Q2 2025 Azenta Inc Earnings Call
Greetings and welcome to the Azenta Cueto 2025 Financial Results.
During the presentation, all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session.
Speaker Change: At that time, if you have a question, please press the star followed by one on your telephone. As a reminder, this conference is being recorded when they may 7th, 2025. I will now turn the conference over to Yvonne Perron, Vice President, FPNA, and Investor Relations.
Yvonne Perron: Thank you, operator, and good morning to everyone on the line today. We would like to welcome you to our earnings conference call for the second quarter of fiscal year 2025.
Yvonne Perron: Our second quarter earnings press release was issued before the open 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.
Yvonne Perron: Please note that effective the first fiscal quarter of 2025, the results of B-medical systems are treated as discontinued operations.
Yvonne Perron: 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 security 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 10K, and our quarterly reports on Form 10Q.
Yvonne Perron: We make no obligations to update these statements, should future financial data or events occur that differ from the board 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 GAP.
Yvonne Perron: 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 of business.
Yvonne Perron: Don GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves.
Speaker Change: On the call with me today is our President and Chief Executive Officer, John Marotta, and our Executive Vice President and Chief Financial Officer, Lawrence Lin
Speaker Change: We will open the call with remarks from John . Then Lawrence will provide a detailed look into our financial results and our outlook for fiscal year 2025.
Speaker Change: We will then take your questions at the end of the prepared remarks and with that I would like to turn the call over to our CEO John Marotta.
John Marotta: Thank you, Yvonne. Good morning, everyone, and thank you for joining us today. I would like to start by providing an overview of our performance in the quarter, then moving to commenting on the broader macro environment and devote the remainder of my opening comments to discussing the significant operational progress we have made this quarter while providing some tangible examples of what we have been up to and the opportunities we see. Thank you for joining us today. Thank you for joining us today.
John Marotta: We're pleased to announce that we delivered a solid second quarter, and that the positive momentum we saw starting this fiscal year continued.
John Marotta: On a year-over-year basis, organic revenue grew 6% in adjusted EBITDA margin expanded by 400 basis points.
John Marotta: Revenue and multiomics grew 3% on an organic basis with the strength of next-gen sequencing.
John Marotta: In sample management solutions, revenue grew 8% on an organic basis, where we saw growth in consumables and instruments, product services, as well as sample storage.
John Marotta: Despite the uncertainty of the broader macro picture, we remain committed to our full-year 2025 guidance for organic revenue growth between 3 and 5 percent and adjusted EBITDA margin expansion
John Marotta: Regarding being medical, the sale process is ongoing and we believe the transaction remains on track to be announced in the second half of the fiscal year 2025.
Lawrence will go into more details on the financials.
John Marotta: The last several months have presented us with an uncertain and evolving macro environment, including tariffs, funding headwins for US academic research and rising geopolitical tensions.
John Marotta: In response to these developments, our executive team continually evaluates the impact we anticipate to our business lines.
John Marotta: and we meet weekly to monitor, assess and counteract any issues.
John Marotta: We have supplemented our understanding by reaching out to over a hundred customers and asking them a set of standardized questions that we track to understand how the macro uncertainty impacts them and better understand what a Zenta can do to be a great partner.
John Marotta: Based on our assessments to date, we believe the impact from the recently announced reductions of NIH funding levels will result in approximately 1% headwind to our revenues
John Marotta: We've immediately put in place countermeasures such that this reduced revenue will have near zero impact on our EBITDA. We've also analyzed recently announced tariffs and have similarly identified countermeasures
John Marotta: Given the operational improvements we have made in the business, we are pleased that despite these impacts we are able to reaffirm our guidance today
John Marotta: More broadly, while the uncertain macro environment presents challenges, we are grateful to be in a position where we can capitalize on the considerable opportunities we anticipate. Thank you very much.
John Marotta: Given we can serve as a lower cost outsourcing solution, we believe we can help alleviate pressures on our customers and we are already seeing examples of this play out. We also benefit from having 540 million of cash on our balance sheet, representing nearly $12 per share of cash.
John Marotta: Having no debt outstanding, and from generating meaningful free cash flow in the first half of the fiscal year.
John Marotta: From this position of financial strength, we are starting to see interesting potential tuck-in acquisitions become available, a trend which we expect to continue or possibly even accelerate if business conditions remain challenging for sub-scale companies.
