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

Good morning. Everybody. Welcome to the Stephens Investment. I'm Jacob Johnson, the Lifescience tools and pharma services analyst here at Stephens. Thanks for joining us this morning. This is the last fireside chat for us for this conference. It's been a great run, but I think we're finishing with a really good one because we had the team from Azenta here with us today, we have President [indiscernible] the new CFO; and Sara Silverman from Investor Relations gone off a quarter on Monday where there's a few updates we're going to chat about. But before I start peppering them with questions on this fireside. I'll turn it over to Steve or Herman for any kind opening comments and we'll go from there.

Yes. Thanks, [ Jacob ]. We're delighted to be here. We're going to try Herman out here. How about that? So he's been with us for 4 weeks. I think he's ready.

There's nothing like jumping right into it. Maybe just couple of minutes on me. I'm the new CFO of Azenta really honored and privileged to have the opportunity to serve the company. Can everybody hear me? Yes? Okay. It's been an exciting couple of weeks Learning the business, spent a lot of time with the various stakeholders and feeling really good about things. Fourth quarter was very strong 25% growth on the top. When you take out the acquisitions and the C&I business, about 6% organic growth, which is very positive. Excited about C&I. It did expand about 9% quarter-over-quarter. So we did see some acceleration still a headwind to growth. That was positive. China, Genomics was a positive story as well. That grew about 12%. The overall China business grew about 2%. There was a tough compare in the products business. But overall, we felt really, really good about where we ended up in Q4. EPS was strong, statement around $0.13 per share. So we were happy about that. So overall, feeling pretty good about where things ended up. We feel good about the guide. Maybe spend a minute on the guide. So 5% to 8% on the topline. sorry about that if people can't hear me. I could always pick the mic up as well [indiscernible]. 5% to 8% on the topline and then when we talk about EBITDA margin expansion, we're looking at about 300 basis points. We feel good about the line of sight that we have to that. We talked a lot about the Phase I, Phase II cost initiatives, which we saw a lot of the Phase I hit the P&L, and that will continue to cycle through as we head into fiscal year 2. The Phase II initiatives, great line of sight to that, and we'll begin to see those savings as we get into the second fiscal quarter of '24. So maybe I'll leave it there for now.

Yes. Thanks [indiscernible] maybe just -- I think it would be good since this is just joined 4 months ago, this is your first conference. Maybe it would be helpful to just kind of give us your background and what attracted you to sent then we'll start asking a follow-up [indiscernible]

Yes. So I spent 20 years in medical devices. I was currently with [indiscernible] Dickinson. I came to Becton Dickinson through its acquisition of C.R. Bard. And the last role that I occupied was Senior Vice President of Finance for I'm a CPA and MBA. I have about 30 years of experience. And what attracted me to Azenta was, I think it's it's exciting space. I think there's a lot of good things going on. And when I think about some of the challenges that they're currently working through EBITDA margin expansion, it's an area where I have a ton of experience and it felt like a probability of success I had great chemistry with my friend, Steve here. That also helps and it's a great team coming in and meeting the Board and spend time with them. It just felt very much like home. And quite honestly, I couldn't wait to get started. So it's been a good couple of weeks.

Glad to have you on board. So going back to guidance, you are September year-end, so it's a little different than kind of calendar '24 commentary. But still, you're pointing to this 5% to 8% growth next year coming off, I think, a 1% decline this year, and I probably want to explain some of the puts and takes there, but still single-digit plus type growth is better than what some people have preview for next year. So what gives you that -- what gives you the confidence in that growth outlook?

