by double digits over last year.

Speaker 2

We're ramping this business on the newest Illumina, NovaSeq X and PacBio Revio platforms. And our proteomics offering continues to advance including AAV viral packaging and gene synthesis and plasmid EZ in our next generation sequencing business, which provides efficient plasmid sequencing using Oxford Nanopore Technology. In the Sample Repository Solutions business, we grew 6% year over year, led once again by double digit growth in storage. We also announced that later this year, we'll be opening a new biorepository location in the Greater Boston area. This 40,000 square foot facility will be our 2nd largest biorepository in terms of sample capacity after our flagship location in Indianapolis.

Speaker 2

We measure relative size not in square footage, but rather in the sample capacity that will be enabled by state of the art automation, which will define this highly differentiated capability. We also announced our collaboration with the Lupus Research Alliance to support the advancements of lupus research and discovery. We're pleased to report that we've received initial samples for this partnership. This project is notable as it reinforces once again our ability to support customers in active trials, which in this case will start small in terms of collection size, but will grow and establish a healthy base of samples for us over time. Moving to the Products segment.

Speaker 2

As expected, the Products business declined 9% year over year on an organic basis, reflecting continued softness in the consumables business. However, excluding the consumables and instruments business, the rest of the product delivered 10% organic growth. A significant contributor to the growth was STORE Systems, which grew 15% year over year and 23% quarter over quarter, reflecting record performance in our large automated stores business stemming from the strong backlog we've accumulated over the past few quarters. We expect to deliver another record quarter in Q4 as well. BioStores revenue was essentially flat quarter to quarter as we continue to see some softness to budget uncertainty.

Speaker 2

The good news is that quarter to quarter, we're seeing an increase in our sales funnel, but it's just going to take longer to convert these opportunities into sales as compared to 6 12 months ago. The dynamic in the Sample Management business continues to move toward Azenta. With each quarter, we're changing the Sample Management To more effectively manage precious bio sample assets, which by the way now measure in the billions of individual samples around the world, It's clear to us that over the coming years, large scale manual freezer frongs will be retired in favor of automated systems as the only means for safe sample handling and high volume sample management. The increasing demand for large scale workflow automation is clear and we're uniquely positioned to support this paradigm shift. Toward that end, over the past 8 quarters, we've won automated system orders that will add more than 60,000,000 samples of automated sample storage capacity.

Speaker 2

Automation per sample management at all temperatures, including cryogenics is the future and we're ready to meet the market demand. In consumables, we continue to see high levels of inventory at our customers. And while this effect is temporary, we have limited visibility into how long the channel may be slower. That said, we're encouraged by what was a relatively strong quarter in our instruments business and our recent acquisition of Zaiath is performing well. Instrument sales are a good indicator that investments in workflow automation continue.

Speaker 2

And as our instruments tend to be closely tied into our consumables, We expect that these sales will support future growth in consumables once inventory levels normalize. Finally, B Medical provided $27,000,000 of revenue and the team did a great job delivering on several additional cold chain solution orders that were received and shipped within the quarter. We continue our business development activities to leverage B Medical's geographic footprint in fast growing emerging markets in support of Azenta capabilities in And we have an exciting pipeline of new product and service offerings in development. And we continue to evaluate a healthy pipeline of potential acquisition targets, Our top line performance and operational execution contributed to both EBITDA and EPS. Encouraged by the positive results of our actions, Our team remains laser focused on sustaining this momentum as we move toward 2024.

Speaker 2

Our enthusiasm stems from our incredibly strong portfolio of products and services Combined with the balance sheet that will support continued growth in our existing markets, expansion into new geographies and innovation that will bring new markets into existence. We thank you for your interest and support as we work to deliver value to our customers and shareholders. And I'll now turn the call over to Lyndon.

Speaker 3

Thank you, Steve. I now refer you back to the slide deck available on our website. Turning to Slide 3 for some highlights. 3rd quarter revenue was $166,000,000 up 25% year over year and up 2% on an organic basis. This reflects strong growth in each of the key areas of large automated store systems, sample repository solutions and genomics.

Speaker 3

The offsetting area of softness was in the Consumables and Instruments business, which continues to experience an oversupplied market. Excluding the C and I business, our organic growth was actually up 8% year over year. Our sales and marketing alignment are gaining traction and our customers continue to subscribe to the high value we bring as a critical sample based solutions and multiomics solutions provider. And I should highlight that B Medical provided results above our prior guidance and above the prior quarter. The higher level of revenue in the quarter combined with the recent cost actions we have taken are showing through in the improvement in profitability.