John Marotta: We are actively evaluating potential acquisitions of high quality assets that would naturally fold into our core business and would help us accelerate revenue growth and margin expansion. We are also investing in our digital capabilities to enhance our e-commerce platforms.
John Marotta: This will improve our data analytics and insights, allow for more targeted marketing and enhance the customer experience while maximizing conversion.
John Marotta: Importantly, we will maintain an exceedingly high bar when deploying capital [inaudible]
John Marotta: We're keenly aware of the power of buybacks, especially given our undervalued stock price, and should our current valuation disconnect persist, we remain open to buying back our own stock. However, our North Star, through all of this will always be long-term value creation to our shareholders. [inaudible]
John Marotta: I would like to now focus on the remainder of my comments on the significant strides we have made in driving operational excellence.
John Marotta: As I mentioned in the first quarter, we started rolling out the Asenta Business System. I'm excited to announce Will Simmons has joined us as Vice President of the Asenta Business Systems to lead the development and execution of ABS.
John Marotta: Will brings a wealth of experience in implementing lean methodologies, enhance some problem-solving capabilities and ensuring alignment to our strategic goals. In the second quarter, we held daily management boot camps with our operating company leadership teams to train them in the fundamentals of daily management, including how to implement and effectively use it.
John Marotta: In addition, we held ABS awareness sessions for employees globally, offering sessions designed to introduce lean principles, daily management, and problem solving. These sessions introduced the concepts of eliminating waste, improving processes, enhancing collaboration.
John Marotta: We are creating a lean culture and mindset for our curiosity in creating momentum.
John Marotta: We will learn through practice and application. We are not striving for perfection. We are requiring progress.
John Marotta: The business system model will harness our talented people, unify our culture and drive our performance . .
John Marotta: Over the first six months, we have structurally re-aligned the organization to operate more effectively and support future growth. In the first quarter, we executed our corporate restructuring. And in this quarter, we completed both operating company restructurings. [inaudible]
John Marotta: Our objectives were to right size our DNA functions, shift centralized resources into the operating companies to provide clarity and accountability, address spans and layers, realign to strategic locations.
John Marotta: We restructured almost 10% of our workforce and our reinvesting in R&D.
John Marotta: Sales, marketing, and product management resources to maximize our customer and market focus. Invest in staffing, open sales territories, expand regional capabilities, and accelerate organic growth, and begin our new product development investment.
John Marotta: Our global organization redesign is substantially complete and we can now focus on growth and productivity.
John Marotta: We remain hyper focused on our customer facing performance metrics, quality and on time delivery.
John Marotta: While we've seen improvement, we are not where we need to be in our taking decisive action to close the gap.
John Marotta: As an example in February , we completed a Kaiser in one of our manufacturing facilities to reduce the quote to delivery cycle time.
John Marotta: We've seen the initial improvement with further actions underway to reach our target. The team is now using highly effective tools to help them visualize the manufacturing process. Identify issues and quickly take corrective action.
John Marotta: As an organization, we are being programmatic on how we spend our time [inaudible]
We are prioritizing on-time delivery and products.
John Marotta: and Services Quality, which will lead to higher customer satisfaction, gross margin improvements, indirect cost savings, and lower inventory. The impact on profitability will be immediate, while improvements in customer satisfaction will help fuel organic growth over time.
John Marotta: The second guy's inheld in the quarter was our sample repository business focused on simplification of order to cash process to shorten the cycle time and improve process quality.
John Marotta: Through the process, we identified the need for greater standardization and enhanced system capabilities to streamline our billing process. Additional workshops and kaisans are already planned to continue this work.
John Marotta: The third Kaizen was in Genewiz, while it began to focus to automate payment capabilities, the value stream mapping revealed an underlying inefficiency within the order to cash process. That is directly impacting customer experience.
Adressing this now became a top priority.
John Marotta: The flywheel of continuous improvement is underway, and we are building real momentum in each of our businesses.
John Marotta: As you can see, there is a lot going on both inside of Zenta and out in the broader environment. We are planning to host an investor day later in the calendar year to update the investment community on what we've achieved in our aspirations for the business in a longer form setting. Stay tuned for more details on this event. Thank you.
John Marotta: I'm excited about the sentence's potential and confident in our ability to deliver long-term, sustainable value to our customers, our employees and our shareholders. With that, I'm pleased to turn the call over to Lawrence. Thank you.
Lawrence Lin: Thank you, John , and good morning, everyone. As I've approached six months at CFO , I'm more excited than ever to be part of this great company. I've spent my time deeply learning how the business operates, getting to know and listening to our global teams, our customers and our shareholders.
