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Item 7. Management’s Discussion and Analysis

2022-11-25 compared with 2021-11-24 · 256 added, 333 removed, 193 unchanged (75% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes principal factors affecting the results of our operations, financial condition and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our Consolidated Financial Statements included elsewhere in this Form 10-K.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes principal factors affecting the results of our operations, financial condition and liquidity, as well as our critical accounting policies and estimates that require significant judgment and thus have the most significant potential impact on our Consolidated Financial Statements included elsewhere in this Form 10-K.

Our MD&A is organized as follows:

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● Results of Operations.

This section provides an analysis of our financial results for the fiscal year ended September 30, 2021 compared to the fiscal year ended September 30, 2020 and for the fiscal year ended September 20, 2020 compared to the fiscal year ended September 20, 2019.

This section provides an analysis of our financial results for the fiscal year ended September 30, 2022 compared to the fiscal year ended September 30, 2021.

● Liquidity and Capital Resources.

This section provides an analysis of our liquidity and changes in cash flows, as well as a discussion of available borrowings and contractual commitments.

This section provides an analysis of our liquidity and changes in cash flows, as well as a discussion of contractual commitments.

You should read the MD&A in conjunction with our Consolidated Financial Statements and related notes in this Form 10-K.

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included above in this Form 10-K for a discussion of important factors that could cause our actual results to differ materially from our expectations.

We are a leading global provid er of life science sample exploration and management solutions for the life sciences market.

We support our customers from research to clinical development with our sample management, automated storage, and genomic services expertise to help our customers bring impactful therapies to market faster.

We understand the importance of sample integrity and offer a broad portfolio of products and services spanning across the life cycle of samples from procurement and sourcing, automated storage platforms, genomic services and a broad range of consumables, informatics and data software, and sample management solutions.

Our expertise and leadership positions enable us to be a trusted partner to pharmaceutical, biotechnology, and life sciences research institutions globally.

In the life sciences sample management market, we utilize our core technology competencies and capabilities in automation and cryogenics to provide comprehensive bio-sample management solutions to a broad range of end markets within the life sciences industry.

Our offerings include automated ultra-cold storage freezers, consumable sample storage containers, instruments which assist in the workflow of sample management, genomic services and both on-site and off-site full sample management services.

We expect the life sciences sample management market to remain one of our principal markets for our product and service offerings and provide favorable opportunities for the growth of our overall business.

Over the past several years, we have acquired and developed essential capabilities required to strategically address the sample management needs across multiple end markets within the life sciences industry.

Our life sciences portfolio includes products and services that we acquired to bring together a comprehensive capability to service our customers’ needs in the sample-based services arena.

We continue to develop the acquired products and services offerings through the combined expertise of the newly acquired teams and our existing research and development resources.

We believe our approach of acquisition, investment, and integration has allowed us to accelerate our internal development and that of the acquired entity, significantly decreasing our time to market.

We have also strengthened and broadened our product portfolio and market reach by investing in internal product development.

We expect to continue investing in research and development and making strategic acquisitions with the objective of expanding our offerings in the life sciences market.

Within our Life Sciences Products segment, we have developed and continue to develop automated biological sample storage solutions for operating in ultra-low temperature environments.

We have a complete line up of automated stores from ambient temperatures to -190°.

Impact of the COVID-19 Pandemic

We have implemented business continuity plans designed to address the COVID-19 pandemic and minimize the disruption to ongoing operations.

Since the beginning of the COVID-19 pandemic in March 2020, however, our business has been impacted at various times by reduced demand for services from customers experiencing lockdowns and quarantines, travel restrictions impacting our ability to service our products, supply chain constraints, increased competition for talent, and governmental mandates at times constraining our employees’ ability to work at our facilities.

During the third quarter ended June 30, 2022, we experienced a two-week facility closure in Suzhou, China as a result of local government protocols and mandates.

As we expect the pandemic to continue to evolve, we will continue monitoring and assessing the effects of the COVID-19 pandemic on our business.

However, we cannot at this time accurately predict what effects these conditions will ultimately have on our operations due to uncertainties relating to variants of the virus, vaccine effectiveness against the variants, the duration of any future outbreak and the pandemic itself, and the length of the travel restrictions and business closures imposed by the governments of impacted countries.

Our financial results will also depend on variables including reduced demand from our customers, the degree that the supply chain may be constrained which could impact our delivery of products and services and the potential negative impact on our operations if there is an outbreak among our employees, as well as the amount of incremental demand caused by research and treatments in the areas of COVID-19 or related threats.

