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

Hello everyone, and let me add my welcome to Sara. We're delighted to have you here today. Thanks for the attention and the time they give to us. I'm really pleased to represent the 3,500 employees of Azenta, talking to you about the things that we are up against from an opportunity. And we just -- we feel this is tremendous potential capability to be into the company. I watch the video, and I see 10 years of history, and I went by pretty quickly. And I can tell you, we stand here today with the same enthusiasm we've always had about what the opportunities are for the company, and we'll spell some of those out for you today, but we're delighted to have you here. I want to start, though, by talking about the purpose. And I think it's important to anchor everybody and when you see a video like that when you talk to any of the employees that we have, when you talk to our customers, I think they reflect the purpose we have as a company, and this is enabling breakthroughs faster. The way we look at ourselves is we innovate for innovators, the kinds of things that we do, enable people who do therapies and drug cures and discoveries, we enable them to do their work faster. And for us, this is purposeful in every event. We are never the company that's going to discover the molecule, but we celebrate when a customer does, we celebrate as if we had. So for us, this is a driving purpose for the company. And you'll see in the core capabilities that we bring as a company. We enable them to do their jobs faster and better and with the kind of precision that they need to be accurate and precise every day. So what drives the company. You'll hear us talk about it thematically throughout everything that we do as a company. When we start to set up at Analyst Day and at Investor Day many months ago, we always wonder what's the right time to do it, but we have to begin planning months in advance. And it turns out, we're confident this is absolutely the right time to have everybody together. And the reason for that is we're in a transformational period as a company right now. We've built a $700 million revenue company with tremendous potential against an enormous market opportunity, and yet we have a company that can't adequately scaled to our promise of being a $2 billion revenue company in 7 or 8 years. We have confidence in our ability to generate revenue. But the way that we're structured as a company, the performance that we have related to the infrastructure that we have won't get us there from a profitability standpoint. So the things that we talk about today relate to investments we're making on 2 fronts. One is the growth opportunities that exist for the company. How do we continue to make investments to drive growth in the market segments that we have that provide tremendous potential, both market opportunity and the ability for us to capture share because of our unique position and the technical and scientific capabilities that we bring. And the other one is how do we make the investment that are necessary for a $700 million company to be able to scale to $2 billion, and to do it profitably. So we put ourselves in a sustainability position for more promise that exists. So between the presentation that I make related to top line and revenue opportunities and the investments we're making to grow the company. Herman makes a parallel presentation. How do we take the current configuration of the company, make those investments to transform ourselves so that we're a profitable $2 billion company able to take on more scale. And these are the issues that face us today. And there are opportunities that face us today. We love those challenges, and we think we're making good on them from the investments we've been making for the past couple of years and what we plan to make for the next 2 years. Before I go on, I also want to set the time frame for the horizon we're talking about. We are in the late part of our second fiscal quarter 2024. And we talk about the opportunities we have going forward for a long-term plan. And our question is, do we go to '26 or we go to 2027 for the horizon of our plan. And we definitely believe we need to focus today the information that we have on a plan that goes to 2026. And the reasons are twofold. One, the changes that we're making over these next 10 quarters are distinct and measurable and they have a tremendous impact on our future beyond the current state. So rather than pick 2027 when we view the markets will be more vibrant and the opportunities that we capture will be in place. We want to talk about the revenue growth opportunities during this next 10-quarter period. We want to talk about the transition and the investments we're making in the company to vision ourselves for 2026. It doesn't mean that we don't forecast and look at what the opportunities in 2027. But I think as you'll understand, as we go through the materials that we've prepared for today, the plans that we have for today, doing discrete measurements of progress against these objectives for the next 10 quarters is essential from an investor standpoint, it's essential from a perspective of the company, too. So this is how we've planned our horizon. These are the investments in the scale and profitability of the business in any event, in any case, as we make investments in the company, we are confident in our ability to outgrow the market at any level. So you'll hear as we talk about the opportunities that we're capturing, that we're positioned to outperform the market in any environment. So as we talk about transforming the company for sustained profitable growth. I'm going to anchor people who may not be so familiar with the company, an outlook at the company, the product portfolios and services portfolios that we have today and then we'll spend a significant amount of time talking about the investments we're making to drive growth in all the segments we participate today. We're an established life sciences company. We're 2/3 of $1 billion. We have a global footprint. We serve customers around the world with the same Azenta face and the same Azenta capability at any customer location. So if we go to a customer in Germany, in the U.S. and China, they see the same company, the same capabilities we represent ourselves in the same way with the same type of service offerings. And it served us particularly well because we have a strong global footprint. We have a huge percentage of the company that's engineers and scientists helping us to capture innovations that are necessary for customers. So not just a global footprint and the means by which we go about our business, we have technical capabilities to serve customers who are demanding in all parts of the world. Over this 10-year period, we've created a very unique life sciences portfolio. This is a capability unrivaled in the space. It's the only company that you could come to, to source samples, to format them into tubes and vials. To store them or to manage the logistics or the storage of these samples and ultimately, to retrieve those samples to interrogate them to decorate them to do genomic analysis and ultimately provide informatics to the people doing discovery. This unique portfolio is a critical capability for every life sciences discovery company, but it's critical, but not core. And so if you imagine a large pharmaceutical company that has millions of samples at various stages in the discovery workflow and the discovery pipeline, ultimately, it becomes a liability if it's not done properly. And because it's critical for them but not core, it is core for us. This is the thing that we do as Azenta that allows customers to do breakthroughs faster. And as we make the seamless transitions from consumables to storage to interrogation, we find that there are a number of benefits we can provide to customers, not just from a scientific standpoint, but also from a cycle time standpoint. So it's a unique portfolio that serves the customers particularly well, and we'll continue to build on the capability as we go forward. And finally, you'll find this at every customer that matters the most demanding customers in the world use our capabilities because of the capabilities that we have. We are exceptional in the storage, in the sourcing, in the genomics capabilities, and we continue to build the customer base. Often, you'll find customers we've been with for more than 10 years because of the capabilities we developed earlier, the problems we help them solve they continue to be customers of ours. And we go from discovery to delivery, serving these same customers. I want to call your attention just to one portion of this because this speaks to the portfolio that we've created as Azenta. So we have 33 out of the top 50. So 2/3 of our top customers buy across multiple portfolio offerings. They buy from the products group, they buy services, they buy genomics capabilities. They buy stores and repository services. So we continue to build this capability. We continue to sell the value of this portfolio. And at this moment in time, at this stage in the company's life cycle, we're really pleased that 2/3 of the companies now buy across multiple product lines and multiple service opportunities. We're not just uniquely positioned from the standpoint of the offerings that we bring, but we have competitive capabilities that we believe are unique amongst the means by which we serve these companies. So we have competitive advantages, both because of our size. We're nimble and we're able to respond to customers quickly. But also this is the only place where you'll find a cadre of employees who understand that workflow we talked about. They understand the genomics, they understand the movement of samples, they understand the protection and preservation of those samples and the requirements for automation from a workflow standpoint customers bring us narrowly problems, and we solve those problems. This is the nature of what we do. We have a competitive capability to uniquely solve their problems around the life sciences sample cycle. And the portfolio is positioned across a number of areas that give tailwinds to the business. And I'll just give you a few here that everybody is aware there's more and more outsourcing of R&D in the life sciences life cycle businesses, pharma and R&D outsource more than 50% of their work today. We are positioned exactly to take care of that from a genomic standpoint, from a proteomic standpoint, from a sample management standpoint, the more that's outsourced, the more opportunity it presents to Azenta. For 5 years, we've been talking about the growth in the samples, high-quality sample collections. Five years ago, we said that there would be a doubling of the number of samples in these high-quality collections in a 5-year period, we were absolutely right. We were right about that same statistic 4 years ago and 3 years ago. And we stand here today with confidence that over the next 5 years, the number of samples in high-quality collections will at least double. And I'll speak in a moment to what that opportunity really looks like. But this growth in outsourced samples because that have to be managed differently because of the size of the collections and the quality of the collections is expanding rapidly. And finally, on the cell and gene therapy front, we believe that this is the future of discovery, the future of cures and science. There's been a little bit in the 2023 time frame, we do believe things are starting to pick up in 2024. We believe the future going forward relates to the cures that come from cell and gene therapy. We're well positioned. And each of these opportunities provides tailwinds for a company like Azenta where we've positioned ourselves to uniquely serve in each of these spaces. So we believe these tailwinds, give us outgrowth market potential in each of the areas that we serve. And finally, we're in a big market. We're a $700 million company in a market that's more than $10 billion. We have sample management solutions multiomics and the sourcing that comes with B Medical. Each of these provides unique growth opportunities that we plan to exploit, not just by being in the marketplace but making investments in the highest growth segments in these spaces. So it's an advantage to be a smaller player that's nimble that has the capabilities to serve these markets. But I do want to put into perspective in the plans that you see today in this time horizon went to 2026. Our forecast is that we're building against a life sciences market with low single-digit growth. So when we give you growth plans and comparisons, if you will, it's against the 1% to 3% market growth period over this time frame. Now we hope it will be more. We hope it will be a higher growth rate. And if so, our outgrowth will perform on top of that market. But to be clear, we forecast in the immediate term a low single-digit market growth against which we build these plans. So now I alluded about market drivers. And this is the part that really energizes the company. It's where we spend the bulk of our time and our energy but how do we continue to capture share? How do we continue to grow our market and where do we vitalize the activities we have with customers. The 3 reporting segments we have, sample management solutions, multiomics and B Medical, each has growth opportunities that uniquely come because of investments that we'll make. So everyone can see the market opportunities that exist, but uniquely, we're positioned to go from the position -- the leadership position we have to make incremental investments to outgrow the space in sample management, in multiomics and in B Medical. I'll spend a moment on each one. Let me start with Sample Management solutions. I'm going to slow you down just for a second because I need to establish one position here. It's different from what we've talked about in the past because as we learn more about the business, we learn more about the opportunity, we begin to really understand what's driving the storage business and the stores business in Azenta. So meaningful discoveries in the life sciences space today always begin with biological samples. And we're talking about billions of biological samples. And I want to summarize the opportunity here in 3 numbers. The first is 24 billion. We imagined as we got into this space more than a decade ago that it was 2 billion to 5 billion samples -- biological samples that were stored cold. What we've begun to realize and we did more research and we brought in some external health and we began to triangulate, there are 24 billion samples that are stored cold today. And I'm not talking about vaccines or face wash for kids, these kind of things. These are clinical and research biological samples, 24 billion are stored on earth today. It's considerably more than we had initiated -- initially thought. But as we get smarter about the businesses we learn more, we understand the magnitude of this as a tremendous opportunity. The second number is 1 million. There are 1 million, 1 million upright manual freezers today that are employed to store these 24 billion samples. And these manual freezers are just for the sample these are upright storage manual freezers and it's a heavy duty cycle. So these freezers store these 24 billion samples. They work hard. These are ultra-cold temperatures. And what happens is the life of those compressors, the life of those freezers is somewhere between 8 and 12 years. So if you imagine, about every 10 years, you're going to replace the freezer. So on an annual base, 10% of these freezers are replaced to store the same 24 billion samples. And to put that in perspective, that's a $1 billion spent every year, $1 billion spent every year to replace freezers that are storing these 24 billion samples. We think that's a mistake that gets made every year, and we can understand now why we have such a strong growth in the