Q3 2024 Azenta Inc Earnings Call

Operator: As a reminder, this conference is being recorded on Tuesday, August 6, 2024. I'll now turn the conference over to Yvonne Perron, Vice President, FP&A, and Investor Relations.

As a reminder, this conference is being recorded Tuesday August six 2024.

I will now turn the conference over to Yvonne Perrin, Vice President <unk> and Investor Relations.

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

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 third quarter of fiscal year 2024. Our third 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.

Speaker Change: I'd like to welcome you to our earnings conference call for the third quarter of fiscal year 2024.

Speaker Change: Our third quarter earnings press release was issued after the close of the market today and is available on our Investor Relations website located at investors data Center Dot Com. In addition to the supplementary Powerpoint slides that will be used during the prepared remarks today.

Speaker Change: 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.

Speaker Change: 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: 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.

Speaker Change: 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.

Speaker Change: 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 incentive business. Non-GAAP measures should not be relied upon to the exclusion of GAAP measures themselves.

Speaker Change: 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 a reconciliation of GAAP measure.

Speaker Change: Yours, they provide an even more complete understanding of the incentive business.

Speaker Change: 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 third 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. And with that, I'd like to turn the call over to our CEO, Steve Schwartz.

Speaker Change: On the call with me today is our President and Chief Executive Officer, Steve Schwartz, and our Chief Financial Officer Herman Kyoto.

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

Speaker Change: We will then take your questions at the end of the prepared remarks, and with that I'd like to turn the call over to our CEO Steve Schwartz.

Steve Schwartz: Thank you, Brian and good afternoon, everyone and thanks for joining us today.

Steve Schwartz: Thank you, Yvonne. Good afternoon, everyone, and thanks for joining us today.

Steve Schwartz: It's great to have the opportunity to report another strong quarter of execution in fulfillment of our long-term growth and profitability objective. We delivered solid above-market growth and more acceleration of profitability. In a life sciences market environment that's still struggling to find its footing, our unique portfolio of capabilities and our market-leading positions in each of our segments leave us less vulnerable to market slowness. We are in a position to capitalize on the fact that all methods of discovery require high-quality, consented samples that can be retrieved, measured, annotated, and stored for future reference and interrogation.

Steve Schwartz: Great to have the opportunity to report another strong quarter of execution and fulfillment of our long term growth and profitability objectives.

Speaker Change: We delivered solid above market growth and more acceleration of profitability.

Speaker Change: In our life Sciences market environment, Thats still struggling to find its footing, our unique portfolio of capabilities and our market leading positions in each of our segments leaves us less vulnerable to market slowness.

Speaker Change: We're in a position to capitalize on the fact that all methods of discovery require high quality consented samples that can be retrieved measured annotated and store it for future reference and interrogation.

Steve Schwartz: As a matter of fact, it's the driving forces of lower cost and faster time to discovery that are moving the markets and attracting customers to Azenta, as we can provide immediate, tangible benefits to customers looking to manage and measure samples with best-in-class capability. We enable breakthroughs faster, and that's the name of the game. Furthermore, in addition to our core business, there is an increasing desire from our customers to have access to rare and valuable samples from human populations that were previously inaccessible.

Speaker Change: For a fact is the driving forces of lower cost and faster time to discovery that are moving the market's in attracting customers to a center as we can provide immediate tangible benefits to customers looking to manage and measure samples with best in class capability, we enable breakthroughs faster and that's the name of the game.

Speaker Change: Furthermore, in addition to our core business is an increasing desire from our customers to have access to rare and valuable samples from human populations that were previously inaccessible as we expand the breadth of our capabilities to source manage and measure samples. We aim to be the provider of a full complement of critical inputs not just for laboratory discovery.

Steve Schwartz: As we expand the breadth of our capability to source, manage, and measure samples, we aim to be the provider of a full complement of critical inputs, not just for laboratory discovery, but also as inputs for powerful AI models, which are hungry for this information and an important factor in the transformation of life sciences and healthcare.

Speaker Change: But also as inputs for powerful AI models, which are hungry for this information and an important factor in the transformation of life Sciences and healthcare.

