Q2 2024 Azenta Inc Earnings Call

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Operator: Greetings, and welcome to the Azenta second quarter 2024 financial results. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press star followed by 11 on your telephone. As a reminder, this conference is being recorded Wednesday, March 8, 2024. I will now turn the conference over to Yvonne Perron, Vice President, FP&A, and Investment Relations.

Speaker Change: Greetings and welcome to the <unk> second quarter 2024 financial results. During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question answer session.

Yvonne Perron: That time, if you have a question. Please press star followed by one one on your telephone.

Speaker Change: As a reminder, this conference is being recorded Wednesday March eight 2024, I will now turn the conference over to Yvonne parent Vice President S. P N E and Investor Relations.

Yvonne Perron: Thank you, operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the second quarter of fiscal year 2024. Our second quarter 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.

Yvonne: Thank you operator, and good afternoon to everyone on the line today.

Yvonne: We would like to welcome you to our earnings conference call for the second quarter of fiscal year 'twenty 'twenty four.

Yvonne Perron: Our second quarter earnings press release was issued after the close of the market today and is available on our Investor Relations website located at investors <unk> com.

Yvonne: Center Dot Com in addition to the supplementary Powerpoint slides that will be used during the prepared remarks today.

Yvonne Perron: There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. 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-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today.

Yvonne: 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.

Yvonne Perron: There are many factors that may cause actual financial results or other events to differ from those identified in such forward looking statements.

Yvonne Perron: 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-K, and our quarterly reports on Form 10-Q.

Yvonne: We make no obligation to update these statements should future financial data or events occur that differ from the forward looking statements presented today.

Yvonne Perron: We may refer to a number of non-GAAP financial measures, 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 and the reconciliation of GAAP measures, they provide an even more complete understanding of the event to business. Non-GAAP measures should not be relied upon to the exclusion of GAAP measures themselves.

Yvonne: We may refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP.

Yvonne: 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 and a reconciliation of GAAP measures. They provide an even more complete understanding of the business.

Yvonne Perron: non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves.

Yvonne Perron: On the call with me today is our President and Chief Executive Officer, Steve Schwartz, and our Chief Financial Officer, Herman Cueto. We will open the call with remarks from Steve on the highlights of the second quarter. Then Herman will provide a more detailed look into our financial results and our outlook for fiscal year 2024. We will then take your questions at the end of the prepared remarks. With that said, I would like to turn the call over to our CEO, Steve Schwartz.

Yvonne Perron: On the call with me today is our president and Chief Executive Officer, Steve Schwartz, and our Chief Financial Officer I'm in Kyoto.

Stephen S. Schwartz: We will open the call with remarks from Steve on the highlights of the second quarter, then Carmen will provide a more detailed look into our financial results and our outlook for fiscal year 'twenty 'twenty four.

Yvonne: 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 Schwartz.

Stephen S. Schwartz: Thank you, Yvonne. Good afternoon, everyone, and thank you for joining us today. I'd like to start off by welcoming Yvonne to her new position as our Head of Investor Relations. Yvonne is steeped in the knowledge of all aspects of Azenta by virtue of the fact that she's also been the leader of our global FP&A function for more than a year, and we're fortunate to have her leading IR here at Azenta. And Sara Silverman, who many of you have gotten to know, has moved to become the CFO of our multi-omics segment, and of course, she's flourishing in that role as well.

Stephen S. Schwartz: Thank you Ivan and good afternoon, everyone and thank you for joining us today.

Stephen S. Schwartz: I'd like to start off by welcoming Gabon to her new position as our head of Investor Relations.

Stephen S. Schwartz: The bond is steeped in the knowledge of all aspects. It presented by virtue of the fact that she has also been the leader of our global F DNA function for more than a year and.

Stephen S. Schwartz: And we're fortunate to have her leading IR here in Atlanta.

Stephen S. Schwartz: And Sarah Silverman, who many of you have gotten to know has moved to become the CFO of our multi omics segment and of course, she is flourishing in that role as well.

Stephen S. Schwartz: Before we get into the quarter, I want to address the announcement that we made in addition to our earnings release about my decision to retire as CEO after more than 14 years at Azenta. This decision follows a discussion with the board as part of the company's active succession planning process. To ensure a smooth transition, I will continue to serve as CEO until a successor is appointed. In the meantime, the board has initiated a search to identify my successor and has engaged Heidrick & Struggles, a leading executive search firm, to assist in the process of identifying and evaluating candidates.

Speaker Change: Before we get into the quarter I want to address the announcement that we made in addition to our earnings release about my decision to retire as CEO after more than 14 years at <unk>.

Stephen S. Schwartz: This decision follows a discussion with the board as part of the company's active succession planning process.

Yvonne: To ensure a smooth transition I will continue to serve as CEO until a successor is appointed.

Yvonne: In the meantime, the board has initiated a search to identify my successor and has engaged heidrick <unk> struggles a leading executive search firm to assist in the process of identifying and evaluating candidates.

Stephen S. Schwartz: I'm confident now is the right time for a transition, and the board agrees. During my tenure, I've been fortunate to work with incredible people from whom I've learned much. And together, we accomplished some incredible feats, including transforming from semiconductor capital equipment company Brooks Automation into Azenta, a standalone publicly traded pure play life sciences company. We've delivered outside shareholder returns. And yet, it seems like we're just getting started

Yvonne: I'm confident now was the right time for a transition and the board agrees.

Stephen S. Schwartz: At Azenta, we believe that's the way all companies should feel. I also want to express my gratitude for the strong support of the Board of Directors, which has always been focused on delivering shareholder value and good governance. I'm confident that Azente is now in a position of strength with annual revenue of almost $700 million and in clear pursuit of our Ascend 2026 plan, which will create further value for shareholders in the future. Being part of this incredible company for the last 14 years with such an outstanding team has been a true privilege. Now I'll turn back to results from the quarter.

Yvonne: During my tenure I've been fortunate to work with the incredible people from whom I have learned much and together, we accomplished some incredible feeds including transforming from semiconductor capital equipment company Brooks automation and towards into a standalone publicly traded pure play life Sciences company.

Stephen S. Schwartz: We've delivered outsized shareholder returns and yet it seems like we're just getting started.

Yvonne: And as we believe that's the way all companies should feel.

Yvonne: I also want to express my gratitude for the strong support of the board of directors, that's always been focused on delivering shareholder value and good governance.

Yvonne: I am confident that <unk> is now in a position of strength with annual revenue of almost $700 million in.

Yvonne: And in clear pursuit of our assay in 2026 plant, which will create further value for shareholders in the future.

Yvonne: Being part of this incredible company for the last 14 years with such an outstanding team there had been a true privilege.

Stephen S. Schwartz: Now I'll turn it back to results from the quarter.

Stephen S. Schwartz: Today I'll focus my remarks on a summary of solid Q2 results, our view of the current market environment, and an update on our outlook for the full year. But before I begin, I want to put today's comments into the perspective of a company in transition. We entered the second half of our fiscal year positive about our prospects for the next years because of all the work we've done over the past years to get into this position.

Stephen S. Schwartz: Today I'll focus my remarks on the summary of solid Q2 results our view on the current market environment and an update on our outlook for the full year.

Yvonne: Before I begin I want to put today's comments into the perspective of a company in transition.

Yvonne: We entered the second half of our fiscal year positive about our prospects for the next years because of all the work we've done over the past years to get into this position specifically, we're confident that the changes we've made to align the business units and sales organizations have fixed the companys structure to best align our capabilities with our customers' businesses.

Stephen S. Schwartz: Specifically, we're confident that the changes we've made to align the business units and sales organizations have fixed the company structure to best align our capabilities with our customers' businesses. And in the process, we successfully reduced annual expenses by more than $25 million, making us more efficient and putting us squarely on a path to accelerated profitability.

Stephen S. Schwartz: And in the process, we successfully reduced annual expenses by more than $25 million, making us more efficient and putting us squarely on a path to accelerated profitability.

Stephen S. Schwartz: Under Herman's leadership, we've initiated a program we call Ascend to lift EBITDA to the high teens by 2026 and on a path to exceed 20% thereafter. And we've developed and launched new innovative products and services in each of our segments that reinforce our ability to continue to outgrow the market in any environment by several hundred basis points. With that backdrop, we're pleased to report that Q2 was another strong quarter, and we're encouraged by the momentum we've seen in the first six months of the year. Even in what is still a down market, we delivered organic growth in all three of our business segments, a meaningful accomplishment in this environment. Now I'll turn to highlights from the quarter.

Yvonne: Under <unk> leadership, we have initiated a program we call ascend to lift the EBITDA to the high teens by 2026 and on a path to exceed 20% thereafter.

Yvonne: And we've developed and launched new innovative products and services to each of our segments that reinforce our ability to continue to outgrow the market in any environment by several hundred basis points.

Yvonne: With that backdrop, we're pleased to report that Q2 was another strong quarter and we're encouraged by the momentum we've seen in the first six months of the year.

Yvonne: Even in what is still a down market, we delivered organic growth in all three of our business segments, a meaningful accomplishment in this environment.

Yvonne: Now I'll turn to highlights from the quarter.

Stephen S. Schwartz: In Q2, we delivered revenue of $159 million, which translates to both a reported and organic increase of 7% year over year. I'll briefly walk through each of the segments, beginning with sample management solutions. Revenue in the SMS segment grew 3% year over year and grew 8% excluding the CNI line of business.

Yvonne: In Q2, we delivered revenue of $159 million, which translates to both our reported and organic increase of 7% year over year.

Yvonne: I'll briefly walk through each of the segments, beginning with sample management solutions.

