Azenta, Inc. (AZTA) Earnings Call Transcript & Summary

All right. Hi, everyone. My name is Casey Woodring from the Life Science Tools team here at JPMorgan. Welcome to our Annual Healthcare Conference. I'm pleased to introduce our next company, Azenta. Just a quick reminder before I hand it off to the management team. If you would like to ask a question during the Q&A portion of the presentation, there's an opportunity to do so on the website. So with that, I'll turn it over to Steve. Thanks.

Casey, thanks very much, and thanks for the invitation. We're really delighted to be here at the JPMorgan Healthcare Conference and especially for a chance to introduce you to Azenta Life Sciences. But before I begin, and before Lindon and I share the presentation here, I want to call your attention to the safe harbor statement as we will be making forward-looking statements, and we call your attention to more fulsome description at www.azenta.com. So with that, today, we present to you Azenta Life Sciences, a truly unique life sciences company. We're really enthusiastic about the potential from a market driver standpoint and our position to address these markets in a unique way. We'll spend some time on our differentiated solutions and Lindon will wrap up with the growth outlook for the company, how we bring together the capabilities we provided against the markets and how we utilize the execution capabilities of the company to deliver what we believe to be a truly compelling growth. So in terms of one-of-a-kind life sciences company, we launched as a $500 million revenue company growing at 20%. And uniquely, we're profitable at this revenue level and these kind of growth rates. Moreover, we're in the process of selling a portion of the business related to semiconductor automation, which makes us a pure-play life sciences company and also upon closure of the transaction, which we anticipate here in the early part of calendar 2022. It will put $2.5 billion of cash on the balance sheet. So $2.5 billion of net cash allows us tremendous opportunities for continued growth in a really robust environment. So we're delighted to introduce ourselves to you, and we'll talk now specifically about the kinds of things that are opportunities for Azenta. But before we do that, I want to make sure that we explain a little bit about the history of the company because we have been at this now in the life sciences space for about 10 years. The foundation of the company back in 2011, we were a 100% semiconductor capital equipment company, primarily as an automation company serving the capital equipment needs for the semiconductor environment. And we had 2 core technology capabilities which were fundamental to the products that we offer: one, automation in controlled environments, literally the movement of silicon wafers in a highly critical controlled environment, and we have the ability to create a vacuum using mechanical means of cryogenic temperature creation. And so these 2 -- this, the mechanical creation of cold and automation put us in a position to serve uniquely a burgeoning area of the life sciences space in the management of samples in automated cold stores. So in 2011, 2012 time frame, we acquired some automated cold store companies, some relatively small ones. And we added our engineering strength and prowess, and we revamped this entire product portfolio. So we have a market leadership position in automated cold stores to serve the needs of large pharma and biopharma companies and just in time actually to begin to manage enormous collections of biological samples. As we serve these customers, we also began to learn that not only did they store samples in our automated cold stores, but they also had a need to archive samples that needed to be stored for long periods of time, but no longer had an immediate use in their facilities. And so we understood that part of this cold chain management of samples was live samples on site in automated cold stores and archived samples off-site, and we acquired a company in 2016 BioStorage Technologies, the largest independent biorepository company, and we put ourselves in a position now to be able to manage cold samples on-site and off-site for customers and provide them a tremendous value proposition about the means by which they manage these critical assets. As we spent time with these customers, we also began to understand that there was other value that we could add to these samples, particularly often the customers would reach into a cold store or to an archive freezer and ask us to retrieve samples and ultimately send them for genomic analysis. And we understood that this is part of the value chain that we could bring to customers as a critical but noncore capability, not just to manage the samples but to be able to interrogate these samples and provide genomic analysis on them. And in the recognition of this capability, we acquired a company, GENEWIZ, a world-class capability in genomic services to read genes and Sanger sequencing and next-gen sequencing and also to write genes to perform the synthesis of genes. And so over the next 5 years, after we were $100 million company, during the next 5 years, we added another $400 million of revenue, providing a full capability across this value chain, managing samples, interrogating samples and ultimately providing data to customers to the point where today, we're now Azenta Life Sciences a $500 million revenue company with a strong history in the space and good connections to the customers, but a fundamental foundation in and around the management of the samples in a very unique space in our environment. So we have a strong track record in the life sciences space. We are a 20-plus percent growth over the past couple of years. So we're 24% CAGR, but a 20% organic grower over this time. We have tremendous leverage built into our model. We have a global footprint and capability, account presence everywhere. And as we add revenue, we're able to deliver significantly