automated stores, where we have such growth -- strong growth in the repository services because we're starting to eat into this as an opportunity. And finally, 2.6 billion. There are 2.6 billion samples generated every year, clinical samples and research samples that need to be stored cold. This provides a tremendous opportunity for us to continue to capture share to take our unfair share of these samples that are generated that need to be preserved. Moreover, when we look at the temperature at which these samples are stored. Half of the samples are stored to cryogenic temperatures and minus 80 degrees C. This is the hardest to manage from an automation standpoint. That's why the system has largely been manual, and are the most precious of the samples because they need their biological samples or often their cells, and they be stored to cryogenic temperatures. So we look at this as an opportunity of 1.3 billion samples per year that ought to be in our stores or in our repositories. So for us, a tremendous opportunity and the sweet spot of our business is in the minus 190 and the minus 80 space. So remember the 1.3 billion samples. So this is important in perspective when we talk about what the opportunities are for us going forward. So now we're in the sample management solutions is now having framed the issue in terms of number of samples. We're going to talk about sample management solutions, starting with the automated cold stores. You've heard us talk recently about the growth in the automated cold store business. It continues to grow. It's now become a more regular business for us in terms of growth always was lumpy when we had only the base stores, we have 24% CAGR over the past 3 years in the automated stores business. The base stores are large automated stores. You know these from population studies from rare disease studies from just generally large collections that need to be managed in an automated system. It's historically been lumpy because these are large capital decisions, but we're seeing this be more persistent. We're seeing the activities that come and the opportunities that come around large automated stores continuing to build. In the light purple shade, you see the cryo business. We launched an automated cryogenic system for the cell and gene therapy market back in 2016 before there was an opportunity. We could foresee there was a need for automation to make sure these samples had the type of integrity from a temperature management standpoint that could only be delivered from automated systems. As the market began to pick up, we penetrated very successfully in cryo. There's been a slowdown in 2023 in cell and gene therapy. But most importantly, we're positioned with the manufacturers of these cell and gene therapies. We've established ourselves as the go-to enabling capability that they're going to need for cell and gene therapy applications as that picks up in 2024 and 2025, the cryo business will continue to grow. And recently, we've talked about new vectors. These are for manufacturers of GMP products that need to maintain temperature integrity, they need to maintain the history of these products, and frankly, to manage their large supply base, we've started to put automated stores for applications to deliver and run the manufacturing process for some of these GMP manufacturing companies. So we have a number of growth vectors here in the large store business that gives us great confidence about what the future looks like, managing more of these 1 billion samples that come to the market every year in our space. I'll add 2 more data points here. We talked about the strong opportunities in stores and the booking opportunities that are coming. For the most part, on the same 24% growth trajectory, we have 24 -- fiscal '24 largely in backlog for how to continue this trajectory for the remainder of this fiscal year. On top of the stores, business is a $25 million services business that is a quite profitable business that we run to maintain the installed base now of more than 200 of these installed systems. So we have a strong we have a strong services business on top, which puts the fiscal '23 number even closer to $100 million. So we have high confidence in our ability to continue to serve this market with large automated stores, and you can understand because of the sheer number of samples that are coming we see more opportunities going forward. Similarly, on the repository side. Now we're in the sample management solutions business talking about outsourced samples to go to our biorepositories. What you see in the chart is the millions of samples that we store in our repositories on behalf of customers. So these are samples owned by customers. At the end of fiscal '23, we had about 50 million cold samples stored in our global biorepositories, and again, a pretty persistent, 20-plus percent growth rate on the number of sample units that we care for. And you can see even an acceleration here recently. We believe that this opportunity will persist, but it's more important to that. We saw a large number of samples. The thing I want to call your attention to is we're much more than a repository. In the earliest days of BioStorage Technologies, when we first were in this business, this was an archive business. People would give us samples to store for long periods of time for a whole time to 7 years, 10 years, 17 years. what people come to us for now is to manage the samples like they would manage their samples to help them manage their clinical trials. We have an enormous volume of samples in and out of our repositories now. So we're at a point now where even with 50 million sample store, we have more than 1 million transactions per month, registering samples or treating samples, discarding samples, sending samples for lab analysis, it's so much more than an archived biorepository. It's now a means by which we help customers to manage their workflows and we keep their samples on site. This is where the challenge and the opportunity comes simultaneously. We store 50 million samples. We transact manually, more than 1 million samples per month. When we get to 100 million samples or 200 million samples or 500 million samples in a repository, this particular method of doing business won't scale. And so one of the things that we -- that is incumbent upon us as the leader in this space for individual sample storage is that we automate biorepositories. You've heard us talk about that in the past. But I want to express today, what's the opportunity here to automate a biorepository. It's a matter of scale and a large scale. It's not how to go from 50 million samples to 70 million samples, how to go from 50 million samples to hundreds of millions of samples and to do it profitably. So I bring a solution to. That looks like a rendering, and I'll explain myself in just a moment. Last month, we introduced a new product, the BioArc Ultra. And this is a next-generation high-efficiency, high-capacity automated store. The capacity of this store to store 0.9 milliliter tubes is 16 million samples. So let's put that in perspective, our entire collection of 50 million samples, if they're in 0.9 milliliter tubes, will fit into 3 BioArc Ultras. I show you a rendering only because we have a working system in the factory in Manchester in the U.K., but we can't get back far enough to take a photograph and encompass the whole thing. So I'll give you a rendering, so you can see what it looks like. But it's really important to know. We've been working on this product with a customer now for a couple of years. It goes to factory acceptance testing next month. So -- and it will be installed within the year, and it's a transformative capability for this customer. It's a transformative capability for the industry believe. And when we talk about a repository that we're putting into the Boston area, the first site that we have automated stores in our Indianapolis repository already. The first of the BioArc Ultras goes into our Boston site. And in 2025, it will be operational, and we believe this will be game changing for the repository business and for the entire Boston area where within a 20-mile radius of this repository, there are more than 400 life sciences companies. Let me show a little bit what I'm talking about with schematic. Each of these individuals squares you see here represents a single manual freezer. This is the amount of storage capacity we have in our biorepository business. I'm from the Midwest, when I see 106,000 square feet, that's 2.5 acres. That's a lot of freezer space. When we talk about the opportunity from the BioArc Ultra, the same capacity fits on the basketball floor. So the same capacity of 50 million sample capability, 0.9 milliliter tubes fits into an incredibly small area. So it's a little bit about footprint. I want to be clear. This is a little bit about footprint, and it's mostly about economics and the way that people will manage samples, the way people will manage samples with us. The first example to give you is if an operator goes from here to retrieve a sample at a freezer in more remote location. By the time they get back to where they started with that sample, we'll have transacted 50 samples from the automated systems. So this is a complete game changer in terms of efficiency, in terms of cycle time, in terms of cost. And in terms of reliability, a customer who is in Kendall Square, will know the location, the precise location of every one of their samples at any time because they'll be connected to the system that tells them exactly where their samples are. And when they order a sample from us, They'll send us a signal and then ask us, please deliver these 100 samples when you can. They'll be able to see which shuttle they're going to be on, where they are, when they're loaded, when they'll be driven down and when they will be received. And when those shuttles go and pick samples up and drop samples off, we'll change the way that they manage samples. For many customers, we'll give them 2 entire buildings of space back. We have customers that have 5,000 and 10,000 manual freezers in their possession. And this, we believe, is no way to proceed. So as a company, I can tell you, we're done by in manual freezers, and it's our objective to get this business model right so that our customers stop buying manual freezers too. We think from a cost standpoint, from an efficiency standpoint, cycle time dependability, we have a much better offering for them. And when they get carbon footprint reductions when they get space reductions, we think this is transformative. The last thing I want to say about this is, I want to put into perspective. This is a capability that exists today. So these are stores that work. This is a slow-moving industry. People have been managing samples like this for 70 years. It won't be an overnight transition, but we firmly believe those incremental samples, those new samples every year are the ones that we'll be able to begin to capture. And 2 years from now, as we exit 2026, we believe we'll have demonstrated this kind of capability and the growth in repository business from that time forward, will be related to the capabilities that we put in place. So we're -- we are really excited about the sample repository business. We have to think hard about what does it mean to have an order of magnitude more sample capacity, but we're thinking about it. And that's how we're positioning ourselves to address this market on a global basis. So I want to talk about multiomics. And I love -- Ginger and I love talking about your business. I'm talking about multiomics. We love talking about GENEWIZ. This is a world-class genomics capability that we continue to grow. 5 years ago, in November, we acquired GENEWIZ. And we acquired GENEWIZ at the time it was about $120 million company. We made investments in the people and the facilities and the capacity. And we grew a $250 million business over a 5-year period. I'm going to show here a little bit about what the business looks like, what we've done, I think people are pretty familiar. We have a Sanger Sequencing business, the foundation of GENEWIZ back in 1999, a Sanger Sequencing business. We added synthesis to it. We add a next-generation sequence. We continue to build with our customers to stay in front of their needs from a genomic standpoint. We had a relatively slow comparative period from '21 to '23. We grew only 3% in the core GENEWIZ business. But as a time when the market was down by 5% on an equivalent basis. So clear 8% outperformance at least from a multiomic standpoint, but considerably lower than we've been in the past. But we believe the persistence. We believe the opportunity still exists as the markets pick up, we'll continue to outperform for the reasons that -- by which we go to market as opposed to the market itself. The thing I want to call your attention to also is the same way we saw a genomics opportunity and the investments that we made -- built this a $250 million business we see multiomics. We see the next opportunities in single cell and proteomics. And some of the clinical services we provide strong growth from these areas give us a meaningful uplift in the business we see an equivalent size business growing from these new omics opportunities compared to what we saw in genomics. So when we look forward, when we look at the opportunities that exist here, we see another $250 million of opportunity just from these new growth areas over the same time period. So a little bit about how to -- and I'm going to do my best to explain this really simply because it's a really simple explanation. I hope I don't get it wrong. Everyone knows about the advances in technology from a Next Generation Sequencing. Every time there's a next-generation tool comes out, the cost of sequencing comes down, the volume increases and the pricing comes down. And yet it's an elastic curve, so the business continues to grow. And this happened, there was a time when the Illumina tool HiSeq was the #1 production tool. It was replaced by NovaSeq 6000 and a vast majority of the data that came off of next-generation tools was in NovaSeq-6000. Illumina recently launched and NovaSeq X and the X Plus capability, we were among the first companies to get a NovaSeq X. This is the relationship that we have as a genomics company. It's a one-stop shop at the forefront of all discovery that customers need. The makers of these tools, the makers of the 10x tools of NanoString, everybody who's been in the business comes early to GENEWIZ to make sure we have an early look at the tools that we shake out the technology that we share feedback with them, how the tool is performing, we always get an early look at this business. So we received in the first batch a NovaSeq X Plus, we installed it, and we shook it out, and we gave feedback, Subsequently, we bought 4 more tools. So we are at the forefront of this technology. But what I show you here is 80% of the data that we generated for Next-Gen Sequencing in the month of January, 80% came from this brand new NovaSeq tools came from 1.5 tools. We have we'll have 5 installed pretty soon. So we made a wholesale change. We're absolutely in front of what the customer demands are, and it's what we've always done. It's always been the nature of the GENEWIZ business. So we're a 10% move now to NovaSeq X Plus. And to put in perspective, a very small percentage of the tools that are installed, a very small percentage of the capacity is out there. We've moved 100% toward it. Customers expect the NovaSeq X Plus pricing even if they don't have a NovaSeq X Plus. We do and we're taking full advantage. We're installing 3 more now. We'll have one in [indiscernible] have one in the U.K. We'll have a total of 5. We are wholesale moved and our customers can depend on us with the next-generation technology. It's always been the method by which we've invested and we continue to do so. And the important point here is