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

All right. Good afternoon, I guess now everybody. Welcome to Day 2 of the Stephens conference. I'm Jacob Johnson, the Life Science Tools and Pharma Services Analyst here at Stephens. Really excited to be joined today by Azenta, which I think as it happens 1-year anniversary of announcing the Azenta brand today. So -- it was exciting to talk about last year and some exciting things to talk about today. We've got CEO, Steve Schwartz; CFO, Lindon Robertson; Sara Silverman from IR who is hanging out in the back, along with Vandana Sriram, the Controller of Azenta. So with that, I will turn it over to Steve or Lindon or both for any opening remarks.

Great. So let me just start off with an overview of our company now. We just finished our fiscal year, and so it's a good time to kind of recapture and as Jacob just highlight, we've been now 1 year into wearing the Azenta name as a stand-alone life science company. Makes us a bit unique. First year as a life science company, we're over $0.5 billion. We reported $555 million of revenue for the year. On the reported line, it was 8% growth for the year, but removing the currency, also the COVID headwinds, we shared that we were up 17% year-over-year on our revenue for the year. So unique in that regard. Unique in the fact that as a first-year stand-alone life science company we're also profitable. We had about 11% EBITDA for the year. A little bit lower than what we had called a year ago and as we exited the year, we clearly were on a path to reestablish some momentum from the third quarter that we had lost into the fourth quarter. Happy to report that we shared earlier this week with investors that we exceeded the midpoint of our revenue and we exceeded our earnings expectation for the quarter. And we saw some really clear signs of growth reestablished. And when we talk about that, it wasn't that we were absent growth. We were -- we positively grew every quarter this year, but people have been accustomed to us growing in the 20% range for a long time, and we had dropped below that in the third quarter. And so in the fourth quarter, what we ended up providing was a 12% when you exclude the exchange rates and the COVID headwinds year-over-year, we grew 12%. We turned in a revenue number of $138 million, a little bit above our midpoint of guidance. The underpinnings of that showed really clear signs of momentum. And it gave me an opportunity to just talk a little bit about the makeup of our business. We're -- about 45% of our business is in genomic services. When you think about genomic services, we're a very large provider of sequencing services to customers as an outsourced provider and also gene synthesis. And that 45% of the revenue, we saw a return to respectable growth -- double-digit growth in all areas except for Europe. Again, on an organic, excluding COVID basis, which in the COVID impact is pretty modest in the genomics business, by the way, it's more of a headwind in China during the lockdown periods than anything else. But we even saw a double-digit growth in China in the fourth quarter. The only one place that we left in very clear indication to our investors is that in Europe we are still in the low single-digit growth in the genomic services and so we still have actions in motion and looking to reinvigorate -- of course, all around the world, but particularly in Europe in genomic services. In the other spaces, we're about 35% in the products business. And the products business grew nicely for the year and for the quarter. And in the quarter, we exceeded -- it was really driven on large automated store systems. Large automated store systems grew, again, more than 20% in the quarter year-over-year and the services associated with that product services grew above 20% for the quarter year-over-year. And so we had a very strong performance there. We had another quarter of record bookings. We talk about large storage systems. Let me put some clarity of what we do there. Large automated ultracold storage systems, something -- if you cut this conference room, which is a long conference room for those on the call, cut it in half, it would run the full length of this, about half the width of this. And there will be a large robot running down the center hallway of this with thousands of shelves on both sides and would very have high -- very high throughput for large pharma, biotech, be able to handle one or maybe a few million or tens of millions in a very large store format in a very automated basis with every sample logged, inventoried into their LIM system, know exactly which shelf, which rack, which spot that sample is in. And it never has to come out of that ultracold temperature environment until it's needed. That's usually a minus 80 degrees Celsius. So high infrastructure solutions that would be installed at your customer site. This is what we're referring to when we talk about another record quarter of bookings. And so this was 12 years ago, was the first acquisition we made in store systems, was around that product set. We advanced it significantly over the years. But this is one of the cornerstones of our fundamental competencies that differentiates us in the market. The other 20% of our business, Sample Repository Solutions. So this is where we store tens of millions, more than 50 million samples on our premises on behalf of our customers. In the quarter, we reported double-digit growth again in this business, 10% year-over-year in the Sample Repository Solutions business. This is recurring revenue. Large part of that 20% of that revenue -- of our total revenue, the largest portion of that is monthly billings that we send out to customers based on the number of samples that they have stored with us. We're an outsourced provider. We bring logistically those samples in or they send them to us, we log them down to the individual sample. Again, what sets us apart from everyone else is we do this at the individual sample. It's at minus 80, sometimes minus 190 temperatures. It is long-term storage. And also, we are very active now in what is referred to as banking storage for customers. Some of our recent account wins, large enterprise relationships, they're relying on us now for that in and out. They may send us samples this month and may want them back 3 months or 9 months from now rather than store them with us for 10 years. And so we handle both types of storage, and we do this and delight the customer and particularly that they know they can get those samples back within 2 days, 6 days. Typically, they'll give us a week notice, but if they needed to, from Indianapolis, we can get the samples to them on their lab bench on the West Coast tomorrow afternoon. We strategically built the business for that kind of turnaround. So this business, the sweet part about this is recurring revenue base. You don't have to keep selling that business from zero to something every month, it's in the freezer, and we're happy to report that the number of samples and the revenue from the pure storage elements that expanded again in the quarter. So with that, again, when you wrap up the quarter around that, we turned in roughly a 12% growth year-over-year. That's organic, excluding COVID environments. In addition, we had another $4 million that we had acquired on July 1. We added Barkey products, which is a controlled rate thawing device, to our portfolio the 1st of July and that was our first quarter of ownership. So that's excluded from that growth rate, but adds a nice revenue stream ahead. And then equally and more exciting is the acquisition of B Medical. We acquired a business B Medical Systems, 1st of October. It's not in those results at all. But for 2023, we announced that, that would be -- we expect it to be at least $130 million of revenue, high-growth capability, servicing 40% of the global population and markets that we don't touch today, that being largely Africa, South America, Southeast Asia. About 20% are markets that we do serve, but the extension into the cold-chain of handling the vaccine -- cold-chain vaccine capabilities that B Medical provides is saving lives. It's making inroads on the immunization level of children that are not immunized around the world. And it's reaching into a market that we believe has tremendous future potential, not just for the basis of the B Medical business but for the rest of the Azenta offering. So very exciting aspects there. With that, let me stop, and I'll turn it back to you and let you questions you may want.

