Hi, this is Paul Knight, the life science analyst at Azenta, which I have followed for over a decade. With me today is Yvonne Perron, the Head of Investor Relations, and Lawrence Lin, the Chief Financial Officer of Azenta. You know, obviously, a lot of questions in all of life science right now, Lawrence and Yvonne. You know, one of the topics has been, of course, amongst investors, NIH/academic exposure. I think that's probably the first topic to start with. Do you want to talk to that? Yeah, of course. Paul, thanks for hosting us, and thank you, everyone, for joining. Let's get into the conversation on NIH. I think, you know, we've done, I think we all agree this topic has created a lot of confusion and uncertainty. One of the things our Multiomics team has done is quite a bit of voice of customer to really better understand the customer segment. Given the six-week pause on reviewing grants, which, you know, has recently lifted the indirect cost caps and staff being released, not being hired, you know, the customers have been cautious and are looking at levers to conserve cash. The positive note here is, I think, is today we have not received cancellations or no big deals lost due to the NIH funding. We're seeing some kind of delays right now because of a lack of clarity. More importantly, here's where we also see through the voice of customer work that there's an opportunity that exists for both our businesses in the segments. Really, as we kind of look at the landscape, our belief really in the past has been that there has been a place for Azenta as a substitution for the core labs, right? Some of what has happened in the last several weeks has really accelerated and confirmed our belief, right? A lot of the core labs can be less efficient. What we've seen is that in two cases recently, there has been kind of an affirmation around what we believe is our advantage. Just last week, we had a large medical research center make the decision to close their center and work with us. Additionally, one of the large universities has just contacted us to ask about getting quotes on how we can provide the service in replacement for the core lab. We are really, out of some of this confusion, really optimistic and excited about the opportunities that our businesses have in light of some of this uncertainty. That is kind of a bit of the work that is done. We spent a lot of time with about our top 30 customers. Because in the last several presentations or prior presentations, we went out and said roughly 35% of our revenue is related to academics, medical, and government. We believe the potential headwind is much lower than if you look at kind of that macro 35%. We pulled all our top 30 customers, kind of went customer by customer, asked them about kind of where they are, what their position is, and what the potential risk is. What the outcome of that kind of very intensive work was, we believe in both SMS and Multiomics, our potential risk is about 2% for 2025. Now, that's kind of in isolation with the macro headwind. Again, I think that's a short-term impact for us. Long-term, there's a significant opportunity in our Multiomics business, as well as our sample repository business around biostores. Considering the indirect caps and a possibility that there will be CapEx constraints in the academic environment, we're a natural fit as Azenta in our biorepositories to provide them with a solution to store their samples. Right. I mean, I think the argument that you've been made by Azenta for many years is right, that a sequencer run can be $35,000 or a lot of money on a next-gen sequencer. And some institutions don't want to make that a capital investment, and b, they don't have capacity to run on a next-gen unit, right? That's right. That's right. It's one of those things where we've got, we're actually here in New Jersey, so we've just spent a lot of time with the lab team. It's been great to see our capabilities and exactly what you say. We've got the scale, the efficiency, and also the ability for us to do some bespoke, really partnerships with our customers, right? We'll walk with them through the process hand in hand. I think that's a bit of the value proposition that our GeneWiz business provides. Okay, great. You know, drilling into academic a little more, I mean, roughly 18% or so of business is academic, and then a little over half is U.S., right? That is how you start getting that number to 2%, I think, is one approach as well, right? That's right. We kind of went from the macro really down to the granular because of the fact that, as you know, some of the NIH funding can be indirect, right? We wanted to wait till this conference really to talk about this because we wanted to do our homework and spend a lot of the time. That's about right. We kind of went both directions just to make sure that we sharpened our pencil here around possible risks. What I will mention is that, yes, we've got a 2% kind of headwind to our number, but we're actively countermeasuring that right now. What I mean by that is we've talked a lot about, and John has talked a lot about, our cost journey that we've kind of embarked on. Part of that cost journey was around redirecting some of those savings that has happened over the last several months into sales, marketing, and R&D. That