that same thing that we've done in genomics is the same thing we're doing in proteomics. We're a qualified Olink provider forever now. I mean we were the earliest among them to be qualified. It's a technology that we know we had early and customers depend on us to do proteomics on the Olink tool single cell. We've been having 10x boxes out in sites for years now. We were way in front of these technologies, this is the method by which we invest and stay in front. So the thing I can tell you with confidence is we will be at the cutting edge of what our customers need. We've made those investments in advance. It's always served the company well. we'll be ahead of the market. There will be some turbulence as there always is with some pricing for a period of time. Ginger Zhou was here today. And Dr. Zhou before she ran the genomics business for us, she ran the Next Generation Sequencing business. So this is Ginger's fourth path through the Next Generation Sequencing cycle, steady hands are at the wheel. We got this under control. The business keeps growing, the margin keeps improving, and the volume of work we're doing is increasing, but we know how to stay in front of it. So we're really enthusiastic about the prospects for multiomics as we go forward. Now I want to address B Medical, and I think everybody is hoping that I'll address B Medical and give you some -- a little bit of detail a little bit of time. So Luc Provost, the CEO from B Medical is with us today, and we'll be glad to answer questions. I want to spend a moment here on B Medical to talk about 2 things related to growth opportunities of B Medical. First is a transformation of part of the B Medical business to align it with Azenta. This is a very important initiative for us, and it will serve us well from a couple of standpoints. First, it will make the profitability more dependable. And the second is to set us up to be able to do the strategic implications, what we're trying to do with B Medical is to do sample sourcing for rare and hard to reach, hard to get hard to transport samples that uniquely we can do with B Medical capability. The things I will tell you is we've been together now we own B Medical for 1.5 years. We absolutely believe in their conviction around vaccine cold chain and everything that we do supports that mission, that life-saving mission. But at the same time, the placement of those vaccine cold chain boxes provides us another opportunity in addition to the vaccine cold chain life-saving mission, how do we do some prospective capability to use those cold boxes to bring high-quality samples back to solve human health issues in country. So it's an important characteristic. And second one is, as we evaluate the portfolio, we have look at the vaccine cold chain business for B Medical. And there's a portion of the revenue that's not related to vaccine cold chain. There are high-quality high-capability freezers, blood management tools and systems that although they're part of the portfolio and their very capable products, they have neither scale nor market position nor are they sufficiently differentiated for us to be able to make a strong business from those products. So we stand by the products. They're excellent. We stand by their capabilities. We stand by all the things B Medical did to make really exceptional products. It's such a small part of the business against very large, very strong, very aggressive competitors that we don't have a means by which we can be successful in this business. More than 80% of the revenue comes from the vaccine cold chain. You see here Africa, Asia, Latin America and more than 90% of the gross margin comes from those product lines. But an inordinate amount of the cost in B Medical is associated with making the non-VCC products go. A realignment of this business will include a discontinuation of the non-vaccine cold chain products, and we'll focus exclusively on VCC. So for us, we'll exit the non-VCC product lines and what gives us a secondary opportunity. We have a world-class manufacturing location in Luxembourg. And with the capacity that's no longer used for the non-VCC products, will compress 4 factories that exist today on part of our footprint into Luxembourg. So we have a world-class manufacturing site with FDA approvals to manufacture products that have regulatory requirements because the B Medical products have passed those requirements. So we have an excellent manufacturing site we'll take advantage of. Herman in his remarks, will talk to you about some of the implications of this footprint compression and the simplification of the business that we think will drive tremendous benefits for the company. The most important point in this first phase is the dependability of profitability from a reconfigured medical business. So I show 3 scenarios for revenue. In a $10 million revenue scenario, we breakeven at the EBITDA line. If we deliver a $40 million quarter in B Medical, it will be more than 20% EBITDA margin. And $25 million, if we ran a $100 million B Medical business at $25 million a quarter would be in [indiscernible] EBITDA. So it will be accretive to EBITDA margins in this reconfiguration of B Medical. So we feel strongly it's the preservation of the VCC business and preserves all the upside opportunities as it relates to how do we use this VCC, these vacuum cold chain containers as the first stop in the cold chain return for sample management will discontinue parts of the business so that -- although our good products that weren't a strong business for us and allows us to realign from a profitability standpoint and preserve all of the upside from a sample sourcing initiative. Okay. So let me spend just one moment on what's only upside in the horizon of this plan. We talk about through 2026. We talk about the opportunities that exist, the investments that we're making. There's a tremendous interest and demand and value in human biological samples from underrepresented portions of the globe, particularly in Africa. The opportunity to bring consented biological samples back that will help in the genetic diversity for discovery, it's of tremendous interest to date -- and this isn't new. This is something that everybody knows. There just hasn't been a mechanism to bring samples back that are preserved and of high enough quality to get high-quality data to act on those. The map you see here of Africa. Each of those green pins represent a vaccine cold chain location that's a health center. This is a solar-powered vaccine cold chain. It's a solar powered refrigerator, if you will, that represents a health clinic. And there are more than 100,000 of these in Africa. Each of those is a health center, an origin point for the being able to draw blood and to put it into the vaccine cold chain box after the vaccines are removed. And the next time vaccines are delivere, they go into the cold box and the biological samples can be retrieved and transported in a cold chain. This is a tremendous opportunity for us to take advantage of the vaccine cold chain footprint that we have, the health centers that they're in and the means by which we're going to bring these samples back. There's a tremendous interest in these samples from ministries of health who want to be able to examine their human population, how can they treat very specific diseases in country? How do they do surveillance testing for the spread of different outbreaks. There are a number of reasons why the footprint matters. And you can imagine from the pharmaceutical company standpoint, as they build out today, it's a poultry, 3% of genomic data has come from these types of underrepresented populations that they can expand that the amount of discovery, the quality of the discovery can go up. Ministries of Health have interest pharmaceutical companies have interest uniquely or the ones who can provide that kind of capability and connect them together. To give an idea about the size, and I want to be cautious about this, we're talking about millions of samples, and we're talking about value per sample in the range of $100. So if you wonder why this is an opportunity for us, it's potentially billions of dollars of health benefits to Africa and hundreds of millions of dollars of opportunity for us as we help to solve this problem and bring samples of high quality back for use and for research. So I paint this only from the standpoint that there's a tremendous amount of interest. There's a lot of activity going on, a lot of parties involved. But the one thing I can tell you is there's tremendous interest to get this done, and we uniquely are the ones who can do it in various regions. So we're active in these conversations as soon as we're able to report that we've begun those, we'll report them to you. But we think this is a tremendous opportunity not built into this horizon for 2026 is something that we hope to be able to begin to deliver soon. I'm going to take your side was just for one minute. Earlier in the chart I showed you the 2/3 of our top 50 companies -- customers buy multiple capabilities from us. I show you one case study from one of the key accounts we have. We set up 4 key accounts as a customer. How do we work with large global pharmaceutical companies to have them understand the value of our portfolio. The fact that we have a global footprint, we can manage this life cycle of samples across their discovery chain. And we show here an example that we started with the GENEWIZ capabilities with this large pharmaceutical company 20 years ago, and we added repository capability, we added storage capability. We added more services from a genomic standpoint. And we grew this business by more than 3x over a short period of time because of the attention we give it as a company, the maturity we have to be able to serve large pharmaceutical companies across the globe and to explain to them the value of our portfolio we think we're being successful. And the maturity that we're allowed to bring to this sales organization allows us a great chance to apply this to additional customers as we go, but we have 4 key customers now. We think the value of the portfolio is being borne out. Our objective is to continue to communicate this. And over the years, we hope to make 33 out of 50 into 50 out of 50. But we have some proof points here that says this is a portfolio that's working, and we spend a lot of time on it. The one thing I will tell you is this is the largest pharmaceutical company with the interest in the activities we have in Africa. They're not part of this yet, but they are very active in Africa, and we believe that there'll be -- when we stand up here at the next Analyst Day, we'll put some of the sample sourcing from Africa on to this chart as well. So when we bring it together, we'll give a growth forecast here for the company, very specifically, strong opportunities based on the sample business as it relates to stores and storage. We didn't talk much yet about the consumables and instruments business. We modeled this business. It's approximately $100 million, but as we model this business in this horizon as a modest grower. So this would be low single digits. It brings the overall growth opportunity. It's highly profitable. We believe it's an integral part of solving the automated sample management business opportunity. But right now, we forecast that as modest growth. It leaves us to high single digits in this forecast horizon for sample management. In multiomics, forecast a mid-single-digit growth. And I'll give you 2 reasons for that. In a slower market environment, we'll outgrow that market, but we can't tell by how much -- a couple of things have happened. North America has been considerably softer than we've seen in past years, and the amount of biotech funding has to come back as a large number of our customers. A large part of our business is related to small biotechs and some have gone out of business, some have just slowed down funding. As that picks up, so too will the genomics. The last part is, I talked to you about the turbulence right now in one more transition to the next generation of -- to the Next Generation Sequencing the transition, the impact that has both on the cost expectations, price expectations from customers. This is a cautious look at how we manage through that. We think we're doing a particularly good job here in the earliest days, but we're still in the earliest days, and it's too early to call what the implications are going to be from a 1-year or 2-year shift to the NovaSeq X Plus. We're confident about our position. We're confident that we'll outgrow the market. We leave this is mid-single digits opportunity here for this horizon. And finally, for B Medical, we forecast modest growth. We think the VCC business will continue. We like the VCC business very much from a profitability standpoint. We think that footprint is going to provide tremendous benefits to us. There's upside potential in sample acquisition. We treat this only as upside right now. And again, we make continuous progress in our contracts, in our agreements so that we have something to report to you. But we like how it's going. We've derisked B Medical to make this a safer bet. And now we're going to continue to work on the sourcing activity because we think that holds tremendous promise, which might dwarf the rest of the B Medical business from a profitability standpoint and opportunity standpoint. I'm going to -- we're going to stop for Q&A session. And please, I'm only going to talk about the stuff on the far left box. Herman is going to fill in the blanks about how do we convert a 5% to 8% grower in this environment against these opportunities. When we've made all those investments, how do we convert that to earnings power. And we feel really confident that we have the opportunity here to deliver extraordinary performance, generate cash and have outsized profitability here over this near-term horizon. And this is one of the reasons we focus on these 10 quarters through the end of '26 because we want to start delivering this soon. I'll showing it to you sooner. And we'd love to have another Analyst Day here in 18 or 24 months to talk about the next plan for 3 years beyond that. That's why we focus here on 24 to 26, it's a period of execution. It's a period of growth for the company and investment in growth and especially to invest in scale. So we can grow the company and deliver on the promise that exists, which is even greater than what we talked about in the past. We do believe there's an outsized opportunity from sample management standpoint, connecting these together with the multiomics business, we just see tremendous potential. And as we exercise the opportunities that come from B Medical will be in a tremendous position, we believe, as we get to 2027 to accelerate the growth even beyond the current forecast. With that, I thank you, and we'll -- we're going to pause here now for Q&A, and we're going to set up. And if I can, I will introduce the team that's here. So the people who join us now, Herman Cueto will come up, Herman is the CFO; David Wang. He's the President of the sample of Management Solutions business. Ginger Zhou is the President of the Multiomics business, Luc Provost is the CEO of B Medical. Also with us today and able to field questions, we won't bring them up. Robin Vacha, Senior Vice President responsible for all the operations. When we talk about automating repositories, that's Robin. So he's got to leave it noon because he's got more work to do. John O'Brien, Senior Vice President and responsible for Business Development; Jason Joseph, is Corporate Counsel. Olga Pirogova is the Senior Vice President and responsible for Global Human Resources; Vio Hughes, Vio is the Chief Accounting Officer and Controller for the company and [ Ivan Peron ] is FP&A executive for us. And Maria, Maria is a manager in our Investor Relations group. I hope I got everybody. Okay. Great. Thank you, everybody.