to the bottom line. We have a tremendous leverage from an EPS standpoint and the execution capabilities of the companies continue to advance. So we're keen about the prospects that we have for the future. We have a strong track record of growth, and we anticipate that we'll continue to drive tremendous revenue growth by capturing the market opportunity that presents itself but also to deliver outsized growth in earnings as a result. So I give you a simplified version of a very valuable portfolio for companies from sample sourcing, the finding of rare samples or the collections that the customers build themselves, our ability to format these samples so they're traceable, trackable and protected in cryogenic environments, our ability to store from ambient temperature all the way down to cryogenic temperatures at minus 190 degrees C and to manage these samples on-site and off-site in a very complex arrangement, it's a very straightforward capability for us. And then as I mentioned, to be able to perform genomic analysis services on these samples that ultimately use a very strong bioinformatics platform to take the results from these incredibly valuable samples and provide that information to customers. So across this sample management value chain, we've created an incredible capability that's of tremendous value to a customer base from academic all the way through biopharma and pharma. In terms of market drivers, we're particularly bullish about the opportunity in front of us. We're a $500 million company looking at what's a $10 billion market opportunity here by 2025. We anticipate even with a very strong growth market, we'll continue to outperform from a growth standpoint, fundamentally because our offerings, both products and services are targeted at the highest growth segments of this rapidly growing market. In particular, from a genomic standpoint, our ability to interrogate cell and gene therapy constructs is a tremendous benefit for the company. We have a very rapidly growing synthesis business that's been growing in excess of 20%, and the capabilities we provide in this space enable us both to capture larger customers and larger contracts at larger customers. And as long as we add capacity and talent and capability, we foresee continued strong growth in genomics. In the SRS area, this is the sample and repository solutions, there's a trend towards more outsourcing of the storage and management of samples, and we're the beneficiaries of this capability as we have capacity and proven business processes that allow customers a safe landing for their samples. And there's a very strong trend in this space, and we're ready to receive. There's a tremendous growth in ultracold stores. Most of that growth, the highest segment of this growth is in the automated ultracold stores and we are automators of ultracold stores across the temperature spectrum. And in particular, we see very strong growth from our ultracold cryogenic automated stores and in consumables and instruments, the ability to track, trace and manage samples, in particular, managed samples at cryogenic temperatures is critical, and we have capabilities in each of these spaces, and we anticipate that we will continue to outpace the already rapidly growing market. The key drivers for our opportunity are samples, and there are billions of samples today that are stored cold around the world. Starting with chemical compounds back in the 1990s, the numbers -- the hundreds of millions of samples that are stored for chemical compounds will continue to be archived for some period of time. But starting with the sequencing of the genome in 2000, the number of biological samples that our store has grown exponentially year-over-year to the point where we're now in excess of 1 billion biological samples that are stored. And as we move towards cell and gene therapy, the types of interrogations that we can perform on these myriad samples, the numbers of samples have been increased dramatically and the complexity with which these samples have to be treated has also grown exponentially. So the sheer sample count has grown in a tremendous fashion. The measurements that we can make on these samples has grown exponentially and the temperatures at which these samples need to be handled reserved and manage has increased dramatically in complexity, it provides a tremendous opportunity for a company like ours who does this as a core daily basis for customers. So we have capacity from a volume standpoint, from the ability to measure and interrogate at the cutting edge and to do it at temperatures that are required for the next generation of discovery. Moreover, we're positioned to capitalize on what are pretty significant market trends. There's a tremendous growth in the outsourcing of R&D. More than 50% of biopharma R&D is outsourced. We're a tremendous provider of outsourced capability. So we match exactly where the market is growing. We anticipate that the number of samples that are outsourced to holders of biorepository solutions will again double over the next 5 years. So we maintain very strong growth opportunity here. Everyone is aware of all the activities going on in cell and gene therapy, but our cryo products, our genomics capabilities on very complex constructs are particularly well suited to the market. And we have a global footprint already. We talk about leverage for the company. Anywhere there's any meaningful life sciences discovery activity going on, you'll find Azenta services teams located their facilities, manufacturing and laboratory capabilities around the world. In terms of differentiated solutions, we have a particularly strong capability here. We have a unique team providing unique solutions. When we say that we have more than 250 PhD-level scientists who engage with customers on a daily base, tailoring their experiments, the results that they bring, the ability to extract DNA to provide unique solutions to customers earliest in the discovery and ultimately through the