is progressing currently in the quarter. On top of that, there are additional sales incentives we've put in place for our sales reps in order to mitigate some of the risks that we've seen. You know, we've sized the prize. Now, you know, the hard work begins as we work to ensure we can meet our commitments. Yeah. Like, it's probably harder to sell a sequencer than it is to sell sequencing as a service. That's right. That's right. Exactly. Yeah, completely understood. I think the other bit of confusion is, you know, in kind of the old pie chart, you know, excluding being medical, we have government, medical, nonprofit as maybe 15-16% of the company. There's a, that's a pretty broad description. I'm guessing a lot of it's not NIH, right? Or yeah, it's not NIH, I guess, or very little. That's right. Sometimes it's hard, right, to parse through the customer categorizations, but you'll obviously have private funding and private equity funding that's in the mix. That's why, quite frankly, when the team started, as I mentioned earlier, we looked at the macro level of kind of the pie chart and said, that's probably not enough for us to action it. Really, that's when we double-clicked into each customer. Got it. You know, I guess in the samples business, how much of samples and stores is actual hardware sales? Yeah. Can you restate the question, Paul? I'm actually not clear what you're asking. Within the storage business. Yeah. You know, everything X, Multiomics, portion of that is cap equipment. That would be your, you know, your principally your stores systems, right, which would be, you know, your kind of automated stores, right, with the, you know, the software. And then you'd have your clinical bio stores as well as cryogenics. I mean, that would be the bulk that you're referring to. Yeah, yeah. Related to stores, I think, Paul, what gives us confidence is around the backlog we have that we referred to in the first quarter, right? We're seeing on about 75% of the year in backlog. There's been no cancellations around that. Remember, as you're aware, these automated stores, there's a long lead time. It's POC accounting. You know, once you're down the path, a lot of the infrastructure is already set up to kind of accommodate these. We feel pretty good right now as it stands based on what we have in the backlog. Yeah. I think you think, Paul, I'll say core product. Within SMS, you have core products, and then you'd have SRS. You could probably think about, you know, the core products as an aggregate, like roughly 60%, with the balance being biorepository. Yes. Right, right. Okay. I mean, I think your pie chart that is in your corporate on the IR pages is pretty direct on talking about how much is pulled for cold systems and services. And then, you know, Lawrence, you've been at the job not long. What are you learning? You know, look, I think at the heart of it, we know the products are great, but more importantly, the team has been extremely gracious and really adaptable to change. I know at the face of externally, when we look at kind of what we talked about, some of the rapid iteration around cost, the org restructuring, along with implementing a lean business system. That's a lot for everyone to digest. What I would say, and you know, I've been on the road for about five months now consistently. What I've heard is the passion from the team and the adaptability. I participated in two Kaizen events the last three weeks just working on how we improve the customer experience. We're here, part of the reason we're here in New Jersey is there's a group of 15 individuals in a room with sticky notes and Sharpies mapping out the experience for when a customer orders NGS or Sanger testing to at the end of the work stream. The beauty of it is, one, we're focused on the customer, but also secondarily, they've just recently identified there's 97 items of waste that is opportunities for us to get more efficient. The thesis stands. I think as John has laid out previously, right, we are focused on our priorities, right? Portfolio optimization, which we've already kicked off around B medical, operational excellence, which I've just touched on around lean, around cost optimization, really kind of right-sizing our P&L, reducing G&A, investing for growth around sales, marketing, R&D. Then around indirect savings, right? What does that mean? We at Azenta have not had a formal indirect procurement team stood up. Recently, over this quarter, we've stood up a group and we're focused on how we optimize where we spend, what we spend. Sounds very rudimentary, basic blocking and tackling, but you know, I think it's core to how we get to where we need to be. Really lastly, around the third priority is value-enhancing capital allocation, right? We're looking at opportunities ahead around how we are disciplined, returning, you know, deploying capital. We're really going to prioritize based on the return opportunities that will yield the growth through productivity initiatives and really areas like M&A tuck-ins. I think, again, really excited about the opportunity ahead at Azenta. We've kind of plotted a path forward. Right now, it's just we're executing. Yeah. Very good. You know, another question that comes up is, is China, what are you seeing in that market right now? How much is, you