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Earnings Call Analysis
Q3-2024 Analysis
Azenta Inc
Azenta reported earnings for the third quarter of fiscal year 2024 with total revenue reaching $173 million, which represents a 5% organic growth year-over-year. This growth comes at a time when the life sciences industry is experiencing significant challenges. Even in this difficult environment, Azenta's diversified capabilities allow it to maintain positive momentum.
The company successfully turned profitable in the quarter, delivering an operating profit of $4.6 million, marking the first such achievement over the last six quarters. Notably, the adjusted EBITDA margin expanded by 440 basis points sequentially and 260 basis points year-over-year, reaching 10.3%. These improvements are part of the 'Ascend 2026' program, which is reshaping Azenta's operational landscape for better efficiency and scalability.
Breaking down the revenue streams, the Sample Management Solutions (SMS) segment saw revenue of $81 million, reflecting a 7% increase year-over-year, buoyed by a remarkable 40% surge in revenue from cryogenic storage solutions. The Multiomics segment delivered $64 million, remaining flat year-over-year, with signs of recovery noted in Gene Synthesis and Next Generation Sequencing (NGS). The NGS segment showed promise as it maintained stable pricing and volume expansion, processing 20% more samples over the past five quarters.
In the B Medical segment, revenue reached $29 million, up 8% organically, driven by increased orders related to vaccine cold chain products. The company is strategically positioning B Medical to focus solely on this area, transitioning away from blood management and medical refrigeration product lines, with expectations for long-term gains toward a planned EUR 60 million initiative in the Democratic Republic of Congo.
Looking ahead, Azenta has adjusted its guidance for full-year revenue, now expected to decline by 1% to 2%, compared to previous guidance of stability (down 1% to up 1%). Importantly, the company is projecting an increase in non-GAAP EPS to a range of $0.30 to $0.36 for fiscal year 2024, attributed primarily to operational efficiencies that offset modest declines in sales.
At the end of the quarter, Azenta boasted a robust cash position of $754 million in cash and equivalents, with no outstanding debt. The company returned $225.9 million to shareholders through share repurchases in the quarter, completing approximately $1.3 billion of a $1.5 billion share buyback program, demonstrating a strong commitment to returning value to shareholders.
In conclusion, Azenta has navigated through challenging market conditions with a focus on profitability, strategic transitions, and operational improvements. With an ongoing commitment to enhancing margins and a strong market presence in key sectors, the company is well-positioned to drive future growth and deliver value to both customers and investors.
Greetings, and welcome to the Azenta Third Quarter 2024 Financial Results. [Operator Instructions] As a reminder, this conference is being recorded, Tuesday, August 6, 2024. I will now turn the conference over to Yvonne Perron, Vice President FP&A and Investor Relations.
Thank you, operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the third quarter of fiscal year 2024. Our third quarter earnings press release was issued after the close of the market today and is available on our Investor Relations website located at investors.azenta.com in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today.
I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the safe harbor slide on the aforementioned PowerPoint presentation on our website, and our various filings with the SEC including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements should future financial data or events occur that differ from the forward-looking statements presented today.
We may refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance, but when considered with GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of the Azenta business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves.
On the call with me today is our President and Chief Executive Officer, Steve Schwartz; and our Chief Financial Officer, Herman Cueto. We will open the call with remarks from Steve on highlights of the third quarter. Then Herman will provide a more detailed look into our financial results and our outlook for fiscal year 2024. We will then take your questions at the end of the prepared remarks.
And with that, I'd like to turn the call over to our CEO, Steve Schwartz.
Thank you, Yvonne. Good afternoon, everyone, and thanks for joining us today. It's great to have the opportunity to report another strong quarter of execution in fulfillment of our long-term growth and profitability objectives. We delivered solid above-market growth and more acceleration of profitability.
In a life sciences market environment that's still struggling to find its footing, our unique portfolio of capabilities and our market-leading positions in each of our segments leaves us less vulnerable to market slowness. We're in a position to capitalize on the fact that all methods of discovery require high-quality consented samples that can be retrieved, measured, annotated and stored for future reference and interrogation.