manufacture of products. We pride ourselves in speed and convenience of high-quality results to customers in the genomics space, in the synthesis space and our ability to deliver products to customers. We have access to samples that customers -- customers can get samples back from us, can get their samples back from us faster than they can find them in their own facilities or from another outsourced provider. So the collections run much more efficiently from a customer standpoint, and we have a tremendous breadth of products and services capabilities that we'll continue to build upon as the market expands and as our capabilities are required by customers. From a diversity of the product portfolio, we're about 60% services and 40% products. We have a full spectrum of reading and writing genes. We're the only company that you can find that both reads and writes genes, and we have sampling repository solutions to manage these samples as we discussed in the past. So we have a nice balance of mix here, serving the entire spectrum of the research community. We also have a significant consumables and instruments business and an ultracold automated store business, which continues to grow. Each of these segments provides tremendous growth opportunities for the company. We've been delivering upon these for the length of the time we've owned GENEWIZ and since the inception of the Life Sciences initiatives back in 2011. And you can see marked by the star here, these are a significant part of our portfolio that we consider to be recurring revenue. So it's a healthy profile, very strong growth from each of the segments, and these are segments that intertwine particularly well Today, there are products and services that are -- capabilities that work together. Ultimately, this converts into solutions that we bring to customers and a blurring of the products and services really to add tremendous value to the offerings for our customers but against everything that they need from sourcing all the way through data of the samples along this value chain. And finally, we have an impressive list of customers here. We serve all of the top 20 pharma companies. Of the top 20 pharma companies, most by at least 8 of the product and service offerings that we have as a company, you see a significant portion of the outsourcing management. And in particular, we have a strong R&D presence. And the purpose for this slide, the takeaway from this slide is we're particularly strong from an execution standpoint, we're particularly strong from the research side of things. And when we bring these 2 capabilities together, a company will stay with us from research all the way through execution and implementation. And that's been the capability that we brought to the industry and brought to the market as a strong strategic company, strong on the R&D side and particularly strong executing the things that we bring to the customers in the earliest phases of their development. And finally, I want to talk just briefly about the growth for the company. We've been acquirers of capability and strong organic growers of everything that we own. When we make an acquisition, we make sure that there are capabilities from a sales standpoint, technology standpoint, capital infusion, management, business process that the companies that we acquire, we continue to grow on a torrid pace to serve the markets that we need to. So one of the criteria that we have is what do we bring to an acquisition to allow them to continue to grow to fit the portfolio and the value proposition. And we illustrate here on this Slide 2, acquisitions over the past 5 years that were transformative at the time they were performing. So we acquired BioStorage Technologies, the outsourced biorepository company at the very beginning of fiscal '16, and BioStorage was transformative. We added capability. We added footprint. We added capital. We added business process and some management and the sales team that allowed us to expand the capabilities to increase the biorepository business, and we've accelerated that business to where it's been a 20% grower for us recently, but we have a tremendous footprint here, transformative at the time, but consistent with the value that we brought to, we've derived tremendous value from BioStorage. We've since done other acquisitions of biorepository companies, but we continue to lever the capability there as the foundation for the offerings that we bring to customers. Then in fiscal '19, 3 years ago, November, actually, in November of 2018, we acquired GENEWIZ, at the time a transformative acquisition for the company that put us into the genomic space. We made significant acquisition in GENEWIZ, we made significant investments to expand our footprint to stay out in front of opportunities that we knew that they could capture, but we had to put capital in place. We had to put people in place. We had to allow them to win the next big contracts without slowing down the customers, and GENEWIZ has proven to be a tremendous asset, world-class capability that's only gotten stronger as we've been together, and we've been nothing but pleased with the performance of GENEWIZ. What we demonstrate overall is we put $1 billion of capital to work over this time period, we've had a CAGR organic growth component more than 20% over the same time period. We're particularly pleased by the model we put into place. We've put $1 billion to work. We stand here at the beginning of fiscal '22 in the face of an opportunity to have $2.5 billion more to put to work and to really extend and expand upon the future capabilities that we have. So we think the business model, we think the method by which we go about acquisition and organic growth, put us into a particularly strong position. And with the firepower that we have on the balance sheet, we're particularly bullish about what the future looks like. So with that, I'll turn the presentation to Lindon, to talk specifically about what's next for us as a company.