Steve Schwartz: At our investor day in March, we outlined a 10-quarter plan to continue to grow revenue faster than the market growth rate while simultaneously transforming the company to deliver on the profit potential that comes with this unique capability portfolio. Today, we report strong progress against these commitments with big positive moves in both areas. Now we'll turn to highlights from the quarter.

Speaker Change: At our Investor Day in March we outlined the 10 quarter plan to continue to grow revenue faster than the market growth rate, while simultaneously transforming the company to deliver on the profit potential that comes with this unique capability portfolio. Today, We report strong progress against these commitments with big positive moves in both areas.

Steve Schwartz: At $173 million, organic revenue was up 5% year-over-year and 9% sequentially, with all three segments contributing positive growth. Sample management solutions grew 7% year over year, with products contributing 5% and sample repository services contributing 11%. On the product side, revenue was up 10% in large automated stores, consistent with the double-digit growth trend we've seen for more than a year. And we're particularly pleased that our cryogenic stores revenue was up almost 40% to a level we haven't seen in a couple years.

Speaker Change: Now I will turn to highlights from the quarter.

Speaker Change: At $173 million organic revenue was up 5% year over year, and 9% sequentially with all three segments contributing positive growth.

Speaker Change: Ample management solutions grew 7% year over year with products contributing 5% and sample repository services contributing 11% on the product side revenue was up 10% in large automated stores consistent with the double digit growth trend, we've seen for more than a year and we're particularly pleased that our cryogenic storage revenue was up almost four.

Speaker Change: 40% to a level, we've not seen in a couple of years.

Steve Schwartz: This is a good sign from the standpoint of cell and gene therapy applications, where we're again starting to see opportunities for multiple unit automated system orders. We remain encouraged by the persistent move toward automated cold storage equipment and away from manual systems.

Speaker Change: This is a good sign from the standpoint of cell and gene therapy applications, where we're again starting to see opportunities for multiple unit automated systems orders, we remain encouraged by the persistent move toward automated cold storage equipment and away from manual systems.

Steve Schwartz: Consumables and instruments grew a healthy 17% year-over-year and 20% sequentially, the best performance in more than one year, and although we're optimistic about the increase, we'll be cautious about calling a turn until we witness this for a few quarters. That said, it's a positive indicator, and we remain aggressive in our push for market share in this space. As I mentioned, in our SRS repository business, we delivered 11% year-over-year growth. Not only are we seeing continued strong growth, but we're simultaneously transforming our operations to be able to handle the significant volume we anticipate in the coming years by aggressively implementing our transformation to automated repositories.

Speaker Change: Consumables and instruments grew a healthy 17% year over year, and 20% sequentially. The best performance in more than one year and although we are optimistic about the increase will be cautious about calling a turn until we witnesses for a few quarters.

Speaker Change: That said it is a positive indicator and we remain aggressive in our push for market share in this space.

Speaker Change: As I mentioned in our Srs repository business, we delivered 11% year over year growth not only are we seeing continued strong growth, but we're simultaneously transforming our operations to be able to handle the significant volume we anticipate in the coming years by aggressively implementing our transformation to automated repositories for example.

Steve Schwartz: For example, today, samples arriving at our repositories can be automatically registered, utilizing tools we've developed for high-speed registration. These samples are subsequently stored in automated stores and managed, using our now fully operational software-as-a-service sample management system.

Speaker Change: Today samples, arriving at our repositories can be automatically registered utilizing tools. We've developed for high speed registration. These samples are subsequently stored in automated stores in managed utilizing our now fully operational software as a service sample management system.

Steve Schwartz: We're beginning to recognize the benefits of this transformation through reduced cycle times and lower registration costs. And these new capabilities are impressing customers who recognize the significant benefits we can provide to them compared to how they manage sample assets today. Toward that end, after almost two years of slower activity from large pharma companies, we're seeing an increase in the number of new sizable sample management opportunities. Our consultative evaluations of customer storage sites are picking up again, and it's these assessments that are typically the precursors to large contractual deals.

Speaker Change: We are beginning to recognize the benefits of this transformation through reduced cycle times and lower registration costs.