Stephen S. Schwartz: Revenue in the SMS segment grew 3% year over year and grew 8%, excluding the C&I line of business.

Stephen S. Schwartz: Store Systems revenue was up 16%, our fourth consecutive quarter of double-digit year-over-year growth. Sample Repository Solutions revenue was up 5% year over year. SMS is our largest segment and accounts for almost 50% of revenue. We've made strategic investments in highly differentiated products and service offerings, including the development of the BioArc Ultra store and the move to automate our biorepositories. As we've detailed for you in the past, this market is fueled by two key factors.

Yvonne: Storage systems revenue was up 16%, our fourth consecutive quarter of double digit year over year growth.

Yvonne: Sample repository solutions was up 5% year over year.

Yvonne: SMS is our largest segment and accounts for almost 50% of revenue we've made strategic investments in highly differentiated products and service offerings, including the development of the <unk> Ultra store and then they move to automate our bio repository.

Yvonne: As we've detailed for you in the past this market is fueled by two key factors one the sheer number of samples that are collected for future discovery.

Stephen S. Schwartz: The sheer number of samples that are collected for future discovery, and 2. The trend toward outsourcing samples to our biorepositories for high-quality care and sample management. We see a bright future for all things SMS as our customers increasingly recognize the value of Azenta's sample management capabilities to improve their operations and speed to discovery. While the life sciences services market continues to face headwinds, we're pleased that the multi-omics segment revenue increased 1% year over year, meaningfully outpacing a declining market.

Yvonne: And to the trend toward outsourcing of samples to our bio repository for high quality care and sample management.

Yvonne: We see a bright future for all things SMS as our customers increasingly recognize the value of presenters sample management capabilities to improve their operations and speed to discovery.

Yvonne: While the life Sciences services market continues to face headwinds, we're pleased that the multi omics segment revenue increased 1% year over year meaningfully outpacing a down market.

Stephen S. Schwartz: In the next generation sequencing portion of our multi-omics business, we're riding the next wave of technological advancement for research and discovery that enables the processing of higher volumes of data at a much lower cost. Our team is experienced not only in how to compete in this type of market environment but also how to be profitable. Our success formula is clear.

Yvonne: And the next generation sequencing portion of our multi omics business. We're writing the next wave of technological advancement for research and discovery enables processing of higher volumes of data at much lower cost.

Yvonne: Our team is experienced not only in how to compete in this type of market environment, but also how to be profitable.

Stephen S. Schwartz: Our success Formula is clear <unk>.

Stephen S. Schwartz: Invest in the latest technology, recruit top scientific talent, and put capacity in place in advance of what we know will be high demand for this service. We've honed this skill over several of these disruptive NGS technology cycles, and we're at it again. We currently have NovaSeq X plus machines up and running at multiple sites.

Yvonne: Invest in the latest technology recruit top scientific talent and put capacity in place in advance of what we know will be high demand for this service.

Stephen S. Schwartz: We are holding this scale over several of these disruptive ngf's technology cycles and we're at it again.

Yvonne: We currently have Nova seek X plus machines up and running in multiple sites as an early adopter. We've already moved almost all of our N. G. S work to this technology we're.

Stephen S. Schwartz: As an early adopter, we've already moved almost all of our NGS work to this technology. We're delivering at the leading edge of what our customers need, and we're working hard to deliver the better economics and superior cycle time our customers expect. In Q2, we saw modest organic revenue growth in next-generation sequencing on sample and data volumes that were again up significantly quarter over quarter. And while we met this increased volume, we were also able to hold gross margins year over year.

Yvonne: We're delivering at the leading edge of what our customers need and we're working hard to deliver the better economics and superior cycle time, our customers expect.

Yvonne: In Q2, we saw modest organic revenue growth in next generation sequencing on sample and data volumes that were again up significantly quarter over quarter.

Yvonne: While we met this increased volume we were also able to hold gross margins year over year.

Stephen S. Schwartz: In our experience with the last three generational shifts in NGS, we're at a pretty good point in the technology cycle and economics learning curve. In another validation of our strategy to invest ahead of discovery needs, we saw tremendous growth from our new multiomics vectors, which include high-throughput proteomics, single cell and spatial biology, as well as some of our new clinical services. In a trailing 12 months comparison for the period ended March 31, revenue for these new services was up 33% year over year to an annual run rate of approximately $30 million.

Yvonne: And our experience from the last three generational shifts in Ngls for a pretty good point in the technology cycle and economics learning curve.

Yvonne: In another validation of our strategy to invest ahead of discovery needs. We saw tremendous growth from our new multi omics vectors, which include high throughput proteomics single cell and spatial biology as well as some of our new clinical services.

Yvonne: In a trailing 12 month comparison for the period ended March 31 revenue for these new services was up 33% year over year to an annual run rate of approximately $30 million.

Stephen S. Schwartz: Our synthesis business continued its strong recovery, delivering 13% organic revenue growth on a year-over-year basis, up 6% sequentially. We're seeing good acceptance of our newer growth vectors, including antibody production and viral packaging. In some ways, the regional look at services tells a more complex story, but it's also a testament to how we're leveraging our global presence.

Stephen S. Schwartz: Our synthesis business continued its strong recovery delivering 13% organic revenue growth on a year over year basis up 6% sequentially.

Stephen S. Schwartz: We're seeing good acceptance of our newer growth vectors, including antibody production and viral packaging.

Yvonne: In some ways. The regional look at services tells a more complex story, but it's also a testament to how we're leveraging our global presence.

Stephen S. Schwartz: Our China business continues to perform extremely well, as in Q2, we delivered a fourth consecutive quarter of double-digit growth. We've reported to you consistently strong performance from China, which we know to be an outlier compared to what others are seeing in the market. By contrast, in North America, we continue to see softness across both NGS and Sanger sequencing.

Yvonne: Our China business continues to perform extremely well as in Q2, we delivered a fourth consecutive quarter of double digit growth.

Yvonne: We reported to you consistently strong performance for China, and what we know to be an outlier compared to what others are seeing in the market.

Yvonne: By contrast in North America, we continue to see softness across both <unk> and Sanger sequencing.

Stephen S. Schwartz: That said, we're seeing indications of improvement in that Sanger revenue was flat quarter to quarter after several sequential quarters of decline, and the reports of increased investment in biotech are promising news that the opportunities will once again increase, as small biotech companies have always been a meaningful source of GeneWiz multiomics revenue. Finally, in Europe, we had another quarter of strong performance, growing 12%, led by NGS. Just two weeks ago, I had the pleasure of meeting many of our customers at the well-attended grand opening of our NGS lab in Oxford, UK, where we're off to a strong start in a key market location.

Yvonne: That said, we're seeing indications of improvement in that Sanger revenue was flat quarter to quarter. After several sequential quarters of decline and the reports of increased investments in biotech is promising news that the opportunities are once again increase as small biotech companies have always been a meaningful source of gene with multi omics revenue.

Yvonne: Finally in Europe, we had another quarter of strong performance growing 12% led by Ngls.

Stephen S. Schwartz: Just two weeks ago I had the pleasure to meet many of our customers at a well attended Grand opening of our N. G. S lab in Oxford U K, where we're off to a strong start in a key market location.

Stephen S. Schwartz: All in all, we had a very solid quarter from our multi-omics business. Before I move on, I want to touch on an area that's important to us, which relates to the business from synergies we derive from services offerings that include sample management solutions and multi-omics capabilities. For the past two years, we've been working to educate customers on the benefits of integrated workflow solutions from our combined portfolio.

Yvonne: All in we had a very solid quarter from our multi omics business.

Yvonne: Before I move on I want to touch on an area, that's important to us which relates to the business from synergies we derive from our service offerings that include sample management solutions and multi omics capabilities.

Yvonne: Over the past two years, we've been working to educate customers on the benefits of integrated workflow solutions from our combined portfolio were.

Stephen S. Schwartz: We're seeing some good results from this endeavor as we currently have more than $40 million in our backlog that we can attribute to synergies across business segments. As we prove the benefits of lower cost and cycle time reduction, we anticipate more and greater opportunities will accrue to us, but already this is a meaningful proof of the value of synergies from our portfolio, and we intend to build on this momentum. Now we'll turn to B-Medical, which is the smallest part of the company at roughly 15% of sales but understandably gets a significant amount of attention.

Yvonne: We're seeing some good results from this endeavor as we currently have more than $40 million and our backlog that we can attribute to synergies across business segments.

Stephen S. Schwartz: As we prove the benefits of lower cost and cycle time reduction, we anticipate more and greater opportunities will accrue to us but already this is a meaningful proof of the value of synergies from our portfolio and we intend to build on this momentum.

Stephen S. Schwartz: Now I will turn to be medical which is the smallest part of the company at roughly 15% of sales, but understandably gets a significant amount of attention.

Stephen S. Schwartz: V-Medical is fundamentally a very good company. They operate in a supportive Luxembourg environment, have a team of very talented engineers, and they've developed manufacturing operations that are highly efficient and high quality. Their products are essential cold chain equipment for the distribution of life-saving cures, and as such, they're delivered under the approval of the FDA and other sanctioning bodies. They have a high market share and incredible technologies. They're profitable and motivated to expand the value of their offerings to couple with the Zenta for greater purpose and profit.

Stephen S. Schwartz: <unk> medical is fundamentally a very good company.

Yvonne: They operate in a supportive Luxembourg environment have a team of very talented engineers and they've developed manufacturing operations, which are highly efficient and high quality.

Yvonne: Their products are essential cold chain equipment for the distribution of lifesaving chairs and as such they are delivered under the approval of the FDA and other sanctioning bodies.

Yvonne: Have high market share and incredible technologies there.