Speaker 3

Non GAAP earnings per share was $0.13 in the quarter and adjusted EBITDA was 7.8%. We are now into our 4th fiscal quarter and when we get to the guidance section, you will see this quarter will support revenue growth For the full fiscal year in the range of 17% to 20% year over year. This includes a flat to down 4% organic projection. If we exclude the soft C and I business, the balance of the business is supporting organic growth of approximately 4% for the year, Now, I would like to turn to Slide 4 to take a deeper look at our results for the quarter. As I already mentioned, Total revenue was $166,000,000 up 25% year over year and up 12% sequentially quarter to quarter.

Speaker 3

Looking at the GAAP P and L on the left side, SG and A expenses were higher year over year, driven primarily by operating structure we added from acquisitions. On a quarter to quarter basis, the SG and A expense increase was primarily driven by the $17,000,000 decrease in the contingent consideration related to B Medical that we took in Q2. We reduced the remaining $1,400,000 of the earn out accrual in Q3. Below the operating income line, we generated $11,000,000 in net interest income this quarter, following the similar trend of previous quarters. GAAP earnings per share for continuing operations was a loss of $0.04 compared to a loss of $0.03 last quarter.

Speaker 3

Now looking over to the right at our non GAAP results, gross margin was 45.6%, which was higher by 4 points versus Q2 with both segments showing improvement. The margin benefit came from the cost reduction actions, the 12% higher revenue And certain non recurring cost adjustments in the product segment. Operating expenses were $77,000,000 up $2,000,000 quarter to quarter. The operating expense line also realized a benefit of the cost reduction actions, but was offset with higher revenue driven sales commissions at B Medical and performance based compensation accruals. On a year over year basis, operating expenses were up $20,000,000 Roughly $11,000,000 of the $20,000,000 year over year increase was related to the acquisitions, while the remainder was primarily driven by investments in sales in R and D net of the cost reduction actions.

Speaker 3

Non GAAP earnings per share was $0.13 per share. Adjusted EBITDA margin in the quarter was 7.8% as we once again see the leverage in the model as revenue increases and cost reduction actions are realized. Now let's turn over to Slide 5 for a review of our Life Science Products segment results. Total segment revenue was $75,000,000 for the quarter, up 57% year over year, driven by acquisitions, which contributed $32,000,000 in the quarter. Dollars 27,000,000 of the revenue from acquisitions was from B Medical, With solid delivery of the orders we previously disclosed plus additional orders booked and shipped, the product segment organic based business declined 9%.

Speaker 3

The C and I business experienced continued headwinds and declined 27% year over year on an organic basis. The rest of the business was up 10% on an organic basis led by a record quarter of large automated store system installations. Products' 3rd quarter gross margin was 44.9%. The sequential improvement was supported by higher revenue, which drives improved cost absorption, The benefit of the cost reduction initiatives and non recurring cost adjustments in the period. These items result in an adjusted EBITDA for the Product segment of 7.8%.

Speaker 3

Next, please turn to Slide 6 review of our Services segment results. The Services segment generated 3rd quarter revenue of 91,000,000 an increase of 7% year over year and 2% quarter to quarter. The organic revenue for the quarter was up 8% With genomics up 8% and sample repository solutions growth of 6%, once again led by double digit growth in core storage as we continue to accumulate samples stored. The genomics business reported growth of 8% year over year and 3% sequentially, Reflecting a continued recovery in Gene Synthesis, which grew 9% compared to the 2nd fiscal quarter and 6% year over year. NGS was up 13% year to year.

Speaker 3

We saw growth in every region compared to the prior year with China showing the highest growth, albeit comparing against the period impacted by COVID with market constraints in 2022. The services business delivered 46 3rd quarter adjusted EBITDA margin for services was 6.8% and improved 1 point sequentially. Now let's review Ascenta's balance sheet on Slide 7. As of June 30, we had $1,300,000,000 of cash, Restricted cash and marketable securities, both short term and long term. We have no debt outstanding.