Speaker Change: And these new capabilities are impressing customers, who recognize the significant benefits, we can provide to them compared to how they manage sample assets today.

Speaker Change: Toward that end after almost two years of slower activity from large pharma companies, we're seeing an increase in the number of new sizable sample management opportunities are consultative evaluations of customer storage sites are picking up again and it's these assessments that are typically the precursors to large contractual deals.

Steve Schwartz: In the quarter, we want a multi-year contract to take over management of a large sample collection for a pharmaceutical company that's closing a facility and will transfer all sample responsibility to us. At the request of the customer, we'll manage their samples in a dedicated, automated store installed at our new Boston biorepository.

Speaker Change: In the quarter, we won a multiyear contract to take over management of a large sample collection for a pharmaceutical company. That's closing of a facility and we will transfer all sample responsibility to us at the request of the customer will manage their samples and a dedicated automated store installed at our new Boston bio repository.

Steve Schwartz: We continue to see tremendous value in our stores and storage services portfolio, and we're pleased with the momentum that continues to build behind what we believe will be a huge transformation in how samples are managed with automation at scale being a game changer for the industry. The multi-omics GeneWiz team had another great quarter, delivering 1% organic year-over-year revenue and 2% sequential growth in a market that remains meaningfully down. The solid performance in a slow market environment continues to position us extremely well for a fast ramp-up in a market recovery.

Speaker Change: We continue to see tremendous value in our stores and storage services portfolio and we're pleased with the momentum that continues to build behind what we believe will be a huge transformation in how samples are managed with automation at scale being a game changer for the industry.

Speaker Change: The multi omics gene with team had another great quarter, delivering 1% organic year over year revenue and 2% sequential growth in a market that remains meaningfully down the solid performance in a slow market environment continues to position us extremely well for a fast ramp up in a market recovery, we're gaining share because of the quality and capability.

Steve Schwartz: We're gaining share because of the quality and capability of our new offerings, as well as our ability to continue to reduce cycle time and deliver the highest quality scientific results that keep current customers coming back to us. Specifically, the Next Generation Sequencing Team had another great quarter. In the face of significant price reductions due to the dramatic decrease in sequencing costs, volume was up more than 20% for the fifth consecutive quarter in terms of the number of samples processed and measured.

Speaker Change: Ability of our new offerings as well as our ability to continue to reduce cycle time and deliver the highest quality scientific results that keep current customers coming back to us.

Speaker Change: Specifically the next generation sequencing team had another great quarter.

Speaker Change: In the face of significant price reductions due to the dramatic decrease in sequencing costs volume was up more than 20% for the fifth consecutive quarter in terms of number of samples processed and measured.

Steve Schwartz: Amidst these large changes, overall NGS revenue was up 3% on an organic basis year over year. Profitability in this product line also ticked up again, and we're bullish that we're at an inflection point. Pricing's been stable over the past three quarters, and we're positioned to sustain growth and higher profitability. This market dynamic is consistent with each of the past three meaningful NGS technology inflections, but this time, it feels as though demand elasticity is driving even more outsourcing of NGS. Two specific results add to our confidence about the future of our NGS business. First, in the quarter, we added more than 700 of what we call new NGS customers.

Speaker Change: And amidst these large changes overall NTS revenue was up 3% on an organic basis year over year profitability. In this product line also ticked up again, and we're bullish that we're at an inflection point.

Speaker Change: Pricing has been stable over the past three quarters, and we're positioned to sustained growth and higher profitability.

Speaker Change: This market dynamic is consistent with each of the past three meaningful NGF technology inflections, but this time it feels as though demand elasticity is driving even more outsourcing of Ngls <unk>.

Speaker Change: Two specific results add to our confidence about the future of our NGL business first in the quarter, we added more than 700 of what we call new to NGF customers. This is a huge number of new customers, but it's also great. Because these are the customers for the fuel for our future work.

Steve Schwartz: This is a huge number of new customers, but it's also great because these are the customers who are the fuel for our future work. And second, our NGS quoting activity, in both the number of quotes and dollar volume, was at record highs in Q3. So all in all, a comfortable position for us in our NGS business. As we reported last quarter, we believe we're past the bottom in revenue for our overnight sequencing, with Sanger and Plasmid Easy offerings growing sequentially for the first time in more than a year. If you recall, our Q2 revenue was flat with Q1, and we believed we'd stemmed any further decline.