And maybe we'll kind of unpack some of the things around the quarter and the outlook and then maybe we'll make our way to the $1.5 billion question at some point.

But first, on genomics. You talked about growth trends by geography. Can you just talk about NGS synthesis saying or kind of demand trends across those key offerings?

Yes. So just to -- by the way, it's -- today is the fourth anniversary of acquiring GENEWIZ also. So it's an auspicious date, November 15.

[ We'll do ] next year on this date.

You bet. So really simply, on the genomics side, we had a nice balance in NGS. So pretty significant growth and return to sustained good performance. We had a record quarter in Sanger, and the September quarter will be higher necessarily usually than the December quarter as the holiday period begins to eat into it, but 2 really healthy segments from a sequencing standpoint. On the synthesis side, again, a little bit low compared to where we -- our expectations were coming into the year. The capabilities for sure exist in a very strong -- our ability to manage some of the logistics challenges we have getting samples from China, it remains a challenge for us. The majority of the gene synthesis activity that we have takes place in China and our ability to get samples out in a timely fashion for customers has been a little bit of a snag for us now for a couple of quarters. We think actions are in place to resolve. But generally, healthy growth in genomics, really strong on the sequencing side and repairs underway for getting the samples logistically distributed to customers.

And on the logistics and getting things out of China, is that just lockdown related or some something internal?

It's difficult to say if it's lockdown related. The lockdowns haven't impacted the business so much in the prior quarter as they had in the quarter before that in the June quarter. The reason being, although the lockdowns continue to persist, if we have employees who are in an apartment complex, for example, gets locked down, we'll lose the services from 5 employees, but the company can continue to function. When the company itself was shut down for almost 2 weeks period, that had a more significant impact. Now having said that, because the logistics patterns are different, it may be COVID related; I can't declare that it is actually. But those are things that will get resolved and hopefully back on track.