Yes. Maybe I'll start, and then I'll let Steve fill in. I think for me, I start with where maybe the comments that I started with, when you peel out the acquisitions and you peel out C&I, you see 6% growth in the quarter. Organic growth in the quarter, 5% in the year. So I would anchor everybody on that. That growth gives me a lot of confidence in the 5% to 8%. From there, I would talk a little bit about the consumables business. So that did accelerate 9% from Q3 to Q4. That gives me confidence. And when we speak to the teams, about the C&I business. It is starting to feel like in places like the U.S., we are getting back to sort of a par inventory level on the distributor side. So we should start to see sales that we sell into the distributors, it's basically replenishing what they're doing in the end market. So that starts to feel good. And then on top of that, I would say, when we pull on Europe, they are lagging a little bit, but it does feel like they've cycled through it, and they should be all the way out of it by the time they get to the second quarter of fiscal year '24. On top of that, we talked a lot about the sales team investments having alignment of the sales force feels really, really good. We're back to this more decentralized model where we have scientists, sell into scientists, and we have asset managers selling to asset managers. That feels really good. The backlog in stores gives us visibility into fiscal year '24, and that's in a good place. SRS is a very sticky business with the long retains and the time lines that we hold samples for, a lot of visibility into that. And I think we'll talk about B Medical, but the information that we provided on the B Medical business gives us confidence in there. So when you think about those couple of data points, we have a lot of confidence in that 5% to 8%, and I'll let you fill in.

Yes. No, I think it's perfect. I'll pile on a little bit to what Herman mentioned. We're a sample sourcing sample management, sample measurement company. We do the critical but not core things for the people who do discovery. And even in an unusually soft environment, the sample business has been strong. So we on the repository services business, the sample storage portion of the business grew 15% in the fourth quarter. The automated storage tools grew 38%. And I think the way we look at that is not as a tools company doing something unusual, just satisfying this persistent demand for the storage of samples. So even in this environment, research continues, critical programs, continue the number of samples that are generated continue. So our tools business is really to to soak up this capacity of samples that have to be stored in cold systems. So that's, 1%, foundation for us, but even in a soft environment, at least that portion of the business that's related to the stores and the repository services relate to the handling of this large number of samples that continues to be generated. So that gives us a foundation, if you will, for part of the business that we anticipate will continue to grow in the environment.

As Herman said, talk about medical. I think we'll -- based on the inbounds that I received this week, that was clearly an area of focus from investors. So I think we have to start there. So look, there are some moving pieces here, you're pointing to significant decline in 1Q, which is we thought was a seasonally strong quarter, maybe historically has been. You also have this DRC contract, which could be pretty meaningful and a mid-single-digit growth outlook for the year. So I don't know if there's a question there, those are just the moving pieces. But can you kind of help us -- I think the question is, how do we square the 1Q decline versus potential upside versus mid-single-digit growth for you?

Yes. So maybe a couple of points. So first, let me clarify the DRC order. So it's EUR 100 million. We expect to receive about 50% of that revenue. The other 50-odd percent will go to a company like Toyota, where we will outfit their vehicles with the cold chain solutions. So the mix of -- that's how the mix of the EUR 100 million will be spent. When we talked about the DRC order, this is a pipeline business. So we our pipeline is rich, and it's in a place where it's actually the most healthy than it's ever been. We've always had big orders, nothing to this magnitude, but but the Medical always has sizable orders that they're dealing with. When we talk about this order, the context that we wanted to talk about in was really -- this is a lumpy business with mid-single digits. When you think about that mid-single-digit growth, this quarter should give you a lot of confidence in the full year, right? So this is a pipeline business, as I said, how the pipeline converts to revenue is sort of what gives everybody a little pause and the commentary was really, hey, this one order of 45 days into the year, should give you a lot of confidence in that mid-single digits. So that was the frame we were trying to go with. A couple quarters back when we first missed with B Medical, we went out and we said, listen, going forward, we're only going to guide a quarter with what we're holding. And the number that we gave is what we're holding. Now could we go and get an order from DRC to begin shipping in this first quarter? Yes, we could. We don't have that order right and we don't want to speculate on when we're going to get it. But as I said on the earnings call, we have inventory. We've actually -- the government when they came to Luxembourg, they actually wanted to see some of the inventory. We showed it to them. So when that order does come in, we'll be ready to go.