Speaker 3

We began a significant share repurchase in the 1st fiscal quarter, committing to $1,000,000,000 to be returned to shareholders in this fashion by the end of this calendar year. Against that objective, by the end of the 3rd fiscal quarter, we had expended $672,000,000 year to date for 14,000,000 shares. And since July 1, we have expended another $92,000,000 or 2,000,000 additional shares. We will keep you updated With the balance of the $1,000,000,000 in repurchases earmarked, we still have roughly $1,000,000,000 of cash available for deployment to operations, investments and return to shareholders. Our track record and plans continue to underscore disciplined capital deployment for generating long term value for shareholders.

Speaker 3

Let's turn to Slide 8 to address the current period cash performance. Cash flow from operations was 17,000,000 The improved cash performance aligns with the improving profit performance. Capital expenditures for the quarter was $8,000,000 resulting in free cash flow of $9,000,000 Let's turn to the final slide for our guidance. Our Q4 guidance reflects a mix of strong backlog and a softer market as highlighted by others in our space. 4th quarter revenue is expected to be in the range of $155,000,000 to $173,000,000 with a midpoint Supporting growth of approximately 19% year over year on an as reported basis.

Speaker 3

This reflects P Medical confirmed orders of approximately $24,000,000 and the balance of the business excluding B Medical to be up $1,000,000 sequentially at the midpoint. We expect the softness in C and I to continue. And if we exclude C and I, the 4th quarter organic revenue for the rest of the portfolio is expected to be approximately 3% year over year at the midpoint. We estimate foreign exchange to be a 1% tailwind and the revenue from acquisitions to be a tailwind of approximately $25,000,000 or 18 points of growth. We expect products revenue, excluding B Medical, to be in the range of $45,000,000 to $55,000,000 Including B Medical, total product segment revenue is expected to be in the range of $69,000,000 to $79,000,000 We expect services revenue to be in the range of $86,000,000 to $94,000,000 and adjusted EBITDA Non GAAP earnings per share is expected to be in the range of minus $0.02 to positive $0.06 As we said previously, the actions to achieve the 1st round of $20,000,000 annualized cost reductions were implemented prior to Q3 and did affect our spend by $5,000,000 in the quarter.

Speaker 3

And we have made the investments we also outlined primarily in sales. We had also announced a second phase of cost actions to support $15,000,000 of additional annualized spending reduction by the end of the calendar year. This effort is underway and we expect to show those savings in our 2nd fiscal quarter of 2024. For the full year, we expect to deliver revenue growth in the range of 17% to 20% year over year and have narrowed our guidance range to $648,000,000 to $665,000,000 which includes approximately $108,000,000 from B Medical. In closing, we are encouraged by the progress we have made this quarter.

Speaker 3

We continue to drive toward further growth and profitability across the business and expect to see further improvement as we move into the next fiscal year. We have a strong balance sheet, tremendous portfolio, a best in class team and are serving the world's premier life science customers, Enabling breakthroughs faster. We're winning and are committed to delivering long term sustainable value for the shareholders. I will now turn the call over to the operator for questions.

Operator

Thank you very much. And your first question will come from the line of Jacob Johnson with Stephens. Your line is open.

Speaker 4

Hi. This is Hannah on for Jacob. Thanks for taking the question. Since you're realigning your segments and combining SRS and Life Science products, can you remind us of the synergies between these two businesses? And then conversely, what does this mean for the effort around cross selling genomic services to FRS customers?

Speaker 2

Sure. Hi, Kenna. This is Steve. I'll be glad to do that. So on the sample management side, as we continue to evolve The business from a repository standpoint, we see more and more repositories really need to be automated.

Speaker 2

So this is a capability that we're bringing Not just to the customers with automated stores, but also to our own internal operations. And when we go to approach a customer now, we talk to them about management to their assets, management to their sample collections. And what happens is we likely will put automated stores on-site. We'll take archival samples off-site. And so the offering that we bring to them is a combination of the repository services and the automated stores that we have.

Speaker 2

And so it's a natural Without a breakpoint, it's a natural way that we can help them to perform asset management in a more effective way. It also continues to drive the means by which we develop automated stores to manage workflows for customers. So this is a natural evolution of the way the Product and services portfolio was moving and it's a really appropriate time for us to get this aligned so that we start fiscal 2024, These business units become 1. It's really a sample management play. From the standpoint of our ability to sell The omics capability to these same customers, as we build the capability and knowledge across the omics business and across the Sample Management Business.