Thank you, Steve. And of course, growth in transformation ahead is in our outlook. Before I go to the outlook, would just revisit the strategy that has driven us consistently over the last decade, it's really principles behind our strategy. #1, we always aimed to lead in the markets that we are participating. And obviously, we're going to put the investments both behind organic as a priority, but we're going to continue to exercise M&A to tune the portfolio for the highest growth. And of course, with the balance sheet that we just described, that Steve just described, we have ample fire power to strengthen that. We always aim for margin expansion of course, to increase the returns over time for investors. And we believe as we do so, we have an eye toward balanced capital deployment, and we in particular, deploy discipline of ROIC focus, which also often question is 1/3 of the LTIP program for our senior team that helps to reward that focus. So with this strategy, I'll just touch first on the principles of capital deployment or some of the experience we have with deployment of capital. And first, I'll just remind you that last year, we had about $514 million of revenue. So it's easy to convert these percentages. On operational CapEx, history has told us we'll use about 6% to 8% of revenue toward CapEx. Now last year, we did apply another 3 points toward a building strategy in China on top of that. But the operational portion that would continue into the future, we would see a model of about 6% to 8% toward our operational CapEx. In the R&D space, you'll see in our P&L structure that about 4% to 6% goes into research and development. Now we have deep capabilities in cryogenic management and automation. And so we continue to spend dollars there. We also invest in the proprietary technologies in the genomics and analysis business while we are maintaining the advanced leadership position in the cold chain on the other side. Now in terms of investment, the $2.5 billion is not something we've historically had on our balance sheet. In fact, we're waiting for the transaction to close and the divestiture of our semiconductor business. And we don't have an update on that today, but what we've said in the past is that it's expected to close in the early months of this year. And the proceeds, the net proceeds will keep -- will put in excess of $2.5 billion on our balance sheet available for investment. As we transition to a life sciences company, our focus is going to be all about that investment to M&A. There's a very specific sub bullet to that, and that is that while we have paid dividend in the past, while we were a semiconductor business, we'll continue to pay that dividend up until we close the deal. And then once we transition past that, we'll put all of those dollars and focus toward the M&A investments and of course, the organic investments of the company, but we will save that firepower for investment. So with that said, we do indeed have a 3-year model, long-term projection model. And by the way, this is also a discipline of the company that we ran for the last decade. We always keep a long-term model out in front of our investors that you can point to discuss what our vision is and see where we're headed. And as we've moved through this next 3 years, we put this one out on November 16 at our Investor Day, we will track ourselves to this. And as we hit certain milestones or clip rates, then we will update the model and perhaps enhance it, if that's the same experience as we've had in the past, and that's our expectation. So in total, on the right side, you can see that we have a revenue growth model of about 16% to 20% or a midpoint of 18%. And the margin leverage where we've been experiencing about 17% in 2021, we see over the 3-year period, can get to 26% EBITDA margin. And so we're at a nice point of leverage in the curve contributing incremental profit and, of course, cash capability to the company. And the ROIC focus is to be well above our weighted average cost of capital as we would project it back up to 12%. Now in the breakout of the model, we do provide products and services split, and those are the 2 reporting segments that we provide to our investors. In the product side, you'll see the growth rate over the 3-year period of 12% to 16%, while services is 18% to 22%. And to provide a little commentary, we had our most distinct element of COVID-based revenue in the product space. And it was about $50 million, $53 million is what we reported in our 10-K as of September 30 for the prior year. And in that context, we did provide some dampening at the low end of the product set because most of that revenue was consumable plastic tubes and formats that we provide to our customers. And so that was the lion's share of the $50 million. And so while we expect that, that has a long tail in the testing environment, as we're all seeing the prevalence of surveillance testing and COVID, we don't have perfect line of sight to that. So we did provide a range there that goes down to 12%. But absent the dampening effect of 2022 over a tough compare of '21, then we believe that '23 and '24 will return to the mid-teen growth rate. In the services side, the 18% to 22% is something we've experienced fairly consistently on the genomic side of our business, which we expect to be 20% to 22% or better, at the higher end of that range. And in the mid- to high teens, we expect the storage repository solutions or sample repository solutions where we store samples on behalf of other customers to be in that range. So a little high teens on the sample repository, and above 20% on the genomic analysis on a pretty consistent basis. Gross margins are modest in terms of future improvement, flat to up 2 points on both sides of products and services, where we gained more -- about 4 points last year and 4 points to prior year. We believe our -- we're always well served to be modest in this projection as we see proof points will improve upon this, perhaps enhance our model. We've also comprehended that these are interesting days in the labor markets that while we have not seen significant consternation in our supply chain of materials, labor indeed is highly valued and competitive. And so we have comprehended some labor cost inside these targets. And again, we would be striving to exceed these, but we'll update that as we move forward. Even with this modest gross margin, the arithmetic starts to be pretty straightforward. With the operating expense required to invest, you can make handsome improvements in the EBITDA margin by leverage over the operating expense. And that's what beats the 26%. And you can see that it's relatively balanced on both the products and the services side of the business. So with this, we do provide some numbers, and we do know that investors will may appreciate the P&L structure here for their modeling. And I won't belabor that, but I'll just draw out a couple of talking points. Certainly, over the last 2 years, you can see, we've taken a business closer to $300 million up to over $500 million in 2021. And our objective is that by 2024, over the next 3 years, to add another $300 million plus to that revenue base. And this, importantly, it's just based on what we own today. This is not counting on M&A that we would be investing for. This is an organic based model going forward based on what we own today. That flat to 2 points of gross margin shows up as I referenced. And at the bottom, you can see that the EBITDA leverage to 26%, thereabout get you to $200 million to $240 million and the earnings per share is up almost 3.5x versus what we show on a continuing operations basis of 2021. So a tremendous earnings potential growth for us is our objective and off of the outlook based on the strategy as we invest organically. And again, this is based on what we own is our model, and we always provide updates if we do a significant acquisition for our investors. With that, I'll just turn toward our rigor and our discipline around M&A. It's important to note that we have a track record of over $1 billion in 10-plus transactions over the last decade just in the life sciences space. And in that discipline, we picked up terrific products, capabilities, market penetration, services business. We've expanded the aperture of the markets we're relevant to but never going far afield. So the very first objective is to make sure it's a strategic fit to where we can add value to the business. So you don't see us jumping very far from where we are, but we certainly look at adjacencies to continue to expand our space. In the financial lens, we're always looking through an ROIC lens as our primary indicator. This being that within 5 years, our emphasis is to get the ROIC above our weighted average cost of capital. Now perhaps it could be 7 years. In our past, we've always emphasized 5 years. As we center around life sciences, we could foresee that given certain pricing in M&A and with great confidence that the trajectory is there, if it ends up being greater than 5 years, we haven't rolled it out, but our primary focus is within 5 years. High growth and, of course, profit leverage is the key for that to work. You only are able to take something at a multiple price today to get to a return on invested capital if you're able to show growth of the profit contributions back to the business case. And so we look for continuous growth and profit leverage with that growth. With that behind us as a track record, we're excited to have the objectives of -- on a base of strong business of $500 million already. So we were $514 million. If you just took the guidance for the December quarter, which we'll report on at the end of this month. But just the guidance would point to a $550 million run rate already. And at this space, high teens growth, profitable growth, already capable of cash. It's very much a unique asset already for investors to look at. There's not very many of us in the space that are at this size in high growth and already profitable. But also combined that with a balance sheet of $2.5 billion with a track record of M&A that built this business and has a trajectory to do so with many relevant opportunities. So the landscape looks rich for us. We're careful, we're cautious, and we commit to our investors that it will come back with returns. And then a final word, I want to give some clarity that while we're a Azenta Life Sciences today, we legally changed that name from Brooks to Azenta as of December 1. We have been using this in the market as we transition the branding both from September through our Investor Day and Investor Day, we announced the legal change was coming as of December 1. As we do this now, again, we expect that the deal will close in the early months where we actually closed already the contractual arrangements to divest the semiconductor business, and the cash proceeds will be available for investing in our part. Clearly, the unique life science company couldn't be more excited and also very pleased to be here as part of the JPMorgan conference. So with that, Casey, we'll turn it back to you for questions.