Speaker Change: Second our NGL quoting activity in both number of quotes and dollar volume were at record highs in Q3.

Speaker Change: So all in a comfortable position for us in our NGL business.

Speaker Change: As we reported last quarter, we believe we're past the bottom in revenue for our overnight sequencing Sanger and plasmid easy offerings growing sequentially for the first time in more than a year.

Speaker Change: If you recall, our Q2 revenue was flat with Q1, and we believe stemmed any further decline.

Steve Schwartz: Indeed, that was the case as we grew sequentially 4% in overnight sequencing, and we anticipate more sequential growth in the fourth quarter. In our synthesis business, we grew by a few percentage points year over year. We're seeing good traction from value-enhancing products we refer to as Gene to X that allow customers to give us more of their downstream workflow from the synthesized gene product. These are differentiated, higher-value extensions of our gene synthesis business.

Speaker Change: Indeed that was the case as we grew sequentially, 4%, an overnight sequencing and we anticipate more sequential growth in the fourth quarter.

Speaker Change: In our synthesis business, we grew by a few percentage points year over year, we're seeing good traction from value enhancing products, we referred to as Jean to ex that allows customers to give us more of their downstream workflow from the synthesized gene product.

Speaker Change: Our differentiated higher value extensions of our gene synthesis business.

Steve Schwartz: Finally, I report on the overall performance of what we call our new vectors, where we delivered a sequential revenue increase of 9% and doubled what we delivered from these offerings just a year ago. Moreover, growth from these new offerings is expected to increase rapidly, boosted by the FinGen proteomics contract that we announced a few weeks ago, as well as business from new service offerings that are associated with our Plasmid EZ solution.

Speaker Change: Finally, I'll report on the overall performance of what we call our new vectors, where we delivered a sequential revenue increase of 9% and double what we delivered from these offerings just a year ago. Moreover.

Speaker Change: Moreover growth from these new offerings is expected to increase rapidly boosted by the Finjan proteomics contract that we announced a few weeks ago as well as business from new service offerings that are associated with our plasma that easy solutions.

Steve Schwartz: Momentum continues to be strong from the adoption of new offerings and share gains, and we believe organic revenue growth in a down market represents significant outperformance, giving us confidence that we're positioned to meaningfully outgrow with any recovery in biotech and pharma spending. Finally, B-Medical delivered a very solid quarter with revenue of $29 million and an accretive EBITDA margin. As we've shared before, we're positioning B-Medical to focus solely on vaccine cold chain products as we wind down blood management and medical refrigeration product lines.

Speaker Change: Momentum continues to be strong from the adoption of new offerings and share gains and we believe organic revenue growth in a down market represents significant outperformance.

Speaker Change: Giving us confidence that we're positioned to meaningfully outgrow with any recovery in biotech and pharma spending.

Speaker Change: Finally be medical delivered a very solid quarter with revenue of $29 million and an accretive EBITDA margin.

Speaker Change: As we've shared before we're positioning <unk> medical to focus solely on vaccine cold chain products, as we wind down blood management and medical refrigeration product lines.

Steve Schwartz: The reshaping of B-Medical is part of a long-term value creation strategy that derives from B-Medical's unique cold-chain capability serving fast-growing emerging markets. In the quarter, we advanced several initiatives which are part of the strategy that are expected to begin to deliver additional benefits from B-Medical into 2025. The first of these is operational.

Speaker Change: The reshaping of <unk> medical as part of our long term value creation strategy of the derived from <unk> medical's unique cold chain capability, serving fast growing emerging markets in.

Speaker Change: In the quarter, we advanced several initiatives, which are part of the strategy that are expected to begin to deliver additional benefits from <unk> medical into 2025.

Speaker Change: The first of these is operational.