Speaker 2

There's a skill set that we've been developing where, people have the ability to connect the customers to The people inside the end user customer who both manage samples and are responsible for preliminary measurements, if you will, on these samples and also the management of the clinical trial. So this is a natural one, requires a little bit different sales capability inside the company, but as we mentioned, we've been adding sales resources that have these particular skills to help us to do the cross sell. So the cross sell has been effective. It will become more effective as we have specialists who are able to connect both the sample management and the omics capabilities. And you'll see more of this as we move into 2024.

Speaker 4

Thanks. And then as it relates to China, it looks like you saw Strong growth during the quarter. Can you just talk about some of the trends you're seeing in China?

Speaker 2

Yes. So it's a little bit different from what we've been hearing from other companies The genomics capabilities in China have been strong. They were strong in the Q3 and we're going to play close attention to it, but we've Gotten off to a good start here in the Q4 as well from very strong growth in China. And so when I say strong growth, the Q3 growth was something close to 20% and we're seeing really good momentum here as we start the Q4 as well.

Speaker 4

Great. Thank you. I'll leave it there.

Operator

And your next question comes from the line of David Saxon with Needham. Your line is open.

Speaker 5

Good afternoon. Thanks so much for taking my questions and congrats on the quarter. Steve, maybe I'll start with the C and I part of the portfolio. I'd love to hear how you're thinking about debt recovery, If you're seeing any early signs that could point to stability in that part of the portfolio. And then sorry for the multipart question I think last quarter you said, destocking wasn't impacting all customers.

Speaker 5

Has that changed at all? And I'll have a follow-up for Glenda.

Speaker 2

Yes. So David, I wish I could tell you it's different. It's not. It's pretty much the same. There are customers I mean, we still have a healthy C and I business, but there is destocking that continues.

Speaker 2

But there are customers that we're selling product to in the second And again in the Q3, I think they've managed their inventory to not be so dramatically large. So it's a similar situation. Indeed, we had Pretty soon. So it's almost a similar environment, a similar look that we had a quarter ago. Still a healthy business, but we haven't seen the uptick We would anticipate that customers will have once the inventory has been burned off.

Speaker 5

Okay, great. And I guess just a quick follow-up to that, Steve. So it doesn't sound like It's worsened at all. Is that correct?

Speaker 2

Not really, David. Let me tell you one thing that was interesting for us, a different dynamic. The instruments business strong in the quarter and we do see that as an indicator that automation continues The fact that there's continued workflow automation being put into place and we think that's a harbinger for An opportunity for more and the healthier consumables business as we move forward because our consumables are adapted precisely for the instruments that we And we're hopeful that before we get out of 2023 that the business ultimately will pick up. But we do guide a similar We do see a similar Q4 as we saw in the Q3.

Speaker 5

Okay. Super helpful. Thanks for that, Steve. And then Linden, Just on the P and L, EBITDA, that was pretty strong, 7.8%. I mean, I get that you started to benefit Some of these cost reduction initiatives, it doesn't sound like you'll see the benefit of that second phase until next early next year's next Q2.

Speaker 5

I guess why the Q4 obviously implies some contraction. Why is that? Any color into kind of if that's conservatism or if you're pulling forward some investments? Thanks so much.

Speaker 3

These are good questions. So on the EBITDA and the 7.8% in the quarter, There's substantial performance improvement as we've highlighted in our remarks. There was also a cost adjustment in there that won't reoccur going forward. So, think of that as a couple of points of pressure, about a point and a half to two points of pressure In the results itself, it won't reoccur. But setting that aside, the performance, you're right.

Speaker 3

It's got a lot of momentum and It's exactly on the absorption that we get with revenue increases. It's also The first phase being completely in the P and L. And while we're making some investments as we go across the quarters, we are working on the Cost reductions by the end of the calendar year. So I would emphasize when you're looking for those benefits of the next phase, We're being pretty thoughtful on this next phase of reduction. It's about integration.

Speaker 3

It's primarily, as we said before, about integrating some of the structures that we've acquired over the years in our manufacturing locations And we're being careful with those structures. So we think that will take some time and we'll give you an update. But There's a data point that I think will be helpful and per David's question, I think it's good for you all, as we gave some data points. The C and I is the one outlier of our business. The rest of the portfolio showed growth throughout.

Speaker 3

And the C and I being down, It was actually down 24% year over year on a as reported basis. And just to put a pinpoint on, it's a little bit less than $19,000,000 of revenue In the Q3, about 11% of our portfolio. So if you set aside that, which I would like to Emphasize, as I've said many times in the past, we love having the C and I business because it's a revenue and profit multiplier. It's not what differentiates us. It's a highly fragmented space.