[Operator Instructions] So we have Maria and cherry on the sides. [Operator Instructions]. So David. And -- when we bring you the mic, please just say your name, your firm. And as Steve mentioned, we're going to do another full Q&A after Herman presents. So please keep your questions on the business top line, we'll tackle profitability in all of those questions after Herman's presentation. Okay.

David Saxon from Needham & Company. So Steve, earlier on, you talked about market growth of low single digits. I think that's meaningfully lower than what you forecasted in your prior LRP. So I just want to confirm or clarify, do you expect -- does that assume these headwinds the markets facing continue through fiscal '26? Are you saying the normalized growth rate is low singles?

So we hope and anticipate the market will grow more. But we're in an environment now that we haven't forecasted either. And we watch other companies who report what they expect the growth rate to be. We forecasted fiscal '24 for us to be 5% to 8% growth. And we listen subsequently to people who said the market is going to be down. We're still confident in our 5% to 8% growth. And what that means is has 5% to 8% growth on what other companies are forecasting to be minus 1% to 1% growth. So we don't want to call the market where we're really confident about our ability to outgrow it. So rather than get in front of that, we wanted to present the case in a business scenario where against the low market growth, this is how we'll grow. And if the market increases, we -- I would tack that growth rate on top of whatever market growth would be.

Okay. Great. And then in the SMS business, you talked about replacing manual freezers I think the SMS TAM, you said the $7 billion. So would love to hear how big of an opportunity that is within the $7 billion? And kind of how far along can you get or penetrate that opportunity over the fiscal '26 funding period.

Sure. That's a great question. Maybe the owner of the business wants to take that one on. David, what do you say?

Yes. Yes, definitely. So -- Yes. So Dave, thank you very much, David, for your question. I mean, what we see in the automated stores business, first of all, is tremendous interest among our customers. And as Steve mentioned, it's not just for, let's say, their traditional legacy collections, but especially for many of their active research and active clinical trial questions. In terms of what the penetration means, what I can say is that, we definitely see that accelerating demand from all the pharma, let's say, top 20 pharma that all of us traditionally think about. Certainly, also some of the manufacturers like the kitting and other folks that work with logistics. We are also seeing, of course, a continuous demand for automation in the traditional biorepository market, whether it be country type of biorepository or specialized repositories, such as oncology or something like that. So it's very hard to say how it will play out, but what I can say is that there's tremendous interest and bookings growth in this area for us.

Next question, Andrew.

Andrew Cooper from Raymond James. Maybe just another one on SMS. You called out the new vectors of growth there. Can you give us a sense for the size of those opportunities and maybe what they're contributing to get to the market growth for that segment as you think about the build through fiscal '26?

Yes. I mean thank you very much, Andrew, for your question. I think a way to look at it is automated stores had traditionally been used let's say, in small molecules and non biologics, for example, for sample or compound management. What we see right now, especially in the general pharma biotech trend going much more towards biologics. In certainly, cell and gene therapy would be a real subset of that. What we see is a lot of penetration of those companies being interested in automation. At the same time, our technology is advancing very rapidly. As Steve had indicated, this ultra low temperature, the minus 80 to minus 190, that's absolutely one of the single hardest physics and mechanical problems for people to work on from an automation perspective. So they naturally turn to us. Another part of it, I would say that comes very naturally for Azenta and sample management is that we are particularly strong in those medium to very large sized stores, which have tremendous benefits, not just CapEx, but in terms of turnaround time. So I would really underscore the whole topic around enabling breakthroughs faster. For example, if we think about the Boston repository, I would love to have that Ultra in the biorepository to a very rapid turnaround of those samples, send them over to GENEWIZ and Waltham, Massachusetts, and then get those data right back to the customer as soon as possible. So I think it's all part of an overall ecosystem that we're working with our customers.

Helpful. But maybe just following up, thinking about high single digit in the segment in the plan there. Can you give us a sense for the amount of growth driven by those new opportunities or new vectors sort of the basin cryo business as you kind of saw it prior? And then maybe secondly, just a little bit on the economics of the storage side versus the transaction side, right? You said 1 million, I think, a month versus 50 million samples. A little bit of flavor there for what that means sort of from an economic perspective as well.

Okay. I won't go into specific details. Obviously, we don't go into that product level detail. What I'd say is an expectation we would have both our automated stores business as well as storage would be continued single-digit growth. I mean, double-digit growth. Some of it is just timing dependent when we get certain orders when we complete certain things for our customers when people set legacy collections or when people begin large clinical trials, for example. The economics of some of the transactions are normally just built into what I would call traditional industry-wide pricing. So whether you bring in the sample and you register it, whether you send it out for analysis, or for a discard. Our pricing is very much in line with the premium side of the traditional mile repository market, I would say.

Andrew, I'm going to add a little bit to that because David was cautious as he should be, a transactional business isn't as profitable nearly as a storage business. And so when we talk about that. One of the reasons that automation is required is how do we make that not a burden on the business. So when we talk about how does this business become not just larger, but more profitable. The thing that we don't want to scale is we want more transactions that aren't moneymaking. And so this is one of the main drivers here, tremendous opportunity for us. David's got initiatives underway. These not just automated stores in the repository, but also automated registration is coming.

Yes. I'll just build one more thing off of what Steve said. You saw that diagram with a very large 2.5 acres versus the basketball court. Imagine the number of lab techs you need to do that versus maybe 2 to 3 to really run the BioStore Ultra. Now the thing is, is that those personnel can be used for much more expert type of work that would be traditional within the biorepository business. So it's a very different business. And I think one that will definitely be leading the market, Andrew.

The next question, I think Jacqueline in the back.

Jackie is with TD Cowen. I'm a bit newer to your business, but you previously mentioned Synthesis was a main driver of your multiomics revenue growth. This might be more of a clerical question. But how do you price your Gene Synthesis business? Do you operate with more of a flat rate based on turnaround time or size? Or do you operate more on a gene-by-gene basis?

So thanks for the question. For Gene Synthesis particularly, the pricing structure is pretty just -- it's not like one flight or one just like just customized. Essentially, we have services, product portfolio in synthesis that's like we have flat price for our customers. Those are more commoditized type and we compete with price, certainly. And in addition, service quality and the product quality so on and so forth, turnaround time. We have product portfolio in synthesis, that's like selling solutions. It's a one-stop shop. We have our own solutions to sell to customers. That's more premium price. So it's a combination. And Gene Synthesis is one of the profit drivers for us in our portfolio.

Great. And how do you think about the competitive landscape as that cost and turnaround time continues to improve across the industry?