As a matter of fact, it's the driving forces of lower cost and faster time to discovery that are moving the markets and attracting customers to Azenta, as we can provide immediate tangible benefits to customers looking to manage and measure samples with best-in-class capability. We enable breakthroughs faster, and that's the name of the game.
Furthermore, in addition to our core business, there's an increasing desire from our customers to have access to rare and valuable samples from human populations that were previously inaccessible. As we expand the breadth of our capability to source, manage and measure samples, we aim to be the provider of a full complement of critical inputs, not just for laboratory discovery but also as inputs for powerful AI models, which are hungry for this information and an important factor in the transformation of life sciences and health care.
At our Investor Day in March, we outlined a 10-quarter plan to continue to grow revenue faster than the market growth rate while simultaneously transforming the company to deliver on the profit potential that comes with this unique capability portfolio. Today, we report strong progress against these commitments with big positive moves in both areas.
Now I'll turn to highlights from the quarter. At $173 million, organic revenue was up 5% year-over-year and 9% sequentially, with all 3 segments contributing positive growth. Sample Management Solutions grew 7% year-over-year, with products contributing 5% and sample repository services contributing 11%.
On the product side, revenue was up 10% in large automated stores, consistent with the double-digit growth trend we've seen for more than a year, and we're particularly pleased that our cryogenic stores revenue was up almost 40% to a level we've not seen in a couple of years. This is a good sign from the standpoint of cell and gene therapy applications where we're again starting to see opportunities for multiple unit automated systems orders. We remain encouraged by the persistent move toward automated cold storage equipment and away from manual systems.
Consumables and Instruments grew a healthy 17% year-over-year and 20% sequentially, the best performance in more than 1 year. And although we're optimistic about the increase, we'll be cautious about calling a turn until we witness this for a few quarters. That said, it's a positive indicator, and we remain aggressive in our push for market share in this space.
As I mentioned, in our SRS repository business, we delivered 11% year-over-year growth. Not only are we seeing continued strong growth, but we're simultaneously transforming our operations to be able to handle the significant volume we anticipate in the coming years by aggressively implementing our transformation to automated repositories.
For example, today, samples arriving at our repositories can be automatically registered utilizing tools we've developed for high-speed registration. These samples are subsequently stored in automated stores and managed utilizing our now fully operational Software-as-a-Service sample management system. We're beginning to recognize the benefits of this transformation through reduced cycle times and lower registration costs.
And these new capabilities are impressing customers who recognize the significant benefits we can provide to them compared to how they manage sample assets today. Toward that end, after almost 2 years of slower activity from large pharma companies, we're seeing an increase in the number of new sizable sample management opportunities. Our consultative evaluations of customer storage sites are picking up again, and it's these assessments that are typically the precursors to large contractual deals.
In the quarter, we won a multiyear contract to take over management of a large sample collection for a pharmaceutical company that's closing a facility and will transfer all sample responsibility to us. At the request of the customer, we'll manage their samples in a dedicated automated store installed at our new Boston biorepository.
We continue to see tremendous value in our stores and storage services portfolio, and we're pleased with the momentum that continues to build behind what we believe will be a huge transformation in how samples are managed with automation at scale being a game changer for the industry. The multiomics GENEWIZ team had another great quarter, delivering 1% organic year-over-year revenue and 2% sequential growth in a market that remains meaningfully down. The solid performance in a slow market environment continues to position us extremely well for a fast ramp-up in a market recovery. We're gaining share because of the quality and capability of our new offerings as well as our ability to continue to reduce cycle time and deliver the highest quality scientific result that keep current customers coming back to us.
Specifically, the Next Generation Sequencing team had another great quarter. In the face of significant price reductions due to the dramatic decrease in sequencing costs, volume was up more than 20% for the fifth consecutive quarter in terms of number of samples processed and measured. And amidst these large changes, overall NGS revenue was up 3% on an organic basis year-over-year. Profitability in this product line also ticked up again, and we're bullish that we're at an inflection point. Pricing has been stable over the past 3 quarters, and we're positioned to sustain growth and higher profitability.