Lawrence Lin: I visit with our teens in Europe , Asia, and the US. We have a talented team that is highly committed to meeting the needs of our customers and to our purpose of enabling breakthroughs faster.
Lawrence Lin: In a dynamic and uncertain macro and environment, our teams are asking with agility and focus.
Lawrence Lin: I've learned that our customers value our deep expertise and our differentiated products and services. I am confident in the strength and capabilities of our core businesses. We are well positioned for success with a winning formula.
Lawrence Lin: Last quarter, I've highlighted several opportunities to strengthen our financial performance by simplifying operations, leveraging technology and building our core capabilities.
Lawrence Lin: We've since taken meaningful steps forward. As an example, a regional sales team partner with our data analytics group to integrate product, funnel, and operational data. Unlocking insights into end markets, territories, and customer behavior.
Lawrence Lin: This enabled us to reallocate marking and failed efforts towards higher potential pharma and biotech targets. It's a scalable approach we plan to replicate across other regions. We've also sharpened our focus on working capital discipline that will drive stronger cash conversion to support our growth strategy.
Lawrence Lin: We put tiger teams in place to address acute needs in our identifying key pain points and root causes to streamline our processes.
Lawrence Lin: We've identified the appropriate KPIs to measure performance and controls. These actions have led to improvements, but there are still more work to be done. The team has energized by the tangible result.
Lawrence Lin: These early wins reinforce our confidence in the broader transformation we've undertaken and are objective of continuous improvement.
Lawrence Lin: While we remain focused on near-term execution, these efforts are equally important in setting a strong foundation for sustainable long-term value creation.
Lawrence Lin: Now, on to the financial results. As a reminder, the results we are referring to today, unless otherwise noted, exclude B-mechal systems, which has now reported under discontinued operations.
Lawrence Lin: In the quarter, we recorded a non-cash loss on Assetel for sale of 24 million on B Medical.
Lawrence Lin: We believe the transaction remains on track to be announced in the second half of fiscal 2025.
Lawrence Lin: During the second quarter, we achieved solid performance across our operating units with notable 6% year-over-year organic revenue growth.
Lawrence Lin: This strong execution, despite ongoing macroeconomic headwinds, demonstrates the resilience of our business and ability to outperform and down cycles.
Lawrence Lin: The results also highlight the breadth and relevance of our portfolio as we continue to meet evolving customer needs in an uncertain environment.
Lawrence Lin: At the same time, our initials to drive efficiency and cost discipline are gaining momentum, contributing to margin improvement and shaping our foundation for long-term shareholder value creation.
Lawrence Lin: To supplement my remarks today, I will refer to the slide that's available on our website.
Lawrence Lin: Turning to slide three for a few highlights, second quarter revenue total 143 million, reflecting a 5% year-over-year increase on a reported basis and 6% on an organic basis. Both are sample management solutions and multi-almic segments achieve year-over-year revenue growth.
Lawrence Lin: Key drivers include continued momentum in next generation sequencing, fuels and instruments and sample storage, along with strong performance in clinical bio-stores and product services.
non-GAAP EPS for the quarter, what's 5 cents?
Lawrence Lin: Adjusted EBITDA margin was 10% for the quarter, reflecting a solid margin expansion of approximately 400 basis points year over year. This marks another sequential step forward in our ongoing efforts to enhance profitability.
Lawrence Lin: The improvement reinforces the sustained benefit of our transformation and our continued focus for driving efficiency and operating leverage across the business.
Lawrence Lin: Free cash flow was $7 million for the quarter, driven primarily by working capital with lower accounts receivable and higher accounts pay.
Lawrence Lin: We ended the quarter in a strong position with 540 million in cash, cash equivalents and marketable securities
Lawrence Lin: Now, let's turn to fight forward to take a deeper look at our results in the quarter. Total revenue was 143 million, representing growth of 5% reported and 6% organic.
Lawrence Lin: In the second quarter, non-GAAP gross margin was 47.5% up 130 basis points year over year. The improvement is largely a result of higher revenue, favorable sales mix, and operational efficiencies .
Lawrence Lin: Adjusted EBITDA margin in the quarter was 10% up 400 basis points year-over-year. Again, non-GAAP EPS was 5 cents per share.