Okay. And then on SRS, solid growth there in the quarter. Maybe, Lindon, as you were talking about that segment and talking about the banking opportunity, which is kind of materializing, can you, one, talk about demand trends for that end market or that offering in general? And two, kind of what does this banking effort kind of open up in terms of TAM? Or how you want to think about it?

What we have found is in the global enterprise relationships of large pharma, this has become more and more important. The trend toward outsourcing is more open and it's accepted that it's a critical aspect of the business, but it's not what pharma wants to spend their time and competencies doing. If you have the storage on site, you end up eating up inefficiencies in terms of not just your assets, but your talent, your skills, your people. And much of the research these days as it's outsourced is also dependent on other third parties. So the samples aren't by definition at the local research R&D centers anyway. So they're already in motion. So a good stopping point can be at a place like Azenta. If the provider can provide that reactive turnaround time to move those samples in this ecosystem of research, which we do very handily, the market opportunity is significant. When we think about the TAM, we think that the outsourcing penetration is still low in the total number of samples. We have more than 50 million samples in storage, where we know that we're the second largest commercial offering and distant #3 would be insignificant. So next to us, we think we're just very small penetration, and we delight these customers, and we become a fundamental arm of their capability in their R&D ecosystem.

I'll add a little bit to that. So as Lindon mentioned, we're over more than 50 million samples cold. That's more than twice what we had when we first got into the business. We've spoken about the need to automate. The number of transactions that we have is measured in millions of months -- millions of samples per month, are touched inbound, outbound, measured, aliquoted. So the automation of this business is now a pretty significant transformation. So it provides a challenge and a huge opportunity for us. The more that we can handle the volume and the velocity of this flux of samples in and out is going to have a tremendous opportunity for us to go capture more business because as large collections come our way, it's really incumbent upon us to be able to manage upwards of tens of millions of touches in a period of time. So we'll continue to be on this ramp, but we're applying a transformative business processes to how do we handle this from a banking transportation.

Got it. Sorry, to just go back to genomics, I got a question on it. And I think it's worth touching on. Just we have seen that business slow down somewhat, but I don't think you're alone and it seems like there's maybe some macro pressures in that business. Can you talk about kind of that slowdown? How much of it do you think is macro? And I want to get to some of the other operational initiatives later, but are there some levers to pull or that you are pulling to kind of help with growth there because it did bounce back this quarter?

Yes. I think it would be tough for us to claim that there are macro issues, although invariably there are. I think when we look at the majority of the issues associated with a slower growth rate in a really healthy business, it's related to our touch points with customers. I think that's what it feels first to us, if we're going to prioritize the topics we have that cause us slower growth. It's inside our go-to-market, then macro is somewhere a secondary would be my guess.

Got it. I want to circle back to kind of the sales efforts a little bit. But just to kind of round out the rest of the portfolio. Freezers, you have automated freezers both the large stores, which I will get to in a second, but you also have automated cryo freezers, which that obviously plays in the cell and gene therapy end market. It seems like you have some customers who really like that offering. Can you just talk about how important that automation component is for your cell and gene therapy customers?

Sure. So from a standpoint of cryogenically storing samples, so below the temperature where biological activity stops, we think automation is critical just because of the viability of the cells and the ability to preserve material that ultimately goes back into a patient. So we think it's a trend that's begun. It will still take some time for rapid adoption. But what we find is when someone adopts the technology, test it out, begins to get comfortable with it, the momentum picks up and it becomes the way that they do it inside a company. So we have multiple customers now with tens of units and this is a pretty fast uptick. And we have some customers who're still on their first or second one and getting it tried out. But the thing that we're comfortable with is once somebody puts automation in place, invariably they buy automated systems after that.

This business, by the way, was up 30% year-over-year for the year.

You call out what it was in 4Q?

It was softer in the fourth quarter sequentially and year-over-year, but pipeline is strong.

Okay. Got it. And then large stores, you talked about record bookings or backlog, I may have messed that up. But strong demand there. I think that is a business that was impacted during COVID, inability to access client sites because when you're installing something the size of a room, you kind of need to be on site. So just talk about what's driving that demand? And then I think the other question around that is just in this macro environment, capital spending perhaps being under a little bit of scrutiny, are you seeing any impact from that?