know, sales in China? You know, we're hearing that, you know, the biotech originators are actually very robust and strong as an end market. If you could talk to, I know you have some operations there, and we could talk on that. Yeah. So, you know, as mentioned in the last earning call, you know, our business, about 10% of our business is China for China. I know in the recent headlines, there's been two items, right? The China Illumina issue, which we've pretty much covered in our last earning call, just to, for avoidance of doubt, right? You know, the team has done a nice job anticipating a lot of that uncertainty in China, you know, for the last several quarters. You know, we do not own any Illumina products. Most of our NGS business is actually through a partnership that utilizes Illumina as well as BGI. The transition and the shift to BGI has been relatively seamless. We've also polled our customers in China and asked them, you know, if there would be an issue through the transition. Most of them have said, look, you know, this is our preference was Illumina, but we are absolutely fine with BGI. And so there's extremely low risk around that front. As we get to talk about a bit of some of the China tariffs, right? Talked about in the last quarter, our exposure for the first 10% tariff was about an incremental $1 million-$2 million that was in our guide. Now, the second tranche 10% that came on after our earnings call, we believe we've got a line of sight around countermeasures to offset that through cost reductions as well as possible market price increases selectively. More to come around that, but that's kind of our path forward around China. Overall, as you look at kind of China, last quarter, we grew high single digits, and we continue to really see that the team continues to execute. Really happy with our progress in China. Good. The sample management business, meaning the storage as a service, you know, seems like one of the best businesses in life science. What do you plan to do with that? I guess just keep growing it or, you know, you can add more color around that management of storage as a service. Yeah. Look, I think, you know, one of the great, this we always say this, you know, the business is our crown jewel, right? It offers us the competitive advantage. The business generates profitable recurring revenue streams, right? And so there's also opportunities here in this business to grow it organically, right? I think we've discussed in the past, Paul, but just to reiterate, right? There's an estimated 24 billion clinical and research biological samples that are stored globally. Yeah. 2.6 billion new samples generate each year, about 50% of these require cold storage, right? That is kind of the market. We own 50 million samples right now. These, as you well aware, are the most precious assets, right? Like drug compounds, therapeutics, biological samples owned by pharmaceuticals, biotech, academic, right? We believe we have a lot of runway to grow this. More importantly, as I mentioned earlier, as the CapEx constraints come to play here in areas like NIH, we believe we have a competitive advantage where we could be the solution for a lot of the folks that no longer can afford like an ultra low temperature freezer, they will come to us. A lot of these contracts, as you know, are 7-25 years. More importantly, what happens when most of our customers come to us, they realize our value fully. Meaning a lot of times, you know this probably better than I do, right? There'll be an ULT at the academic or the customer, and they just put the samples into their freezer and close it. Whereas once they come to us, all the items are categorized, the vials are barcoded, and essentially we have a warehouse management system. We end up becoming an extension of kind of what they need, whether they need long-term storage or actively samples come in and out through one of our automated stores that we have in-house. We believe, one, there's a huge runway and we have a competitive advantage because of all the automation we have in place. Yeah, I'll agree. The BioArc Ultra does seem to be kind of a game changer. Are you selling those yet or are you putting in a facility in Boston, if my memory serves me correct, utilizing the BioArc Ultra? That's right. Yeah. So in the press release recently, we talked about UK Biobank and them putting in a BioArc Ultra, right? I was just in Manchester, I can't remember, last week, and these are impressive automated warehouse management stores. And so. Because Manchester manufactures. Because Manchester manufactures these. One, just the ability to store within the space is a game changer. That is why UK Biobank has really gone with us. I think the University of Miami is also looking at this as well or has put in one for their Institute of Human Genomics. You are right. In Boston, we are going to stand up an Ultra in the back end of the year. That is currently in the works. I'm guessing that'll change to lower the price of storage for some of these customers as well. Absolutely. I think down to the metric of sample per sq ft, right? That's going to be key, especially with real estate CapEx constraints, the ability to put more in a similar footprint and go vertically, I think will be a significant advantage for our customers and