Lawrence Lin: With that, let's turn to slide 5 for review our segment results starting with sample management solutions for FMS
Lawrence Lin: FMS revenue was 80 million for the quarter, up 8% year-over-year on both a reported and inorganic basis. Growth was driven by strong performance in both sample repository solutions and core products, with key contributors including consumables and instruments, product services, clinical biosource, and sample storage.
Lawrence Lin: This growth was partially offset by year-over-year declines in automated stores primarily due to the timing of orders We feel confident with the full-year revenue given the health of our stores backlog
Lawrence Lin: Kyle Stores were also down year over year, reflecting softer demand in markets closely tied to
Lawrence Lin: FMS 2nd quarter, non-GAAP gross margin was 49.7% up 340 basis points year over year, driven by higher revenue, payroll sales mix, operational efficiencies, and the impact of certain non-recurring items recorded in the same period last year.
Turning next to the multi-ohmic segment.
Lawrence Lin: Multiomics delivered revenue of $64 million with a growth of 2% on a reported basis and 3% on an organic basis.
Lawrence Lin: The growth was primarily driven by next generation sequencing, which grew 20% year over year and has now shown price stabilization for the fourth consecutive quarter, alongside continued double digit volume growth.
Lawrence Lin: Key-large deals continue to contribute to strong Euro-Ugains, particularly in North America and Europe
Lawrence Lin: Despite the challenging macro and geopolitical environment, China continues to show strength with 5% organic revenue growth.
Lawrence Lin: Jean Pynthesis revenue declined 10% year over year largely driven by a difficult comparison against 13% growth in Cueto 2024, which benefited from a one-time surge in orders from large form of customers.
Lawrence Lin: As a reminder, Cueto 2024 marked our strongest performance since Cu3 of 2022. We saw a continued softness in North America, which we are actively monitoring.
Lawrence Lin: There was a general slowdown driven by delays and commit projects from a few key pharma customers.
Lawrence Lin: We saw an 18% year-over-year decline in fangirl sequencing consistent with the continued transition across the industry towards newer sequencing technologies.
Lawrence Lin: Interestingly, Plasma-DZ, our Oxford Nanoploro-based solution, continues to perform very well and is capturing meaningful share and expanding rapidly. In fact, its revenue has more than double compared to the same period last year, reflecting strong market adoption.
Lawrence Lin: The Plasma DZ four-year revenue projection is on track to nearly offset the decline in hangar sequencing revenue year-over-year.
Lawrence Lin: Multi-omics non-GAAP girls margin for the second quarter was 44.9% down 140 basis points year over year. The decline was primarily driven by lower revenue and fanger sequencing and gene synthesis.
Lawrence Lin: On a positive note, NGS gross margins improve versus the prior year, as we continue cycle through pricing pressure and benefit from higher volumes.
Lawrence Lin: Next, let's turn to Slide 6 for a review of the BALGEE [inaudible]
Lawrence Lin: We ended the quarter with 540 knowing a cash, cash equivalents, and marketable securities. We had no debt outstanding.
Lawrence Lin: Capital expenditures for the quarter was $7 million, as we continue to invest for growth and scale in our sample match with solutions and multi-omics businesses.
Lawrence Lin: Turning to guidance on flight 8. As you saw on our press release, we are reiterating our guide for 2025 as we expect organic revenue growth of 3% to 5% for the full year, with multiomics to grow low single digits and sample management solutions to grow mid single digits.
Lawrence Lin: We are reaffirming our commitment to 300 basis points of adjusted EBITDA margin expansion year over year.
Lawrence Lin: As John previously mentioned, our executive management is meeting weekly to identify, qualify, and counteract emerging macro issues including those related to both tariff and NIH funding. Our current guidance incorporates the combined effects of the headwind and countermeasures we've identified.
Lawrence Lin: To close, this was a strong quarter that reflects our differentiated portfolio of products and services in addition to solid execution by our teams.
Lawrence Lin: We remain clear-eyed about the macro and industry-specific pressures and are working to mitigate the impact while staying focused on our long-term priorities, driving operational discipline, advancing innovation, and investing in areas of strategic growth.
Lawrence Lin: This concludes our prepared remarks, and I will now turn the call over to the operator for questions
Speaker Change: Thank you, sir. Ladies and gentlemen, if you do have any questions at this time, please press star followed by one on your touch-tone phone. You will then hear a prompt that your hand has been raised. And should you wish to decline from the polling process? Please press star followed by two.
Speaker Change: Also, if you're using your speaker phone, you will need to lift the handset first before pressing any keys. Please go ahead and press star one now if you do have any questions.