Yes. So a couple of things. The underlying biorepository business when customers put sample management, automated tools on site, that's for normal capacity expansion. It's for population studies, it's for rare disease studies. They're the same reasons that people always put large automated stores into a facility. The thing that we've seen that's significantly different, now people are using automated cold sample management for the management of their business. There are companies that have samples that they sell, that they distribute and we're beginning to be part of an automated workflow for how they manage their inventory. So it's a really interesting growth opportunity that's come to us that we measure in multimillions of dollars. So this isn't just a store or 2. These are pretty significant installations that are going in place using the version of our large automated stores, not just to manage biological samples for research or for storage, but rather for their manufacturing processes and ultimately distribution.

Got it. And then just kind of rounding out life science products on the C&I side, you talked about 12% organic growth ex COVID, reported growth, I think, a little bit lower due to some tough COVID comps, which you have for another couple of quarters. I guess just the first question there that we get from investors is how much visibility or how much clarity do you have around what's COVID and what's non-COVID? I think people are worried that there's kind of shadow COVID in there. So maybe just talk about COVID trends and then the visibility into that business.

Yes. We really don't think that there's that much ambiguity on this. It is not a ledger specific number, but it takes a lot of reviews based on the types of tubes -- certain tubes, we know are in that environment, but also the customer orders and applications. So this has been something that's been scored by the order number, not by an estimate so much. To put numbers on that COVID environment, we reported we had about $22 million of COVID revenue this past fiscal year. The previous year was $53 million. The lion's share of that is in the consumable space. The $22 million in particular, in 2022, was just about all consumables. There's puts and takes. We do some vaccine management, by the way, still for COVID each quarter. We have also had some estimated headwinds, particularly in the China lockdowns, which we factor into these estimates. I will highlight for investors at the back of our earnings deck this quarter, we put in a very explicit table for everyone to see, the table of those bridges to ex COVID. But this COVID environment on the C&I has been substantial. We have comparative years in Q1 and Q2 for 2023, still with round numbers, $10 million each quarter back in 2022 first quarter, second quarter. By the time we get to second half, the COVID headwinds pretty much are away from us.

Yes. Got it. That's helpful. And then just the last thing on C&I. I guess, over the last year or 2, you talked about, "Hey, we won demand from these COVID customers for a number of our offerings in that business. It's brought us some new customers. We think longer term, we'll be able to retain these people for kind of non-COVID efforts." Where do you stand in that journey?

So at the end of this current COVID environment, we're higher than we were. So Jacob, we had a few years of relatively flat performance in C&I. In COVID, we had a rapid acceleration. And we did note that the change to automation was going to be something of a transformation. And we -- the end result, the ex COVID numbers that are there showed indeed that there's been growth in the business.

Got it. And then B Medical, just closed that acquisition. You talked about $130 million of revenue this coming fiscal year. I think that's 25% growth. Can you just talk about the drivers of that? And how much visibility you have into that growth into next year?

This is an exciting part of the business for us to be able to add this. We capsulized this at a tagline that says, B Medical's in the business of saving lives. Our entire business is built that way to advance and make research faster. But this extension of the cold chain extends the placement and capability of storing vaccines in 40% of the world's population that is vastly underserved, not just in life sciences, but even in the infrastructure to support a cold chain. So much of this cold chain environment is supported from solar-powered electricity that is installed for the purpose of the cold chain. Not all of it, but much of it in that kind of context. So we're talking about Africa, South America, Southeast Asia. The COVID content has been relatively small, a few million dollars in 2022, less than $10 million projected for 2023. So the vast majority of the $130 million is non-COVID. What's driving this end market is really compelling for all of us to take inventory of. The way the WHO and UNICEF assesses the market, pre-COVID, they had an 86% metric on global immunization of children around the world. Through the COVID years, that didn't advance; that actually fell behind to 81%. And in fact, they have a metric that they measure, children around the world that haven't had a single vaccination numbered about 13 million pre-COVID. This past year now numbers 18 million children around the world have not had a single vaccination in these -- mostly in these geographies that we're addressing. So people are concerned. I know in the business world, well, how much of that demand has been assessed to be COVID? What's driving the growth demands here? The growth demand here truly is -- and the concerns in these geographies is less about COVID, it's more about the impact of polio, the malaria, the other diseases that you can vaccinate and eradicate, but we haven't been able to get to those children. So it extends the cold chain capability with information coming back with the condition of that cold chain. The products that B Medical put out there is devices that you can see -- we can see electronically, a dot on the screen, zeroing right on a container, tell if that container's open or closed, what the temperature inside the container is, what the temperature outside the container is and see the history of what that container has done for the past 3 days or 30 days or however long you want to look at it. That's the information technology that B Medical put into their products. So they could see that installation base, and they can see the clusters of it around cities in Nigeria and then the lack of it across the rest of the geography of Nigeria, where it needs to be expanded. They see where the opportunities are. Obviously, this is project oriented. This is funded by the likes of Gavi, other third parties. And so it's project-oriented, be lumpier revenue, but there's no doubt that the needs are not just there for growth and capabilities, but the needs are there for saving those lives and that capability. I'll let Steve -- because I think this lends right into then what is the longer-term potential for a business with B Medical, I think it's exciting.