We are a leading global provider of life science sample exploration and management solutions for the life sciences market.

We entered the life sciences market in 2011, leveraging our in-house capabilities of precision automation and cryogenics that we applied significantly in the semiconductor market, to provide solutions for automated ultra cold storage.

Since then, we have expanded our offerings both organically and through a series of acquisitions.

We now support our customers from research to clinical development with our sample management, automated storage, and genomic services expertise to help our customers bring impactful therapies to market faster.

We understand the importance of sample integrity and offer a broad portfolio of products and services supporting customers at every stage of the life cycle of samples including procurement and sourcing, automated storage systems, genomic services and a multitude of sample consumables, informatics and data software, and sample repository solutions.

Our expertise, global footprint and leadership position enables us to be a trusted partner to pharmaceutical, biotechnology, and life sciences research institutions globally.

In total, we employed approximately 3,200 full-time employees, part-time employees and contingent workers worldwide as of September 30, 2022 and have sales in approximately 100 countries .

We are headquartered in Chelmsford, Massachusetts and have operations in North America, Asia, and Europe.

Our portfolio includes products and services offerings developed by us internally as well as many offerings we have added through multiple acquisitions designed to bring together a comprehensive capability to service our customers’ needs in the sample-based services arena.

We continue to develop new products and services offerings and enhance existing and acquired offerings through the expertise of our research and development resources.

We believe our approach of acquisition, investment, and integration has allowed us to accelerate our internal development and significantly accelerate our time to market.

Within our Life Sciences Products segment, we have developed and continue to develop automated biological sample storage solutions for operating in low temperature environments.

We have a complete line up of automated stores from ambient temperatures to -190°C.

Our BioStore’s ™ unique design allows controlled temperature storage down to -80°C with the industry’s highest throughput of sample retrieval.

Our BioStore portfolio offers improved data management and sample security for vaccines and biologics stored at -80°C.

Within our Life Sciences Services segment, our genomics services business advances research and development activities in gene sequencing, synthesis editing and related services to meet market demands.

Recently, enabled by newly developed proprietary technologies, we launched a portfolio of new services, targeting analysis of adeno-associated virus, a common vector used in cell and gene therapy.

We will continue to focus on developing processes and technologies that can streamline sample to data workflow.

Within our Life Sciences Services segment, our genomics services business advances research and development activities by gene sequencing, synthesis, editing and related services.

We offer a comprehensive, global portfolio that we believe has both broad appeal in the life sciences industry and enables customers to select the best solution for their research challenges.

This portfolio also offers unique solutions for key markets such as cell and gene therapy, antibody development, and biomarker discovery by addressing genomic complexity and throughput challenges.

Our sample repository solutions business is a global leader in sample storage and management, and provides a full suite of reliable cold and ultra-cold chain solutions.

Sale of the Semiconductor Automation Business

In the fourth quarter of fiscal year 2021, we entered into a definitive agreement to sell our semiconductor automation business, which consists of our Brooks Semiconductor Solutions Group reportable segment, to Thomas H.

Lee, Partners, L.P., or THL, for $3.0 billion in cash subject to customary adjustments.

Since our founding in 1978, we have been a leading automation provider and partner to the global semiconductor manufacturing industry.

At the completion of the sale of the semiconductor automation business, we will no longer serve this market.

We anticipate closing of the transaction in the first half of calendar year 2022 upon satisfaction of customary closing conditions and regulatory approvals.

The semiconductor automation business has been classified as discontinued operations and, unless otherwise noted, this MD&A relates solely to our continuing operations and does not include the operations of our semiconductor automation business.

Sale of the Semiconductor Cryogenics Business

In the fourth quarter of fiscal year 2018, we entered into a definitive agreement to sell our semiconductor cryogenics business to Edwards Vacuum LLC (a member of the Atlas Copco Group) for approximately $675.0 million in cash, subject to customary adjustments.

We originally acquired the cryogenics business in 2005 as part of the acquisition of Helix Technology Corporation.

The semiconductor cryogenics business has been classified as discontinued operations and, unless otherwise noted, this MD&A relates solely to our continuing operations and does not include the operations of our semiconductor cryogenics business.

On July 1, 2019, we completed the sale of the semiconductor cryogenics business for $659.8 million.

Net proceeds from the sale were $551.7 million, net of taxes and closing costs paid and remaining taxes payable.