Speaker 3

We are glad we have it because it provides us additional revenue and profit and Leverage as markets are good, but you get bet when it comes down like it is at 24%. We will we've continued to take Some leaning actions on that business as we had. But with that said, if you remove that, our organic growth is quite Remarkably different than the rest of the market, and this is where Steve, had emphasized in his remarks. We really believe that the marketing and sales actions And the value of our portfolio, across the other 90% is really standing out in the market and we couldn't be more pleased with how the market is accepting and taking it. So, we really believe we're back on the 90%.

Speaker 3

The C and I is just going to take us a while to work So David, thank you for your questions. I think they're spot on to the key items in the release.

Speaker 5

Great. Yes. Thanks for all the color and congrats on the quarter.

Operator

Your next question comes from the line of Vijay Kumar with Evercore ISI. Your line is open.

Speaker 6

Hey guys, thanks for taking my question and Congrats on good execution here. Steve, maybe my first one here on some of these numbers end markets, Starting with genomics, you mentioned GeneSensys on the service side up 9, NGS up 13. Does it imply, Sanger was down? So can you talk us through why NGS was up 13%, Sanger was down? Is that NGS strength being driven by new product sets?

Speaker 6

Or is there any color on what's driving that? And sort of Biopharma, I think some of your peers have spoken about cautiousness on capital budgets. Can you talk about bookings trends within the storage business and be medical? Any sensitivity From a CapEx, cautiousness.

Speaker 2

Yes. Thanks, Vijay. Gosh, if that was the first one, I'm curious how many questions you got, but let me try. So a few things, you had it right. So the synthesis business Up 8% is we think a really healthy look for us 2 consecutive quarters of increase from where we've been.

Speaker 2

I think you recall We'd had a downward trend and I think we had issues to resolve from a delivery standpoint. So we feel we're in a good position there. We Just to put some color on that, we've seen a lot of aggressive price pressure in the synthesis business that we did not chase down. And we had some delivery issues as we've been as we communicated to people, but we've resolved those. We continue to deliver extremely high quality, High speed and we do really complicated things for customers.

Speaker 2

So we're really confident about that. The China business in synthesis has also been pretty healthy. On the NGS business, the 13% growth is so I'll give you a couple of pieces there. One is just strong across the board capability and BJ also every once in a while will win a project That allows us to have a good slug of NGS business in a particular quarter, followed by digestion from that same customer until they come back for another study. But we had a good solid growth period in NGS, and we continue to be healthy there.

Speaker 2

We're making investments on new tools, continue to be aggressive about winning customer business. And we anticipate That will be investments that we make will allow us to continue to grow that business over the long term. The Sanger business was flat. So just to give you an idea, so Sanger was 0. So when you put when you do the arithmetic there, indeed Sanger was flat.

Speaker 2

One of the things I will say is, as we announced Plasmid EZ capability where we do the measurement of the plasmid in the NGS business and that was formerly Sumsanger. So same customers, but measurements that we're doing now, they don't we don't put those into the Sanger business Per se, we put some of those into the NGS business. It was relatively small, so it's not a big swinger here. But when in the past, when you've seen the Sanger business grow 3% 4% year over year for us to have 0 there. Now we put a little bit of that what would have been otherwise Sanger growth Into the NGS business.

Speaker 2

And then Vijay, if you can remind me the next question.

Speaker 6

Sorry, on the bookings on the capital side, Steve, just given some of your peers talking with cautiousness on biopharma spending?

Speaker 2

Yes. So, Vijay, we saw flat on the cryo business, just to give an idea. So different from The past when we've been on upward trend, so I presume that's equivalent to some of the softness people are seeing In that regard and we're seeing again, we mentioned on prior calls, there's business that we know Requires automated cryo, for example, but some of those things have been delayed. And so we had anticipated growth at about this time of year when we started the fiscal year To have it be flat is different from the plans that we had at the beginning. So indeed there's some softness there and some projects that we believe are just being delayed.

Speaker 2

And as they come, we'll be in we're in position to win, but that's what we're seeing. On the large automated stores, We have pretty significant backlog. We see that business continuing to be very strong. And so the cryo side flat large automated stores, We continue to see that business growing significantly and for the next few quarters, we'll continue to Work to get the capacity of our factory up, so we can deliver. We're on time for customers, but if that business grows, we're going to need to Continue to make improvements in operational capability to make sure that we can deliver.