Great. Thank you, both. That was a great overview. I had some questions come in via e-mail while you guys were speaking. So hopefully, we have enough time to hit on all of them. The first one was around operating leverage. What are the key sources of operating leverage in your business model in the context of the longer-term EBITDA guide versus the 200 bps in improvement in gross margin over that same time period? So in other words, what causes OpEx as a percentage of revenue to drop from 41% today to 31% in 2024?

Yes. So the 10 points that you observed from 41% to 31%, let me highlight first that we've highlighted that inside of our structure today, there's almost 3 points, about 3 points of operating expense burden, because we're still carrying a portion of the discontinued operations as they help to manage the corporate structure. That's just the accounting rules. As soon as the divestiture happens, will drop approximately 3 points. So really, we're looking for about 7 points, 5 to 7 points in the improved operating efficiency of the OpEx line. In that context, recognize this. We're not a start-up, so to speak. We have good footprint, not just in North America but also in Europe and in Asia and significantly in China, but also Japan, Korea and other places, Singapore. So we already have the blueprint or footprint in each of these areas. And so as we add business to our growth, it's going to come with investment in sales resources, but it doesn't need to expand substantially the infrastructure or new sites, new locations that are unproductive. We build on what's already productive. And while we're not shy about adding investments, we just -- we're not in the pure start-up phase. So we're at a nice point in the operating structure of life where we can leverage what we have. We're certainly going to be investing in the sales and the IT capabilities and the disciplines required for growth. And I'll highlight just out of that comment, just a year ago this month, we had a Chief Commercial Officer with the integration capabilities of large companies where she came from, that has really brought the transition of the branding, transition of the sales team with an integrated commercial front and has helped us even further fine-tune the sales effectiveness under that leverage curve.