Steve Schwartz: The Bee Medical Factory in Luxembourg has now absorbed production from three SMS factory sites that we'd closed, giving us meaningful synergies, more manufacturing capacity, lower costs, and better Bee Medical cost absorption. These are important milestones that are part of creating the world-class factory that we described to you at Investor Day. Importantly, we received our first order from the Democratic Republic of Congo from the large MOU announced last November. It's small in terms of dollars, but it's positive because it signals a commitment to this 60 million euro project that will be driven by the health ministry now that the new government is finally in place.

Speaker Change: Medical factory in Luxembourg is now absorbed production from three SMS factory sites that wed close, giving us meaningful synergies more manufacturing capacity lower cost and better be medical factory cost absorption. These.

Speaker Change: These are important milestones that are part of creating the world class factory that we described to you at Investor Day.

Speaker Change: Importantly, we received our first order from Democratic Republic of Congo from the large Mou announced last November.

Speaker Change: Small in terms of dollars, but it's positive because it signals our commitment to the $60 million Euro project that'll be driven by the health Ministry now that the new government is finally in place.

Steve Schwartz: Again, this is not a signal of timing but rather reinforcement that we believe the business will happen. Finally, we advanced our participation in two multi-party sample sourcing initiatives where we are a critical partner. So, a good quarter for B-Medical and great progress in its transformation to align with Azenta's strategic initiative. All in, we're extremely pleased with our strong results for Q3. We demonstrated solid growth in a soft environment, we delivered meaningful strategic gains in each of our business segments, and, as you'll now hear from Herman, we accelerated results from our transformation initiatives, allowing us to grow while we transform the company for scale and improved profitability. Moreover, we continue to distance ourselves further from competitors.

Speaker Change: Again this is not a signal of timing the rather reinforcement that we believe the business will happen.

Speaker Change: Finally, we advanced our participation in two multiparty sample sourcing initiatives, where we are a critical partner.

Speaker Change: One of these projects are set to deploy in Q4 and will be a first critical test of our capability to source and protect valuable human biological samples.

Speaker Change: So a good quarter for <unk> medical and great progress in its transformation to align to us into strategic initiatives.

Speaker Change: All in we're extremely pleased with our strong results for Q3.

Speaker Change: We demonstrated solid growth in a soft environment, we delivered meaningful strategic gains in each of our business segments and as you'll now hear from Herman we accelerated results from our transformation initiatives, allowing us to grow while we transform the company for scale and improve profitability.

Herman Kyoto: Moreover, we continue to distance ourselves further from competitors every day, we're charting new and next opportunities to benefit our customers, which we know we can uniquely deliver.

Steve Schwartz: Every day, we're charting new and next opportunities to benefit our customers, which we know we can uniquely deliver. Before I turn the call over to Herman, I want to give a brief update on the search for my replacement. Of course, we can't comment too much except to say the search is a top priority, and its progress is planned. We have strong interest from highly qualified, experienced candidates, and the interview process is ongoing. We're confident we'll identify a great next CEO for then.

Speaker Change: Before I turn the call over to Herm and I want to give a brief update on the search for my replacement of course, we can't comment too much except to say that search is a top priority and is proceeding as planned we have a strong interest from highly qualified experienced candidates and the interview process is ongoing we are confident that we will identify a great next CEO for example.

Speaker Change: And now I'm pleased to turn the call over to Herman.

Herman Kyoto: Do you.

Herman Kyoto: Thank you, Steve and good afternoon, everyone. Let me start by saying, how proud and encouraged I am of the incentive team on the disciplined execution that enabled us to accelerate the realization of savings into the third quarter contributing to our margin expansion and profitability. In addition to above market topline revenue performance.

Speaker Change: The efforts and initiatives of the ascend 2026 transformation program are bearing fruit and the results we're reporting today reflect that.

Speaker Change: As you could see in the financial results, we issued today for the third fiscal quarter, we delivered adjusted EBITDA margin of 10, 3%, which equates to 260 basis points of expansion year over year, and 440 basis points versus the prior quarter.

Speaker Change: And that and even more exciting in my mind is that we turned profitable in Q3, delivering an operating profit of $4 6 million feet.

Speaker Change: We have not seen over the last six quarters.

Speaker Change: This is the result of a fully engaged organization leading initiatives focused on reshaping the company for long term success scale and growth.