This market dynamic is consistent with each of the past 3 meaningful NGS technology inflections, but this time, it feels as though demand elasticity is driving even more outsourcing of NGS. Two specific results add to our confidence about the future of our NGS business. First, in the quarter, we added more than 700 of what we call new to NGS customers. This is a huge number of new customers, but it's also great because these are the customers for the fuel for our future work. And second, our NGS quoting activity in both number of quotes and dollar volume were at record highs in Q3, so all in, a comfortable position for us in our NGS business.
As we reported last quarter, we believe we're past the bottom in revenue for our overnight sequencing, with Sanger and Plasmid-EZ offerings growing sequentially for the first time in more than a year. If you recall, our Q2 revenue was flat with Q1, and we believed we'd stemmed any further decline. Indeed, that was the case as we grew sequentially 4% in overnight sequencing, and we anticipate more sequential growth in the fourth quarter.
In our synthesis business, we grew by a few percentage points year-over-year. We're seeing good traction from value-enhancing products we refer to as gene to X that allows customers to give us more of their downstream workflow from the synthesized gene product. These are differentiated higher-value extensions of our Gene Synthesis business.
Finally, I report on the overall performance of what we call our new vectors, where we delivered a sequential revenue increase of 9% and double what we delivered from these offerings just a year ago. Moreover, growth from these new offerings is expected to increase rapidly, boosted by the FinnGen proteomics contract that we announced a few weeks ago as well as business from new service offerings that are associated with our Plasmid-EZ solutions. Momentum continues to be strong from the adoption of new offerings and share gains, and we believe organic revenue growth in a down market represents significant outperformance, giving us confidence that we're positioned to meaningfully outgrow with any recovery in biotech and pharma spending.
Finally, B Medical delivered a very solid quarter with revenue of $29 million and an accretive EBITDA margin. As we've shared before, we're positioning B Medical to focus solely on vaccine cold chain products as we wind down blood management and medical refrigeration product lines. The reshaping of B Medical is part of a long-term value creation strategy that derives from B Medical's unique cold chain capability serving fast-growing emerging markets.
In the quarter, we advanced several initiatives, which are part of the strategy that are expected to begin to deliver additional benefits from B Medical into 2025. The first of these is operational. The B Medical factory in Luxembourg has now absorbed production from 3 SMS factory sites that we'd closed, giving us meaningful synergies, more manufacturing capacity, lower cost and better B Medical factory cost absorption. These are important milestones that are part of creating the world-class factory that we described to you at Investor Day.
Importantly, we received our first order from Democratic Republic of Congo from the large MOU announced last November. It's small in terms of dollars, but it's positive because it signals a commitment to this EUR 60 million project that will be driven by the health ministry now that the new government is finally in place. Again, this is not a signal of timing but rather reinforcement that we believe the business will happen.
Finally, we advanced our participation in 2 multiparty sample sourcing initiatives where we are a critical partner. One of these projects is set to deploy in Q4 and will be a first critical test of our capability to source and protect valuable human biological samples. So a good quarter for B Medical and great progress in its transformation to align to Azenta's strategic initiatives.
All in, we're extremely pleased with our strong results for Q3. We demonstrated solid growth in a soft environment. We delivered meaningful strategic gains in each of our business segments. And as you'll now hear from Herman, we accelerated results from our transformation initiatives, allowing us to grow while we transform the company for scale and improve profitability. Moreover, we continue to distance ourselves further from competitors. Every day, we're charting new and next opportunities to benefit our customers, which we know we can uniquely deliver.
Before I turn the call over to Herman, I want to give a brief update on the search for my replacement. Of course, we can't comment too much, except to say the search is a top priority and is proceeding as planned. We have a strong interest from highly qualified experienced candidates, and the interview process is ongoing. We're confident we'll identify a great next CEO for Azenta.
And now I'm pleased to turn the call over to Herman. Thank you.
Thank you, Steve, and good afternoon, everyone. Let me start by saying how proud and encouraged I am of the Azenta team on the disciplined execution that enabled us to accelerate the realization of savings into the third quarter, contributing to our margin expansion and profitability. In addition to above-market top line revenue performance, the efforts and initiatives of the Ascend 2026 transformation program are bearing fruit, and the results we are reporting today reflect that.