Yes. So beyond the $130 million and the steady growth of the opportunities for B Medical, there are incredible health initiatives being started in many of the countries where they're already present. But the health initiatives and the biorepositories that are beginning to be formed to do human health studies are woefully inadequate from the standpoint of what the high-quality samples and the number of samples and the breadth of samples that will go into a biorepository because it's just not available to take a blood draw from someone, from a child, if you will, and then try to bring it back to biorepository without a refrigerated cold chain is something that makes the sample unusable and have no value. The B Medical footprint in a country that may have 5,000 or 10,000 of these sites, where the vaccines are stored, to have a health worker go out to a remote village to do an inoculation of a child to bring a blood sample back in the same cold carrier and put into the vaccine box, suddenly, satisfies and conquers this issue about can the samples be high enough quality, can they be preserved? And then what we envision is the ability when the vaccines are delivered next to have in the same cold carrier to have those brought back to an in-country biorepository will have a tremendous impact on the value of this footprint and the touch points and for the disease recognition and human health. These are vastly underrepresented populations. The vaccines and drugs that are developed are for people like us, as opposed to the populations in those countries, has a tremendous demand and opportunity that's not able to be accessed because of the quality of the samples to work on. So we think this is a transformative enormous opportunity for some of these fast-growing emerging markets to provide a real value from what are now stationary boxes that are used only one way in the vaccination of children and rather to have a true human health fingerprint will be of immense value and there seems to be -- not seems to be, there's tremendous interest in us pursuing this as a use of the B Medical capability. So it's a product business for the last 40 years. We think it's a tremendous opportunity for a service business that comes as a result of this installed base and what we think is an exceptional capability.

Thanks for that, Steve. And thanks, Lindon, for stealing my follow-up question. So let's -- going back to operational initiatives. On your call on Monday, Steve, I think you outlined kind of an update to your sales strategy. I think you've been going after some larger opportunities and maybe with less of a focus on some of your bread and butter customers. And I think you're trying to return to focusing on some of those customers. So can you just talk about the kind of journey you've been on from a sales perspective? And then is this -- let's just talk about the journey, where you've been and where you're going?

I'll be glad to, and thanks -- no thanks for asking again, Jacob. Just really simply, the transformation companies go through from a $600 million or $700 million size to $2 billion size is necessarily requires different structure, different capabilities for us to put in place so that we can serve the market opportunity in a different way. We went through a branding exercise a year ago, which we think was tremendously successful. We took a confederation of acquisitions and product capabilities that we have and we put them under the Azenta umbrella, and we think that resonates with customers about the value and the power that we bring to them as a single unified company. Simultaneously, we took these business units that had dedicated sales teams, so as the genomics business and a genomic sales team, as a consumables business a consumable sales team, same with store, same with cryo, and we put them together under the Azenta umbrella and we've restructured some of the sales activities so that people could sell Azenta capabilities and solutions to customers, which was a really right thing to do. And one of the things that we discovered is we did it also without backfilling some of those touch points we had. So Lindon as a person responsible maybe for genomic sales, also had the opportunity to sell more Azenta capabilities and we lost -- we believe we lost some focus for scientists, for selling to scientists; for people selling to stores, for selling to stores and some of that dilution we think cost us, to slow the business down. So we think we have a pretty good handle on it. The transformation that we made was, we believe, a really right transformation. The reorganization, the sales that we made was also a really right transformation. It's backfilling some of the capabilities that we need to sustain that growth and to grow as a company, we think required more investment and it's something we just got behind on. So we've been putting that into place. It's going to take a little while to get this ramp going, but we anticipate by the time we come out of 2023, fully functioning, high capability go-to-market, customers have the touch points that they're used to and we'll have the account structure that's necessary for a company that has ambitions to grow like we will.

