Azenta (AZTA) Q3 EPS Jumps 36%

Azenta (AZTA -2.50%), a provider of life sciences solutions focusing on sample management and genomics services, released its third-quarter fiscal 2025 results on August 5, 2025. The headline: Non-GAAP profitability beat expectations, but GAAP revenue was flat and missed analyst forecasts. Azenta posted non-GAAP diluted EPS from continuing operations of $0.19, outperforming the $0.14 consensus Non-GAAP EPS estimate. Revenue (GAAP) was $144 million, essentially unchanged from a year earlier and $5.38 million below the $149.38 million GAAP estimate. Margin improvements and cash flow gains came from disciplined cost controls, against a backdrop of challenged sales growth. Management reiterated its full-year FY2025 targets of 3% to 5% organic revenue growth and approximately 300 basis points of adjusted EBITDA margin expansion, highlighting stable operations but also signaling ongoing pressures in certain business segments.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q2 2025 earnings report.

Business Overview and Strategic Focus

Azenta operates in the life sciences sector, offering a range of sample management solutions and multiomics services. These include automated storage systems, cryogenic systems, genomic sequencing services, and sample biorepositories tailored for pharmaceutical, biotech, and academic clients worldwide. The company underwent a significant transformation in recent years, moving away from its roots in semiconductor automation and refocusing exclusively on the life sciences market. This shift included divesting its semiconductor business and expanding its portfolio through targeted acquisitions like Barkey Holding, which enhanced its cold chain and bioprocessing storage capabilities.

In the current environment, Azenta’s key success factors are its broad product suite, continuous innovation, global reach, and strategic use of capital for growth and operational enhancements. It serves over 14,000 customers—including major pharma, academia, and government institutions—across more than 120 countries. The company’s transition to a pure-play life sciences operation aligns with industry trends favoring personalized medicine, biologics, and increasing demand for secure, scalable biological sample storage and advanced sequencing solutions.

Quarter in Review: Performance, Metrics, and Developments

The third quarter showed a notable split between improving profitability (non-GAAP adjusted EBITDA margin was 12.3%, up 260 basis points year over year) and muted sales performance (GAAP revenue was $144 million, flat year over year). Non-GAAP diluted EPS from continuing operations increased 35.7% year over year, landing well ahead of the analyst forecast, with non-GAAP EPS of $0.19 exceeding the analyst estimate of $0.14. This beat in non-GAAP earnings stemmed almost entirely from cost management and margin improvements rather than from higher sales volumes. Adjusted EBITDA climbed to $18 million, Adjusted EBITDA increased 28.6% from a year ago and marking further margin progress. Non-GAAP gross margin rose to 48.5%, up 1.8 percentage points, due to both improved sales mix and execution on cost control initiatives.

Revenue, however, showed no growth, remaining at $144 million (GAAP) and coming in 3.6% below consensus estimates for GAAP revenue. Organic revenue declined 2% year over year. The Sample Management Solutions (SMS) segment, which covers products such as automated storage and cryogenic systems, saw revenue fall 4% to $78 million, with organic sales shrank 6% year over year. This decline was driven primarily by weaker demand in core products like Automated Stores and Cryogenic Systems. Areas such as Sample Storage, Clinical Biostores (controlled-access product lines for sensitive biomaterials), and product services partly offset these declines.

The Multiomics segment, which covers genomic analysis tools and sequencing services, posted 4% growth year over year, reaching $66 million in revenue. Next Generation Sequencing (NGS) emerged as the main source of expansion, while Classic offerings including Sanger Sequencing and Gene Synthesis continued to decline. Management emphasized that NGS order trends remain strong, especially in regions like China and Europe where local execution models have helped counteract broader market volatility. The company’s ongoing partnership with Pacific Biosciences (a genomics and sequencing instrument company) aims to support Azenta’s NGS efforts and expand its technological reach in personalized medicine.

Operating cash flow improved to $26 million. The cash balance at quarter end was $565 million, giving Azenta a substantial liquidity cushion and no debt obligations. Management highlighted that this strong financial position allows for ongoing investment in research and development, targeted acquisitions, and potential share buybacks. AZTA does not currently pay a dividend.

One significant one-time item this quarter was a non-cash $50 million impairment charge related to discontinued operations, specifically linked to B Medical Systems (a cold-chain asset now being sold). This had a negative impact on GAAP net income but did not affect continuing operations. The segment performance also shows that margin improvement is currently the main lever for earnings growth. Management referenced ongoing macroeconomic issues, particularly tariffs, reductions in U.S. academic research funding, and geopolitical risks, but stated that cost cuts and operational shifts have fully offset these headwinds so far.

Outlook and Key Watch Points

For the remainder of fiscal 2025, management maintained prior guidance, projecting organic revenue growth between 3% and 5% and an adjusted EBITDA margin increase of approximately 300 basis points is expected. No specific EPS guidance was given. Leadership reaffirmed its balanced capital deployment strategy, indicating that cash would be used for further strategic investments, selective acquisitions, and operational enhancements, with buybacks as a lesser priority.

In the quarters ahead, investors may want to monitor whether SMS segment sales stabilize or rebound. Management flagged continued macro risks like tariffs and research funding headwinds, but stated that mitigation plans are in place, including organizational changes and the use of a dedicated team to address geopolitical and regulatory threats. With ongoing restructuring now complete and new commercial models in place, attention will shift to organic growth—particularly in next-generation sequencing solutions. The company’s large cash reserve also positions it to pursue strategic acquisitions should opportunities arise.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.