Azenta, Inc. ($AZTA)

Hello, and welcome. My name is Jenny, and I will be your conference facilitator today for Azenta's Acquisition of Uk Biocentre Acquisition Call. [Operator Instructions] As a reminder, this conference call is being recorded today, Tuesday, March 10, 2026. I will now turn the conference call over to Yvonne Perron, Vice President, FP&A and Investor Relations.

Good morning, everyone, and thank you for joining us. As you know, last week, we announced that Azenta entered into a definitive agreement to acquire Uk Biocentre. The press release and a presentation to accompany today's call are available on the Investor Relations section of our website. Joining me today are John Marotta, President and Chief Executive Officer; and Lawrence Lin, Chief Financial Officer, who will discuss the strategic rationale for the transaction and provide additional details. Before we begin, I will briefly refer you to the safe harbor statements included in the presentation, which outline important information regarding forward-looking statements and the use of non-GAAP financial measures. With that, I'll turn the call over to our CEO, John Marotta.

Good morning, everyone, and thank you for joining us today. I'll use the first portion of our time discussing the strategic rationale behind our acquisition of the Uk Biocentre and how this transaction expands our global footprint, scales our biorepository operations, reinforces our position as a trusted partner to the life sciences industry and strengthens our long-term profitable growth outlook. Then we will open it up for Q&A. I'll start by sharing how excited I am to welcome the Uk Biocentre into the Azenta portfolio and family. Its operational excellence, automation capabilities and deep management expertise make it an outstanding long-term strategic fit for Azenta. This acquisition is fully aligned with the capital allocation strategy we outlined at Investor Day. Uk Biocentre is one of the world's largest automated biorepositories, strategically located and positioned to support future growth without incremental capital investment. The U.K. is one of the world's largest leading life sciences research hubs at the forefront of genomics, precision medicine and long-term population studies, supported by sustained public investment, strong regulatory frameworks and close collaboration between public and private sectors. To support this research, Uk Biocentre has established itself as a critical and trusted partner, supporting the research programs in the region. Its capabilities in high throughput sample processing, automated biobanking and long-term cold storage are purpose-built for large-scale multiyear studies that require reliability, consistency and scientific rigor. Uk Biocentre will continue operating under its own brand and identity, maintaining its reputation of high quality and operating excellence. Uk Biocentre has storage capacity of over 30 million samples and solely uses Azenta's BioArc automated quad banks and will be deploying the 16 million capacity BioArc Ultra later this year to further advance its automated and high throughput capacity. The biorepository uses our standardized Azenta FluidX tubes to enable seamless and efficient processing. The biorepository is state-of-the-art with automation-first infrastructure. Importantly, Uk Biocentre is located within the Golden Triangle, the key research corridor connecting London, Oxford and Cambridge. This places it at the heart of the U.K. life sciences ecosystem near top academic institutions, pharma and biotech activity and provides excellent proximity to our other U.K.-based operations. With this strong foundation in place, let me walk through the strategic rationale and value creation for bringing the Uk Biocentre into Azenta and how the combined capabilities will deliver long-term growth and operational synergies. First, the Uk Biocentre allows us to meaningfully strengthen our presence in Europe, not only from a geographical standpoint, but in terms of relevance and the embeddedness within the region's most important research ecosystems. This brings us closer to local customers and decision-makers, creating a strong European hub. It also positions us to expand into new markets to vitally serve a growing demand for our pharma and biotech customers. Second, we have strong operational and automation synergies. UKBC's operations are already aligned with Azenta standards, which allows us to immediately scale throughput and increase efficiency without disruptive ramp-up time. Third, the UKBC offers a national infrastructure that is difficult to replicate. They are a trusted operator for U.K. government research programs, providing predictable, high-volume sample processing and storage. This combination of reputation, a strong management team, capabilities and a program connectivity would take years to build organically. Finally, this acquisition combines UKBC's operational excellence with Azenta's commercial expertise and pharma-biotech relationships. By bringing together their proven capabilities and our global commercial engine, we create a full-service, high-value platform. In short, the acquisition of Uk Biocentre strengthens Azenta's end-to-end lifecycle sample solutions, expands our European footprint and creates a platform for scalable sample management and research support. By bringing the Uk Biocentre into the Azenta portfolio, we deepen long-term strategic customer relationships, grow reoccurring sample storage revenue across academia and government, and accelerate the growth of new and existing customers in pharma and biotech. I'll hand the call over to Lawrence to talk through the financials.