Speaker Change: First, we will hear from David Saxon, at Needham, please go ahead David.
David Saxon: Great. Good morning, John Lawrence. Thanks for taking my questions.
Speaker Change: I have a couple on the guidance, so first half organic growth is tracking closer to the top end of the guidance.
Speaker Change: Combs get easier as we move into the back half. You talked about this 1% impact from funding, but I wanted to just ask how we should think about the cadence of growth.
Speaker Change: In the back half versus the first half, he's maintaining the bottom end of the guide more reflective of just the uncertain macro or are there any specific dynamics. Thanks.
Speaker Change: You see playing out that kind of currently would be a risk to growth outside of the funding portion. And then lastly, can you talk about the currency assumptions in the back half and then I'll just have one follow up. Thanks.
David Good morning, it's good to be with you [inaudible]
Lawrence Lin: So listen, we're holding our guidance. We've cleared the 1% risk on NIH. We'll get into that more. I'm certain today, but I'll let Lawrence walk through sequentially how we view this.
Lawrence Lin: Yeah, hey David, look, in total, the 2025 quarterly revenue profiles shouldn't be significantly different.
Lawrence Lin: then prior year. So I think we should use the Simmo profile. The first half of 2025 was a touch ahead of
Lawrence Lin: Last year, but we expect the third and fourth quarter generally be in line with priors regardless of kind of the NIH and the macro. We're seeing it in the similar pattern.
As you, as we look at EBITDA,
Lawrence Lin: Ajustity, but I was almost 28 million, which leads us about 38 million in the second half of the year. The 10 million dollar acceleration is going to be driven by a combination of...
Lawrence Lin: Revenue drop-through that we're going to see in the second half of the year.
Lawrence Lin: Just a little bit more color. You know, a lot of times our stores volume will happen the back end of the year. Usually when our customers want to see it. And then and then the realization of partial year savings from restructuring that we talked about in the first quarter. [inaudible]
Hopefully that's helpful.
Speaker Change: Yeah, that is super helpful, thanks for all that, and really appreciate all the color on kind of a macro and...
Speaker Change: You know, all those details. I'll probably leave some follow-ups on that to the other folks, but I wanted to ask about the SMS leadership transition earlier in April . Any color around that departure and whether you're looking internally or externally for a new leader. Thanks so much.
Yeah, you bet, you bet. You know, we're...
Speaker Change: We want to thank First and foremost David for his contributions to the company. He's been here quite a long time and there's a personal situation that is solving for there. Secondly, I'm going to jump in directly and running that business. That's a main.
Speaker Change: SRS and SMS is really the crown jewel of the company, so we're rolling our sleeves up and getting real deep into that business.
Speaker Change: Effectively looking at that business from the lens, specifically the biorepositories.
Speaker Change: Separate from CNI and separate from stores and cryo. Those are different businesses, different go-to markets, but the value prop to the end users in terms of how we manage.
Speaker Change: Biological Assets is still the same, that ecosystem works really well together, so we're excited about rolling our sleeves up there and moving that business in the right direction.
Great. Thank you.
Goodbye.
Speaker Change: Next question will be from Vijay Kumar at Everkore, please go ahead Vijay.
Hey guys, congrats on the nice execution here.
Richam, I guess. Yes.
Speaker Change: I guess you made some comments on the past hate. This could be as high as 2% during the conferences. So just walk us through the assumptions behind the 1% headwind. Is it all coming in the back half and where's the offset coming from?
Speaker Change: Sure, you bet. First off, I want to be clear, I mean, we have we have the countermeasured this risk in exposure completely.
Speaker Change: And so, what it is is we're about 20% of our global revenue comes from the academic end market.
Speaker Change: And so what we did is the team went out, we had about 30 conversations in...
Speaker Change: In that end market with a lot of the academic customers, and we've been able to understand how they're thinking about things.
Speaker Change: And we've also pivoted the organization specifically around Carmen and biotech to offset that. We've run a number of sales initiatives. The team's done an outstanding job of countermeasuring that risk.
Right now. [inaudible]
Speaker Change: You know, there were, there were a number of hits we took, Vijay.
Speaker Change: We had steel aluminum and there was potential asset freezes in China.
What we did around that was…
Speaker Change: We set up a geopolitical war room, kind of early around biosecured to understand that and
Speaker Change: I'm going forward. I'm very confident in the level of detail we have around that. I mean, I can give you details even to the specifics of the bill of materials around steel and aluminum terrace. I mean, were that detailed around this as an organization? I'm really pleased with what the team has done here.