So your question is more about the trending?

Yes, just like kind of related to competition, we see a lot of companies starting to offer premiums and they're starting to more capitalize on supply chains. How do you kind of view that competitive landscape?

Yes. Doing this business for 15 years, this doesn't stop. It's always just -- one thing it showed to me is the technologies when it's more mature, the price will drop. And that enable customers to do more enabling customers actually. And for us, we have the economic scale and we have domain expertise. They are like other competitions like selling lower price. But we -- it's always like that. We are not winning 100% on price. We're winning overall our service like as a whole and the solutions, and the quality, and the one stop shop. We have a lot more to sell. So overall, this is a normal competition landscape for us, and we continue but continue with our successful journey to compete in the market.

Great. And if I could just sneak one quick one in. What's your take on emerging technologies and DNA synthesis like enzymatic DNA synthesis or enzymatic assembly?

Yes. I would say we are closely monitoring these new technologies in every product portfolio we are offering today. And enzymatic is definitely one of them, right, more just like more environment-friendly for example, and more is enabling customers to do themselves. When it's become more mature, we will like be more just like focused in terms of thinking about like taking actions about onboarding, but now it's still in early stage of it's promising, but it's in early stage still in discovery stage. So for us, as a commercial provider, we're relying on mature technology, but enzymatic for example, is definitely and our radar to be evaluated constantly.

I think, Jacob, next question.

Steve, maybe following up on the consented samples opportunity. A lot of what you guys have talked about today is how do you store samples on behalf of customers, sell freezers to them so they can store themselves. So this consented sample opportunity is maybe a little bit different business model. Can you kind of give us a vision of what that might look like -- and maybe I think you had Transit Biomarkers, which maybe was involved in that. Does it feel with that? And then the second question there is, it's not assumed in this FY '26 outlook. Is this an opportunity that could materialize before then? You're just not including in your forecast or how we should think about the timing of it?

All right. So thanks, Jacob. And I think you hit the essence of everything. So a couple of things. The difference between Transit Bio and others is those are -- that was a business where customers would ask transit buyer to buy a sample, to locate a sample for them that they would own in the opportunities we have in Africa, for example, the opportunities we believe consented samples will be dealt with by countries and health ministries because they'll be very protective as they should be about what kinds of information and what rights can go along with those samples. Having said that, anonymized properly consented samples will be the responsibility of those health ministries, the collection and the measurement per se, of those samples will be ours. And we believe the rights to those samples for subsequent discovery will be ours. This is a fundamental difference. And as long as there is an arrangement where there's a public and private sharing of this opportunity. We think that helps to move it forward. It helps to get tremendous support for it, and it puts us in control of the means by which that country would allow us to monetize for their benefit and for us. So this is the distinct difference. It also adds a little bit of complexity in one sense because it takes more time, but it also has a lot of clarity in terms of how people can be assured that samples will be used properly sourced properly and done under in a respective way in a respectful way. And I think that's the #1 concern. There's perfect alignment there and then how to is what it comes down to. So we believe that's the opportunity, and it's not us who has to go in and do anything other than secure consent, but those kinds of things will be decided by the ministries of health and the providers and the patients will simply be there to manage and transact and do it for the guidelines. So we think that's a real opportunity. There's an agreement and consent that that's the way it will happen in more than one country. And so the question will be then how do we get it initiated. But because all the forces are going in the same direction, it's something that everybody wants to have happen. We're confident it will happen. It brings us to the timing. We're putting a little cushion on all timing related to Africa. Luc is coached to send that one. So it's always dependable. It's not just dependable on time. So we're confident. So we're -- we also want to leave it out there beyond 2026 as we can bring it in, we will.

Great. Next question.

This is [ Jordan ] from Evercore. Maybe my first one, of the 2.6 billion samples generated each year, you said about 50% need the ultra-cold storage of this percentage, which of this percentage, what percentage uses the Azenta solution currently? And what's the opportunity for share gains in the near term?

You want to?

Yes. I don't know. It is a very hard one to dimensionalize because we do have this mix of the legacy collections as well as the active ones. Honestly, I think it's an appreciable percentage but I have to get back to you with an estimate. I think we'd have to have the team do some maths on that.

So let me add a little bit the one thing we -- sorry, David.

No, no, please.

I think we left off of this. We think that absolute growth in samples is the range is somewhere in the 4.5%. So on 24 billion samples, it's probably an incremental $100 million because some of the samples are discarded for various purposes over time. but we still treat all 2.6 as an opportunity. But on an incremental basis, someone replaces a freezer and puts those same samples back into that freezer or throws these samples away and use that empty freezer space for this. We treat it as $100 million incremental. That's one way to look at it. And -- but we do look at all replacement as a chance for us. So it's somewhere in between those. That's the bid-ask spread here, and that's just we need to do a little bit more work on there. But fundamentally an incremental 4.5% is what you'd imagine on the 24 billion.

That's helpful. Maybe one more for me. Of the 80% data being generated on the Nova X what has been the increase in the amount of NGS data being generated over the past few quarters as you've transitioned to the Nova X?

Yes. I will take this one. Yes. It's a part of like 15% to 20%. And not only data like increase that showed our volume growth, right? So we are capturing the volume in the market. It's in that time zone that we need to capture the volume, adjust our price. And most importantly, we have internal development capability. We're maintaining and improve our margin at the same time. So it's coming with experiences and volume growth, it does like come in with benefit of adjusting our fixed cost investment. So overall, we are in this positive trend. And this volume is something we are taking right now, and we're pretty happy about like the volume growth. That means customer is still using us and more customer -- where is this price adjustment, more -- it enable data getting cheaper. Enable customers to use -- to be excited about this new technology and use more about this new technology and a driving for our source driving for like us [indiscernible]. So it's about 15% to 20%.

Yuan?

Yuan Zhi from B. Riley. Maybe some clarification there. So number one, for the non-vaccine coaching services, is that part overlap with Barkey. So within the B Medical, there's a blood management solution. Is that services overlap with the Barkey acquisition you did a few quarters ago? And is that still considered a core business?

Yes. I'll take this a couple of things. Unrelated to the business, so the -- the non-vaccine cold chain part of Medical is on the freezing side. The Barkey business is showing and these devices are in the process -- they'll be one of the product lines that moves into the Luxembourg factory. So you'll see the overlap, but those are regulated devices and perfect fit for the factory in Luxembourg. It's very much core product.

Got it. And then maybe one question on the multiomics. [indiscernible] on another question earlier on the enzymatic synthesis. I'm just curious, is there any demand or increased demand for protein sequencing at the moment within the proteomics space?

Protein sequencing is something that we are looking into, but it's in [indiscernible] our product portfolio. Currently, we offer it, but it's super small in our portfolio right now. For us, that's gene sequencing is one. It's becoming mature right now. So the next one is peptide sequencing, and that is protein. So we are super close right now evaluating peptide sequencing capability, just like NovaSeq one of the new technology we are evaluating and the peptide sequencing is definitely one of the major focus for us.

Yes, sure Elliot. Can you just wait for the mic. Right there.

Elliot Turner with RGA Investment Advisors. I'd love to hear David, you mentioned briefly this notion that with Boston with automated stores, you could retrieve a sample and send it over to GENEWIZ nearby. And I'd love to hear, like generally what the opportunity is to drive that cross-sell. What have been the missing links in the past from really building out that motion? And what lessons might you have learned through the sales force reorg and the different go-to-market motion over the past couple of years on that front?

Yes. So maybe Ginger and I can tag team on this because we work together a lot on this. I mean what I'd say is the sales force motion is pretty natural. We have those normal cross-sell promotions and compensation mechanisms in there. I would say more importantly is that the SMS sales force and the GENEWIZ and multiomic sales force understand really well what that intersection is. Ginger and I already have many tens of deals where our customers are using both services and it's in one booking. And sometimes they discover the ability to do it as well as their science progresses. So I think it's coming more and more naturally for our team, and I think it's a matter of training more than anything at this point.

Yes. Typically, those deals are larger deals -- and we -- I think since Azenta launched. In the past 2 to 3 years, we really practice our muscle, how to sell more just like with one Azenta solution. We were not very good at it at the beginning. Now we are -- we learn so much from the customers. And actually from sample sourcing to every module mix order starting from samples. So we have the sourcing, we have the storage, we have the analysis, and we have like the transport. So customers, especially like customers with -- especially larger customers, they value one stop shop. They value ease of use with the provider, and we were able to remove their pinpoints through the journey, especially on sample-sourcing like capability and ability. So one Azenta solution has been like becoming more and more powerful, and we're pretty excited about it.

And I'll just add one practical point. In many of these cases, the multiomics labs, and let's say, the biorepository just use that as an example. In many cases, they're in the same building or like very, very close to each other geographically. So the teams are also learning from each other in terms of what could be done with our customers.

That's really helpful. And like does having a more distributed footprint now that you're opening storage in Boston and you have more labs outside of China to do the sequencing, does that all help drive maybe an accelerating growth in the cross-sell over the next few years?

I think it does.

Yes, Yes. The answer is yes. It does.

And I mean, to what degree is that built into this forecast? And any sort of color would be helpful.

Forecast for like [indiscernible].

[indiscernible] forecast.

We...

Nothing from the current trajectory to be really clear.

Yes.

The amount of growth that David and Ginger have been able to demonstrate together is the same thing as forecasted in this plan.

Okay. Maybe we have a couple of minutes to take a few -- oh, we got one more in the room. Okay, Tom, go ahead.

Yes. I just had a question on the GENEWIZ business. I think when it was acquired, the headquarters was based in China and just curious with the integration and increasing U.S. government focus on BGI and other entities in China. Have you segmented, I guess, the business, whether it's data analysis or Gene Synthesis where I guess, it's more regional. So if it's a U.S. or European customer that information is generated outside of China, just curious about there.

Yes. So I'll...

Let me just adjust one thing. The headquarters for GENEWIZ has always been South Plainfield, New Jersey. We have a significant establishment in Suzhou in China. In China, our business is about 17% of the multiomics business. That said, Ginger can address the comments you have. We do a majority of the Gene Synthesis in China for the globe. So I think that's really the nature of your question. Ginger, will go ahead too.