During the first quarter of fiscal year 2021, the final net working capital was determined, resulting in a negative adjustment in the amount of $1.8 million payable to Edwards.

As part of this sale, we transferred our intellectual property, for our cryogenics pump products, but not our intellectual property related to our semiconductor automation or life sciences businesses.

On July 1, 2019, in connection with the completion of the sale of our semiconductor cryogenics business, we used $495.3 million of the cash proceeds to extinguish debt.

As a result of the debt extinguishment we recorded a loss on extinguishment of debt of $5.2 million in the fourth quarter of fiscal year 2019.

Refer to “Liquidity and Capital Resources” for further discussion of the debt extinguishment.

In the fourth quarter of fiscal year 2021, we entered into a definitive agreement to sell our semiconductor automation business to Thomas H.

Lee, Partners, L.P., or THL, and completed the sale on February 1, 2022, for $2.9 billion in cash.

In connection with the planned divestiture of the semiconductor automation business and our continued focus on our life sciences businesses, we changed our corporate name from “Brooks Automation, Inc.” to “Azenta, Inc.” and our common stock started to trade on the Nasdaq Global Select Market under the symbol “AZTA” on December 1, 2021.

Since our founding in 1978, we had been a leading automation provider and partner to the global semiconductor manufacturing industry.

With the completion of the sale of the semiconductor automation business, we no longer serve the semiconductor market.

The semiconductor automation business has been classified as a discontinued operation and, unless otherwise noted, this MD&A relates solely to our continuing operations and does not include the operations of our semiconductor automation business.

Our business is comprised of two reportable segments, our Life Sciences Products segment and our Life Sciences Services segment.

For further information on our reportable and operating segments, please refer to Note 19, “Segment and Geographic Information” to our Consolidated Financial Statements included under Item 8, “Financial Statements and Supplementary Data” of this Form 10- K.

Our Life Sciences Products business is a leading provider of automated ultra-cold storage solutions for biological and chemical compound samples.

For further information on our reportable and operating segments, please refer to Note 18, “Segment

and Geographic Information” to our Consolidated Financial Statements included under Item 8, “Financial Statements and Supplementary Data” of this Form 10- K.

Our Life Sciences Products business is a leading provider of automated cold storage solutions for biological and chemical compound samples.

Our storage systems provide reliable automation and sample inventory management at temperatures down to -190°C and can store anywhere from one to millions of samples.

Our sample management solutions include consumable vials and tubes, PCR plates, instruments for supporting workflow, and informatics, all of which focus on providing customers with the highest level of sample quality, security, availability, intelligence and integrity throughout the lifecycle of samples providing customers with complete end-to-end “cold-chain of custody” capabilities.

Our sample management solutions include consumable vials and tubes, PCR plates, instruments for supporting workflows, and informatics.

This portfolio provides customers with the highest level of sample quality, security, availability, intelligence and integrity throughout the lifecycle of samples providing customers with complete end-to-end “cold-chain of custody” capabilities.

On July 1, 2022, we acquired Barkey Holding GmbH and its subsidiaries, or Barkey, a leading provider of controlled rate thawing devices for customers in the medical, biotech and pharmaceutical industries, headquartered in Leopoldshöhe, Germany.

Our Life Sciences Services business is a leading provider of solutions addressing the many needs of customers in the area of genomic analysis and the management and care of biological samples used in pharmaceutical, biotech, healthcare, clinical, and academic research and development markets.

Millions of samples are processed every year, each containing valuable information that must be preserved with the sample.

Through our genomic services we provide a broad capability to customers for sequencing and synthesis of genes.

We process millions of samples every year, each containing valuable information that must be preserved with the sample.

Our genomic services provide a broad capability to customers for sequencing and synthesis of genes.

Our sample management services include off-site storage services, transport services, laboratory services, and interactive informatics solutions.

We also provide expert-level consultation services to our clients throughout their experimental design and implementation.

Our services also include short- and long-term sample storage and management of the “cold chain of custody” from collection, to storage, to retrieving the sample which ultimately may go back into the customer’s research workflow.

Acquisition completed after fiscal year end

On October 3, 2022, we acquired B Medical Systems S.á r.l and its subsidiaries, or B Medical, a market leader in temperature-controlled storage and transportation solutions that enables the delivery of life-saving treatments to more than 150 countries worldwide.

This acquisition complements our cold chain capabilities, adding differentiated solutions for reliable and traceable transport of temperature-sensitive specimens.