us. Yeah. I'm looking at your PowerPoint from your long ago analyst day, but the portion of business that's related to like the B3C freezers, how's demand for that type of technology? We have seen, we saw, you know, coming out of the second half of 2024 and into Q1, we talked about the solid demand in cryogenics. You know, we feel good about that space, that performance, and continuing to build the funnel there. I think as we see, you know, more funding, you know, kind of flow in as well as a resurgence in kind of the CGT space, that's an area we can play, you know, strongly in. That is coupled with automation as well, right? Those units as well. It has the same advantage that Lawrence really talked about on the automated stores. The question we then hear is B Medical, obviously up for divestiture. Any update there, Lawrence? Yeah. Look, the B medical sale process continues to progress. At this time, there's really no additional updates to share beyond what we discussed during our Q1 earnings call. As we mentioned previously, our value creation committee is highly involved in the sales process, and we've engaged external advisors. You know, ultimately, we're really focused on maximizing the value of the sale. You know, I know we've talked in the past of kind of putting ourselves in an internal deadline in the first half of the year, but obviously we're looking at a broader scope of the 12 months that we've kind of given ourselves here. Hope to update everyone as there's additional news. Yeah. And then the kind of when will we see guidance on long-term potential of margins and growth? Will you do an autumn analyst day? What are you thinking there, Yvonne or Lawrence? Yeah. We are in the midst of planning our upcoming analyst day. I think John mentioned we're thinking in the June-ish timeframe is at least what we're targeting right now. At that time, we will certainly update LRP, you know, strategic initiatives, as well as additional opportunities that we kind of see in our capital allocation space, right, in terms of what we want to do out to 2027. Yeah. Okay. It will be in our Indianapolis facility. I think that is going to be really a highlight that we hope to be able to give the investors a tour of, kind of what we do. Really excited for that opportunity. Right. I think you do a lot of Lilly work there, no? Lilly, yeah. Yeah. Yeah. Yeah. Absolutely. It'll be great to see. I think people. What's the latest count on number of customers that are kind of basically sole outsourcing to you? Last I remember was seven, but do you know or can you say? I honestly, I'm not sure, Paul. I'm not sure, but we can get back to this group and kind of share. I would think it's probably not less than what you recall. It's probably more, but we can follow up. Yeah. I mean, I'm sure that the biopharma market continues to be pretty robust for you on storage. Yeah. Absolutely. Yeah. I mean, I think there was, what, overcapacity in the industry in 2023, but you know, what's your view on market as the year 2024 finished and we move into 2025 for the biopharma forgetting government academic? Yeah. In terms of the market? Just biopharma and market. Yeah. I think, you know, it's kind of in line with our expectations. You know, Paul, you know, still pretty robust as we look forward. I think the opportunity, as I mentioned, kind of overall landscape still exists. And it's really kind of our opportunity and our, you know, ability to win. Yeah. I think the biopharmas too, they're settling in post some of the reorgs that they've been doing, right, in terms of where they're going to focus and prioritize. I think that will, you know, has the potential to be a tailwind in 2025 as well once they hopefully get past that activity and that reprioritization of priorities. You're in the New Jersey sequencing and service site right now? That's right. We are. Yeah. That's right. Yeah. What portion of business on service is sequencing? You do a lot more than that, I believe, right? Yeah. This facility does primarily, it's the NGS and Sanger. Yeah. Okay. I don't, you know, I think in the past you've offered other products like PCR, you know. Yes. Yeah. Yeah. And there's, yeah, the prep and clinical is here as well. Great. China was your last big expansion effort. What's the utilization rate of the China facilities now? Utilization? You know, we've just, you know, we've just really gotten to, and John and I had the opportunity to see the China facility. It's a large, you know, 12-story building. In terms of utilization, we don't get into that level of detail, but you know, again, our China growth was. Multiomics was 7%. 7% in Q1. It continues to grow. Multiomics China. Yeah. I Yeah. I mean, that's, you know, it's a real hub of kind of our advanced degree specialists in that area. And they're really situated around a lot of similar life sciences companies. We continue to see strong performance despite some of the other China more macro headwinds that we, you know, we've seen to date from the China Multiomics team. Great execution from that team there. Great. I know you're very busy. We really appreciate your time today and look forward to the year ahead. Yeah. Great. Thank you so much. Thanks for the opportunity to talk to the teams. Yeah. Appreciate it, Paul. Thank you. Absolutely. See you soon.