Yes. The model -- the headquarter in the U.S. has started in 1999 in U.S. and the China actually started like 2008. So it's like one of the largest labs for us like in China, but we'll have 14 of them like around the globe. So the model always regional production. We have regional production capability, and we have regional support. So it's pretty independent regionally running. That's our model. We do leverage global capacity, but the majority is regional operating like independently. The only one that's being just closely monitor is Gene Synthesis because that's the one we produce in China, leveraging like the benefit like how we build it up and serve global customers. And for now, like we're closely monitoring the risk like due to geopolitical tension and other trends. But for us, building a lot, building capacity is not the issue because we constantly doing so. We copy ourselves everywhere. If we need to, like all the hubs, we have all the labs, and they serve the same like services and to the customers with the same like model. So if we need it, we will build it outside of China, but we haven't got to that point in terms of trigger it, but we're closely it right now.

Okay. Maybe I'll take one from the webcast. So this is the one on B Medical. So can you talk about the synergy with B Medical. This is about the sample acquisition opportunity. Do you have any examples or case studies on the last mile vaccine distribution business, how the B Medical is positioned to help Azenta and collecting more samples.

Thanks for the question. Actually, B Medical is really well positioned for sample acquisition in Africa. As Steve mentioned, we have tens of thousands of health centers that are equipped with our equipment which is a storage -- cold storage in that location, but also an energy source because we supply also not only cold storage, but also energy there. And to have so many, I would say, spots in Africa allows us to also have direct contact and direct communication with ministers. And we are in direct contact with several ministers of health today already on sample acquisition in Africa, and they are highly interested, they're highly interested because we have a flawless record in Africa with the vaccine cold chain. They know that we belong out to a major company who has also unique capacities and combining the 2 together really makes a unique opportunity for the African countries to have a new also resource for them to finance their health care through the sample acquisitions.

Okay. So we're about at time. So thank you guys for the questions of this session. I still have some on the webcast, and we'll try to get to those in the next Q&A. From here, we're going to take just a 10-minute break, and then we'll be back with Herman Cueto, our CFO, to do the financial overview. Thank you guys. [Break]

Well, welcome back, everybody. My name is Herman Cueto. I'm the Chief Financial Officer for Azenta. I want to start with a thank you. I appreciate everybody coming out today. I've got some great content that I want to share. I'm excited to share it with you today. I don't have any cool renderings of the BioArc Ultra and 2.5 acres of land that are 2,800 stores, but I've got some good stuff that we'll walk through today. So I have 4 key chapters that I'm going to walk everybody through. We're going to start with a little bit of a look back on how we performed and where we're headed inside of fiscal year '24. And when you look at a slide like this, I think what comes off the page is that revenue growth was pretty strong over this period of time. It continues into fiscal year '24. It was aided by some inorganic opportunities, but the profitability did not drop through to the bottom line until we get into fiscal year '24. And I stand up here today with a lot of confidence that this type of improvement you're going to see each and every year over this LRP period. We already have the programs, the initiatives, the governance in place to drive this type of profitability. And you're already seeing it. You're seeing it in everything that we're doing today, especially over the last 2 quarters. Now if we were to go back 12 months ago, when we exited the first half of fiscal year '23, we had a 2.9% EBITDA margin. Not where we want it to be. We quickly assembled the leadership team of Azenta. We came up with the Phase 1 and Phase 2 cost initiatives. And those cost initiatives drove 350 basis points of improvement from the first half to the second half of fiscal year '23. And it's the foundation for what you saw on the last slide what we're going to deliver inside of fiscal year '24. This is a company that knows how to do this. Changing the profitability profile of Azenta is something that we have a lot of confidence in and you're seeing the results right now. It's an exciting time at Azenta. You heard Steve talk about this wave of samples and what that could mean for our organization. You also heard him talk about the B Medical opportunity and what it could mean to bring samples, the acquisition of samples into what we do every day. But as Steve alluded to, we're at a critical juncture in the company's evolution. We have to transform the company right now because what got us to $700 million in revenue won't take us to $2 billion. We're in this perpetual cycle of every dollar of revenue that we go and grab. We have to add incremental resources. It's not the business we want to be in. We have to transform right now, right this minute to make that happen. And to enable that, we've put together a transformation management office that will focus on 2 key things over the next 10 quarters. It will focus on building the foundation for scale and growth and simplifying the company. And as you're going to see in a minute, there's an ancillary benefit. As we simplify the company, we have an opportunity to make tremendous progress on our cost savings initiatives. I want to introduce our transformation program to everybody today. We're calling it Ascend. Ascend is a simple word. It has a simple meaning. But in the context of what we're trying to do right now, it's profound. We're trying to move up our revenue growth above what the market is doing, and you see from what Steve talked about, we'll be able to do that over this LRP period. And we're also looking to move up our profit profile to something much more competitive than we are today. And if you let me talk about how I see the opportunity at Azenta, I would start with, over the last 10 years, we've built this wonderful capability of end-to-end sample management solutions, world-class capability. Our customers love us. But to get here, we bought 15 companies along the way. And as we rightfully focused on building out the ecosystem, we let a lot of these small subscale companies run somewhat independently and continue to operate subscale. So when I look at where we are, and I have a lot of experience doing this, C.R. Bard was a very acquisitive company. Becton, Dickinson, a very acquisitive company. I successfully led the integration of C.R. Bard into Becton, Dickinson in 2017 and 2018. What we're going to talk to you about doing is not rocket science. Companies do it all the time when they buy other companies. They simplify and they build for scale, and they extract value every time they buy a company. And what I'm going to share with you is that as we simplify, we're going to pick up at least $30 million of cost savings over this period of time '25 and '26. So this will be the cool picture that I have. It doesn't get much cooler than this. But where are we after 15 acquisitions? So we're a $700 million company. We've got a lot of stuff, a lot of complexity. Take a look, 13 IT systems, 45 physical sites, a ton of legal entities. This is what we're going to be working on. The programs are already identified. We have line of sight to it. The teams are circling and getting things done as we speak. But unraveling this complexity and simplifying for scale and growth creates a tremendous opportunity. Ascend is going to focus, and I'll say it this way. The first wave of Ascend will focus on 4 key things. We're going to focus on our sites. We're going to focus on our portfolio. We're going to simplify our organization, and we're going to spend a lot of time on our IT systems and making sure those are optimized. So when we buy the next 15 companies, they're getting plugged in. I'm not going to go through all 4 of these, but I am going to double-click on 2 things. I want to talk about site rationalization for a moment. So when site rationalization came to the TMO, we got together, and we put all 45 locations on a sheet of paper. And we circled the locations that are strategic, the most important locations to what we do every day. And we pushed them off to the side. We're going to continue to invest in them and we're going to optimize them within the footprint that they currently occupy. Everything else needs a plan. And as you've heard Steve talk about what we're doing in Luxembourg, where we're taking 4 factories and merging it into one, and it's a world-class capability. I actually was there 2 weeks ago. And I grew up in factories. I've worked in 3 factories, including a factory in Mexico and Puerto Rico. So I know manufacturing very well. This is a world-class facility that we're going to put 4 factories into one. Perfect example of site rationalization. Or more recently, and all goes in the background, we have our Head of HR. We have our site in Burlington, our headquarters. We looked at our Burlington headquarters, and we thought about our long-range planning and what we want out of a corporate office. And we looked at the size and scale of what that should be. And we realized we had more space than we needed. So we shrunk our footprint in our corporate office. And those benefits will start seeing inside of this quarter. My point here is these rationalization plans, some get done quicker than others. Some will take a little bit longer, the timing of a lease, a regulatory consideration that we want to be thoughtful about. But inside of this LRP, the next 10 quarters, there's $10 million to $15 million already identified that we're going after. Let me double-click on org simplification. And I'm going to use my function finance as an example. So today, the cost structure of Azenta Finance, 5% of revenue. So everybody has an iPhone. I could do this math. I'm a CPA, but I could do this math in my head, 5% of $700 million is $35 million. Now anyone who has run a company or operated inside of one knows that benchmarks can always be debated. But in my experience, a world-class finance organization should be 2%, less than 2%. So within my function alone, there's $20 million of opportunity. Not within this LRP period, we'll start to work it now but we'll get to a point where we'll take cost out of finance. And this 5% isn't only headcount. I'm not even talking about headcount. I'm talking about consulting costs, and I'm talking about specialized services on these IT type systems where it's very hard to find people to work on it, and it's expensive. It's not just a headcount thing. There are other costs embedded in here. And as we simplify the company and we simplify the IT systems, we could simplify where work is getting done and we can begin to squeeze and take cost out. And if I use this page as a true north, where we're headed, what success will look like. In fiscal year '26 -- September 30 fiscal year '26, when we deliver this, we will have delivered an EBITDA margin above mid-teens. And we would have prepared this company for the wave of samples that could come in, the opportunity that B Medical could provide, and when we begin to find strategic tuck-in M&A, it will get plugged right into a very efficient operating model moving forward. So timing, very important. So the Phase I and Phase II cost initiatives already underway, you're seeing those benefits. They'll drop in, as we talked about. But the Ascend program will deliver $30 million to $40 million of savings between '25 and '26. And think of it in terms of $15 million to $20 million per year over that time period. And once we deliver that, we will have our site set on fiscal year beyond '26 and delivering a 20% plus EBITDA margin. And the next phase of value-creating initiatives where are they going to come from? They're going to come from the BioArc Ultra. They're going to come from automation in our factories, our repositories and our labs. And I want to be clear the investments to do that are in this plan, the benefits are not. So third chapter, capital allocation. Since launching Azenta in 2022, we've deployed $1.5 billion of capital. By the time we exit fiscal year '24, the $1.5 billion that you see on the page is going to be $2 billion. The $500 million increase is because of the share repurchase program that's underway right now that we're currently executing. And when you think about the $2 billion, 75% of that would have been directed towards returning capital back to shareholders through the share repurchase program, the other $500 million would have been directed towards acquisitions and organic vectors, CapEx, R&D, things like that. When we get to September 30, 2024, we will have $500 million of cash and 0 debt, a very, very strong balance sheet position. And we're going to have a business that the flywheel is starting to turn, and we're generating positive free cash flow. This will ramp over this period of time. So '24 will be positive. But low or single digits. '25, you'll have some of these investments in the transformation and then '26, you'll really start to see it accelerate. But within the 3-year time frame, $100-plus million of positive cash flow. We will be in a wonderful position to continue to invest in R&D, CapEx, look at strategic tuck-in M&A. And we always have the opportunity to return capital back to shareholders through another share repurchase program if we choose to do that. You're not going to see a seismic shift in how we deploy capital over the next 10 quarters. The one difference will be we'll invest in the transformation, and we should think about that being in a range of $35 million to $50 million, and that will be -- there will be noncash items in there. There will be CapEx in there, but that's about what the transformation will cost Wave 1 but not a strategic shift in how we deploy capital. Okay. Final chapter. So the next 2 slides are a repeat of what Steve shared, but I want to put a finer point on what -- how I think about this. Over the last 2 quarters, you heard me talk about on the earnings calls getting at an organic growth profile of the company. And I talk about removing inorganic and removing the tough compare that we had in C&I that we've cycled through now. And when you unpack all that, you see a number that's pretty consistent with what's on the page there. That should give everybody in this room tremendous confidence in our ability to deliver that because we're seeing it right now. Now are there opportunities for us to be on the high end of this range? Or opportunities for us to do better than this? There are. The wave of samples. And when that comes, that will be an opportunity. If the market improves in multiomics, cell and gene therapy funding comes around, biotech funding comes around, yes, there'll be an opportunity to outperform in the multiomics business. And then the wonderful opportunity that we have with B Medical and the acquisition of samples, that too, could be a potential upside, not in this plan. And if I were to put our commitments on a page, this is what it would look like. We spent a lot of time talking about revenue. We've outlined the programs that are already identified underway being worked right now with line of sight to it to deliver an EBITDA margin above mid-teens business that's generating positive cash flow and EPS growth greater than 45% CAGR over that 3-year period, and we'll be in a range of $0.75 to $1.20. You should have a lot of confidence in our ability to execute this plan. And I've shared a slide like this in the past. If you look at where it's going to come from. So the incremental sales will drop through nicely. And when you look at how we get from [ 4 6 to 15 to 17 ]. About 40% will come -- of the benefit will come from the leverage on the sales. The remaining 60% will come from the benefits that we just spoke about. And once we deliver this, we'll have our site set on 20% plus. And the next vectors for value creation will come from things like automation. And when we're standing in front of you at the next Analyst Day, we'll be telling you all about that and how we're going to deliver it. We have a page in here to help with modeling. I won't read it, but it's here. So everybody has it. And we're always happy to answer questions, if necessary. And this is my last page, and then we'll go to Q&A. But if I were to wrap up with a couple of key messages, Azenta is a very unique company with incredible capabilities with a world-class ecosystem that our customers love. We're transforming the company for scale and growth. We know how to do it. We have an experienced leadership team that understands what we need to do and executing today. As we simplify the company, the ancillary benefit are these cost-out initiatives, again, somewhere between $30 million and $40 million. Capital allocation will look very familiar to what we've done in the past. And I think today, we have outlined very clear objectives, milestones, achievements that we could talk about on all of our investor calls over the next several quarters. So with that, I'll pause here. We'll go to Q&A. We need to go to Q&A quickly because we have a lot of work to do to deliver this plan for you. But let -- maybe Steve could join me up here, and we could take some questions.