Speaker Change: Let me talk about the actions we've completed as part of the <unk> 2026.

Speaker Change: In the area of portfolio optimization, we've now exited two non strategic product lines.

Speaker Change: Third quarter revenue was $173 million up 4% year over year on a reported basis and up 5% on an organic basis.

Speaker Change: We saw growth in sample management solutions, particularly in both large automated and cryogenic stores and in consumables and instruments.

Steve Schwartz: The Medical also contributed to the performance with better than expected revenue as we were able to secure more vaccine cold chain orders in the quarter, exceeding the Q3 revenue guide. Sanger sequencing was down 8% organically year-over-year but grew 4% quarter-to-quarter, and while we continue to cycle through an evolving Sanger market, we believe we are past the low. The EPS raise is primarily driven by operational improvements, which offset the impact of lower sales, and interest income is now expected to be approximately $32 million.

Speaker Change: <unk> medical also contributed to the performance with better than expected revenue as we were able to secure more vaccine cold chain orders in the quarter exceeding the Q3 revenue guide.

Speaker Change: non-GAAP EPS for the quarter was 16.

Speaker Change: And adjusted EBITDA margin was 10, 3%.

Speaker Change: And as I mentioned in my initial remarks. This is an outstanding acceleration with a meaningful 440 basis points of expansion from Q2, and 260 basis points year over year.

Speaker Change: We ended the quarter in a very strong balance sheet position with $754 million in cash cash equivalents in marketable securities.

Speaker Change: Free cash flow was slightly negative in the quarter with a usage of $5 million.

Speaker Change: Driven by the timing of billings.

Speaker Change: Through three quarters, we have generated positive free cash flow of $11 million.

Speaker Change: In Q3, we returned $225 9 million of capital to our shareholders through the repurchase of $4 2 million shares of incentive stock.

Speaker Change: To date, we have now completed roughly one 3 billion of the $1 5 billion of planned share repurchases.

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

Speaker Change: Sorted in the prior year that offset the benefits of operational efficiency and sales mix.

Speaker Change: Turning next to the multi Omics segment.

Speaker Change: Multi omics delivered revenue of $64 million in the third quarter flat year over year and up 1% on an organic basis with growth in both gene synthesis and next generation sequencing.

Speaker Change: Despite a market slowdown gene synthesis saw the largest revenue quarter since Q2 of 'twenty two bolstered by new product offerings in Ngls, we saw a moderation of price erosion and significant increases in the volume of data generated.

Speaker Change: Sanger sequencing was down 8% organic year over year, but grew 4% quarter to quarter and while we continue to cycle through an evolving sanger market. We believe we are passed the low point.

Speaker Change: Our multi omics business in China delivered organic revenue growth of 4% once again outperforming a soft market.

Speaker Change: Gross margin in the multi Omics business was 47, 5% up 130 basis points year over year, driven by productivity gains in direct material labor and fixed overhead leverage.

Speaker Change: And finally be medical.

Speaker Change: Approximately 300 basis points of margin expansion and we are raising the non-GAAP EPS guide to a range of 30.

Speaker Change: To <unk> 36 for fiscal year 2024.

Speaker Change: The EPS raise is primarily driven by operational improvements, which offset the impact of lower sales and interest income is now expected to be approximately $32 million.

Speaker Change: In closing we are pleased with our performance in Q3, we are committed to delivering on our purpose, serving our customers and enabling life sciences breakthroughs faster.

Speaker Change: This concludes our prepared remarks, and I will now turn the call over to the operator for questions.

Speaker Change: At this time, we will conduct a question and answer session.

Speaker Change: To ask a question you May press star one on your telephone and wait for it to be announced.

Speaker Change: To withdraw your question. Please press star one again, please standby with deposit Q&A roster.

Speaker Change: One moment for our first question.

Speaker Change: Our first question will come from the line of Jacob Johnson from Stephens. Your line is open.

Jacob Johnson: Hey, Thanks, good afternoon everybody.

Jacob Johnson: Congrats on the quarter.

Speaker Change: Maybe starting in somewhat random place, but cryogenic freezers up 40% in the quarter.