No, that's helpful perspective. I still have some follow-up unfortunately. I guess, so you're right. You're only guiding to the orders you see and to your credits as you've done that, we've seen beef pedicles outperformed expectations, I think, in those 2 quarters. We've just been good to see. And I understand the philosophy about guiding that way. I think the question we get is the -- I think like the guide implies, let's call it, $10-ish million of revenue from [indiscernible], right? And I think last quarter, [indiscernible] but you got something well above that. And in theory, 1Q is seasonally stronger quarter. So is there some reason why you haven't seen more orders to date in this quarter versus last quarter?

I think again, the quarter is not over. So I think there is the possibility that we could see something else. We just don't want to count on it right now. I wouldn't point to anything in particular as I said, the pipeline is healthy, and we're feeling good about that. I don't know if you would add.

We're really comfortable with the year and obviously, we're not as comfortable with the the quarter guide on where we are at the moment.

Well, maybe on the year. So you've been clear, you're very comfortable for the year, DRC -- it certainly gets you a long way there. or a good way there -- but you also said, well -- and that you had expected some DRC contribution and then this contract and maybe larger than what you thought. But you also said that it could be upside to guidance. I think naturally the question I have, but also the question we get is, well, how much does guidance assume from DRC or how much upside could it be this year? And I don't know [indiscernible].

There's not -- DRC was in the pipeline DRC was always in the pipeline, just not to the magnitude that we're currently seeing, so it was there. So how much upside there could be. We don't want to speculate on that. I mean we've had some foot faults in this area that we just want to be a little bit more cautious on that right now.

The part that's most interesting for us. Obviously, it's a good piece of business. But for the first time, this will contemplate samples back which is the nature of the business. So vaccines out from a delivery standpoint and in the same vehicle, bringing whole blood samples back that is the highest propensity of sickle cell anemia in the Democratic Republic of Congo and the infamortality is particularly high in DRC, population of 100 million people. Health Minister wants to do that whole blood is necessary for the kinds of studies that they need to do, is a huge deal for us. And that's what really enthused us about [indiscernible]

Maybe just as you mentioned, that was part of the -- I think when you bought the B Medical people like freezers and we've been through that, right? But you had you'd also made the case, hey, there's a sample angle to this. So maybe can you just elaborate on that and [indiscernible], where do the samples go?

Yes. So we inferred, there's a second phase that's underway. The first part is, can you get the local cold clinics? And can you get transported in and out. So I think those are done. We're in conversations now about how do we how do we process the samples, how do we extract DNA, how do we make the measurements that are necessary. But that's the engagement we want. It's exactly why the order was upsized and starting now to have those conversations. So we'll report that as we can. This is all of our vaccine boxes to start.

Yes. Okay. Got it. And then just one last one on the kind of revenue guidance. Herman, you alluded to the lumpiness of this business, but -- the other question we got is, okay, if I include DRC and some of these numbers, then I back that out, then the business is down or if you're growing mid-single digits, some contribution from this that maybe the base business could be down. Does that mean there's something going on here? So maybe to give you an opportunity to respond to that. And it seems like maybe looking at one-off lumpy contracts and stripping them out it's unfair because there's lumpy ones [indiscernible]

No. I mean -- it's not what we're intending for I think the message was more to give everybody confidence in that mid-single-digit guide. No, I wouldn't read into it. I mean this is -- these are contracts. You have to go out and work these for a long time, and I'd go back to how the revenue converts. It's not a weakness. It's always a timing thing. We're dealing with charitable organizations, [indiscernible], UNICEF, Gates Foundation. So the timing of how you convert is always the big unknown, but the pipeline is out there. It's rich. Look at the DRC as a way to gain a lot of confidence that this year should be achievable.

Got it. And just last one, be medical, just margins. I think they declined sequentially. I think that was a onetime item. But can you kind of -- how should we think about margins in that business from here?

I would think about it in the mid-30s -- mid- to higher 30s.

Okay. Maybe for Steve on genomics in China. You grew 12% in China in genomics. We've had other companies here, [indiscernible] not great China is. And so can you just -- you talked about some on the call, but can you kind of give some color why you're bucking the trend in genomics and make what you're seeing elsewhere?