Business and Financial Performance

Our performance for the twelve months ended September 30, 2022, 2021 and 2020 are as follows:

Year Ended September 30,

Dollars in thousands

Cost of revenue

Operating expenses

Research and development

Selling, general and administrative

Restructuring charges

Total operating expenses

Operating loss

Interest income

Interest expense

Loss on extinguishment of debt

Other expense, net

Loss before income taxes

Income tax provision (benefit)

Loss from continuing operations

Income from discontinued operations, net of tax

Results of Operations

Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021

We reported revenue of $513.7 million for fiscal year 2021 compared to $388.5 million for fiscal year 2020, an increase of $125.2 million, or 32%.

Gross margin was 47.5% for fiscal year 2021 compared to 44.3% for fiscal year 2020, an increase in gross profit of $71.7 million.

Operating expenses were $274.9 million for fiscal year 2021 compared to $208.7 million for fiscal year 2020, an increase of $66.2 million.

We reported an operating loss of $31.1 million for fiscal year 2021 compared to an operating loss of $36.6 million for fiscal year 2020, a decrease in operating loss of $5.5 million, which was primarily attributable to the revenue growth and gross margin improvement, partially offset by higher operating expenses.

Other expenses, net includes $16 million of expense due to the release of a tax indemnification asset which is offset within our income tax benefit from the release of a related liability.

Overall, we generated a net loss from continuing operations of $28.9 million during fiscal year 2021 as compared to $26.4 million in fiscal year 2020.

Please refer to the “Results of Operations ” section below for a detailed discussion of our financial results for the fiscal year 2021 compared to fiscal year 2020.

Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019

We reported revenue of $388.5 million for fiscal year 2020 compared to $334.2 million for fiscal year 2019, an increase of $54.3 million, or 16%.

Gross margin was 44.3% for fiscal year 2020 compared to 40.3% for fiscal year 2019, an increase in gross profit of $37.5 million.

Operating expenses were $208.7 million for fiscal year 2020 compared to $182.0 million for fiscal year 2019, an increase of $26.7 million.

We reported an operating loss of $36.6 million for fiscal year 2020 compared to an operating loss of $47.4 million for fiscal year 2019, a decrease in operating loss of $10.8 million, which was primarily attributable to the revenue growth and gross margin improvement, partially offset by higher operating expenses.

We generated a net loss from continuing operations of $26.4 million during fiscal year 2020 as compared to $61.1 million in fiscal year 2019.

The decrease in operating loss was primarily attributable to our increase in operating income in the current year as well as a loss on extinguishment of debt of $14.3 million and higher interest expense of $19.3 million in fiscal year 2019.

Revenue increased 8% for the fiscal year 2022 as compared to the prior fiscal year driven by revenue growth in our Life Sciences Services segment of 13%.

Gross margin was 46% for fiscal year 2022 compared to 47.5% for fiscal year 2021.

Operating expenses in fiscal year 2022 increased by $5.4 million compared to the prior fiscal year due to increases in both research and development expenses and selling, general and administrative expenses.

We reported an operating loss of $24.7 million for fiscal year 2022 compared to an operating loss of $31.1 million for fiscal year 2021, primarily due to the retirement of tradenames related to the rebranding of the Life Sciences business of $13.4 million and a charge related to liabilities for import tariffs related to imports in prior fiscal years that took place in the fourth quarter of 2021.

This was partially offset by inflation and investment in the business.

We also recorded $16 million of net interest income from our investments in marketable securities in fiscal year 2022.

Overall, we generated a net loss from continuing operations of $11.3 million during fiscal year 2022 compared to a net loss from continuing operations of $28.9 million in fiscal year 2021.

Please refer to the “Results of Operations” section below for a detailed discussion of our financial results for the fiscal year 2022 compared to fiscal year 2021.

Cash Flows and Liquidity -

Our cash and cash equivalents, restricted cash and marketable securities were $244.0 million as of September 30, 2021 and $260.7 million as of September 30, 2020.

Both fiscal year 2021 and 2020 each exclude $45.0 million of cash classified as assets held for sale related to the semiconductor automation business.

Cash and cash equivalents and restricted cash as presented on our Consolidated Statements of Cash Flows is on a total company basis and were $285.3 million as of September 30, 2021 compared to $302.5 million as of September 30, 2020.

The decrease of $17.2 million included cash outflows for investing activities of $146.3 million and financing activities of $25.9 million, partially offset by cash inflows from operating activities of $149.9 million.

The effects of foreign exchange positively impacted the annual change in balances by $5.2 million.