David Saxon from Needham. So just wanted to talk about the cadence for your fiscal '27 -- sorry, '26 targets. So it sounds like the 5% to 8% revenue growth should be kind of level loaded in '25, '26. Herman, on the margins, can you help us with the cadence? Like when does the $30 million to $40 million of cost savings come in? And how should we think about the cadence?

I would continue to model it at 300 basis points, 300-plus basis points per year. So you see that in '24, you'll see something consistent in '25 and '26.

Great. And then the tax rate comes down fairly meaningfully from fiscal '24. What's driving that? Is just that the legal entity changes or anything...

If you recall this year, our tax rate was elevated. We had some share-based compensation things that brought that number up and it would level down into the mid- to high 20s over the foreseeable future and that's what we have modeled.

Okay. And is there any opportunity to bring that down further? Or is -- I think it's [ 27 to 29 ] kind of how we should think about the outer years?

Yes, I would continue to model it in the mid- to high 20s.

Jordan?

This is Jordan from Evercore again. What is the guide assuming for gross margins in 2026? From our calculations, the guide implies around 47%, does that sound about right to you?

We're not guiding gross margin, but you could certainly get there. The cost initiatives certainly improved gross margin. So we're going to see gross margin improvement, but it's not going to be a metric that we're going to guide.

Got you. And it looks like the guide is assuming about flattish OpEx dollars, does that sound right to you? And if so, does that seem reasonable given the greater than 6% revenue outlook?

I mean you're going to see SG&A as a percentage of revenue move into the mid-30% range. So that's how you should think about it.

Okay. Next question from Andrew.

Andrew Cooper, Raymond James again. Maybe just thinking about, obviously, the cost saves being pretty impactful here. But if my math is right, you're sort of saying 125-or-so bps of sort of typical margin expansion over the next couple of years each year. Is that the right starting point to think about if the market is growing low single digits like you're assuming what that should look like after this $30 million or $40 million as we think about sort of the...

What's the 125 basis points?

It's just you said 40% of the, call it, 10 to 12 points of expansion were from...

From leverage on -- yes, operating leverage.

Correct. So if we think about ex the actions you're putting in place, the typical year, what it might look like in terms of whether it's beyond fiscal '26 or kind of from the traditional path.

Think of it this way. When you look at that operating leverage, so you could do the math on what the sales are. We have a gross margin today in the mid-40s. So it leaves you with something. Sales times the gross margin leaves you with a dollar amount. Keep in mind, we always invest 5% of sales in R&D, and you're left with something, something small. And over this LRP period, you should expect to see that type of leverage. And then beyond that, I think it's just going to depend on the focus of the company. We're certainly going to be driving towards an EBITDA margin inside of the 20s. So we'll just have to see what that looks like when we talk about that next phase of '27, '28, '29, when we get there.

Yuan, next.

Yuan from B. Riley. I'm just curious about the cash flow assumption there. So we are taking about 11% -- up to 11% savings from the SG&A. And in the meantime, we are going to invest 6% to 8% of revenue into a variety of things to improve the top line. I'm just curious, with this net-net, how are we thinking about the cash flow generated from the operation.

All of the cash flow that we talked about will be generated from the operation of the business.

Can we get to the $100 million number accumulated over 3 years because we are talking about sequential savings from SG&A. And then we are talking about continued 6% to 8% revenue investment that leaves us relatively small number there.

I -- you must be doing math that maybe we could take off-line. I certainly see $100-plus million of free cash flow being generated by the business, maybe it's something that you and I talk that off-line. You might be looking at something a little bit different than I.

And then a follow-up on that $100 million free cash flow generated. What's the plan there for this $100 million? Will you open to do dividend? Or will you just continue for investment?

I would -- it's exactly how I described it. Our capital deployment strategy will look very similar to what it looks like today. We'll continue to invest in R&D. We're going to invest in CapEx. We're going to invest in the transformation. We're going to continue to look at value-added strategic tuck-in M&A. And if it makes sense to do so, we always have the opportunity to return capital to shareholders through a share repurchase.

Okay. Next question in the back.

Matt Sykes from Goldman Sachs. Just more on capital deployment, specifically M&A. Just given the level of streamlining and consolidation you're planning with the Ascend program. How does that make you think about your future acquisitions? I know you talked about strategic bolt-ons, but these acquired companies still come with additional IT systems, footprints. Does it change the type of companies you're looking for? Does it change the frequency number of M&A you're planning on doing? I mean I guess my question is, how do you avoid getting into a similar situation 3 or 4 years from now versus the future plans?

Yes. I would say, first and foremost, and Steve will jump in and add color. But you're not going to see transformative M&A. If you do see anything, it will be tuck-in M&A. So it will be generally something smaller that we're building out a capability or expanding the capability and a smaller company like that is going to have an infrastructure that we'll be able to absorb inside of the key platforms that we want to run as a company, Oracle Cloud, as an example. We'll just plug it right in.

Jacob Johnson from Stephens. Herman, I appreciate kind of the efforts around site rationalization, IT systems. That seems like pretty low-hanging fruit. If I go back to the last Investor Day, Steve, we talked a lot about kind of cross-selling opportunities, uniting under one brand. I'm just kind of curious on that opportunity, that's not something I heard mention today. Is that something that maybe is not included in this plan. And maybe as we think about the beyond 2026, that's something we could see as an incremental margin opportunity.

Yes. So Jacob, I showed one chart that showed what we've done with one top pharmaceutical company related to cross-selling. We believe there are opportunities. David and Ginger talked about the kinds of things they do together. In the current forecast through '26, it shows the pace that we've been on, we think there are more opportunities and we'll deliver them first. What we found is it turns out it's the genomics team that's the most capable because they have the conversations with customers, where do the samples come from? What do you do with the samples when we're done. And so they've been able to generate the most opportunities for us so far. I will say, in addition, we have the Lupus Research Alliance, which we announced. We have 3 other rare disease types of studies that encompass the storage, the management, the kitting and lab services that go along with those. So they've begun to come because we have the capability that we have. So it is cross-selling in a sense. And the thing is that they're a slow ramp. So we talk about these things with great pride. These are 10-year projects that ultimately will deliver $20 million each, but it's hard to see it here in the near term. But when you stack the second one and the third one and a fourth one on top, these are synergy opportunities that are built into the plan, but even over a 2-year horizon, they may generate $1 million a year but 4 years from now, there will be $4 million a year, $5 million a year. And as we add more of these rare disease types of studies where we can manage samples and collections and lab services for those, we'll just keep stacking them on top of each other. So they're happening. They're slow build, but it's exactly the kind of business we built the company for and Lupus is a perfect example. It's a slow ramp. And the objective here is to demonstrate that capability to 50 of those research alliances that depend upon -- if 23 research organizations that need a centralization of samples and data, we're built for that, and we're starting to demonstrate it.

Okay. I'll take one from the webcast. I have one on B Medical. From a profitability standpoint, can you talk a little bit about the discontinuation of the non-BCC product lines a little more on the drivers of this decision? And how should we think about this in the context of the 1.3 billion biological samples that we discussed in the presentation.

Maybe I can take the profitability and the discontinuation. I would say, you heard -- if we step back, you heard Steve talk about automation and manual medical refrigeration, it's something that is certainly going to be evolving out of the norm in the future. So when you think about it from that context, it's a business that -- it's a good business, but it's not something long term we want to be in. So when -- we were looking at B Medical and thinking about profitability, and what we could do to drive profitability. There were certainly some investments that were made like here in the United States as an example, that we took a long -- a harder look at, are we making money? Is it a market that we could win in? It's a large market. There's tough competitors. There's no real pathway to leadership. Those are some of the things that went into the decision to rethink that business.