Speaker Change: to countermeasure our risk there. But we've cleared that, Vijay. We've cleared it nicely, yeah. Maybe to add Vijay, you know, look, I think the NIH funding issue presents an opportunity for a Zenta, too, right? Talk a bit about this in the past. Our belief is that...
Speaker Change: That these actions will force less efficient core labs to close or scale back and shift to outsourcing. You know, we're an active discussion with several cores in terms of outsourcing options.
Speaker Change: I think there's a lot of opportunity here to win some share in this space, so, you know, there are significant opportunities for us to enter.
Speaker Change: That's helpful comments that may be one on free cash and margins, free cash performance first half.
was quite impressive.
Speaker Change: Is that a sustainable number and sort of related on the margins here? First half, execution is coming well above your annual plan of 200 basis points. I think back half
Speaker Change: Maybe just a hundred basis points of margin expansion hit the guidance. So is that is a step down on margin expansion first half or second half contemplating tariff and what is the total tariff impact if so?
Speaker Change: Yeah, let me take the free cash flow item first. So, as you know, second quarter free cash flow was about $7 million dollars, full year right now, excluding the medical or year-to-date is $26 million dollars. You know, was that comprised of the really driven by primarily from lower AR, improved buildings, especially around our stores, projects, and higher AP. Net net, it's really when you look at...
Speaker Change: When you look at it, it's really around better working capital execution [inaudible]
Speaker Change: Albert, in the first quarter, there was a bit of an upside in terms of a tax refund generated.
Speaker Change: We're really optimistic and we're still holding to kind of our LRP target of a hundred million in free cash flow and feel pretty confident about that.
As it to your second point around,
Joseph Ebert, the short answers.
Speaker Change: Art Guidance, Collinton Plates, some of the tariff impact. As John mentioned from a top line perspective, we've offset some of the challenges there. And that step down is...
Speaker Change: is generally, as you know, we had some stock comp and bonus.
Speaker Change: Releases in the back end of last year and that's got to create a bit of a pop issue and unevenness to our EBITDA but we are still holding to the 300 basis point guidance.
Speaker Change: and John M. Schwartz. Thank you. Thank you. Thank you. Thank you.
Thanks, guys.
Giver, thank you, Vijay.
Speaker Change: Next question will be from Paul Knight at Keybank. Please go ahead Paul.
Hi, John.
As you've gone through this event, a business system roll out,
or you.
Speaker Change: Set now with the sails for structure, that's kind of been fluctuating in the past, I'm sure you're fixing it.
Where are you when at that aspect?
of ABS.
Sure, you bet. Hey, thanks for the question, Paul.
Speaker Change: Listen, we're early in our growth journey here with ABS. I mean, the first thing we did was get our structural go-to-market in place. And so we have...
Speaker Change: Align the organization regionally now. I think it's to our benefit. We're seeing a regional go-to-market mountain set is global.
One, we've aligned it regionally. We've aligned it regionally.
Speaker Change: We had a number I shared with you early on and we had a number of open territories. We have filled most of those now.
Speaker Change: and we're investing now in ABS. So the team is driving, we're rigour around
Speaker Change: What do you need to do to win in a short-sale cycle model versus a long-sale cycle model? How do we drive performance in each of those? One being more activities-based, one being more funnel-based and deal-by-deal opportunity-based? I'm pleased with the progress right now. Early innings, Paul.
Speaker Change: But we're investing here and we're driving some rigor around that specifically. I mean, I think the numbers are 24 head count that we're going to be investing in specifically in sales globally. So we're pleased about that.
Speaker Change: And the, you know, you mentioned the crown jewels being SRS and SMS and a pre-impressive 8% organic growth rate. The biologic market probably grows around there. Do you think that's kind of the long-term growth rate potential for those businesses?
Now, we don't think we're reaching our full potential.
Speaker Change: What you can expect is, we want to come out with...
Speaker Change: What that plan looks like over the coming years in the investor day we're going to have in the later half of this year and give you a more clear eye view of that but the short answer is no. We're not we're not even close to reaching our full potential.
Discovery Market for you at this juncture.
Speaker Change: It is, it is, it's a great market for us. Thank you so much, I'm in.
Speaker Change: One of the things, let me answer the question just directly first. So our business in China, we're at
We're we're growing 5%
Speaker Change: When R.P.'s multinationals are down dramatically, our gene synthesis is up 8% in that market. Goes back to the comment I made around specifically this regional go-to-market. Our business is...