Got it. That's helpful. Maybe one on the $2.5 billion of capital that you're going to plan to deploy. How should we think about the timing? When are we going to start to see some deals? And can you talk a little bit about the sizing of what you're looking at, tuck-ins versus maybe something a bit larger?

Sure. So Casey, we've been pretty active. So even before we had that, we announced in May that we were going to separate the companies, and we had the ideas about how to look at opportunities with perhaps what was going to be up to $1 billion of capacity. Now with the transition to an outright sale of the semiconductor automation business, the aperture is a little bit wider. The number of deals that we could probably do is larger. But the critical focus around the value chain is still the same. So the same opportunities existed are out there. We'd anticipate that in 2022, of course, we'll start to put some of this to work. And we're active in and around the space where we see this $10 billion of market opportunity and not to diverge too dramatically from that here in the near term. But obviously, we anticipate that here in 2022 we'll begin to put meaningful amounts of capital to work.

Got you. I think you're guiding to sequential declines on the product side of the business next quarter. What are some kind of upside and downside drivers there? It would be interesting to hear that.

On the product side, as highlighted in our earnings announcement 3 months ago that we had a record quarter in our cryo automation. We had a good quarter in our large automated stores, but also we had consistency in COVID-related revenue in the consumables business. So we've got a range that could provide for stability in products, but also see downside depending on the softness of the COVID-related revenue at the bottom end. And with that, the reading is exactly correct. We provided those commentaries that we would expect the quarter to be just a little bit softer, primarily on our line of sight on stores that we're working on for this -- for the December quarter. And we're not here today, by the way, to provide an update to that. So all of our comments reflect our guidance from 3 months ago.

Got it. Maybe going to COVID, you mentioned. So I'd be curious, what exactly do you sell for COVID? And is there any reason why your COVID revenue wouldn't track in line with what's currently happening in the overall COVID testing or co-vaccine market? How should we think about this revenue in 2022?

I would emphasize, we're a small piece of a very large market. So trying to correlate us mathematically would be terrific if we could do that. But the visibility of the line of sight that we have on a consumable-based order stream isn't very strong. And so we're just being modestly, I would say, responsible. I wouldn't use the word conservative. We're being responsible in letting all of our investors know that sometimes there may be ups or downs. We saw a peak up closer to the $20 million range in the very first half of 2021 and then moderate to an average of $10 million over the last 2 quarters that we had reported. We do see, to your point, that the testing has a very long tail on it and perhaps even research. The testing is the predominant driver in our consumables plastic. But -- so I don't have a reason to tell you it would drop, but the variability in this, in line of sight to it is not very strong. Casey, I should also highlight that while we talked a little bit about softness sequentially, we also talked about the expansion of the services sequentially, and that supported somewhat stable quarter-to-quarter. And when we talk about softness and sequential, we're talking about really minor percent. And we've got a projection at a midpoint that supports about 15% growth year-over-year in the guidance that, again, that we provided 3 months ago.

Got it. We have 1 more minute here. So I just want to get a quick one in on GENEWIZ. It seems like demand is really strong for this service here. I'm just wondering if there's any bottlenecks to meeting the demand here, lockdowns in China, anything to kind of call out as we head into the new year?

Team is doing a great job staying in front of it, Casey. So it's a struggle from the standpoint. It's not easy, but they're staying the front of pretty good opportunities. They move capacity around as they need to. I think team is doing a really good job. We're always cognizant of what might happen, but we have reagents, we have resources. But a fast-growing business like that staying in front of is not easy, but the team is doing a great job.

Great. Well, looks like we're out of time. Thank you, guys, for joining today, and have a great rest of the conference.

Thank you, Casey.

Thank you.