Azenta, Inc. (formerly Brooks Automation, Inc.) — FY2021 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended September 30, 2021, including fourth-quarter results. The company’s continuing operations comprise Life Sciences Products and Life Sciences Services, providing automated sample storage, consumables, instruments, genomic services, informatics, biospecimen procurement, and sample-management solutions. The company announced that these businesses would be rebranded as Azenta Life Sciences during the first half of fiscal 2022; its Nasdaq ticker was expected to change from BRKS to AZTA on December 1, 2021.
In September 2021, the company agreed to sell its semiconductor automation business to Thomas H. Lee Partners for approximately $3.0 billion in cash, subject to customary adjustments and regulatory approvals. The business is presented as discontinued operations, so continuing-operations results primarily reflect the life sciences businesses.
Key financial metrics
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Continuing-operations revenue | $513.7 million | $388.5 million | +32% |
| Gross profit | $243.8 million | $172.1 million | +$71.7 million |
| Gross margin | 47.5% | 44.3% | +3.2 points |
| Operating loss | $(31.1) million | $(36.6) million | Improved $5.5 million |
| Loss from continuing operations | $(28.9) million | $(26.4) million | Worsened $2.5 million |
| Income from discontinued operations | $139.6 million | $91.2 million | +53% |
| Net income | $110.7 million | $64.9 million | +71% |
| Basic earnings per share | $1.49 | $0.88 | +69% |
- Life Sciences Products revenue was $199.6 million, up 54%; Life Sciences Services revenue was $314.1 million, up 21%.
- Adjusted segment operating income was $45.8 million, compared with an adjusted segment operating loss of $0.2 million in FY2020. Products generated $23.1 million and Services generated $22.7 million of adjusted operating income.
- Fourth-quarter revenue was $136.9 million, gross profit was $66.1 million, operating loss was $21.2 million, loss from continuing operations was $22.4 million, and net income was $21.8 million.
- Operating cash flow was $149.9 million, compared with $37.9 million in FY2020. Investing cash outflow was $146.3 million, including $95.5 million for acquisitions and $52.8 million for capital expenditures.
- Total cash, cash equivalents and restricted cash were $285.3 million, including $45.0 million classified within assets held for sale. Cash, restricted cash and marketable securities excluding held-for-sale cash were $244.0 million.
- Outstanding term-loan principal was $49.7 million, net debt carrying value was $49.7 million after $0.3 million of deferred financing costs, and the weighted-average debt interest rate was 2.8%. The revolving credit facility provided approximately $57.7 million of availability, with no borrowings outstanding.
- Non-cancelable commitments totaled $65.9 million, including $44.0 million of inventory purchase orders, $15.9 million of information-technology commitments, and $6.0 million related to the China facility.
Material changes versus the prior comparable period
- Revenue growth benefited from higher demand for consumables and instruments related to COVID-19 activity, as well as growth in next-generation sequencing, gene synthesis, and Sanger sequencing. Management estimated that COVID-19 increased FY2021 revenue by approximately $53 million.
- Gross-margin expansion reflected volume leverage, favorable mix, and operating efficiencies. FY2021 cost of sales included a $5.5 million accrual for tariff liabilities related to intercompany imports associated with the GENEWIZ business.
- Operating expenses increased to $274.9 million from $208.7 million. Selling, general and administrative expense included $20.7 million of merger and acquisition expenses, including $18.6 million related to separating the semiconductor automation business, and a $13.4 million impairment charge for abandoned tradenames following the Azenta rebranding.
- Other expense included a $16.0 million release of a tax indemnification asset, offset by a related tax benefit. The company also recorded a $20.1 million income-tax benefit, primarily from reversals of uncertain tax positions and valuation-allowance reductions.
- Acquisitions included Abeyatech for approximately $19.3 million and Trans-Hit Biomarkers for approximately $15.1 million. The company also acquired Precise Automation for approximately $69.8 million; that business was included in discontinued operations.
- Capital expenditures increased to $52.8 million from $39.9 million, including construction spending for the Suzhou, China facility.
- The company paid $29.7 million of dividends during FY2021. Management disclosed that it intended to discontinue quarterly dividends after completion of the semiconductor automation sale.
Guidance, outlook, risks and unusual items
The filing does not provide formal quantitative revenue or earnings guidance. Management expected continued growth in life sciences products and services through internal development, acquisitions, and potential future acquisitions, while acknowledging that long-term liquidity requirements were difficult to predict because of COVID-19 and broader economic uncertainty.
- The semiconductor automation sale was expected to close in the first half of calendar 2022, subject to regulatory approvals and other closing conditions. Failure or delay could adversely affect liquidity, strategy, operating results, and the stock price.
- Completion of the transaction was expected to provide approximately $3.0 billion of cash before customary adjustments, but the filing does not specify the ultimate net proceeds or their planned allocation.
- Key operating risks include COVID-19-related supply-chain and logistics disruptions, component shortages, customer delays, tariff and trade restrictions, foreign-exchange exposure, cybersecurity incidents, facility disruptions affecting stored samples, customer concentration, and competition.
- The ten largest customers represented approximately 19% of continuing-operations revenue in FY2021; no individual customer exceeded 10% of consolidated revenue.
- Goodwill was $469.4 million and net intangible assets were $186.5 million at September 30, 2021. The company reported no goodwill impairment, but impairment testing depends on projections, discount rates, margins, and growth assumptions.
- Edwards Vacuum asserted indemnification claims related to the prior semiconductor cryogenics sale. The company could not determine the probability or amount of potential losses, although management did not expect a material adverse effect and indicated that applicable insurance may cover losses beyond contractual deductibles and escrow.
- Legal proceedings arise in the ordinary course of business; management stated that none was expected to have a material adverse effect, while noting that outcomes remain unpredictable.
Most important facts for investors to verify
- Whether and when the semiconductor automation sale closed, the final cash proceeds received, transaction-related taxes and costs, and the resulting capital-allocation decisions.
- Post-separation revenue growth, gross margins, operating profitability, and cash conversion of the standalone Azenta life sciences businesses.
- The sustainability of COVID-19-related demand, particularly for consumables and instruments, and the effect of normalization or new variants.
- Progress, cost, and expected returns from the Suzhou facility and other capacity investments.
- Resolution of the GENEWIZ tariff matter, Edwards indemnification claims, contingent consideration, and other contractual commitments.
- The impact of discontinuing the quarterly dividend and the company’s post-transaction liquidity, debt profile, and acquisition strategy.