Got it. And then maybe for Lindon kind of last wrap-up on the quarter. I think gross margins in both segments were maybe a little lighter than we would have expected. You talked about kind of seeing sequential expansion into 1Q. So just maybe talk about puts and takes on the gross margin side and some of your key offerings.

We did see some pressures in the fourth quarter. We were about 46% in the services business, down about 1 point quarter-to-quarter. And in the products business, we were about 40%, down more like 4 points. And so overall about 44% for the business. And we've been up in the high 40s a year ago. And what we -- obviously, we faced labor inflation significantly on the services side for the past 2 years. We've talked about that. It continued in through 2022, a little bit stronger than what we anticipated. While we've taken some price, we think there's still more opportunity on price. On the product side, while the benefit of this is mix, I don't want to put it off on mix because we've invested substantially. The cryo business, the automated cryo business, which we see to be quite strong in the pipeline, we have built investments into our manufacturing capability for the automation of the space for a much -- for a significantly larger business. As we do that, we put a little more overhead in place to be absorbed in the current sales. And so we put a little under-absorption on our backs at that point. We do see that turning more positively as we go through 2023. We also had some under-absorption related to consumables but also the slowdown of the acquisition of inputs into the business. So now let me turn more forward-looking. What we highlighted is we see confidence in adding a couple of points of gross margin in this immediate first quarter -- in the December quarter, that is, of our fiscal year. And as we do that, I caution investors that we'll be adding some operating expense as well as we restore some of the variable compensation accruals. So at bottom line EBITDA, you're going to see some stability on EBITDA and not so much the progression from that core business. What will be lifting us a little bit is B Medical coming in to this first quarter, we'll have a large quarter. They have a larger skew in the December quarter than what we experienced in the rest of our business. We project their revenue to be $45 million of the $130 million to be in this quarter. And with that, they'll get a little lift in the leverage in this quarter. So now I want to take you in the next to that second quarter, you're going to see what I think is continued enhancement in our core business but then that leverage on the B Medical will offset that. So you're going to see stability from first quarter into second quarter, my expectation right now line of sight, and then enhancement as we grow through the year. EBITDA, we expect to get up past the 10% level as we go through the middle of the year, and average at least 10% for the year on the EBITDA margin, which in this last fourth quarter was 7%. So we'll see progress as we go through the year.

Got it. And then just the other 2023 piece, 30% growth, but you got to B Medical in there. So I think it's something like high single-digit organic growth outlook. I think that probably ramps throughout the year given the tougher comps in the first half, but maybe also by kind of segment, how we should be thinking about the key growth drivers around that organic growth outlook?

Yes. So what we described on -- when you peel back into the organic, excluding COVID, we'll see low double digits for the year overall, and we did highlight that, that begins in high single digits for this beginning part of the year and then it will move through that low double digits, we'll finish stronger than that in the second half is our anticipation. Services versus products, we see comparable growth capabilities in the year for both businesses. However, the bigger COVID headwinds are going to be in the consumable space. We do think that we'll find ourselves in organic ex COVID on both sides of the business, though in clear double-digit territory for the year.

Got it. All right. We've got 10 minutes left or so and we can't [indiscernible] which is the $500 million or $1 billion or $1.5 billion question. I'll let you answer which one of those or maybe all of the above. But just the buyback you announced last week, you've got [ $1 billion ] of cash. That's not new, but the buyback is new. Maybe just talk about the decision behind deciding to buy back what could be a significant amount of stock?