Yvonne: They are profitable and motivated to expand the value of their offerings to coupled with the center for greater purpose and profit.

Stephen S. Schwartz: And as you know, the hard part of the business is the unpredictable nature of the specific timing of purchase orders, and hence revenue, which is hard to forecast with any accuracy, as the typical funding sources are large global humanitarian and health organizations, which are not predictable in terms of timing. We've taken some significant actions to better align the B-Medical business with Azenta. Some of these actions were outlined in our Investor Day presentation, and we've taken some additional decisions since then.

Stephen S. Schwartz: And as you know the hard part of the business is the unpredictable nature of the specific timing of purchase orders and hence revenue, which is hard to forecast with any accuracy as a typical funding sources are large global humanitarian and health organizations, which are not predictable in terms of timing.

Stephen S. Schwartz: We've taken some significant actions to better align the b medical business to enter some of these actions we outlined in our Investor day presentation, and we've taken some additional decisions since then.

Stephen S. Schwartz: We're now focused on the vaccine cold chain product lines only, and we plan to discontinue medical refrigeration and blood management product lines, which leaves us with a streamlined and focused B-medical operation that will deliver at least 20% EBITDA in our outlook. And even with the consolidation of factory space, we still have the capacity to manufacture more than $200 million in annual VCC revenue. These actions will not improve the visibility of our timing but will definitely allow us greater profitability through this focus.

Yvonne: We're now focused on the vaccine cold chain product lines, only and we plan to discontinue medical refrigeration and blood management product lines, which leaves us with a streamlined and focused be medical operation that will deliver at least 20% EBITDA and our outlook.

Yvonne: And even with the consolidation of factory space, we still have capacity to manufacture more than $200 million in annual <unk> revenue.

Yvonne: These actions will not improve the visibility of our timing, but we will definitely allow us greater profitability through this focus.

Stephen S. Schwartz: I want to give two additional updates on B-Medical. First, we're still not confident in the timing of ARD POs that will start the delivery of the $60 million of BCC products into the Democratic Republic of Congo. Second, because we have two quarters of actual and one quarter of guidance totaling approximately $60 million in B-Medical revenue, we're not in a position to hold our expectation for what we thought was a conservative $115 million to $120 million year. Instead, we'll reset expectations for fourth quarter revenue to be approximately $25 to $30 million.

Speaker Change: I want to give two additional updates on be medical.

Speaker Change: First we are still not confident in the timing of <unk> that will start the delivery of the $60 million of BCC products into the Democratic Republic of Congo.

Speaker Change: Because we have two quarters of actual in one quarter of guidance totaling approximately $60 million of be medical revenue.

Speaker Change: Not in a position to hold our expectation for what we thought was a conservative $115 million to $120 million a year.

Speaker Change: Instead, we will reset expectations for fourth quarter revenue to be approximately $25 million to $30 million.

Stephen S. Schwartz: Even with this adjustment in B medical revenue expectations, you'll hear from Herman that we reiterate our commitments to EBITDA and earnings improvement for this fiscal year. Nonetheless, we remain very positive about this business. We're operating with the largest opportunity pipeline in B-Medical's history and have much confidence in revenue that will be ours. That said, we've skinnyed down to the valuable, defensible essence of market-leading capabilities for vaccine delivery and maintain the potential for upside value from unlocking the true strategic intent to be medical, which is sample acquisition of the previously unreachable diversity of the African population. Toward that end, we are actively involved in three critical initiatives that are underway in Africa.

Speaker Change: Even with this adjustment can be medical revenue expectations, you'll hear from Herman that we reiterate our commitments for EBITDA and earnings improvement for this fiscal year. Nonetheless, we remain very positive about this business.

Speaker Change: We're operating with the largest opportunity pipeline and be medical history and have much confidence in revenue that will be ours.

Speaker Change: That said, we skinny down to the valuable defensible essence of market, leading capabilities for vaccine delivery and maintain the potential for upside value from unlocking the true strategic intent to be medical.

Stephen S. Schwartz: Which is sample acquisition of the previously unreachable diversity of the African population.

Speaker Change: Toward that end, we're actively involved in three critical initiatives that are underway in Africa.

Stephen S. Schwartz: In summary, our sample management business remains a steady and consistent source of growth, offering exceptional products. Our services solutions play a key role in Discovery, and as mentioned, we're expanding our service offering. Both business solutions are in high demand, and they will continue to make investments to lead the industry on both fronts with a lot of blue sky ahead. As we maneuver through the slower market, this is the natural time to be hyper-focused on improving profitability.

Speaker Change: In summary, our sample management business remains a steady and consistent source of growth offering exceptional products.

Speaker Change: Our services solutions play a key role in discovery and as mentioned, we're expanding our service offerings.

Stephen S. Schwartz: Both business solutions are in high demand will.

Speaker Change: We will continue to make investments to lead the industry on both fronts with a lot of Blue Sky ahead.

Speaker Change: As we maneuver through the slower market. This is the natural time to be hyper focused on improving profitability our.

Stephen S. Schwartz: Our cost and operational efficiency initiatives are in full swing and already delivering ahead of plan, and we're preparing for the return of a healthier market. Herman will talk to you about the transformation initiatives he's leading to build long-term scale and efficiency for Azenta. As I turn the call over to Herman, I want to thank you for your interest and support of Azentha and for the support I've received from many of you over the years.

Speaker Change: Our cost and operational efficiency initiatives are in full swing and already delivering ahead of plan and we're preparing for the return of a healthier market.

Speaker Change: Simon will talk to you about the transformation initiatives, leading to build long term scale and efficiency for event.

Speaker Change: As I turn the call over to Herman I want to thank you for your interest and support of events at and for the support I've received from many of you over the years.

Speaker Change: <unk>.

Herman Cueto: Steve. Before I begin to discuss the quarter, I would like to add my thanks to Steve for leading Azenta for so many years and positioning the company where it is today. Steve, you will be a hard act to follow.

Herman: Thank you Steve.

Herman: Before I begin to discuss the quarter I would like to add my thanks to Steve for a leading center for so many years and positioning the company where it is today.

Herman Cueto: Steve you will be a hard act to follow and I like many others I'm grateful for the leadership and collaboration you've shown me since I joined.

Herman Cueto: And I, like many others, am grateful for the leadership and collaboration you've shown me since I joined. And with that, let's begin the quarterly review. Good afternoon, everyone.

Speaker Change: And with that let's begin the review of the quarter.

Herman Cueto: As I shared with you in March, we're building the company for scale and growth. And the actions that I'm going to talk to you about today will certainly bring that to light, because things are moving at a terrific pace. Let me begin with the $111 million non-cash goodwill impairment charge we recorded in the quarter. This is related to the B-medical segment and is due to the reduction of the long-term revenue growth rate, which included a contribution from the non-vaccine cold chain products that we are exiting.

Speaker Change: Good afternoon, everyone as I shared with you in March we are building the company for scale and growth and the actions that I am going to talk to you about today, we'll certainly bring that to light because things are moving at a terrific pace.

Speaker Change: Let me begin with the $111 million noncash goodwill impairment charge, we recorded in the quarter.

Herman Cueto: This is related to the BD medical segment and is due to the reduction of the long term revenue growth rate, which had included a contribution from the non vaccine cold chain products that we are exiting.

Herman Cueto: This is part of operationalizing the strategic portfolio shift that we outlined at Investor Day. The singular focus on vaccine cold chain enables a more profitable B-medical segment as we move towards its strategic intent of sample acquisition.

Speaker Change: This is part of operationalize and the strategic portfolio shift that we outlined at Investor day.

Speaker Change: The singular focus on vaccine cold chain enables a more profitable medical segment as we move towards its strategic intent of sample acquisition.

Herman Cueto: Before I get into the quarterly results, I want to spend some time discussing Ascend 2026, the transformation program that I introduced at Investor Day in March. I am very excited to announce several key milestones, beginning with our Portfolio Simplification Initiative. In the second quarter, we exited B-Medical products in the U.S. market and announced the winding down of the sample sourcing product offering within our sample management solutions business. As part of our site optimization initiative, we have successfully exited seven locations with another two to be completed in the very near term. Included in the nine is the exit from three Boston area sites, medical care in the US, and sample sourcing.

Speaker Change: Before I get into the quarterly results I want to spend some time discussing ascend 2026, the transformation program that I introduced at Investor Day in March I am very excited to announce several key milestones beginning with our portfolio simplification initiatives.

Speaker Change: In the second quarter, we exited the medical products in the U S market and announced the wind down of the sample sourcing product offering within our sample management solutions business within.

Speaker Change: Within our site optimization initiatives, we have successfully exited seven locations with another two to be completed in the very near term <unk>.

Herman Cueto: Included in the nine is the exit from three Boston area sites be medical in the U S and sample sourcing.

Speaker Change: These early wins are giving us more confidence in the trajectory we are on to simplify the company and enable the profitability goals, we have set forth.

Herman Cueto: These early wins are giving us more confidence in the trajectory we are on to simplify the company and enable the profitability goals we have set forth. We are equally excited about the advancement of our IT system strategy, where in the quarter we eliminated one ERP and launched an ERP initiative within multi-omics to simplify and scale operations. Turning to our results for the quarter and to supplement my remarks, I refer back to the slide deck available on our website. Turning to slide three for some highlights.

Speaker Change: We are equally excited about the advancement of our system strategy, where in the quarter, we eliminated one ERP and launched an ERP initiative within multi omics to simplify and scale operations.

Speaker Change: Turning to our results in the quarter and to supplement my remarks, I refer back to the slide deck available on our website.

Herman Cueto: Turning to slide three for some highlights.