Sure. So we grew -- a little bit odd, we grew 12% in the September quarter. And the China team was crushed because they grew 23% in the June quarter. So it's probably proximity and capability. So in our headquarter building in China is in Suzhou and surrounded by 1,000 Lifesciences companies. So proximity matters. Our customers are there that physical, personal scientific contact we have with people allows us to sustain a with the local customers, our ability to turn quickly because of the proximity really matters. So I think I think it's demonstrated capability in almost a captive market has served us particularly well. But the fact of the matter is on the product side, just like everybody else is seeing product was considerably down in the same quarter. So we had a net 2% growth in China, but the genomic part was up 12%. So it's not an anomaly, and we are there because of the scientific community. And so we think it will continue to serve us well. Just -- yes, please don't ask us to predict it as to what's coming, but we think we'll outperform what others are seeing just because we have local capability. And the momentum is really strong.

And then just the other one on genomics. You talked about some pressures from themacro talking about what you're seeing there, including kind of the -- how competitive is pricing, I guess, on that business?

So the pricing element is there's a continuous pressure, I think, just on pricing generally, but we don't see it in saying. We don't see any things that people know what the cost structure is, where we see it is in the expectations people have for lower-cost next-gen sequencing. And I think we'll see that roll out. So we see a few percentage points is built into our forecast. But as our costs come down, we're pretty comfortable we'll hold the margin -- profile our targets to hold the margin dollars, but at least we'll hold the margin profile. And as the cost, hence prices come down, we do believe that volume will be increased. So when you when you have a chance to do a whole genome sequence at the almost the price [indiscernible] we think people are going to move that way. So it's been -- the trend is what everybody is seeing per system, and we anticipate that in our go forward.

Got it. And then again, 38% growth in storage systems. We've heard about capital equipment spending, right? And you guys are bucking the trend there as well. So maybe could you talk about what's driving the strength in that business?

Yes, I think it's sample comp. I think people have to have a place to put their samples. There's an overwhelming trend toward automation. I think as the collections get larger, as they get more complicated people really do have to automate. We're seeing that as one of the growth vectors in the storge. And the other one is, historically, the stores have been used for rare disease collections, population studies where the entity will have 1 million or 2 million or 3 million samples in a large automated store. What we're seeing now is as companies continue to expand their businesses, companies that manufacture biological materials, they're now buying our stores to manage their inventory. So they bought an Amazon warehouse, but biological materials contained in a large store so that they can summon inventory with the customers. So we have now 4 large recognizable customers who manufacture biological materials who buy our stores to manage their supply chain and production. So it's a growth vector on top of the historical sample business, and we anticipate that will continue to grow just because it really simplifies the manufacturing shipping process for them.

Interesting. Maybe just -- the other piece of the kind of freezer stuff, the cryo freezers, I think, there may be some signs of optimism, but maybe that's an area that's felt some of the macro pressures. Can you just talk about what you're seeing in demand there? And then maybe dovetail that with cell and gene therapy demand in general this year?

Sure. So the -- on the cryo side, it's been softer. There's no question it's been softer and -- but what -- so we talk about green shoots, though we did fill an order in the fourth quarter for multiple systems to one customer. And that's what we used to see on a regular basis. So it's a good sign. It's not going to -- I can tell you that everything is going to change, but we've been a few quarters without that. But when customers order 5 or 10 units at a time, -- we know there are lines that are going through and manufacturing processes that are going. And it's the first one we've seen where it wasn't just 1 or 2 units going to various places. So as for a very -- for a specific therapy. And we think that's a real plus for us.

In theory, those seem like they're well suited for kind of commercial distribution of [indiscernible] cell and gene therapy because you are [indiscernible]

That's correct. So automation and then the retains. So always -- there are two steps. The therapy is manufactured, then it's usually a whole time of 7 days during the test period. And then there's always a retain. So the beauty of it is there's a persistence of once that -- even once that dose is shipped, there's a revenue that stays in this [indiscernible] system, and it will be in an automated system.

Got it.

Maybe the you had asked about the growth Cell gene therapy?

Yes, yes. Just what you're seeing from that industry? Because I think it's been impacted by the funding backdrop to some degree. But it feels like there's a little bit of a dichotomy of like if you have some things that are maybe going towards commercial or later-stage stuff, that's holding up relatively well, maybe weaker on the earlier stage. But that's from what others have said. So what are you seeing?