As you could see in the financial results we issued today for the third fiscal quarter, we delivered adjusted EBITDA margin of 10.3%, which equates to 260 basis points of expansion year-over-year and 440 basis points versus the prior quarter. Beyond that and even more exciting in my mind is that we turned profitable in Q3, delivering an operating profit of $4.6 million, a feat we have not seen over the last 6 quarters. This is the result of a fully engaged organization leading initiatives focused on reshaping the company for long-term success, scale and growth.
Let me talk about the actions we've completed as part of Ascend 2026. In the area of portfolio optimization, we've now exited 2 nonstrategic product lines, 1 in Sample Management Solutions and 1 in B Medical, which, as you know, aims at reshaping the B Medical segment to focus solely on vaccine cold chain products and the related sample acquisition strategy.
In our site optimization initiative, we made tremendous progress in Q3, where we impacted another 6 locations. Within the 6 was a focus on B Medical's operation in Asia, where we were able to exit 3 of their 5 locations and reduce the footprint in another. Since we started this journey, we have closed a total of 10 sites and reduced our footprint in another 3. At this point in time, we have closed or optimized approximately 30% of our sites. Our IT initiatives aimed at streamlining and integrating systems is progressing well, and we are on target to consolidate 3 systems following our fiscal year-end.
With that, I would like to turn to our results in the quarter, and to supplement my remarks, I refer back to the slide deck available on our website. Turning to Slide 3 for some highlights. In the face of what continues to be a challenging market, third quarter revenue was $173 million, up 4% year-over-year on a reported basis and up 5% on an organic basis. We saw growth in Sample Management Solutions, particularly in both large automated and cryogenic stores and in Consumables and Instruments.
B Medical also contributed to the performance with better-than-expected revenue as we were able to secure more vaccine cold chain orders in the quarter, exceeding the Q3 revenue guide. Non-GAAP EPS for the quarter was $0.16 and adjusted EBITDA margin was 10.3%. And as I mentioned in my initial remarks, this is an outstanding acceleration with a meaningful 440 basis points of expansion from Q2 and 260 basis points year-over-year. We ended the quarter in a very strong balance sheet position with $754 million in cash, cash equivalents and marketable securities. Free cash flow was slightly negative in the quarter with a usage of $5 million driven by the timing of billings. Through 3 quarters, we have generated positive free cash flow of $11 million.
In Q3, we returned $225.9 million of capital to our shareholders through the repurchase of 4.2 million shares of Azenta stock. To date, we have now completed roughly $1.3 billion of the $1.5 billion of planned share repurchases.
Now let's turn to Slide 4 to take a deeper look at our results in the quarter. Total revenue was $173 million. Non-GAAP gross margin was 45.2%, down 40 basis points year-over-year, driven largely by nonrecurring items from last year, which made for a difficult prior year compare. Non-GAAP operating margin was 2.6%, an improvement of 330 basis points year-over-year coming from a combination of top line sales growth and our cost saving efforts, which resulted in a meaningful year-over-year reduction in SG&A. Adjusted EBITDA margin was 10.3%, up 260 basis points year-over-year. Again, non-GAAP EPS was $0.16 per share in the quarter.
With that, let's turn to Slide 5 for a review of our segment results, starting with Sample Management Solutions or SMS. Total SMS segment revenue was $81 million for the quarter, up 7% year-over-year on both a reported and organic basis, driven by growth in storage of 13% and in products, which was up 5% as we expected but softer than we would have liked due to the pushout of orders within our OEM product line from the second half of '24 into Q1 of '25.
Consumables and Instruments grew 17% and large automated stores were up 10%. As Steve mentioned, cryogenics had the best performance in more than 2 years, up almost 40%. SMS third quarter gross margin was 46.1%, down 130 basis points year-over-year, driven by the impact of certain onetime items recorded in the prior year that offset the benefits of operational efficiency and sales mix.
Turning next to the Multiomics segment. Multiomics delivered revenue of $64 million in the third quarter, flat year-over-year and up 1% on an organic basis, with growth in both Gene Synthesis and Next Generation Sequencing. Despite a marked slowdown, Gene Synthesis saw the largest revenue quarter since Q2 of '22 bolstered by new product offerings. In NGS, we saw a moderation of price erosion and significant increases in the volume of data generated. Sanger sequencing was down 8% organic year-over-year but grew 4% quarter-to-quarter. And while we continue to cycle through an evolving Sanger market, we believe we are past the low point.