Speaker 6

That's helpful, Steve. And maybe a quick one here for Linden. I think

Speaker 3

So, yes, if you look Off of what we finished Q3, our base business is actually expected to be up about $1,000,000 quarter to quarter. And in our very specific look at this and of course there's a range around it, we see services being Flat to down $1,000,000 and products being up $1,000,000 And we still see a lot of deliveries ahead of us on the large automated Stores. So, we've got that business being relatively flat quarter to quarter, but up, just a touch of a1000000. So in the B Medical, in our guide here of $24,000,000 this is centered I mean it's a single number, Not a range around it. It's based on the firm orders that we've scheduled in the quarter.

Speaker 3

And I would emphasize to everybody, we've got a range of history here. So this in Q3, we are pleased that they were able to get almost $6,000,000 Above what we had projected at this time last quarter, booked and shipped. In the previous quarters that ranged from We had one quarter that was less than $2,000,000 done in the final, I'll say, 50 days. And the other quarters were close to that $2,000,000 to 3 So it ranged Q3 stood out as being $6,000,000 but that so far in our short history with them that's been the Standout. So we'll look for $24,000,000 to be a solid guide.

Speaker 3

And if we get more orders, we'll expect that to ship as well.

Speaker 6

Understood. Thanks, guys.

Speaker 2

Thanks Vijay.

Operator

Your next question comes from the line of Yuan Shi with B. Riley. Your line is open.

Speaker 7

Congrats on a strong quarter, Tim, and thank you for taking our questions. I'm curious for the Genomics Services, Can you comment on if the recent flood in China has any impact on the operation and demand in 4Q? Then I have a follow-up question.

Speaker 3

So, that's not been an aspect of business impacts for us. And, Yaron, I appreciate, the very specific question. We pay a lot of attention to China. Just to remind people, Our genomics business has a significant operating center in Suzhou, China and it has done tremendous for us. In terms of not just the delivery, globally of gene synthesis, but also development of an unusual Successful business inside China, providing the services across Sanger NGS as well as Synthesis on the ground in China.

Speaker 3

As Steve mentioned, not only are we not seeing that impact that you asked about, but we're not really seeing the softness The people have called out in China. So we're watching it, but right now we're fairly bullish on China. So, appreciate the color and the question.

Speaker 7

Got it. And I'm glad to see the quarter The growth of gene synthesis is 9% and the NGS 13%. I'm just curious, can you provide more color on the market share, Whether you are gaining or losing market share in the genomic services sector and how does that compare to your peers? Thank

Speaker 3

It's a really tough one. I would highlight to you that as I mentioned in our remarks, China grew faster than the other areas. We saw growth across each region in genomics. And I think if I look at total life sciences space, we've seen a lot of announcements that have, saw numbers down. But the genomics space, services space doesn't have a tremendous amount of publications that would highlight to us in this Somewhat fragmented business whether we were able to gain share.

Speaker 3

I do believe when you're in this level of growth year over year, We're seeing challenges, but we're able to grow through it. We would anticipate we may be taking a little share, but it would be a little share based on the size of our business And the growth rates now. Come back and ask me that question when we get up into the teens double digits and I'll have fun answering that question.

Speaker 7

Got it. Thanks for taking our questions.

Operator

And there are no further questions pending. I'll turn the call back to Lindon Robertson for closing remarks. Thank you.

Speaker 3

Yes. We really appreciate everybody tuning in and the questions always are insightful ones to help add color to our announcement. We couldn't be more delighted, with the progress that the business has shown year to date. As you recall, when we reported this time last year, We disappointed some people at that point, but since then, I think our assessment, our realignment of the business, Our focus on sales and marketing, our investments have been what's been driving our results and we're seeing that momentum. As I highlighted, You take out the C and I, which is about 11% of our revenue.

Speaker 3

The other 90% has got handsome growth In a market that's struggling a bit. With that said, we'll continue down that path and we'll continue to take some cost out as we've committed On the second phase to be done by the end of this year, the calendar year that is. And we look forward Giving you an update and before that, of course, at the end of our fiscal year, which finishes September 30, so we'll see you, which traditionally comes in the 1st week or so of November, so that report out. So we look forward to seeing you In the meanwhile, in some conferences, but thank you for tuning in today. Appreciate it.

Operator

And that does conclude the conference call for today. We thank you very much for your participation and ask that you please disconnect your

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Earnings Conference Call
Azenta Q3 2023
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