And in terms of the sample count, we're talking about the potential for millions in B Medical types of territories against 1.3 billion, so it's a little bit small number in comparison, but it would be incremental.

Any more in the room? Okay. Sure.

Herman, can you talk about what you're assuming for working capital in the free cash flow number that you put out there? I think a lot of the working capital metrics are still very elevated versus the time of the semi divestiture?

Yes. I think from a working capital point of view, we continue -- we are seeing improvements in things like inventory, accounts payable, accounts receivable, all that is baked in. But we're making a lot of those improvements. We saw them in '23, and they're dialed into '24. When we get into '25 and '26, it's very similar with not a ton of wholesale changes.

Okay. I have another one from the webcast. So what are the benefits of deploying the BioArc into SMS not included in the current LRP? And what is the time line for installing into the current SMS footprint?

Do you want to take it?

I'll start. So as Steve mentioned, we're going to be putting a BioArc into our Boston repository that will be 2025. We actually have ongoing one active installation of one of our automated stores in Minneapolis. And then we're actually deploying the second one, but now as we speak of [indiscernible]. I think we foresee as we look at capacity across all of our sites around the world, deployment more BioArc Ultra, but we'll be very focused around customer demand of our space and the [indiscernible] but I think we envision the future [indiscernible].

Yes. So only in this [ hard ] time horizon, only modest numbers for samples in the Boston biorepository to be clear.

Okay. Don?

I think there's a question in the back.

Yes, okay. I will go with that. [Sherry, grab the mic]

So in addition to the $13 million that you're taking out of B Medical for kind of noncore assets, what other noncore kind of just kind of unprofitable subscale revenue are you taking out? I think what I'm trying to reconcile is the 5% to 8% growth over the next couple of years, how many basis points are you taking out of that in order to make it so efficient?

I think the way to think about it, Don, is if you start with '23, which is the base year, it's about what we're planning for right now. It's about $16 million that would come out of the base.

Just from 2023?

Yes.

So that will all come out this year?

It will come out -- no, it won't all come out this year because there's timing, there's work that we need to do to make it happen. But when we get to fiscal year '26 and we compare base to base, there's about $16 million of sales in '23. Now we're working this in real time. So it will take us a little bit of time to get through it, but we'll largely be through it by the time we get into '25. And Don, [indiscernible] maybe just a final point. For example, we have inventory in certain jurisdictions that we're looking to -- if we have the opportunity to sell that inventory, we certainly want to sell it rather than write it off.

A question in the back.

Martin Ji from ClearBridge. A couple of questions. First, on the cash flow, I think the 6% to 8%, that means roughly maybe $50 million per year for the CapEx. How much of that is for the scaling up of your structure to meet the demand? I'm talking about maybe a BioArc, the build of that and some other expenses that's -- from that $50 million.

Yes. What I would say is -- so what you're going to see over this time period, it's more elevated than where we want it. We certainly want to get to a place where we're investing 5% of sales into CapEx. A lot of that would be directed towards growth. Over this time period, you do have investments in things like the BioArc Ultra. We are -- we have the Boston repository that we're investing in. We have a U.K. lab that we're investing in. And the transformation, of course, will carry a little bit of CapEx all of it, most of it is directed towards growth, though.

Okay. And the $100 million cumulative 3-year free cash flow, does it include the assumption for the divestiture of the non-VCC, too.

Yes.

You can give us like maybe a rough range for that divestiture proceeds?

With a revenue percent?

No, no, the proceeds from the divestiture that you have...

We have -- I misunderstood your question. We're exploring how we exit it, whether it's a divestiture or just a wind down.

So it's not including in that $100 million.

No. So you're referencing if we were to sell it as an example, with the proceeds -- yes, that's not modeled in.

Got you. And one last one. Back to the chart. I mean, the slide on the stand-alone freezers versus the bio outer. On that installation base, the current stand-alone freezer, are they tend to be held by bigger companies they have a few onsite or it's like 1 season 2 seasons, are the most of those freezers now.

Most of the freezers from 3 companies. And so more than 80,000 freezers a year from 3 companies. And there are 3 large companies supplying the freezers. And we're not one of them.

Okay. I'll take another one from the webcast. We have the long-range plan assumes mid-single-digit growth in multiomics. Can you talk about kind of the dynamics there in terms of how we should be thinking about the legacy business versus some of the growth areas that Steve talked about with Proteomics, clinical services, et cetera.

Yes. I could start and then maybe Ginger could add. I would start with the fact that the biggest piece of the business, next-gen sequencing is certainly in a dynamic market as we cycle through the price and we cycle through the volume, you're going to see modest growth in that business. Profitability should remain consistent with where we are today. Sanger, we talked about there continues to be pressure in that market, but it's stable. You do see benefits from these new vectors, but they're evolving. It's going to take us time to ramp it. The way to think about it is the new vectors like proteomics. We also have geographical expansion, which is going to be important, like the U.K. lab. And outside of that modest market recovery in this market, as we know, somewhat down. That's the way to think about it for right now. Would you add?

Yes. Our projection is ahead of market growth. That's our projection. So it's the market. And we serve like more than 4,000 institutions and more than 100,000 end users. So you can imagine when like the market has some challenges, our customer has some challenges, but it's just a matter of time when they return, when they start to spend, we will continue to grow.

Paul?

A couple of questions. Number one, on the GENEWIZ business, there's a lot of interest in element and other techniques. You're technology agnostic are you not? So that is not a threat or is a threat, if you could talk to that. And then the other is investors new to the story always ask, why is their GENEWIZ here? I mean my question really is if you're running a stores business, could you really be that differentiated unless you had GENEWIZ?

Ginger, do you want to take the first part?

Yes. I will take the first one about -- first one is about -- sorry, is it...

About element, the other technologies out there, yes.

Yes. I got -- recently, I got a lot of these couple of questions about the new platforms coming out of the market. For GENEWIZ business, our model is delivered data to customers. It doesn't constrain with any platform we operate from. So it's all about which platform gives us the best quality and the best cost and also the best like just enable us to serve our customers for data. And we constantly monitor new technologies in the market and which was the best one. And we can switch to the newer, like that's the best one in the market and easily for us because our experience is operating on the platform, but not constrained on the platform. Definitely, for us, we welcome the competition in the instrument field. That gives us the leverage of negotiation, but not constrained by one company. And also these new technologies coming out of the market, is in general driving segment for our customers to use new technology and leverage these new technology and a cheaper data to enable them to go through their research faster and that drive outsourcing model as well. So for us, it's opportunity. It's not a risk. As long as we stay very just diligently ahead of the curve and drive for the change when it's ready.

And Paul, on the question about the stores, 2 things. One, far and away, we have the most superior technology from a stores standpoint. Only ones we like to automate at the scale we have and the only ones to automate the cryogenics. So that in and of itself drives the stores business. The storage business, on the other hand, is the one that lends itself better to the genomics opportunity because the tightest group, you'll find anywhere is a researcher letting their sample outside of the research facility to go somewhere else. If we're able to put that into a repository, the secondary step for us doing the genomic analysis on it is relatively straightforward because it's outside of the facility already. So that's where the opportunities exist for us to leverage the genomics capabilities with the repository businesses because those are samples that have already been released out and we have access to do that faster than they can possibly do it. in-house.

So I have another one from the webcast. Can you talk about the thought process between doing additional M&A and maybe doing additional buyback authorization?

Go ahead. No, go ahead.

I think it's always a consideration. I mean we're about growing the company. The #1 use we have for our capital is organic growth, the kinds of things that we do inside the company to drive new products to drive innovation to put capital to work to increase the capacity of facilities. Secondarily, we look at acquisition capabilities that bring something to the company that we don't have or to add scale that it can drive accretion and synergies with the business and we always have the option and we've demonstrated it. We all got the option from a capital deployment standpoint to buy shares back. And those are the decisions we make at all times. It's not a point in time there's continuous discussions that we have.

Any last questions in the room? Okay. I think with that, maybe we'll move to the summary. Steve, I'll turn it over to you.

Thanks, Sara. Thanks, everyone. I want to just start with one bit of commentary. I want to be really clear. We're not calling a market here. That's not our job. It's not our business. When we say low single digits here between now and the end of 2026, we're standing in an environment right now where larger players, people who are more connected to the broader market, talk about flat market performance here in the '24 period after a relatively slow '23. For us to consider our plans, we show it against modest growth. So something in the 1% to 3% range. But we're not calling that as the market. We're basing our model against that. So when we say we're going to grow 5% to 8%, that's incremental to what we put out for a market growth of 2% plus minus. So just I want -- I want to have clarity there. It's not up to us to call the market. We participate in the broader market. And we fully anticipate and we hope that the market will grow more. And you should anticipate that at the same time, we will outgrow. So that's just to put that into perspective, and it's also a cleaner way to look, we believe, at our business at this point in time, we're making really strong investments against top line growth. We're making incredible investments, and we have terrific alignment around the operational capabilities that will improve the company that will allow us to grow to scale that we think is fully in our control to go get. So we do have our sights set on very specifically how do we deliver these next 10 quarters to put us on a path for what's going to happen as we grow to a $2 billion company. And that for us is really the driving factors for everything that we're about today. We hope we had a chance to convey it to you. I want to just take one moment, I want to thank our customers, of course, and I especially want to thank our employees, our 3,500 employees to support those customers because they've done a fantastic job with commitment, with purpose to continue to help us grow the business. We, as general managers of the business units have high confidence that our teams are doing the kinds of things that are necessary and doing it with enthusiasm to deliver on these plans. So finally, I want to thank you for the time, for your participation, for the energy you put into the company from many of you for the investments you've made in the company for the belief you have in how we'll deliver. So thank you for the time today. Thanks to everyone who participated, and we really look forward to reporting to you quarter by quarter on our progress. So thanks very much, everyone.

Okay. Thank you, guys. And we'd love to get your feedback on today's event for you on the webcast, for those of you in the room, please fill out the survey. We really want to hear from you. For those of you who might have submitted questions in the chat that we didn't get to, feel free to e-mail me, [email protected] or [email protected], and we can certainly answer any remaining questions you may have. For those of you on the webcast, that's all for today's event. For those of you in the room, we will be serving a late lunch, and you will have the opportunity to speak to the Azenta executives in the room. Thank you so much for joining us today.