Herman Cueto: Second quarter revenue was $159 million, up 7% year over year on both a reported and an organic basis. We saw solid growth in SMS, both in storage and in large automated stores. Performance within B-Medical against a soft compare in the prior year quarter helped drive the increase. However, the consumables and instruments business remained a headwind to growth in the quarter as we continue to see longer purchasing cycles for instruments due to the uncertainty in the timing of capital investment.

Speaker Change: Second quarter revenue was $159 million up 7% year over year on both a reported and organic basis we.

Herman Cueto: We saw solid growth in SMS, both in storage and in large automated stores.

Herman Cueto: Performance within be medical against a soft compare in the prior year quarter helped drive the increase.

Herman Cueto: The consumables and instruments business remained a headwind to growth in the quarter as we continue to see longer purchasing cycles for instruments due to the uncertainty in the timing of capital investment.

Herman Cueto: However, on a positive note, we did have a late surge of orders come in at the end of March on the consumable side that didn't convert to revenue in the quarter. However, bookings in the month of March for consumables were the largest we have seen since the pandemic, and CNI bookings in the second quarter were the highest over the last eight quarters.

Speaker Change: However on a positive note we did have a late surge of orders come in at the end of March on the consumable side that didn't convert to revenue in the quarter.

Herman Cueto: Bookings in the month of March for consumables was the largest we have seen since the pandemic and C&I bookings in the second quarter were the highest over the last eight quarters.

Herman Cueto: We continue to be confident that we have now cycled through the inventory stocking dynamics in the U.S. and Europe, and our distribution network has returned to pre-COVID inventory levels, which will help stabilize the consumables product lines as we move forward. Excluding C&I, organic revenue growth was a healthy 9%. We delivered non-gap EPS of $0.05 and adjusted EBITDA of 5.9% in Q2, a nice acceleration from Q1, where adjusted EBITDA was around 3%, a meaningful 300 basis points expansion.

Speaker Change: We continue to be confident that we have now cycled through the inventory stocking dynamics in the U S and Europe and our distribution network has returned to pre COVID-19 inventory levels, which will help stabilize the consumables product lines as we move forward.

Speaker Change: Excluding C&I organic revenue growth was a healthy 9%.

Speaker Change: We delivered non-GAAP EPS of five.

Speaker Change: And adjusted EBITDA of five 9% in Q2.

Speaker Change: A nice acceleration from Q1, where adjusted EBITDA was around 3% a meaningful 300 basis points expansion.

Herman Cueto: We ended the quarter in a very strong balance sheet position with $975 million in cash, cash equivalents, and marketable securities. Free cash flow, at $2 million, was positive for the fourth quarter in a row. In Q2, we returned $74 million of capital to our shareholders through the repurchase of 1.2 million shares of Azenta stock. To date, we have now completed roughly $1.1 billion of the $1.5 billion of planned share repurchase. We continue to be extremely well positioned from a balance sheet perspective, and as I have said in the past, after this investment, we will still have roughly $500 million of cash on hand that can be used for disciplined and long-term value-creating initiatives.

Speaker Change: We ended the quarter in a very strong balance sheet position with $975 million in cash cash equivalents and marketable securities.

Herman Cueto: Free cash flow at $2 million was positive for the fourth quarter in a row.

Herman Cueto: In Q2, we returned $74 million of capital to our shareholders through the repurchase of one 2 million shares of our center stock.

Speaker Change: To date, we have now completed roughly $1 1 billion of the $1 5 billion of planned share repurchases.

Herman Cueto: We continue to be extremely well positioned from a balance sheet perspective, and as I have said in the past. After this investment we will still have roughly 500 million of cash on hand that can be used for disciplined and long term value creating initiatives.

Herman Cueto: Now, let's turn to slide four to take a deeper look at our results in the quarter. Total revenue was $159 million, and non-GAAP gross margin was 44.3%, up 310 basis points year over year. This was driven by strong operating efficiencies within our factories and labs, plus non-recurring adjustments in the prior year. Non-GAAP operating margin was negative 3.6%, up 530 basis points year over year. Adjusted EBITDA margin was 5.9%, up 750 basis points year over year, driven by leverage from the combination of improved expense management, the impact of the cost reduction initiatives, and a soft prior year comparison. Again, non-GAAP EPS was $0.05 per share in the quarter.

Speaker Change: Now, let's turn to slide four to take a deeper look at our results in the quarter.

Speaker Change: Total revenue was $159 million.

Speaker Change: non-GAAP gross margin was 44, 3% up 310 basis points year over year.

Speaker Change: This was driven by strong operating efficiencies within our factories and labs, plus nonrecurring adjustments in the prior year.

Herman Cueto: non-GAAP operating margin was negative three 6% up 530 basis points year over year.

Herman Cueto: Adjusted EBITDA margin was five 9% up 750 basis points year over year, driven by leverage from the combination of improved expense management the impact of the cost reduction initiatives and a soft prior year compare.

Speaker Change: Again, non-GAAP EPS was <unk> <unk> per share in the quarter.

Herman Cueto: With that, let's turn to slide five for a review of our segment results, starting with sample management solutions, or SMS. Total SMS segment revenue was $74 million for the quarter, up 4% year-over-year on a reported basis and 3% on an organic basis, driven by growth in large automated stores and in the sample repository solution. SMS's second quarter gross margin was 46.3%, up 620 basis points year over year, mostly driven by operational efficiencies and transformation activities, plus the impact of certain non-recurring adjustments in the prior year. Turning next to the multi-omic segment, Multiomics delivered revenue of $62 million in the second quarter, flat year-over-year.

Speaker Change: With that let's turn to slide five for a review of our segment results, starting with sample management solutions or SMS.

Speaker Change: Total SMS segment revenue was $74 million for the quarter.

Herman Cueto: Up 4% year over year on a reported basis and 3% on an organic basis driven by growth in large automated stores and then sample repository solutions.

Speaker Change: SMS second quarter gross margin was 46, 3% up 620 basis points year over year, mostly driven by operational efficiencies and transformation activities plus the impact of certain nonrecurring adjustments in the prior year.

Speaker Change: Turning next to the multi ethnic segment.

Speaker Change: Multi omics delivered revenue of $62 million in the second quarter flat year over year.

Herman Cueto: Organic revenue for the quarter was up 1%, with gene synthesis growing 13% year-over-year, which is the largest revenue quarter since Q3 of 2022, spurred by innovation. Next generation sequencing was up slightly year over year on an organic basis, while Sanger sequencing was down versus last year and continues to face headwinds from the ongoing softness in the North American market.

Speaker Change: Organic revenue for the quarter was up 1% with gene synthesis growing 13% year over year, which is the largest revenue quarter since Q3 of 'twenty two.

Speaker Change: Spurred by innovation.

Speaker Change: Next generation sequencing was up slightly year over year on an organic basis.

Herman Cueto: Hanger sequencing was down versus last year and continues to face headwinds from the ongoing softness in the North American market.

Herman Cueto: Our multiomics business in China delivered another strong quarter with organic growth of 15% and continues to outpace competitors. The multiomics business gross margin was 46.2%, up 90 basis points year over year, despite the pricing headwinds in next generation sequencing. This expansion was driven by operational efficiencies and labor productivity, laboratory cost savings, and volume leverage on our fixed overhead, and finally, the B-Medical segment. Revenue was $23 million in the quarter, up 51% reported, and up 49% on an organic basis.

Speaker Change: Our multi omics business in China delivered another strong quarter with organic growth of 15% and continues to outpace competitors.

Speaker Change: The multi omics business gross margin was 46, 2% up 90 basis points year over year, despite the pricing headwinds in next generation sequencing.

Speaker Change: This expansion was driven by operational efficiencies and labor productivity laboratory cost savings and volume leverage on our fixed okay.

Speaker Change: And finally, the medical segment.

Speaker Change: Revenue was $23 million in the quarter up 51% reported and up 49% on an organic basis.

Herman Cueto: The higher than initially expected level of revenue we set forth during the Q1 earnings call was primarily due to additional vaccine cold chain orders received during the quarter. Gross margin of 32.4% was up 370 basis points, primarily driven by sales mix.

Speaker Change: The higher than initially expected level of revenue we set forth. During the Q1 earnings call was primarily due to additional vaccine cold chain orders received during the quarter.

Speaker Change: Gross margin of 32, 4% was up 370 basis points, primarily driven by sales mix.

Herman Cueto: Next, let's turn to slide six for a review of the balance sheet. As I mentioned earlier, we ended the quarter with $975 million in cash, cash equivalents, and marketable security. We had no debt outstanding.

Speaker Change: Next let's turn to slide six for a review of the balance sheet.

Speaker Change: As I mentioned earlier, we ended the quarter with 975 million in cash cash equivalents and marketable securities we.

Speaker Change: We had no debt outstanding.

Herman Cueto: During the quarter, we generated $8 million of positive cash flow from operations, as you can see on the next slide. Capital expenditures for the quarter were about $7 million, mainly from investments in multi-omics equipment, as well as our Oxford UK site and the Boston biorepository facility build out. Again, free cash flow in the quarter was $2 million. Turning to guidance on slide 8.

Herman Cueto: During the quarter, we generated $8 million of positive cash flow from operations that you could see on the next slide.

Speaker Change: Capital expenditures for the quarter were about $7 million, mainly from investments and multi omics equipment as well as our Oxford UK site in the Boston Bio repository facility build outs.

Herman Cueto: Again free cash flow in the quarter was $2 million.

Speaker Change: Turning to guidance on slide eight.