Our cash and cash equivalents, restricted cash and marketable securities were $2.3 billion as of September 30, 2022 and $244.0 million as of September 30, 2021.

Fiscal year 2021 excludes $45.0 million of cash classified as assets held for sale related to the semiconductor automation business.

Cash and cash equivalents and restricted cash as presented on our Consolidated Statements of Cash Flows are on a total company basis and were $1.0 billion as of September 30, 2022 compared to $285.3 million as of September 30, 2021.

The increase of $0.8 billion was attributable to $1.5 billion of investing activities, including $2.9 billion of proceeds from the sale of the semiconductor automation business offset by $1.5 billion of investments in marketable securities, new acquisitions and capital equipment;

$63 million of cash outflow from financing activities, and $466

million of cash outflows from operating activities.

The cash outflow from operating activities includes $431.6 million of taxes and $52.5 million of fees related to the sale of the semiconductor automation business.

The effects of foreign exchange reduced the cash balance by $180.8 million.

Please refer to the “Liquidity and Capital Resources” section below for a detailed discussion of our liquidity and changes in cash flows for fiscal year 2022 compared to fiscal year 2021.

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These estimates are based on a number of factors, including the degree of required product customization and the work required to be able to install the product in the customer’s existing environment, as well as our historical experience, project plans and an assessment of the risks and uncertainties inherent in the contract related to implementation delays or performance issues that may or may not be within our control.

We estimate a loss on a contract by comparing total estimated contract revenue to the total estimated contract costs and recognize a loss during the period in which it becomes probable and can be reasonably

We review profit estimates for long-term contracts during each reporting period and revise the estimate based on changes in circumstances.

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Adjustments to fair values of assets and liabilities made after the end of the measurement period are recorded within our operating results.

During the third quarter of fiscal 2021, the Company recorded $9.4 million level 3 liability which represents contingent consideration for an acquisition within the Life Sciences Products segment.

The amount is contingent based on the acquired business’ performance for the twelve-month period ending December 31, 2021.

Please refer to Note 4, “Acquisitions” for further detail.

Changes in the fair value of contingent consideration resulting from a change in the underlying inputs are recognized in results of operations until the arrangement is settled.

Intangible Assets, Goodwill and Other Long-Lived Assets

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We have two operating and two reportable segments consisting of Life Sciences Products and Life Sciences Services.

As of the date of our goodwill impairment test, we had six reporting units which three reporting units are within semiconductor automation discontinued operations.

The three reporting units within the continuing operations include one reporting unit within Life Sciences Products operating segment and two reporting units within the Life Sciences Services operating segment.

As a result of a change in our management reporting structure and immediately post to the annual goodwill impairment test, the Company combined two components within the Life Sciences Services operating segment, Sample Repository Solutions and Genomic Services components, into the Life Sciences Services reporting unit.

The Company evaluated the aggregation criteria under ASC 350 for the two components and concluded that they exhibit similar economic characteristics and meet the aggregation criteria.

We previously had three reporting units, which included the Life Sciences Products operating segment, which constitutes of a single reporting unit, and two reporting units within the Life Sciences Services operating segment, sample repository solutions and genomic services, which have been combined into a single reporting unit within the Life Sciences Services segment following the 2021 impairment test.

See Note 8, “Goodwill and Intangible Assets” for additional information.

We perform our annual goodwill impairment assessment on April 1 st of each fiscal year.

We evaluate a reporting unit’s goodwill for impairment between annual tests if events occur or circumstances change that would more likely than not reduce the fair value of such reporting unit below its carrying value.

In accordance with ASC 350, Intangibles- Goodwill and Other , we initially assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value.

In accordance with Accounting Standards Codification 350, Intangibles- Goodwill and Other , we initially assess qualitative factors to determine whether the existence of events or circumstances indicates that it is more likely than not that the fair value of a reporting unit is less than its carrying value.

If we determine, based on this assessment, that it is more likely than not that the fair value of the reporting unit is less than its carrying value, we perform a quantitative goodwill impairment test by comparing the reporting unit’s fair value with its carrying value.

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No impairment loss is recognized if the fair value of the reporting unit exceeds its carrying value.

We also concluded that the fair value of the aggregated reporting units significantly exceeded the book value thus no adjustment to goodwill was necessary.

We determine fair values of our reporting units based on an income approach in accordance with the discounted cash flow method, or DCF Method.