I mean we have seen -- we saw growth in the year. So I want to be clear on that. but it was more indexed to Q1 and Q2. As we got into Q3 and Q4, it did begin to slow down. But we did see growth in the year-end. It's not a huge portion of our business, it's probably 5%, 6%, something like that.

Where is it mostly cryo and some GENEWIZ is that...

So we do our best to determine GENEWIZ, which is generally based on the customer. So we're always clear with everybody. If we called that cell and gene therapy business last quarter, cell and gene therapy this quarter, there's likely more. But unless the company is clearly declared that's what it is, it's really hard for us to tell -- so -- but we're consistent in our reporting just to understand what the trend would be.

Yes, and then just on C&I, Herman, you talked through a lot of this earlier, but maybe the sequential increase seems to me kind of feel like it's bottoming or bottomed just cut your take on that business.

Yes, I think we will have a tough compare in Q1. So Q1 was the largest sales volume of fiscal year '23. So keep that in mind. Yes, I mean, all signs are certainly pointing to that. When you look at the data and you talk to the team, you feel that maybe we have started to see the bottom. But listen, we're going to have to go through it and see where the actual results start to come in. As I said in -- when we were on the call earlier this week, we haven't planned on a ton of growth in that space. So we're being mindful of what we saw in '23. So -- but yes, I mean, don't want to get overly excited, but it certainly does feel like maybe we have bottomed down a little bit.

Got it. Maybe I'll pause there if anybody has any questions on kind of topline trends, and then we'll get to the margin side of things. No? Okay. Maybe just one thing on the guide for the year. I think you're pointing like low single-digit growth in 1Q and then it's something a little better than that for the full year. So that implies some kind of pickup and acceleration throughout the year. Can you just talk about what's driving that acceleration throughout the year?

Yes. I would point to maybe two things is, the sales team will start to hit optimal productivity levels. So that's one thing that will certainly drive the back half of the year as those investments start to really pay for us. The second thing is, I do think there's an innovation agenda that will start to ramp up, we'll see some positive things in the genomics business ample. And then we're really trying to do more in terms of geographic expansion, and we've made some investments there that should begin to payoff as we get into the back half of the year.

Maybe, Steve, just one follow-up on that, just the sales strategy. I feel like you've kind of gone back more scientists, selling to scientists. So can you just talk about why that's so powerful? And then I guess, longer term, I think at some point, there was kind of an idea we need to unify our selling strategy and cross-sell everything. Is that still a direction at some point you could move? Obviously, you've kind of reversed course a little bit in the near term. .

Yes. It's a really good question. So we we went to selling the portfolio of capabilities to customers. When we assess the portfolio of top 20 pharmaceutical companies, all by every one of our elements from us, but they don't purchase that way. So although they're customers of all those elements, they don't -- their genomics people buy from our genomics team, the stores people buy from our stores team. And so when we spread our sales around the [indiscernible], we lost some of those very specific contents that allow us to have a point of sales and really focused contact with the customer. During the past 5 quarters, we realigned the genomic sales with scientists to scientists. We realigned the business unit now so that the sample management and the stores are together. So we can have salespeople talk to the customer, how do we manage your sample assets across the life cycle and the workflows. And that's been a great alignment. So now we have 2 sales organizations almost exclusively dedicated to selling those capabilities to the customers, and that's where the customers are. That's how they want to engage. In terms of cross-selling, this is still a huge opportunity for the company, but the means by which we bought out, we'll be a little more patient. And the things that we have begun to do our genomics people know now to engage the customer, where do those samples come from? Where do those samples go next? What do you do with them? So we can at least begin to have those conversations, but I don't have a genomic person asking about their sourcing. And then by the same token, in the repository business, when they pack up sales to ship to a laboratory. We know that there's an opportunity for us to do those same kind of samples. And so we're learning how to treat those things incrementally from one -- we have a diagram from one [indiscernible], from one step in the process to the next one, how do we bridge those. So we'll get back to it. And I think that's a process that over the next 3 years, the customers will get used to it, we'll get better at it. And there is, without question, an opportunity for us to simplify that for the customer from sourcing to formatting and storage and measurement and giving them data when customers know that there's a single place to get all of that done in a world-class fashion. We do believe that's the direction we'll get there as opposed to forcing it forcing our customers to go there.