Herman Cueto: As you saw in our press release, we continue to feel really good about our multi-omics and SMS businesses and are reiterating the full-year Organic Revenue Guide for both segments. For the B-medical segment, however, we are adjusting down the full-year revenue outlook. While the B-Medical pipeline continues to be robust, and in fact, is growing, the conversion to revenue remains unpredictable. However, our experience with B-Medical is that once something comes into the pipeline, it has a high probability of converting to revenue. The timing is and continues to be the great unknown.

Speaker Change: As you saw in our press release, we continue to feel really good about our multi omics and SMS businesses and are reiterating the full year organic revenue guide for both segments.

Speaker Change: For the BD Medical segment. However, we are adjusting down the full year revenue outlook.

Speaker Change: While the B medical pipeline continues to be robust and in fact is growing the conversion to revenue remains unpredictable.

Speaker Change: Our experience with be medical is that once something comes into the pipeline. It has a high probability of converting to revenue.

Speaker Change: Timing is and continues to be the great unknown.

Herman Cueto: The Ascend 2026 Transformation Initiatives that we are deploying within BMedical will enable us to deliver approximately 20% of adjusted EBITDA. With five months left to go in the fiscal year, we feel it is appropriate to adjust BMedical revenue to a range of $80 million to $90 million for the full year. The adjustment in B-Medical brings the full year company organic revenue guide to a range of negative 1% to positive 1%, or $659 million to $671 million.

Speaker Change: The ascend 2026 transformation initiatives that we are deploying within be medical will enable us to deliver approximately 20% of adjusted EBITDA.

Speaker Change: With five months left to go in the fiscal year, we feel it is appropriate to adjust b medical revenue to a range of 80 million to $90 million for the full year.

Speaker Change: The adjustment and be medical brings the full year company organic revenue guide to a range of negative 1% to positive, 1% or 659 million to 671 million.

Herman Cueto: Even with this change, we stand by the adjusted EBITDA guide of approximately 300 basis points of margin expansion, and we will be raising the non-GAAP EPS guide to a range of 27 cents to 37 cents for fiscal year 2024. The EPS raise is equally distributed between operational improvements and higher interest income. In terms of the quarterly guidance, please refer to page nine of the slide deck for color and key considerations. For Q3, we expect revenue growth to be roughly flat year over year. Combined multi-omics and sample management solutions, revenue is expected to grow low single digits. We are holding 23 million B medical orders at this time, which would make the B medical segment down 14% year over year.

Herman Cueto: Even with this change we standby the adjusted EBITDA guide of approximately 300 basis points of margin expansion and we will be raising the non-GAAP EPS guide to a range of 27.

Herman Cueto: So 37 for fiscal year 2024.

Speaker Change: The EPS raise is equally distributed between operational improvements and higher interest income.

Speaker Change: In terms of the quarterly guidance. Please refer to page nine of the slide deck for color and key considerations.

Herman Cueto: In Q3, we expect revenue growth to be roughly flat year over year.

Speaker Change: Buying multi omics in sample management solutions revenue is expected to grow low single digits.

Speaker Change: We are holding $23 million of be medical orders at this time, which would make the BD medical segment down 14% year over year.

Herman Cueto: We expect gross margin to be approaching the mid 40%, and R&D expense as a percentage of revenue will be around 5%. SG&A is expected to be in the low 40s and better than Q2 as a percentage of revenue. Overall, we expect the business to deliver an adjusted EBITDA margin that approaches mid-single digits to high-single digits and non-GAAP EPS to be a couple pennies better than Q2. In closing, we are pleased with our performance in Q2. We are committed to delivering on our purpose, serving our customers, and enabling life sciences breakthroughs faster. This concludes our prepared remark. I will now turn the call over to the operator for questions.

Speaker Change: We expect gross margin to be approaching the mid 40 percents.

Speaker Change: R&D expense as a percentage of revenue will be around 5%.

Speaker Change: SG&A is expected to be in the low forties and better than Q2 as a percentage of revenue.

Herman Cueto: Overall, we expect the business to deliver an adjusted EBITDA margin that approaches mid single digits to high single digits and non-GAAP EPS to be a couple of pennies better than Q2.

Herman Cueto: In closing we are pleased with our performance in Q2, we.

Speaker Change: We are committed to delivering on our purpose, serving our customers and enabling life sciences breakthroughs faster.

Speaker Change: This concludes our prepared remarks.

Speaker Change: I will now turn the call over to the operator for questions.

Operator: Thank you. And as a reminder, to ask a question, you will need to press star 11 on your telephone and wait for a name to be announced. To withdraw your question, please press star 11 again.

Speaker Change: Thank you and as a reminder to ask a question you will need to press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby we compile the Q&A roster.

Operator: Please stand by while we compile the Q&A roster. One moment for our first question, and our first question will come from the line of David Saxon from Needham.

Speaker Change: One moment for our first question.

Speaker Change: And our first question will come from the line of David Saxon from Needham.

David Joshua Saxon: Your line is open.

David Joshua Saxon: Great. Hi Steve and Herman. Thanks for taking my questions. And Steve, congrats on all you've accomplished at Brooks and Azenta. And I hope you will enjoy your retirement. Thank you. Yeah, of course. In terms of questions, maybe just two for me. Maybe I'll start probably for Herman. Just on the B-medical guidance, you know, you're bringing that down. I just want to understand how much of that is driven by the DRC contract, you know, 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, you know, in that part of the pipeline.

Speaker Change: Great.

David Joshua Saxon: Steven Herman Thanks for taking my question and Steve Congrats on all you've accomplished that Brooks in Atlanta, and I Hope you enjoy your retirement.

David Joshua Saxon: Thank you.

David Joshua Saxon: Yes of course in terms of questions, maybe just two for me.

Stephen S. Schwartz: Maybe I'll start probably for Herman just on the medical guidance.

David Joshua Saxon: Youre, bringing that down I, just want to understand how much of that is driven by Dr. DRC contract.

David Joshua Saxon: <unk>.

David Joshua Saxon: Maybe getting pushed out to fiscal 'twenty five.

David Joshua Saxon: Kind of how much of that is driven by just the.

David Joshua Saxon: The rest of the.

David Joshua Saxon: Pipeline.

David Joshua Saxon: Timing.

David Joshua Saxon: In that part of the pipeline.

Herman Cueto: Yeah, David, thank you for the question. It's it's a combination of things.

Speaker Change: Yes, David Thank you.

David Joshua Saxon: For the question, it's a combination of things the DRC is certainly a part of the takedown.

Speaker Change: 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.

Herman Cueto: 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.

Speaker Change: That size that $60 million, certainly bolstered the pipeline up.

Herman Cueto: 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 question. 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 for non-VCCs are key contributors to the takedown.

Speaker Change: But the fact of the matter is we removed DRC from our current guide.

Speaker Change: Excuse me, 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.

Herman Cueto: The exit from the U S. Non BCC market is also a factor.

Speaker Change: And I would say the combination of DRC and the exit of the U S market and non BCC are key contributors to the takedown.

Stephen S. Schwartz: Okay, that's helpful. And then maybe this is for Steve, I think.

Speaker Change: Yes.

Speaker Change: Okay. That's helpful. And then maybe this is for Steve I think so.

Stephen S. Schwartz: So for SMS, you know, one of the questions I get from investors is about the growth in large stores. And you know, 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, you know, continue to grow or at least be replenished? And I know it's early in the BioArk Ultra launch, but how significant could that be to the backlog and the durability of large stores' revenue growth?

Stephen S. Schwartz: 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 Youre seeing that gives you confidence that the backlog in <unk>.

Stephen S. Schwartz: Thanks so much.

Speaker Change: <unk> to grow or at least be replenished.

Speaker Change: And I know, it's early in the <unk> <unk> ultra launch, but how significant could that be to the backlog and the durability.

Speaker Change: Large stores revenue growth. Thanks, so much.

Stephen S. Schwartz: Yeah, you bet. Thanks, David.

Speaker Change: Yeah, you bet, Thanks, David Yes.

Speaker Change: An interesting period for us in every quarter were.

Speaker Change: 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.

Speaker Change: We are 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.

Stephen S. Schwartz: Yeah, it's really an interesting period for us, and every quarter we stop being surprised by the magnitude of the orders that are coming, so the backlog continues to build even as revenue grows. So 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. In terms of the BioArk Ultra, you know, we went through a factory acceptance test a couple weeks ago, as we mentioned.

Stephen S. Schwartz: And the backlog continues to grow in terms of the <unk>.

Speaker Change: <unk> ultra.

Speaker Change: We are.

Stephen S. Schwartz: We went through a factory acceptance test a couple of weeks ago. As we mentioned was fortunate to be there when the customer was there and that was.

Stephen S. Schwartz: I was fortunate to be there when the customer was there, and that was a pretty nice event. That's a massive store and a capability that they'll receive here this year. And our conversation pipeline is really strong. So there's a high level of interest there for all of the large automated stores. So to summarize for you, I think the activity level is as high as we can remember the revenue increases.

Stephen S. Schwartz: So on the bookings side, the backlog continues to be really solid. So when we talked about a solid backlog 12 months ago, we had more backlog now, and the revenue continues to grow. So they never know how long that's going to be.

Speaker Change: Pretty nice event, that's a massive store and a capability that they will receive here this year.

Speaker Change: R R.

Speaker Change: Our conversation pipeline is really strong so theirs.

Stephen S. Schwartz: High level of interest there for all of the large automated stores. So.

Speaker Change: To summarize for you I think the activity level is as high as we can remember the the revenue increases so too the bookings the backlog continues to be really solid so when we talked about our solid backlog 12 months ago, we have more backlog now and the revenue continues to grow so didn't even know how long that's going to be but we also talked about additional vic.

Speaker Change: There is not just.

Speaker Change: But the particular samples for.