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Application of the goodwill impairment test requires judgment based on market and operational conditions at the time of the evaluation, including management’s best estimates of the reporting unit’s future business activity and the related estimates and assumptions of future cash flows from the assets that include the associated goodwill.

Different assumptions of revenue growth rates, gross margin percentage, selling, general and administrative expense percentage and the discount rate used in the DCF model could result in different estimates of the reporting unit’s fair value as of each testing date.

We completed our annual goodwill impairment test as of April 1, 2021 for the three reporting units within our continuing operations, including Life Sciences Products as the only reporting unit within our Life Sciences Products segment, and Sample Repository Solutions and Genomic Services within our Life Sciences Services segment.

Based on the test results, we determined that no adjustment to goodwill was necessary.

We conducted a qualitative assessment for the Life Science Products reporting unit and determined that it was more likely than not that its fair value was greater than its carrying value.

As a result of the analysis, we did not perform the quantitative assessment for this reporting unit, and therefore, did not recognize any impairment losses.

We performed the quantitative goodwill impairment test for the two reporting units within the Life Sciences Services segment.

We determined that no adjustment to goodwill was necessary for these two reporting units.

Both reporting units’ fair values significantly exceeded their respective book values.

Different assumptions of revenue growth rates, gross margin percentage, selling, general and administrative expense percentage and the discount rate used in the DCF Method could result in different estimates of the reporting unit’s fair value as of each testing date.

We completed our annual goodwill impairment test as of April 1, 2022 for our continuing operations Life Sciences Products and Life Sciences Services segments.

Based on the test results, we determined that no adjustment to goodwill was necessary at that time.

We conducted a qualitative assessment for the Life Sciences Products and Life Sciences Services reporting units and determined that it was more likely than not that its fair value was greater than their carrying value.

As a result of the analysis, we did not perform the quantitative assessment, and did not recognize any impairment losses.

In the fourth quarter of 2022, we experienced a decline in our stock price resulting in our market capitalization being less than our carrying value of our reporting units.

Therefore, as of September 30, 2022, we assessed several events and circumstances that could affect the significant inputs used to determine the fair value of our reporting units, including updates to operating margins and cash flows, and the overall change in the economic climate.

We considered the decline in the market capitalization being less than the carrying value of our reporting units in our evaluation of goodwill impairment indicators and determined it appropriate to perform a quantitative assessment of both our reporting units as of September 30, 2022.

Our valuation was based on the DCF Method.

We concluded that there was no impairment, as the estimated fair value of the segments exceeded their carrying value.

In the event the financial performance of either of the segments does not meet our expectations in the future, we experience a prolonged macro or market downturn, or there are other negative revisions to key assumptions used in our DCF Method, we may be required to perform additional impairment analyses and could be required to recognize a non-cash impairment charge.

We are required to test long-lived assets, other than goodwill, for impairment when impairment indicators are present.

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The loss is allocated to the assets within the group based on their relative carrying values, with no asset reduced below its fair value.

During the fourth quarter of fiscal year 2021, we announced that the life sciences businesses will be rebranded under a single, unified life sciences brand, Azenta Life Sciences, or Azenta, during the first half of fiscal year 2022.

We did not test our long-lived assets for impairment during fiscal year 2022 since no events indicating impairment occurred during the periods then ended.

During the fourth quarter of fiscal year 2021, we announced that the life sciences businesses would be rebranded under a single, unified life sciences brand, Azenta Life Sciences, or Azenta, during the first half of fiscal year 2022.

We concluded that the abandoned tradenames for these businesses were fully impaired in the fiscal fourth quarter of 2021 and recorded a $13.4 million charge for the tradename impairment loss.

The impairment loss is included in the Selling, general and administrative expense in our Consolidated Statements of Operations .

We did not test our long-lived assets for impairment during fiscal years 2020 since no events indicating impairment occurred during the periods then ended.

We state our inventory at the lower of cost or market amount and make adjustments to reduce the inventory cost to its net realizable value by providing estimated reserves for excess or obsolete inventory.

We state our inventory at the lower of cost or market and make adjustments to reduce the inventory cost to its net realizable value by providing estimated reserves for excess or obsolete inventory.

The reserves are established for the difference between the cost of inventory and its estimated market value based on assumptions related to future demand and market conditions to reduce the carrying value to its net realizable value.

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We evaluate the profitability of each tax-paying component on a historic cumulative basis and on a forward-looking basis while performing this analysis.