Speaker Change: That's a pretty striking number.

Speaker Change: What they did this quarter if they had.

Speaker Change: Above the center overall EBITDA margin.

Speaker Change: All of the things that we're doing around the <unk> 2026 to rightsize that business. They are starting to bear fruit. So.

Speaker Change: Yes, we're going to we're going to rotate resources to the places that are growing of course.

Speaker Change: But the things were doing will give us the runway to explore things in a profitable way.

Speaker Change: Got it makes sense, thanks for taking the questions.

Jacob Johnson: Thanks Jacob.

Speaker Change: One moment for our next question.

Jacob Johnson: Okay.

Speaker Change: Our next question comes from the line.

Speaker Change: Jay Kumar from Evercore ISI Your line is open.

Speaker Change: Hi, This is Sofia cannot on for Vijay I just had a quick question on the EBIT margin. So the current guide implies about a 250 bps sequential step up into <unk>.

Speaker Change: I'm wondering if you could just talk about the factors that go into that step up and then kind of going off that what is the right jump off point as we start to think about fiscal 'twenty five from a margin standpoint.

Chairman: Hi, Sofia, Chairman I won't talk about fiscal year 'twenty five but.

Speaker Change: I actually don't think its a step up from Q3 to Q4 to hit.

Matt Stanton: And our next question comes from Matt Stanton from Jefferies. Your line is open.

Speaker Change: And our next question comes from the line of Matt Stanton from Jefferies. Your line is open.

Speaker Change: Hey, Thanks, Hey, Matt maybe one for you.

Speaker Change: Maybe one on the <unk> side it sounds like.

Speaker Change: Things are maybe getting a bit better than maybe we have brighter days ahead, you talked about demand elasticity. This time around versus prior cycles, maybe driving more outsource demand, maybe just kind of talk a bit more about why this time might be different we might see that and then you talked about 700, new customers any way you can kind of level set.

Speaker Change: On what normal quarter last year was just to kind of get.

Speaker Change: The magnitude of the activity you saw in the quarter here. Thanks.

Speaker Change: Sure Hey, Thanks, Matt Matt a couple of things one it seems like compared to other cycles when there's been a transition like this.

Speaker Change: It feels like our end customers, who used to do their own sequencing, maybe have delayed some of the tool purchases and they're sending their spend and their work to us So thats.

Speaker Change: It's what we envisioned might be the case and that's kind of what's proven to be happening here over the last quarters.

Speaker Change: Went over 700, new customers. This quarter, there was an increase of 100 from the prior quarter.

Speaker Change: To give you an idea so it feels like there's a pretty significant momentum build.

Unknown Executive: And it just feels to us right now as though customers want to take advantage of them.

Speaker Change: To the last part of your question almost all of the data that we generate today and the measurement. We make is on the X plus tools. So we've made that conversion already.

Speaker Change: Prior to prior to the last quarter.

Speaker Change: Excellent that's all I had.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: I think we have a follow up question.

Speaker Change: From the line of Jacob Johnson from Stephens.

Speaker Change: Your line is now open.

Jacob Johnson: Hey, Thanks, Greg.

Jacob Johnson: Yes, hi, thanks for taking the follow up.

Jacob Johnson: Two follow ups I guess first just following up on that last line of questioning Ngls up 3%.

Jacob Johnson: Steve I think I heard you say volume was up 20% as we near the end of some of the pricing headwind.

Is that volume growth a proxy for how we what we could see from mgs or any caveat there as we think about mgs growth as pricing comps normalize.

Speaker Change: Yes, so Jacob we hope so let me start with two things we hope. So we think the volumes are good. The other thing I'll say is when we look at the last three conversion cycles. When there were appreciable decreases in the cost of sequencing, we're at or a little bit ahead performance wise compared to where we were before but I think thats customer behavior.

Jacob Johnson: I think I think more people are outsourcing. So we anticipate we will see continued progress here now we got work to do improves to do but there's nothing that says that we wouldn't have a chance then on the on the <unk>.

Herman Cueto: Thank you. Now I want to turn it back over to Herman Cueto for any closing remarks.