Maybe getting the margins, and this will be probably a leading question. But Herman, you just joined Azenta. Can you talk about your key area of focus?

It's margin. Yes, margin is certainly a key area of focus. And listen, when we spun the semiconductor business, we lost a large portion of the revenue, not an equal amount of expense went with it. So there is some stranded overhead, and it will be my job to find a way to systematically optimize that. So that's certainly a key area of focus. We talked about an Analyst Day in the beginning of calendar '24, -- my expectation is we'll spend a lot of time going through the plans to do just that.

And in the near term, you're pointing to, I think, 300 basis points of EBITDA margin expansion in 2024 -- can you just talk about the, I guess, Phase I and Phase II cost savings, how those. How that plays into next year and then operating leverage?

Yes. So I think when we spoke about these programs, there were 2 of them in the past. We said it will be 400 basis points of expansion. So the simple math on that, if we're a $700 million company 400 basis points, that's $28 million. So each program was about equal, I think, around $14 million. Phase 1, we did see more than 50% of that hit the P&L. And then the remainder will come into fiscal year '24. Phase 2 really starts in the second fiscal quarter and will ramp as we find our way through the year. But we should see 2/3 of that hit the P&L. So as you kind of exit fiscal '24, we should everything... Approaching double digits. -- there will be a little bit of carry on into Phase II into fiscal '25. But the exit rate on EBITDA will be approaching double digits. Yes. And then just incremental margins or operating leverage... Yes, there's a good amount there. So if you take the sales growth, and it really shows up nicely on the slides that we used for the earnings call. If you think about the sales growth in the neighborhood of $40-ish million and not that I want people to take a ruler out and measure the operating leverage, but you could -- if you look at that, you will see that the operating leverage, the EBITDA margin on those sales is somewhere in that 20-ish percent range, which for a company our size and our growth profile and the markets that we play in, we think that's a pretty good margin. Don't worry somebody already has taken out a roller and hand and may get to do that tomorrow. -- on the flip side of that chart, the Euro still kind of reinvesting some coming back to the business, just key areas of growth. And I think some of it relates to the Boston buyer positives, but any other cause? Yes, I would certainly talk to the sales team that we've been talking a lot about that's in there. We also have an investment in the U.K. Oxford U.K. lab that we're going to be investing in. So yes, there are investments as well that we're making.

Got it. Maybe on the Boston bio-repository, can we just talk about India has been what we always talked about for a long time, the decision, I mean, Basis logical place with the decision to double in there. [indiscernible]

So there's a reluctance sometimes for distance of samples. And so it's an easy investment for us to make to someone, any researcher to bring samples to have us pick up samples to put them into a repository and return on the same day if they need. So someone can order samples the the cost of real estate in and around Kendall Square is unsuitable for a freezer for us to have that capability in a location close by where they can probably retrieve the sample faster by sending us a signal, please deliver these samples and they can do it down the hall. It's a big deal. So we're really bullish about the opportunity we have from a discovery standpoint to support customers in the area and to be really efficient. It will, within 2 years, it will be almost exclusively automated as a repository and this mix had a huge amount of difference because customers will be able to have us pick samples up and within 2 hours know that it's registered in automated system, they won't lose sight of their sales. We think this is a -- I think it's transformative. The reason Boston is a test area for us, and it's willing customers and it's a transformative repository strategy for us.

Okay. And then just kind of the final one back on margins, Herman. You mentioned at Investor Day, so maybe this is -- I don't need to ask this question because the answer is just wait. But Pesenti previously pointed to mid-20s-type EBITDA margin. Is that still a reasonable target? And what will it take to get to that type of margin?