Good morning, everyone. Thank you, John. As disclosed in our press release, we paid GBP 20.5 million for Uk Biocentre, net of cash and inclusive of up to GBP 1.8 million in contingent consideration upon the completion of certain milestones. The transaction was fully funded from cash. Uk Biocentre operates the same fiscal year as Azenta. And for the fiscal year ended September 30, 2025, Uk Biocentre generated GBP 15.3 million in revenue, which was down year-over-year. The decline largely reflects the timing of large research program phases driven by lower sample processing related to the Our Future Health programme. In 2027, we see a clear opportunity to build on this research foundation driven by expected extension of the program and the associated increase in volume from new participants and enrollees. In addition, growth from targeted commercial investments, particularly within the pharma and biotech sectors, will help diversify the customer base and accelerate growth in the region. We expect to have these sales investments in place by the end of fiscal 2026. While we anticipate 2026 to be dilutive to adjusted EBITDA by approximately 35 basis points, we expect it to be accretive in 2027 and 2028, driven by volume growth and operating leverage from the levers I just discussed. We believe the financial profile of Uk Biocentre is fully aligned with the capital deployment criteria we outlined at Investor Day. The acquisition reinforces our strategic focus on high-quality, scalable recurring revenue assets. And now, we'll turn the call over to the operator for questions.

[Operator Instructions] Your first question is from David Saxon from Needham.

I just wanted to ask quickly on modelling. I mean, Lawrence, you talked about the GBP 15.3 is down year-on-year. I guess what's kind of a realistic revenue contribution number we should think about for your -- the remaining fiscal '26? And then how should we think about the go-forward kind of revenue and cost synergy opportunities? I know it's dilutive this year, but would love any color on maybe the magnitude of potential accretion to organic growth and margins.

Yes. Let me start with some of the synergies, David, and I'll come back to your modelling question. One of the things that is important to note, fiscal '25 and fiscal '26 really is going to represent a snapshot in time. It doesn't really represent the full potential. The current run rate is well below our installed capacity. So I would say, looking at fiscal '24, kind of that GBP 20 million to GBP 21 million range is probably where this will be at a normalized level. When you look at synergies, our assumptions around synergies are mainly around revenue. So let me be more helpful. For revenue, it's really broken down into 3 opportunities. In the area of pharma -- sorry, in the area of government and academic, we have a tailwind in this area since UKBC is a trusted partner to the government. We expect to see the volumes for the OFH programme Phase 2 in our processing business to pick up in fiscal 2027. And again, to be helpful, that's going to be -- puts us closer to this normalized revenue level that you saw in fiscal 2024. Secondly, in around pharma and biotech, we will leverage Azenta's commercial engine and pharma and biotech relationships on top of adding additional commercial headcount this year. This will really help us diversify the customer's base and accelerate commercial growth in the U.K. while creating additional pull-through for our automation and our consumables. We've been working on and expect to have resources in place by the end of fiscal 2026. And this will really help us balance the revenue mix between -- mix towards really higher reoccurring, high-margin storage products. And then last but not least, on the revenue synergies, as John mentioned, UKBC will become the anchor tenant for Azenta products in Europe, really integrating with our German biorepository to generate additional cross-border business. We have an excellent management team at UKBC, led by Tony Cox, which will help us grow in region.

Your next question is from Paul Knight from KeyBanc.

Regarding the BioArc Ultra, this seems like it could be category killer for vertical refrigeration units. So will you really have BioArc Ultra for your sites exclusively and not allow even competitors to have access? So can you kind of frame up how BioArc Ultra really should give you a competitive edge?