Our Multiomics business in China delivered organic revenue growth of 4%, once again outperforming a soft market. Gross margin in the Multiomics business was 47.5%, up 130 basis points year-over-year, driven by productivity gains in direct material, labor and fixed overhead leverage.
And finally, B Medical. Revenue was $29 million in the quarter, up 7% reported and 8% on an organic basis. The higher than initially expected level of revenue was primarily due to additional vaccine cold chain orders received during the quarter. Gross margin of 37.3% was down 170 basis points, primarily driven by sales mix.
Next, let's turn to Slide 6 for a review of the balance sheet. As I mentioned earlier, we ended the quarter with $754 million in cash, cash equivalents and marketable securities. We had no debt outstanding. During the quarter, free cash flow was negative $5 million. Capital expenditures for the quarter were about $7 million as we invested for growth and scale in our Sample Repository Solutions and Multiomics businesses.
Turning to guidance on Slide 8. As you saw in our press release, we are lowering our full year to a range of down 2% to down 1%. This is versus our prior guide of a range of down 1% to up 1%. At this point in the quarter, B Medical's firm orders are approximately $16 million and with 9 months of actuals would land B Medical at $80 million of revenue for the year. This is due to conversion delays in a still robust pipeline.
SMS is now expected to grow mid-single digits as a result of the shifting of OEM orders to Q1 of 2025. We continue to feel good about our Multiomics business and are reaffirming the revenue guide of growing low single digits to mid-single digits.
Even with this change, we stand by the adjusted EBITDA guide of approximately 300 basis points of margin expansion, and we are raising the non-GAAP EPS guide to a range of $0.30 to $0.36 for fiscal year 2024. The EPS raise is primarily driven by operational improvements, which offset the impact of lower sales, and interest income is now expected to be approximately $32 million.
In closing, we are pleased with our performance in Q3. We are committed to delivering on our purpose, serving our customers and enabling life sciences breakthroughs faster. This concludes our prepared remarks, and I will now turn the call over to the operator for questions.
[Operator Instructions] Our first question will come from line of Jacob Johnson from Stephens.
Congrats on the quarter. Maybe starting in somewhat random place, but that cryogenic freezers up 40% in the quarter, that's a pretty striking number and much better than, I think, another peer that reported tonight on the freezer side. We're still hearing about some muted capital equipment spend. So I'm just curious kind of -- I'm guessing some of that was off a low base, but what drove the growth in cryo freezers? Is it the differentiated aspect of the offering or anything you'd call out there?
It's automated systems are the driver here. These are -- Jacob, for the first time in several quarters now, we had some multiple system orders for customers who have converted to automation. And so they have these systems in place. They spent the last few quarters verifying that was the way they were going to go, and we had multiple system orders. And so that's a good boost for us.
We haven't seen the constraints because these are not huge ticket items. These are in the $150,000 to $250,000, so it's not multimillion kind of things like the large automated stores. And so we haven't seen any reluctance from customers to keep purchasing. But by and large -- although we have manual cryogenic freezers as well, but by and large, the trend that we see is for the automated systems.
Got it. And then maybe for my follow-up, Herman, I guess on B Medical, just kind of high level, as you think about strategic planning and rightsizing cost, obviously it's a business that's going to be down 29% this year. I imagine if DRC comes back, maybe it could be something better than next year. I'll let you wait to opine on 2025 B Medical trends. But I'm just kind of curious how you think about managing resources for that business given some of the variability in the revenue streams there.
Yes. Thanks, Jacob. Listen, what we said at Investor Day is that we're going to build B Medical to be an accretive EBITDA margin business for the long haul. We continue to see value in the sample acquisition strategy. So we're going to continue to go after that. But when you look at where they're coming in, what they did this quarter, they had an above Azenta overall EBITDA margin. All of the things that we're doing around Ascend 2026 to rightsize that business, they're starting to bear fruit. So yes, we're going to rotate resources to the places that are growing of course. But the things we're doing will give us the runway to explore things in a profitable way.