Speaker Change: Biological studies for population studies for rare disease, but rather we're seeing them now these additional vectors for manufactured products, which also continues to be strong. So good a good environment for large stores.

Stephen S. Schwartz: And we continue to see healthy backlog. So when we when we look at what the next 12 months look like we feel pretty confident in our ability to forecast that business.

Speaker Change: Great. Thanks, so much and congrats again.

Speaker Change: Thank you thanks, David.

Speaker Change: Thank you one moment for our next question.

Stephen S. Schwartz: Our next question comes from line of Jacob Johnson from Stephens. Your line is open.

Speaker Change: Hey, Jacob.

Stephen S. Schwartz: Hi, This is actually Hannah on for Jacob Thanks for taking the question.

Stephen S. Schwartz: But we also talked about additional vectors, not just those, but particular samples for biological studies for population studies for rare diseases. But rather, we're seeing these additional vectors now for manufactured products, which also continues to be strong. So, a good environment for large stores, and we continue to see a healthy backlog. So when we look at what the next 12 months look like, we feel pretty confident in our ability to forecast that business.

Speaker Change: First you all have done a really good job guiding quarterly for being medical is there anything you can do to better forecast the medical revenue over longer periods of time.

Speaker Change: Let me see let me try it a couple of ways, we look at a number of things, including the sources of funding, which actually this is <unk>.

Stephen S. Schwartz: <unk> engaged in 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.

Stephen S. Schwartz: With a 12 months notice as to what we think is going of course, we have to win we have to win our share of that business, but we are.

Stephen S. Schwartz: We have high market share so we're pretty steady there and I would say that it's the other half of the revenue, it's a little bit tougher to call again, when Herman mentioned that when we when we know we have one business. We generally wanted the timing in particular is pretty hard so when we when we guide the business if you get the at our Investor day, we guided that.

Stephen S. Schwartz: Business. After we took out the med RAF and blood management systems that fiscal 'twenty three was around $100 million.

Stephen S. Schwartz: We guided our multiyear plan toward low single digits, we have a pretty good sense that thats going to be at so when we when we look at the business right now just the vaccine cold chain portion.

Stephen S. Schwartz: To be around $100 million every 12 months period plus.

Stephen S. Schwartz: Plus a little bit of growth built in feels like the right way to do it I wont tell you that we'll be able to nail it from that standpoint, but generally if the funding agencies don't fund than they've missed an opportunity they've missed what the people who contribute that money have asked them to do so that part gives us some.

Stephen S. Schwartz: Pretty good feeling that it will get spent but.

Stephen S. Schwartz: Right now we're looking at that business in the.

Stephen S. Schwartz: 100, 100, plus a little bit range and after we feel pretty good about what it looks like over a 12 month period.

Speaker Change: Great. Thank you and then also Steve Congrats on all the accomplishments on your upcoming retirement.

Speaker Change: What are the key criteria. The board is looking for a CEO.

Speaker Change: Gotcha, and I don't know, but.

Speaker Change: Here's my thought on that.

Stephen S. Schwartz: Really excellent company and if you ask anyone of us.

Stephen S. Schwartz: He will tell you the same I think they're going to they're going to I know, they're going to look for somebody who is going to keep keep the strategy alive and just continued to take advantage of what we see is tremendous market opportunities.

Speaker Change: I'm really eager.

Stephen S. Schwartz: To see who can step forward you know my background wasn't here and there are a lot of people who are really equipped to just do excellent things with the company to work with this team.

Stephen S. Schwartz: I think the board is in the process of getting that specification defines and I'll be I'll be really excited to see who they bring and be very supportive of that transition.

David Joshua Saxon: Great. Thanks so much and congratulations again, Steve.

Speaker Change: Great. Thanks, I'll leave it there.

Steve: Thanks Shannon.

Stephen S. Schwartz: Thank you, David. Thank you.

David Joshua Saxon: Yes.

Speaker Change: Thank you one moment for our next question.

Operator: Thank you. One moment for our next question. Our next question comes from Jacob Johnson from Stevens. Your line is open. Hey Jacob. Hi. Hi, it's actually Hannah on for Jacob. Thanks for taking the questions.

Stephen S. Schwartz: Our next question will come from the line of Vijay Kumar from Evercore ISI. Your line is open.

Jacob K. Johnson: This is Steve. Let me try it a couple ways.

Stephen S. Schwartz: We look at a number of things, including the sources of funding, which actually, this is Gabby and Gates 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 with a 12-month notice as to what we think is going on. Of course, we have to win our share of that business, but we have a high market share, so we're pretty steady there.

Hannah: Hey, guys. Thanks for taking my questions to you and you'll be missed wishing you all the best.

Stephen S. Schwartz: It's been it's been a it's been quite a journey.

Stephen S. Schwartz: And I would say that it's the other half of the revenue that's a little bit tougher to call. Again, when Herman mentioned that when we know we've won business, we've generally won it, the timing, in particular, is pretty hard.

Stephen S. Schwartz: Yeah.

Stephen S. Schwartz: Vijay we had covers.

Stephen S. Schwartz: So yes, it's been a long time at it.

Stephen S. Schwartz: So when we guide the business, I think at our investor day, we guided the business after we took out the MedRef and blood management systems so that fiscal 23 was around $100 million. We guided our multiyear plan toward low single digits, and we have a pretty good sense that that's going to be it. So when we look at the business right now, just the vaccine cold chain portion to be around $100 million every 12 months, you know, plus a little bit of growth built in, feels like the right way to do it.

Speaker Change: Yes. The transformation is complete so wishing you all the best.

Speaker Change: I had a few questions here.

Stephen S. Schwartz: On guidance here.

Stephen S. Schwartz: Simple management I think.

Stephen S. Schwartz: In the first half of them low singles.

Stephen S. Schwartz: Is the third quarter guide, assuming low single source sample management and <unk>.

Stephen S. Schwartz: And I think that would imply.

Stephen S. Schwartz: Double digits in Q4 am I thinking about it the right way and what drives that seek uniform to step off.

Stephen S. Schwartz: I won't tell you that we'll be able to nail it from that standpoint. But generally, if the funding agencies don't fund, then they've missed an opportunity, they've missed what the people who contribute that money have asked them to do. So that part gives us a pretty good feeling that it'll get spent. But right now, we're looking at that business in the 100, 100 plus a little bit range. And I feel pretty good about what it looks like over a 12 month period.

Stephen S. Schwartz: Gosh, Ed, I don't know. But they're there. Hey, here's my thought on that.

Stephen S. Schwartz: Here's my thought on that: this is a really excellent company, and if you ask any one of us, everybody will tell you the same. I think they're going to, I know they're going to look for somebody who's going to keep the strategy alive and just continue to take advantage of what we see as tremendous market opportunities. I'm really eager to see who can step forward. My background wasn't here, and there are a lot of people who are really equipped to just do excellent things with the company and work with this team. I think the board is in the process of getting that specification defined, and I'll be really excited to see who they bring in and be very supportive of that transition. Thanks.

Speaker Change: Yeah. So so.

Stephen S. Schwartz: Vijay.

Operator: Thank you. One moment for our next question. Our next question will come from Vijay Kumar from Evercore ISI. Your line is open.

Stephen S. Schwartz: SMS in Q3.

Vijay Muniyappa Kumar: I do have a firm order in hand right now.

Vijay Muniyappa Kumar: That I pushed into Q4, it's worth a couple of million dollars. We have a minor supply chain delay that we expect to have resolved in may or early June.

Operator: But.

Vijay Muniyappa Kumar: I don't want to.

Vijay Muniyappa Kumar: Say I could do something and then end up not being able to deliver it so I I pulled that order or push that order into Q4. So that's so there was a step up that's part of the reason you see it.

Vijay Muniyappa Kumar: And let's see Q harboring am I thinking about that right.

Vijay Muniyappa Kumar: Sample management is up.

Vijay Muniyappa Kumar: Low singles.

Operator: Yes.

Vijay Muniyappa Kumar: We're certainly thinking about it the right way P J, yes.

Operator: Understood.

Vijay Muniyappa Kumar: And that one on the.

Vijay Muniyappa Kumar: On the NGL side here Steve.

Vijay Muniyappa Kumar: Steve I wanted to make sure I understood. This correctly, where total Ngls I think you said was up slightly with North America. It looks like a flat to down Europe up significantly what's driving this.

Vijay Muniyappa Kumar: Disparity from a regional perspective.

Vijay Muniyappa Kumar: Is that the transition to the <unk> X I think at their analyst day, you had a slide on the amount of data being generated on the <unk>.

Vijay Muniyappa Kumar: Now at this point in time, the transition complete and should we expect <unk> to grow in the back half.

Vijay Muniyappa Kumar: Vijay our history would say that.

Vijay Muniyappa Kumar: So let me do it in a few pieces.

Vijay Muniyappa Kumar: We've shifted almost all of the.

Vijay Muniyappa Kumar: And GFS to the Novo seek X plus and we're running at three sites. We have most of the majority of those tools in North America. This is this is customer business level. So the.

Vijay Muniyappa Kumar: The strength in.

Vijay Muniyappa Kumar: The strength in Europe is.

Vijay Muniyappa Kumar: For a little bit of a smaller base in North America.

Vijay Muniyappa Kumar: Is the funding levels that are consistent with the rest of the business consistent with.

Vijay Muniyappa Kumar: You also what we've seen in Sanger, but indeed it when we look at history, we've taken a two or may be three quarter dip, sometimes as we get there.

Vijay Muniyappa Kumar: The volumes out because we get calibrated on how to run the new tools, but already we're in a little bit better spot just on the second quarter of this transition and are holding and improving actually gross margin and holding the revenue flat during the transition. So it feels pretty good. So we like we like where we are in the cycle and we'll just keep reporting every quarter to let you know.