Paul, it's John. Good to be with you. So a couple of things to think about. I mean, we -- our stores business, we don't differentiate a competitor versus not in terms of who we sell to and why we sell to them. I think the one thing that is important here is that the BioArc Ultra and our stores gives us the customers' high throughput or access to their samples at a very fast pace from an archival perspective. So being more specific, in biorepositories, you have archival type of storage, which is low. You're not accessing those samples at a high rate. There's medium and then there's high, which is where the stores come into play. Clearly, our biorepositories have all 3 of those, and that's the way we're continuing to set this up. Today, UKBC does have ULTs on site, but that's again for these archival or low-touch samples that are needed from a customer perspective. So it's all -- really all 3 we look at in terms of our biorepositories. We're not going to constrain any sales in terms of our competitors or someone wanting access to this type of technology. It does give us a competitive advantage on the cost side. And I think that, that's got to be pretty clearly articulated from us, and we're going to continue to do that, gives us a cost-leading position. If you look at the levers around driving value to our customers around customer intimacy, where we're spec-ed into the workflows and then what is our cost-leading position, where is our cost position. And we're in a cost-leading position because of our automated workflows, the vertical integration on consumables and then you have the stores and automation on the stores, which is kind of the epicenter for this high throughput automation tailwind that's occurring in the industry right now. So I hope that helps, Paul.

Your next question is from Vijay Kumar from Evercore.

This is Kevin on for Vijay. Just one on U.K. Data Center historically being a customer. What was their revenue contribution historically? And what will be the net incremental revenues from the transaction, so revenues, excluding intercompany eliminations?

Kevin, first, UKDC was one of Azenta's best customers, and that's another reason why we love this business. They have 7 automated stores and leverage our FluidX tubes to create a really complete automated solution for their customers. To answer your question, we don't break out the specifics here, but really just to give you a couple of items. So the manufacturing and installation of the BioArc Ultra is largely complete. It should be online in April or May time frame. Any impact on revenue will be prospective and not a retrospective adjustment. In terms of consumables, we will see roughly half a year of purchases converted to internal purchases. This was included in our transaction valuation and the impact has been contemplated.

Your next question is from Mac Etoch from Stephens.

Just one for me. I guess you, Lin, kind of answered this already, but it sounds like the incremental CapEx, I just want to get a sense of how much is required to scale the site as you finish out the deployment on the BioArc Ultra?

Yes. In terms of CapEx, Mac, the great news here is like today, UKBC has about 30 million samples of capacity which right now has about -- they're at 40% utilized. So we don't see much requirement for CapEx, and that's kind of why there's been a lot of capital efficiency acquiring really this established platform. So on top of that, this capacity really provides meaningful headroom to grow and scale the business without requiring additional investment here. And it really opens up the aperture for us to really go gain additional revenue from pharma to biotech as we talked about.

Your next question is from Brendan Smith from TD Cowen.

Maybe just piggybacking off an earlier question, and I wanted to make sure I heard you correctly. Can you maybe just expound a bit on the additional kind of OpEx you expect to make this year into the UKBC? Or I guess, really to bring it up online, I heard you about the CapEx side of the conversation, but if you could maybe provide a bit more color on how we should expect -- how much we should expect really from kind of an OpEx standpoint here and how we should think about the cadence of that over the next few quarters?

Yes, Brendan, great question. So generally, the investment we're going to put in place starting in fiscal '26 is really around sales reps to help on the pharma biotech side here, and that roughly, we're going to bring in around 4 reps. That's generally the -- all the OpEx that we're going to bring in. One of the things around cost synergies and operating leverage is really, again, the existing UKBC capacity allows us to really get higher throughput at the same operational cost and drive margin expansion without much headcount or structural changes. And really, when you look at kind of the middle of the P&L, we're really going to be leveraging additional Azenta automation know-how around the front end of the storage process such as registrations. So from an OpEx and really kind of expenses, it's really purely commercial investment upfront.

There are no further questions at this time. Please proceed with the closing remarks.

Very good. Thank you, everyone, for attending today's call. We are very excited about the team's continued performance around M&A, and we're very excited to welcome UKBC to the Azenta portfolio and family of companies. Thank you again, and have a good day.

Thank you. Ladies and gentlemen, the conference has now ended. Thank you all for joining. You may all disconnect your lines.