Our next question is from the line of Vijay Kumar from Evercore ISI.
This is Sophia Knopp on for Vijay. I just had a quick question on the EBITDA margin. So the current guide implies about a 250 bps sequential step-up into 4Q. And I was wondering if you could just talk about the factors that go into that step-up and then kind of going off that, what is the right jump-off point as we start to think about fiscal '25 from a margin standpoint?
Sophia, it's Herman. I won't talk about fiscal year '25, but I actually don't think it's a step-up from Q3 to Q4 to hit the overall guide. Maybe it's flat to down a little bit from Q3 to Q4. Maybe we could talk offline on the modeling.
Yes, that would be great.
Our next question will come from the line of Andrew Cooper from Raymond James.
This is Noah Lewis on for Andrew. I just had a quick question. So C&I, I think, you said grew 17%. And I just wanted to see like what you're seeing in those end markets there and maybe even also within SMS, what you're hearing from customers. And is that purely just a timing thing on the guidance change? Or is there anything else going into that?
Yes. No, it's Herman. So in the third quarter, C&I grew 17%. Within instruments, as we've seen in prior quarters, bookings in the quarter were soft as we saw capital spending continue to be somewhat constrained. However, the pipeline continues to look strong, indicating that demand remains healthy, and it's tied to spending delays. However, we did see revenue growth in instruments quarter-to-quarter, which we viewed as a positive. And on the consumables side, revenue growth was very strong. We saw significant double-digit sequential and year-over-year increases.
So related to SMS, yes, it's certainly just a timing thing. Maybe if I talk for a minute about the change in the guide, if I were to start with B Medical, at this point in the quarter, as we talked about in the prepared remarks, we're holding about $16 million firm orders. Through 9 months, B Medical's delivered $64 million of revenue, and that takes us to about $80 million. The midpoint of the last guide was about $85 million. So $5 million of the change was driven by that.
And then the remaining $5 million is related to our OEM product line. We make an automated store for a customer that goes into a lab automation system, and we're working with that customer to shift some of the volume from the second half of '24 into Q1 of '25. It's not lost volume at all. It's just a movement of revenue from -- in our case, one fiscal year to the next.
And our next question will come from the line of Matt Stanton from Jefferies.
Maybe one for you -- maybe one on the NGS side. It sounds like things are maybe getting a bit better. Maybe we have brighter days ahead. You talked about demand elasticity this time around versus prior cycles, maybe driving more outsourced demand. Maybe just kind of talk a bit more about why this time you might be different or we might see that. And then you talked about 700 new customers. Any way you can kind of level set us on what a normal quarter is or what last year was just to kind of get the magnitude of the activity you saw in the quarter here?
Sure. Thanks, Matt. Matt, a couple of things. One, it seems like compared to other cycles, when there's been a transition like this, it feels like our end customers who used to do their own sequencing maybe have delayed some of the tool purchases and they're sending their work to us. So that's -- it's what we envisioned might be the case, and it's kind of what's proven to be happening here over the last quarters.
We went over 700 new customers this quarter. That was an increase of 100 from the prior quarter, just to give you an idea. So it feels like there's a pretty significant momentum build. And we -- as I mentioned, we had a record in quote activity, both in the number of quotes and the dollar volume on quotes. And it just -- it feels to us right now as though customers want to take advantage of a significant opportunity to have a reduced price because of our cost structure and are outsourcing more of the NGS work.
So again, we'll report on that as we go forward in quarters, but that's been our observation here over the 3 quarters. Pricing seems to have stabilized. Volume continues to grow fifth consecutive quarter over quarter growth of 20% growth in terms of volume. And we'll see what happens from here. But right now, I think there are just not as many tools installed, and we've got a lot of capacity in place ready to take -- for you to take customer business and turn it fast.
And Herman, maybe one for you on the margins. So still guiding for up 300 bps for the year despite the lower top line. Is that just mix dynamics? Or are there other kind of cost levers you're pulling maybe faster to protect that 300 basis points? You laid out quite a hefty list of improvements around Ascend 2026 for the year. So just kind of curious on what's kind of underpinning the ability to drive that margin expansion still.