After evaluating all the relevant positive and negative evidence we reduced our valuation allowance against certain foreign net deferred tax assets resulting in a tax benefit of $2.0 million in fiscal year 2021.

We continue to hold a U.S.

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We measure compensation cost for all employee stock awards at fair value on the date of grant and recognize compensation expense over the service period for awards expected to vest.

The fair value of restricted stock units is determined based on the number of shares granted and the closing price of our common stock quoted on the Nasdaq Global Select Market on the date of grant, and the fair value of stock options is determined using the Black-Scholes valuation model.

Such fair values are recognized as expense over the service period, net of estimated forfeitures.

The estimation of stock awards that will ultimately vest requires significant judgment.

We consider many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience.

The fair value of restricted stock units is determined based on the number of shares granted and the closing price of our common stock quoted on the Nasdaq Global Select Market on the date of grant.

In addition, for stock-based awards where vesting is dependent upon achieving certain operating performance goals, we estimate the likelihood of achieving the performance goals.

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RESULTS OF OPERATIONS

Please refer to the commentary provided below for further discussion and analysis of the factors contributing to our results from operations for the twelve months ended September 30, 2022 and 2021.

A comparison of our results for the fiscal year ended September 20, 2021 to the fiscal year ended September 20, 2020 is included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for fiscal year ended September 30, 2021, filed with the SEC on November 24, 2021.

Our revenue performance for the twelve months ended September 30, 2022, 2021, and 2020 is as follows:

Year Ended September 30,

Dollars in thousands

Life Sciences Products

Life Sciences Services

Total revenue

Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021

We reported revenue of $513.7 million for fiscal year 2021 compared to $388.5 million for fiscal year 2020, an increase of $125.2 million, or 32%.

Revenue for fiscal year 2022 increased 8% as compared to the prior fiscal year.

The COVID-19 pandemic has had varying impacts on our business for the fiscal year ended September 30, 2022.

Further discussion of the impacts by each segment are discussed below.

Our Life Sciences Products segment reported revenue of $199.6 million for fiscal year 2021 compared to $129.8 million for fiscal year 2020, an increase of $69.8 million or 54%.

The increase in revenue was driven by all major product lines.

Consumables and instruments were the most significant driver of the increase, primarily due to COVID-19 related demand.

Our Life Sciences Services segment reported revenue of $314.1 million for fiscal year 2021 compared to $258.8 million for fiscal year 2020, an increase of $55.3 million or 21%.

We reported an increase of $56.2 million from our genomics services business driven by Next Generation sequencing, gene synthesis services and Sanger sequencing.

We reported a decrease in sample repository solutions revenue of $1.0 million primarily due to reduction of outsourced genomic services which were provided through an alliance with Infinity BiologiX LLC, formerly RUCDR, that was terminated in the fourth quarter of fiscal year 2020.

Offsetting the decrease in revenue from the alliance was an increase in storage, informatics, and revenue from the acquisition of Trans-Hit Bio.

Revenue increased 30% excluding the impact of the RUCDR alliance.

We estimate that the impact of the COVID-19 pandemic on our revenue for the fiscal year ended September 30, 2021 was a net increase of approximately $53 million in the aggregate primarily attributable to the increased demand for in our consumables and instruments products.

Further discussion of the impacts of the COVID-19 pandemic has had on each segment are discussed below.

Our Life Sciences Products segment revenue was decreased slightly over year.

This was due to growth in stores & services product lines which was offset by a reduction in consumables and instruments, as COVID-19 related demand declined in fiscal 2022 from the prior fiscal year.

Our Life Sciences Services segment revenue increased 13% in fiscal year 2022 compared to the prior fiscal year, with double digit growth in both our genomics and sample repository solutions businesses.

Sample repository solutions revenue increased 18% in fiscal year 2022 compared to the prior fiscal year due to the growth in our storage services.

Genomic services revenue increased 11% in fiscal year 2022 compared to the prior fiscal year primarily due to an increase in our next generation sequencing business.

We estimate that revenue related to the COVID-19 pandemic for the fiscal year ended September 30, 2022 was approximately $22 million in the aggregate primarily attributable to the increased demand for our consumables and instruments products as compared to COVID-related revenue of $53 million for the year ended September 30, 2021.

We anticipate continued growth in revenue from our life sciences products and services businesses through our internally developed products and services and through our acquired businesses and potential future acquisitions.