Speaker Change: Ma, behave very local and regional. And so we quickly pivoted to that in Q4.
Speaker Change: Kounder Q4, RQ1 and Q2, we quickly made those changes and the teams have done a nice job. Our China business shows up very much like a local China company.
Speaker Change: And we want to keep it that way. We're doing, there are certain things we're doing in Europe that are centred to Europe . Same thing with the US, and it's working right now, but more to come on it, Vijay. We're very confident with what we're doing in the China market. [inaudible]
Okay. Thank you.
Sorry, my apologies, Paul. No problem.
Yeah.
Speaker Change: Next question will be from Matt Stanton at Jeffries. Please go ahead Matt.
Matt Stanton: Thanks, maybe just to pick up their on gene synthesis. You know, you talked about it was down the quarter but tough double digit comp there last year, could you give a little more color in terms of?
Matt Stanton: Trent, either, you know, customer's academic first by a farmer in the quarter or by geography, sounds like America's was maybe a little bit softer and then any change in your expectations here for the year, I know you left multiomics overall on change it mid single, but any color in terms of how tariffs. [inaudible]
Matt Stanton: Foot Impact, the gene was business from a demand destruction side and then just you know another company in this space and out some targeted actions on the academic side a few months ago. Sure if you've seen any change in trends as a result of that for for you where you know the industry more broadly thank you.
No change in how we're thinking about the business
Matt Stanton: What we've seen is, in Pharma specifically in our large Pharma partners, there was kind of a bit of a pause on some large programs that they had
Matt Stanton: and for our synthesis business specifically. And what do I mean by that? There's been a lot of restructuring in Pharma and in R&D, and specifically...
Matt Stanton: We've seen some turnover with some PIs and just some general pausing there, so
Thank you.
Matt Stanton: We think we're through that. Actually, we're seeing some green shoots lately to get us back on trend in the early days of this quarter. So, we're pleased with what we're seeing right now. I think that's being cleared and lifted.
April Buckings look real good at this point.
Matt Stanton: But no change on our view in Gene Lewis in Multi-Am. I mean, that team is really executing nicely. Ginger has been doing a great job of commercially driving performance again with regional execution.
And they've done a really nice job, so we're pleased.
Speaker Change: Bet, thanks. And then, and then maybe one on, you know, Capitol Hill.
Speaker Change: Deployment, you know, John in your script, you noted kind of the the balance sheet optionality over five million of tasks on the balance sheet. I think you've been pretty clear since you joined in terms of
Speaker Change: Your preference is for capital deployment and maybe to share repurchase towards the bottom end but sounds like maybe just given where
Speaker Change: Shares Are You're a little more open to that so I guess talk about kind of framework of how you balance [inaudible]
Bye-bye, first.
Speaker Change: Other actions and obviously others in the space are talking about dislocation and balance you fire power so just talk about kind of where you're funnel today and I think one of the big folks is for you going back to when you start it was just. [inaudible]
Speaker Change: Re-vamping and building the M&A muscle. So maybe just an update in terms of where you and the team sit from, you know, the final, but also the muscle to be able to execute and integrate on some of these tuck-in deals. You noted, thanks.
Debye.
Speaker Change: Well, when it comes to preference, I mean, our preference is to drive long-term shareholder value, and we do that through the four levers of capital deployment, first being around gross margin and productivity, second around growth initiatives, that's commercial and R&D, third is around M&A, and fourth is around buyback.
Speaker Change: and so we look at them all holistically in terms of driving that value. There's no bias to one or the other. The bias is is right now the opportunities around M&A I think are becoming more clear to us.
Speaker Change: things are, you know, in certain areas, there's some action ability right now and we're pretty excited about that.
Speaker Change: We're always open to buybacks. I mean, I think as a board, we have these conversations very openly as a board in terms of how we're thinking about it. But if you look at kind of levers one, two, and three
Speaker Change: The opportunities in front of us are there. They're real. The returns are real and we're excited about pulling those lovers for us.
Speaker Change: But we're always open to buybacks. I mean, I think when you're going into uncertain times, which we are, and we're looking at the global macro. I mean, we do business outside of the medical in over nearly 50 countries. [inaudible]
Speaker Change: and so it's not lost on us what's going on globally. We look at that, we look at, again, those three levers.