Vijay Muniyappa Kumar: How we're doing but if you if you compared where we were in the last three transition cycles, we're little bit ahead of where we were in each of those transition cycles.

Vijay Muniyappa Kumar: And that's helpful and maybe one last one Herman EPS was raised by <unk>. It looks like all of it came from below the line maybe between tax and lower interest income and lower revenues.

Vijay Muniyappa Kumar: Is the implication carrier our margins are stepping up.

Vijay Muniyappa Kumar: I'm just trying to understand.

Vijay Muniyappa Kumar: The margin expansion didn't change.

Vijay Muniyappa Kumar: Revenues came down.

Vijay Muniyappa Kumar: What's driving this EPS increase.

Vijay Muniyappa Kumar: Yes so.

Vijay Muniyappa Kumar: Vijay what I would say is let me begin with sales.

Vijay Muniyappa Kumar: If if you look at and you could you could see this math and Youre already doing it we have a step up from Q3 to Q4.

Vijay Muniyappa Kumar: That'll be in the neighborhood of about $20 million.

Vijay Muniyappa Kumar: B medical is about $4 million of that step up and based on prior quarters performance, we could see some of that come in in Q3.

Vijay Muniyappa Kumar: And SMS as I just described to you. There is a couple million dollars order that we have in hand that could be delivered in Q3, if we get the parts that I pushed to Q4.

Vijay Muniyappa Kumar: In multi omics. If you remember we started to see the pricing pressure in Q4 of last year.

Vijay Muniyappa Kumar: We expect to cycle through those headwinds as we exit Q3 and head into Q4.

Vijay Muniyappa Kumar: And beyond that we have businesses as you were just talking to Steve about.

Vijay Muniyappa Kumar: Stores in storage that are growing nicely for us and consumables as as we talked about in the prepared remarks are on a very positive trajectory.

Vijay Muniyappa Kumar: In the middle of the P&L.

Vijay Muniyappa Kumar: We talked about nine site exits there are other plans underway right now that reduced the footprint of sites even further.

Vijay Muniyappa Kumar: And beyond that we're making really good progress on our organization simplification initiatives. So the way I would think about it Vijay is the combination of the GP drop on the sales step up and the <unk> 2026 programs.

Vijay Muniyappa Kumar: It gives us it gives us the line of sight to the EBITDA and EPS that were guiding.

Vijay Muniyappa Kumar: Hey Vijay, guys, thanks. Thanks for taking my questions to you, and you'll be missed. Wishing you all the best. It's been quite a journey.

Vijay Muniyappa Kumar: I hope that's helpful. Thanks, guys.

Vijay Muniyappa Kumar: Thanks, guys.

Stephen S. Schwartz: Vijay, we had conversations a long time ago, so yeah, it's been a long time since we talked.

Vijay Muniyappa Kumar: Okay.

Vijay Muniyappa Kumar: Thank you.

Vijay Muniyappa Kumar: One moment for our next question.

Stephen S. Schwartz: And our next question will come from one of your <unk> Z from B Riley.

Vijay Muniyappa Kumar: Yes, the transformation is complete. So, wishing you all the best. I had a few questions on guidance here. Sample management, I think in the first half we've done low signals. Is the third-quarter guide assuming low signals for sample management? And I think that would imply double-digit growth in Q4. Am I thinking about it the right way, and what drives the 3Q to 4Q step up?

Vijay Muniyappa Kumar: You are now open.

Herman Cueto: Yeah, so, so, Vijay, um... SMS in Q3. I do have a firm order in hand right now that I pushed into Q4. It's worth a couple of million dollars. We have a minor supply chain delay that we expect to have resolved in May or early June. I don't wanna.

Vijay Muniyappa Kumar: Thank you for taking our question Steve It has been great working with you and thank you for your contribution to introduce this automation to biologic sample management.

Vijay Muniyappa Kumar: And for CQ, Herman, am I thinking about the right way sample management is going, low singles?

Speaker Change: Thanks Joanne.

Speaker Change: Maybe a couple of questions from us.

Vijay Muniyappa Kumar: Wow.

Herman Cueto: It's a clarification for the lowered guidance.

Vijay Muniyappa Kumar: <unk> was it mainly coming from the lower revenue guidance from being medical or were there some other factor being H aspect.

Speaker Change: No. It was it was be medical we reiterated.

Vijay Muniyappa Kumar: The full year guide for both multi omics and SMS.

Speaker Change: Got it and then maybe take a step back here, so with lowered revenue 400 anti floor and then.

Vijay Muniyappa Kumar: Some accelerating outlet business here what does this mean.

Vijay Muniyappa Kumar: Mean towards the 125 96 pattern on both topline and bottom line.

Herman Cueto: No I don't think it changes anything.

Vijay Muniyappa Kumar: <unk>.

Speaker Change: When we think about SMS and multi omics, we continue to feel really good about those two businesses and the trajectory that they're on as we.

Vijay Muniyappa Kumar: We talked about large stores grew 50% this quarter and new vectors and multi omics are starting to contribute nicely to the top line.

Vijay Muniyappa Kumar: In multi omics were growing when everybody else is down so we feel really strongly about those two businesses.

Vijay Muniyappa Kumar: <unk> medical as Steve reminded everybody.

Vijay Muniyappa Kumar: And we were at Investor day, when we remove the non vaccine cold chain product lines from the starting point of be medical fiscal year 'twenty three will be about $100 million and we said that business will grow low single digits and we feel good about that especially when we look at the forecasted funding projections that actually <unk>.

Vijay Muniyappa Kumar: <unk> vaccine cold chain.

Vijay Muniyappa Kumar: Timing of course is always a question.

Speaker Change: Got it that's all from US. Thank you for the color there.

Speaker Change: Thanks, Sue and thanks, Sean.

Speaker Change: Great. Thank you.

Herman Cueto: Yeah, you're certainly thinking about it the right way, Vijay.

Speaker Change: One moment for our next question.

Herman Cueto: And our next question will come from the line of Matt Stanton from Jefferies. Your line is open.

Speaker Change: Thanks appreciate it.

Speaker Change: Good maybe one on China and mid teens growth in multi omics was nice to see.

Speaker Change: Clearly, it's been a challenging market for the broader tool space, just unpack a bit more of what you're what you're seeing in China, what kind of underpinning that demand and then what you're penciling in.

Herman Cueto: In China for the year.

Vijay Muniyappa Kumar: Understandable. And one on the NGS side here. Steve, I want to make sure I understood this correctly, where total NGS, I think you said, was up slightly. With North America, it looks like it is flat to down, and Europe is up significantly. What's driving this, you know, disparity from a regional perspective? And is that the transition to the No Seek Act? I think at their endless day, you had a slide on the amount of data being generated by the No Seek Act. So is now, at this point in time, the transition complete? And should we expect NGS to grow in the back half?

Stephen S. Schwartz: I would say that, but let me do it in a few pieces. NGS to the NovoSeq X Plus. And we're running at three sites. We have most of the, we have the majority of those tools in North America. This is at the customer business level. So the strength in Europe is, again, for a little bit of a smaller base. In North America, funding levels that are consistent with the rest of the business, and consistent with also what we've seen in Sanger.

Herman Cueto: Yes, Hi, Matt This is Steve when we look at China. This has been a.

Stephen S. Schwartz: But indeed, when we look at history, we've taken a two or maybe three-quarter dip sometimes as we get the volumes up, as we get calibrated on how to run the new tools. But already, we're in a little bit better spot just in the second quarter of this transition, holding and improving gross margin and holding revenue flat during the transition. So it feels pretty good. We like where we are in the cycle.

Stephen S. Schwartz: And we'll just keep reporting every quarter to let you know how we're doing. But if you compare where we were in the last three transition cycles, we're a little bit ahead of where we were in each of those transition cycles.

Stephen S. Schwartz: Really outperformance for the past four quarters, we we've been in double digits growth in China win when the market's been down significantly each of the last four quarters I'll give you a couple of things one being in China, serving Chinese customers is a big deal.

Stephen S. Schwartz: We're right in the middle of Suzhou and there are hundreds if not 1000 life sciences companies close by.

Stephen S. Schwartz: We're staffed with really outstanding scientists and really aggressive sales teams, who serve the customers, particularly the way we win.

Vijay Muniyappa Kumar: And that's helpful, Steve. And maybe one last one.

Herman Cueto: Herman, EPS was raised by eight cents. It looks like all of it came from below the line, right between tax and lower interest income. You lowered your revenues. Is the implication here that your margins are stepping up? I'm just trying to understand if the margin expansion didn't change, and if revenues came down, you know, what's driving this EPS increase?

Herman Cueto: The gene with team.

Vijay Muniyappa Kumar: Vijay, what I would say is, let me begin with the sale. If you look at, and you could see this math and you're already doing it, we have a step up from Q3 to Q4. That'll be in the neighborhood of about $20 million. Be medical is about four million of that step up.

Herman Cueto: And based on prior quarters' performance, we could see some of that come in Q3. For SMS, as I just described to you, there's a couple million dollar order that we have in hand that could be delivered in Q3 if we get the parts that I pushed to Q4. For Multeomic, If you remember, we started to see the pricing pressure in Q4 of last year. So we expect to cycle through those headwinds as we exit Q3 and head into Q4.

Herman Cueto: And beyond that, we have businesses, as you were just talking to Steve about, stores and storage that are growing nicely for us, and consumables, as we talked about in the prepared remarks, are on a very positive trajectory, in the middle of the P&L. We talked about nine site exits. There are other plans underway right now that reduce the footprint of sites even further. And beyond that, we're making really good progress on our organization and simple simplification initiatives.

