David Saxon

David Saxon asked about Azenta's confidence in restoring Sample Management Solutions (SMS) gross margins, distinguishing between controllable factors and customer dynamics. He also inquired about the composition of the reiterated 300 basis points EBITDA margin expansion, specifically the gross margin (200 bps) and operating expense (100 bps) mix, and if OpEx would contribute more. Additionally, he asked for an update on capital spending conversations with academic and government customers, confidence in improvement, and its potential impact on North America demand and growth.

Answer

President and CEO John Marotta acknowledged Azenta-specific challenges like product/geo mix, margin headwinds, and quality issues in Automated Stores, alongside market factors such as slower North America growth and government shutdown impacts. He reiterated confidence in the full-year guidance, emphasizing the company's commitment despite increased difficulty. EVP and CFO Lawrence Lin detailed the Q1 adjusted EBITDA decline, attributing it to $2 million from stores' quality issues, $1 million from North America lab inefficiencies, and $700,000 in non-recurring inventory adjustments. He affirmed the 200 basis points gross profit and 100 basis points OpEx contribution, driven by anticipated second-half sales volume, Azenta Business System (ABS) productivity, and price initiatives. Regarding academic and government capital spending, Mr. Marotta noted strong momentum in Europe/Middle East and 'green shoots' in the U.S., expressing bullishness for the back half of the year based on confirmatory customer conversations.