Yes. So just to remind everybody, we had -- we were a semiconductor capital equipment automation company and life sciences company together. In May of 2021, we announced that we were going to separate the 2 companies -- into 2 standup public companies. And as we prepared for that, we ultimately made a decision to sell the semiconductor automation business to a private equity firm. And in doing so, in February of this year, we had the net cash balance of $2.5 billion that came from a $3 billion sale. So when we were standing up 2 companies, we anticipated that we'd be able to figure out a way to have maybe upwards of $500 million on the life sciences business to continue to do acquisitions and have that business grow. Both businesses were cash generating. It was adequate and ample. At the time, we spent the last 6 months with $2.5 billion on the balance sheet. We put $0.5 billion to work buying 2 great companies, Barkey and B Medical. But as we look forward and at the same time we look at the stock price, the best use we had for a significant amount of cash was return to shareholders to buy the what we think were undervalued shares. So the decision around $1.5 billion leaves us actually with a meaningful return to the shareholders, and at the same time leaves us with $500 million approximately in the positive cash flow, EBITDA, the opportunity to spend upwards of $1 billion if a deal came that was of some size. So for the next couple of years, we'll continue to run the company with adequate ability to do acquisitions to continue to add value. We just didn't have opportunities that we're going to spend $1 billion or $2 billion that fit the strategic road map. We weren't going to go buy revenue for the sake of that. And so better in the hands of the shareholders. And we're really keen about the position; we love having the balance sheet that we have on the back end of this. And a lot of opportunities still out there; just none of a particular size to be so transformative.

Steve, you referred to some of this, but I guess, I'd like to put a finer point on it because it is kind of the question we received around this is M&A was the #1 priority for capital allocation. Now you're doing a buyback. Obviously, the stock is in a very different place. So I think people understand that piece of it. Is this a signal at all that you're not seeing M&A opportunities in this market? Because it would seem that they would be presenting themselves, or that you're perhaps less interested in M&A?

No, not at all. I think we're keen to continue to do M&A. We did 2 deals here in the last 4 months, but the deals will be of that size. So different from having that much capital put to work. We think for the next 2 years, we're set and we got the opportunity to do the kind of deals that we want. As shareholders see us responsibly manage that and continue to grow the business, we think we'll have access to capital as things become available to us. We're not going to sit on that cash for the next 2 years.

Got it. That's helpful. Maybe I'll just see if anybody in the audience here has any questions. Okay. Well, maybe just one last one for me, kind of putting this all together. As we think about Azenta now as a stand-alone life sciences company and where you play and what you're focused on and then you add B Medical and I think a lot of focus around samples, so maybe as we think out the next 5 years, what is the key focus? Like how should investors think about the investment thesis on Azenta and where you want to play and maybe where you're going to go potentially if you do want to do some additional M&A?

Yes, sure. So I'm going to continue on answering specifically the question, Jacob, but I'll be glad to share with you. So in the acquisition of both Barkey and B Medical, if you look at the capability we have as a company, we have a sample sourcing business. People can come to us to get a rare disease type or certain samples. So we start at that end of this cold chain in the sample portfolio. With the acquisition of Barkey and B Medical now we go all the way to the treatment of the patients. So we go from patient to patient in terms of what kind of capability that we have. We can bulk up on any of these areas as one. We do also believe that there's a significant transformation that's begun a couple of years ago, and we'll start to see it where there wasn't a company of adequate size to handle some of these enormous collections that are not going to be outsourced. And so because we've been able to prove that we're able to handle, when we talk about millions of touches per month, this is the kind of capacity and capability that we have to have to be able to allow large pharmaceutical companies, biological life sciences companies to outsource collections and the management and the measurement of those samples is critical but not core for them and it's core to us, is what we do. And so the more capability we bring, the more customers are willing to give it to a supplier like us. We think that's really -- we think the flywheel has begun to spin, and there's going to be tremendous opportunity for us. As you look at other things that we'll do, if you imagine that we make more than 1 million Sanger measurements every month, that we generate thousands of terabytes of data, the data capabilities in a company like ours will become a more significant part of the portfolio and the value that we bring to customers.

I think that's the perfect note to end on, Steve and Lindon. Thank you so much for being with us here in Nashville.

Thanks, Jacob. Thanks, everyone.

Good conference. Thanks.