Speaker Change: and we're in a very, very strong position because of our balance sheet, and we're going to be disciplined around whatever levels we are pulling, we're going to make sure that those returns are there. And I think that's a departure from the past. I mean, we're going to be very disciplined around that.
with with Lawrence coming in and the board, of course.
Speaker Change: Various Board members on that. And so this is always a part of the conversation that we're having right now. So again, we understand what levers we can pull, we're having conversations around those and I think levers one, two, and three make a lot of sense right now.
Okay, appreciate it. Thank you.
Good. [inaudible]
Speaker Change: Ladies and gentlemen, once again, should you have any questions? Please press star followed by one on your touch on phone.
Speaker Change: Next question will be from Brandon Smith at PD Cowan. Please go ahead Brandon.
Brandon Smith: Ray, thanks for taking the questions, guys, and congrats on the quarter. Maybe just a couple of quick ones from us. I only touched on this a little bit, but I wanted to ask if you have any sense or have had any conversations with customers or with the last quarter.
Brandon Smith: That might suggest any potential order, pull forwards to get ahead of or around terraces here. And it's been if you're kind of seeing or you might expect certain segments within your revenue streams to feel that maybe more than others. Thank you very much.
Brandon Smith: And then really just I know you also touched on this a little bit within multiomics. We spoke to some nice price stabilization on NGS and then market and trying to but I get just wondering if you can. [inaudible]
Brandon Smith: expand on a bit on some of the NGS ordering trends a little more broadly just anything that you're seeing that you would call out how you're thinking about that growth opportunity maybe just over the medium term if you just notice any particular shifts in customer priorities where you think GeneWiz is especially primed to compete.
Thanks.
Durr, you bet. Thank you, Bern.
Let me go to the customer insights. So,
Brandon Smith: And about a month or so ago, we got all of our commercial leaders on a call and started a weekly cadence of reaching out to nearly 100 customers and we asked them four standard
Brandon Smith: We wanted to gain insight into how they were thinking about the macro.
Brandon Smith: All of the headwinds that we've talked about, they're facing as well, so we wanted to understand this from their perspective.
Brandon Smith: and it was at every level of the organization, executive level down the individual contributor.
Depending, it depended, also it was a very cross-function
Brandon Smith: and so it was in R&D, it was in procurement, it was in supply chain, it was in finance, it was at the executive ranks. We took all of that data in and there were a number of themes that came out of that. What was clear to us is quality matters right now in this environment in terms of who they're partnering with.
Brandon Smith: outsourcing opportunities are probably in front of us more than we thought they were.
Brandon Smith: And so what we heard was we're looking at more outsourcing opportunities, we get excited about that, you heard Lawrence talk about that, even in the core labs, you know the academics because of the headwinds there, there's more opportunities coming to us, but even in farming biotech [inaudible]
that was underappreciated. [inaudible]
Brandon Smith: The diversification of supply chain risk. Where are portfolios sits today? Where are sites sits today?
Brandon Smith: You know, how is that supply chain secure versus others? Again, well positioned so these insights were were really helpful and we we kept that cadence going for a number of weeks
Brandon Smith: We brought that in, and again it was all around quality, the delivery of the product or service in the cost.
Brandon Smith: It's for us to position the organization to take advantage of those needs that our customers currently have based off of the macro dislocation.
I'm
Brandon Smith: Let me talk about the NGS, so NGS, I mean, again, you know, no change in terms of how we view the end market right now in the end of the man's side of it, but...
Brandon Smith: If anything, it goes back to the original comments we had around these customer insights. I mean, you know, they're looking for partners that...
Brandon Smith: are giving them a competitive advantage internally and that's the quality of our service, the delivery of our service which we've also been able to really stand high on and then lastly the cost of that.
Those two.
Brandon Smith: The insights I gave you around customers directly correlates to how we view NGS. It's no change, and we're just going to continue to do what we're doing. If anything, we may see a little bit of an increase in outsourcing here to my prior point, but all in all feel pretty bullish on where we are right now with that team.
Got it, super helpful. Thank you guys. You bet. Good.
Speaker Change: And at this time it appears we have no further questions, I would like to turn it called back over to Mr. Marotta.
John Marotta: Very good. Thank you. And first off, thank you for joining us. We're really pleased to deliver a strong second quarter and very well positions to continue to deliver performance here to create value for our shareholders.
Speaker Change: We're excited about the journey we're on and I want to thank our 3,000 employees that make a Zenta very special. It's good to be with you this morning and thank you again.
Speaker Change: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending and at this time we do ask you to please disconnect your lines.
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