Herman Cueto: <unk> was founded and all the way until we acquired them and beyond there.

Herman Cueto: So the way I would think about it, Vijay, is the combination of the GP drop on the sales step up and the Ascend 2026 program. It gives us a line of sight to the EBITDA and EPS that we're guiding.

Herman Cueto: They're driving forces solid science Superior service and I think they really apply that in China and so as as other competitors have struggled we picked up that business and as we built capacity that we have a new facility. There we have.

Vijay Muniyappa Kumar: I hope that's helpful. Thanks guys. Yeah, that's helpful. Thanks guys.

Herman Cueto: An enormous amount of capacity built into China. It allows us to also serve larger customers because we have the capacity to take on contracts that we couldnt when they're a.

Operator: Thank you. One moment for our next question, and our next question will come from Yuan Zhi from B Riley. You are now open.

Yuan Zhi: A smaller entity. So I think it's just aggressive.

Yuan Zhi: And aggressive sales and huge capability that allows us to be successful in China. Similarly, it's where we perform our synthetic biology, so the synthesis businesses from China and as we've built capacity and capability. They serve they serve most of our global capacity and I think just the better they get.

Yuan Zhi: That's a market is booming for all of us.

Yuan Zhi: A lot of business to be had we continue to win it by serving the customers with high quality and fast turn even though we do it in China, and I think thats proven to be particularly successful so.

Yuan Zhi: Business for in China for China, and from China for the rest of the world both businesses is doing particularly well.

Yuan Zhi: Thanks, that's helpful and maybe one on instruments, which will remain a bit of a challenge any signs youre seeing that were at or near the bottom whether the orders just kind of a change in conversations with customers.

Yuan Zhi: I guess any more color or visibility on when things could improve and be made returned to growth.

Yuan Zhi: Understanding there is.

Yuan Zhi: Start to go up against some easier comps there too thanks.

Operator: Yes.

Operator: You said instruments, you make the consumables and instruments part of the business.

Yuan Zhi: Yes exactly.

Yuan Zhi: Okay, because there yes.

Yuan Zhi: Instruments for some people is our tools business also I think our I think our stores and storage businesses are particularly strong.

Yuan Zhi: On the consumables and instruments Herman mentioned that we saw a pretty strong uplift in orders towards the end of the quarter and then they came in in time that we couldnt necessarily get them. All solved I will tell you that we can feel the momentum starting to pick up and and if anything I think we had anticipated the orders coming in a little bit earlier in the quarter, but in general.

Yuan Zhi: We're positive that we're out of the <unk> that we're out of.

Yuan Zhi: Depleted backlog situation people are starting to take.

Yuan Zhi: Supply now so.

Operator: We don't have the proof points in front of US right now, but we've got a good good order pattern here in the near term and it feels like that that we're up off the math here.

Operator: In the consumables and instruments business Herman anything to add.

Yuan Zhi: I mean, maybe Matt just a little bit of color.

Yuan Zhi: Revenue and bookings for instruments in the quarter was was soft and we saw capital spending continue to be constrained. However, the pipeline continues to look really strong indicating that demand is healthy. It's just tied up in spending delays and on the consumable side. It was.

Yuan Zhi: It was very strong we saw significant double digit sequential and year over year increases in bookings and the bookings number in Q2 was the highest that we've seen since the pandemic.

Yuan Zhi: So it's.

Yuan Zhi: The instruments are.

Yuan Zhi: Caught up in capital funding that Hasnt changed we do hear that.

Yuan Zhi: Biotech funding as an example is starting to loosen up we expect that there will be a lag there between that funding starting to happen in orders coming through.

Yuan Zhi: So we're just.

Yuan Zhi: We're just riding the same wafers as everybody else on that instrument side.

Yuan Zhi: Thanks, I appreciate the color.

Operator: Okay.

Yuan Zhi: Thank you for taking our questions. Steve, it has been great working with you, and thank you for your contribution to introduce this automation to biologic sample management. Thanks Yuan. Maybe a couple of questions from us. Herman, was it mainly coming from the lowered revenue guidance from B-Medical, or were there some other factors in each aspect?

Yuan Zhi: Thank you.

Yuan Zhi: And I'm not showing any further questions in the queue I would like to turn the call back over to Hermann for any closing remarks.

Herman Cueto: No, it was It was B-Medical. We reiterated the full year guide for both multi-omics and SMS.

Yuan Zhi: And then maybe we take a step back here, so with lower revenue for 2024 and then some acceleration in the business year, what does this mean for the 2025 and 2026 guidance on both the top line and bottom line?

Herman Cueto: Well, thanks, everybody I appreciate you joining the call today I want to have a say a big thank you to Steve for leading this wonderful company for 14 years, we look forward to working with you over the next several months. So youre success for successor is identified.

Herman Cueto: Now, I don't think it changes anything, Yuan. When we think about SMS and multi-omics, we continue to feel really good about those two businesses and the trajectory that they're on. As we talked about, large stores grew 50% this quarter, and new vectors in multi-omics are starting to contribute nicely to the top line. And in multi-omics, we're growing when everybody else is down. So we feel really strongly about those two businesses. In B-Medical, as Steve reminded everybody when we were at Investor Day, when we removed the non-vaccine cold chain product lines from the starting point of B-Medical, fiscal year 23 would be about $100 million, and we said that business would grow in low single digits. And we feel good about that, especially when we look at the forecasted funding projections that actually enable the vaccine cold chain. Timing, of course, is always a question.

Yuan Zhi: Got it. Yeah, that's all from us.

Yuan Zhi: Thank you for the helpful time. Thanks Yuan. Thanks Yuan.

Operator: One moment for our next question, and the next question will come from the line of Matt Stanton from Jefferies.

Speaker Change: Big shoes to fill as I said in the prepared remarks, but.

Matthew Jay Stanton: Thanks, appreciate that. How are you? Good. Maybe one on China, mid-teens growth and multi-omics was nice to see, you know, clearly, it's been a challenging market for the broader tool space. Just unpack a bit more of what you're seeing in China, what's kind of underpinning that demand, and then, you know, what you're penciling in for China for the year.

Stephen S. Schwartz: Hi Matt, this is Steve. When we look at China, this has been really outperformance for the past four quarters. We've been in double-digit growth in China when the market's been down significantly each of the last four quarters. I'll give you a couple things.

Stephen S. Schwartz: One, being in China and serving Chinese customers is a big deal. We're right in the middle of Suzhou, and there are hundreds, if not a thousand life sciences companies close by. We're staffed with really outstanding scientists and really aggressive sales teams who serve the customers particularly well, when the GeneWiz team was founded, and all the way until we acquired them and beyond.

Stephen S. Schwartz: [inaudible] An enormous amount of capacity built into China allows us to also serve larger customers because we have the capacity to take on contracts that we couldn't when we were a smaller entity. So I think it's just aggressive sales and huge capability that allows us to be successful in China. Similarly, it's where we do our synthetic biology.

Speaker Change: Thank you to the 3500 plus employee associates around the world. Thank you.

Stephen S. Schwartz: So the synthesis businesses from China, and as we've built capacity and capability, they serve most of our global capacity, and I think just the better they get, that's a market that's booming for all of us. There's a lot of business to be had. We continue to win it by serving customers with high quality and fast turn, even though we do it in China, and I think that's proven to be particularly successful. So better business in China for China, and from China for the rest of the world. Both businesses are doing particularly well.

Matthew Jay Stanton: Thanks, that's helpful. And maybe one on instruments, which you know, remain a bit bit challenged.

Stephen S. Schwartz: Any signs you're seeing that we're at or near the bottom, whether it be orders, just kind of a change in conversations with customers? I guess any more color visibility on when things could improve and maybe return to growth? Understanding, you know, there's starting to go up against some easier comps there too. Thanks.

Stephen S. Schwartz: Yeah, that's a, you said instruments. Do you make the consumables and instruments part of the business? Yeah, I guess.

Stephen S. Schwartz: Okay, because yeah, instruments for some people is our tools business also. I think our stores and storage businesses are particularly strong. On consumables and instruments, Herman mentioned that we saw a pretty strong uplift in orders toward the end of the quarter. And, you know, they came in so late that we couldn't necessarily get them all solved.

Stephen S. Schwartz: I will tell you that we can feel the momentum starting to pick up. And, if anything, I think we'd anticipated orders coming a little bit earlier in the quarter. But in general, we're positive that we're out of the depleted backlog situation. People are starting to take, Mark Ruffin, Christopher Mollerlokken, Mark Foley, Christopher Mollerlokken, Yvonne Perron, Mark Foley, Christopher Mollerlokken, Haakon Amundsen. In the quarter, the environment was soft, and we saw capital spending continue to be constrained.

Stephen S. Schwartz: However, the pipeline continues to look really strong, indicating that demand is healthy. It's just tied up in spending delays. And on the consumable side, it was very strong; we saw significant double digit sequential and year over year increases in bookings. And the number of bookings in Q2 was the highest that we've seen since the pandemic. [inaudible] So.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Stephen S. Schwartz: So it's, you know, the instruments are. [inaudible] We're just riding the same wave as everybody else on that instrument side.

Operator: Thank you. And I'm not showing any further questions in the queue. I'd like to turn the call back over to Herman for any closing remarks.

Speaker Change: Thank you for your participation in today's conference. This does conclude the program you may now disconnect everyone have a great day.

Herman Cueto: Well, everybody. I appreciate you joining the call today. I want to say a big thank you to Steve for leading this wonderful company for 14 years. We look forward to working with you over the next several months till your success as successor is identified. Big shoes to fill, as I said in the prepared remarks, but thank you to the 3,500 plus employee associates around the world. Thank you.

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