Yes. So the ASCEND 2026 program is bearing fruit and things are coming online faster maybe than we would have committed to. So we're always planning ahead, and there's always things in the pipeline. Things fall off, and then things come on faster, and we're just experiencing that. So we talked about in the prepared remarks that we've already, for example, optimized, closed 10 sites. We've rightsized another 3. That's continued -- that's finding its way into the P&L. It's a combination of things. So there are cost actions related to ASCEND 2026 that's helping us reach these targets. And we still feel good about the fiscal year '26 commitment.
[Operator Instructions] Our next question will come from the line of Lucas Baranowski from KeyBanc Capital.
This is Lucas on for Paul Knight at KeyBanc. Last quarter, I believe you mentioned that you had 2 more sites that were expected to close over the near term. It sounds like those have occurred now. But are there any further closures that you're expecting in the coming quarters?
Yes. So we do have a couple others that we are currently working on. I don't want to disclose whether they'll happen in the fourth quarter or next year, but we do have a few things in flight right now.
Okay. Great. And then switching over to the Multiomics business. I believe you had some sites where revenue was expected to be flat sequentially as you transition over to the new NovaSeq X Plus. Has that transition finished at this point? And are you starting to see a step-up in revenue?
Yes. It's actually an interesting dynamic, Lucas. So -- and we've said this in the past. Where we're seeing price losses, it's actually being offset by volume gains. We've been able to maintain the margins in the business because the new technology actually enables us to use less raw material, less labor. And on top of that, we're able to leverage our fixed overhead structure, and it's the combination of those 3 things that have contributed to the margin stabilization.
Over, I would say, the last 2 quarters, the ASPs have stabilized, and we're beginning to get to the point where we're lapping these tougher compares. So NGS in the quarter, growing 3% is the largest quarter growth that we've seen in the past year. So it's a positive sign for this business for sure.
And Lucas, this is Steve. To the last part of your question, almost all the data that we generate today and the measurement we make is on the X Plus tool. So we made that conversion already prior to the last quarter.
I think we have a follow-up question from the line of Jacob Johnson from Stephens.
Two follow-ups. I guess, first, just following up on that last line of questioning, NGS up 3%. Steve, I think, I heard you say volume was up 20%. As we near the end of some of these pricing headwinds, is that volume growth a proxy for how -- what we could see from NGS? Or any caveats there as we think about NGS growth as pricing comps normalize?
Yes. So Jacob, we hope so. Let me start with 2 things. We hope so. We think the volumes are good. The other thing I'll say is on -- when we look at the last 3 conversion cycles when there were appreciable decreases in the cost of sequencing, we're at or a little bit ahead performance-wise compared to where we were before. But I think that's customer behavior. I think more people are outsourcing. So we're -- we anticipate we'll see continued progress here.
Now we've got work to do and proofs to do, but there's nothing that says that we wouldn't have a chance then on the more solid -- like Herman says, year-over-year compares that, that wouldn't be a lot more solid business. So we anticipate that's the case. We'll wait and see. But the customer volume and customer activity has been really strong.
Got it. And then just one other follow-up on multiomics just on synthesis. It's been topical for customer -- or for investors. You guys have mentioned the potential to add U.S. manufacturing for synthesis if customers are asking for it. I'm just curious, have you heard any of that from customers?
Yes. Let me -- Jacob, Herman and I'll share this one. So customers ask from a risk mitigation standpoint, and we're prepared. So we have -- we already do manufacturing synthesis in North America. Customers ask because they want to know that in the event that we couldn't supply from our China facility, for example, could we, and the answer, of course, is yes. But there's no push for it, and no customers have gone away from us as a result of the way that we're structured today.
So indeed, it's a question, but only a question, and it's mostly for the risk mitigation strategy. So -- but we're prepared -- if we needed to, we'd be prepared to move more manufacturing to North America.
Now I will now turn it back over to Herman Cueto for any closing remarks.
Okay. Well, thank you, everybody, for joining us today. I would like to thank our 3,000-plus Azenta employees worldwide for their hard work and dedication. That concludes our call for today. Thank you, everybody.
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