I think it's -- I think we have to talk more about it. I mean, it really will depend on the growth profile. I mean, so if we have a growth profile that's in the teens, we're going to obviously want to invest to maintain that. So I think it's a more to come, type answer right now. As I said in the past, we see what everybody else sees. We do have to get margins north of where they are today, and we're going to be spending a lot of time to do that. And we'll establish time lines and goals as we get into this Analyst Day. So higher is the near-term answer, we'll get a more fine answer.

Yes, absolutely right. And then just, I guess, last line of questions just on capital allocation. I appreciate us being a Nashville again, it's becoming Eren now. We're Monday night, I'm in Nashville in a hotel room and I get an agent buyback announcement. So just Steve or Herman, can you just kind of talk about the capital allocation, the decision to do the final $500 million?

Yes. Maybe I could start and then Steve, you could fill in. So it's really just living into this authorization that we had set up about a year ago. We committed to the $1 billion. We'll live into that by the time we exit this calendar quarter. And then when you look at where Azenta is trading today, it's certainly -- it's a good time to buy. Is that the stock. We feel like it's at a undervalued. So we'll take the opportunity to buy shares and return that capital back to shareholders. It does -- it will leave us with about $500 million of cash on $700 million business. That's a lot. So when we think about near-term M&A, this will be plenty of money to continue to be look at things and make the good choices that we'll make. And then as we get into more programs to expand EBITDA margin, if we need to consolidate some things, it will certainly give us a lot of flexibility to do that as well. Yes. So just couple that. During this next 2 years, you can mention the margin expense is going to be really important. -- get EBITDA. We spent a significant amount of energy and money getting the sales team back. So we have a growth profile. We're not back to the 20% growth we had for 5 years, but the market doesn't support it either. But we think those investments are the right ones. So the next thing that we'll do from an operational standpoint, footprint standpoint, system standpoint is to make sure we have a foundation as a $700 million company, the things that we need to do to be a $2 billion company and have a considerably higher EBITDA margin, more profitability, things that we're going to do during this next year or 2. We have tuck-in kind of acquisitions to build out more capability, but the portfolio is complete and now proving that we can have this kind of growth supporting a lot more profitability as he of focus. So $500 million cash is really appropriate as we get more profitable, if it's time to do something. If we can find a bigger acquisition to do a couple of years from now, hopefully, shareholders will be very supportive of helping us to go do that. And that's really how we look at it. 500 is really adequate to have the company start to get back on the track that we -- that the shareholders deserve... And then the remainder will come into fiscal year '24. Phase 2 really starts in the second fiscal quarter and ramp as we find our way through the year, but we should see 2/3 of that hit the P&L.

[indiscernible] pick up samples to them, put them into a repository and return them same day if they need. So someone can order samples the cost [indiscernible]

Profile that's in the teens, we're going to obviously want to invest to maintain that. So I think it's a more to come type answer right now. As I said in the past, we see what everybody else sees. We do have to get margins north of where they are to is trading today, it's certainly -- it's a good time to buy Azenta stock. We feel like it's at a undervalued. So we'll take the opportunity to buy shares and return that capital back to shareholders. It does -- it will leave us with about $500 million of cash on $700 million business. That's a lot. So when we think about near-term M&A, this will start to get back on the track that we that heals deserved.

You answered my M&A question. So any other questions? Can you sort of talk about kind of obviously, you've had an activist involved and there's this resolution, I guess to some extent, can you kind of give us an update on kind of what -- where that stands, kind of what -- what's kind of their objective to try [indiscernible] The question is on an activist in the stock. And you announced some 2 new board members -- impressive new board members maybe talking about that and kind of where that stands.

Yes. I won't comment on the activist to request at all for us at [indiscernible] shareholder that sees great value in the company. And I think any conversations we had were constructive, all the decisions that were taken by the board. And I think that's the way we would talk about it. We're the activeness withdrew their nominations and I think for the satisfaction of the direction the company has taken and where we are. So just we wouldn't comment more, but we love having the shareholder thinks there's a lot of value in the company, and that's a good thing for us...

All right. Well, Steve, Herman, Sara. Always great to see you guys here. Thanks so much for joining us, Herman. Great to be [indiscernible]

Thanks, everybody.