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Operating Income (Loss)

Our operating performance for the twelve months ended September 30, 2022, 2021 and 2020 is as follows:

Year Ended September 30,

Dollars in thousands

Life Sciences Products

Life Sciences Services

Total revenue

Operating income:

Life Sciences Products

Life Sciences Products adjusted operating margin

Life Sciences Services

Life Sciences Services adjusted operating margin

Segment adjusted operating income

Total segment adjusted operating margin

Amortization of completed technology

Restructuring related charges

Impairment of intangible assets

Amortization of acquired intangible assets

Restructuring charges

Tariff adjustment

Other unallocated corporate expenses

Total operating loss

Total operating margin

We reported an operating loss of $24.7 million for fiscal year 2022 compared to an operating loss of $31.1 million for fiscal year 2021.

The decrease in operating loss of 15% was driven by higher revenue and gross profit, partially offset by an increase in both research and development expenses and selling, general and administrative expenses compared to the prior fiscal year.

Within operating expenses, selling, general, and administrative expenses increased $61.8 million, and research and development expenses increased $4.6 million.

Restructuring expenses decreased $0.3 million.

Selling, general and administrative expenses for fiscal year 2021 included $13.4 million of impairment charges related to abandoned tradenames due to the rebranding of our life sciences business announced during the fourth quarter of fiscal year 2021.

Cost of sales in fiscal year 2021 also included $5.5 million of cost of sales accrued for tariff liabilities related to intercompany import activity that occurred during the fiscal years of 2016 through 2020.

The costs resulted from an internal review of the transaction value used to calculate tariffs on intercompany imports of samples shipped from our genomics services business.

Operating income for our Life Sciences Products segment was $22.0 million for fiscal year 2021 compared to an operating loss of $4.2 million for fiscal year 2020.

Cost of sales for our Life Sciences Products segment includes charges for amortization related to completed technology of $1.1 million for fiscal year 2021 and $1.2 million for the fiscal year 2020.

Adjusted operating income for our Life Sciences Products segment, which excludes the charges mentioned above, was $23.1 million for fiscal year 2021 and adjusted operating loss in fiscal year 2020 was $3.0 million after excluding these charges.

The decrease in operating loss was primarily due to the impairment of a trademark in 2021 of $13.4 million.

Operating income for our Life Sciences Products segment was $11.0 million for fiscal year 2022 compared to an operating income of $22.0 million for fiscal year 2021.

Cost of sales for our Life Sciences Products segment includes charges for amortization related to completed technology of $1.1 million for both fiscal years 2022 and 2021.

Adjusted operating income for our Life Sciences Products segment, which excludes the charges mentioned above, was $12.2 million for fiscal year 2022 and adjusted operating income in fiscal year 2021 was $23.1 million after excluding these charges.

Please refer to Note 18, “Segment and Geographic Information”.

Operating income for our Life Sciences Services segment was $10.3 million for fiscal year 2021 compared to an operating loss of $4.4 million for fiscal year 2020.

Operating income for our Life Sciences Services segment was $10.8 million for fiscal year 2022, a slight increase as compared to an operating income of $10.3 million for fiscal year 2021.

Cost of sales for our Life Sciences Services segment includes charges for amortization related to completed technology of $6.3 million for fiscal year 2022 and $7.0 million for 2021.

Fiscal year 2021 cost of sales includes $5.5 million of cost accrued for tariff liabilities as discussed above.

Fiscal year 2020 includes $0.3 million of restructuring related charges.

Adjusted operating income for our Life Sciences Services segment, which excludes the charges mentioned above, was $22.7 million for fiscal year 2021 and adjusted operating loss in fiscal year 2020 was $2.9 million after excluding these charges.

Fiscal year 2021 cost of sales includes $5.4 million of cost accrued for tariff liabilities related to intercompany import activities that occurred during the fiscal years from 2016 to 2020.

Adjusted operating income for our Life Sciences Services segment, which excludes the charges mentioned above, was $16.8 million for fiscal year 2022 and adjusted operating income in fiscal year 2021 was $22.7 million after excluding these charges.

Please refer to Note 18, “Segment and Geographic Information”.

We reported gross margins of 47.5% for fiscal year 2021 compared to 44.3% for fiscal year 2020, an increase of 3.2 points.

Gross margin increased 3.4 percentage points in the Life Sciences Products segment and 3.1 percentage points in the Life Sciences Services segment.

Cost of revenue for both fiscal years 2021 and 2020 included $8.1 million of charges for amortization related to completed technology.

Cost of revenue for fiscal year 2021 included $5.5 million of cost accrued for tariff liabilities as discussed above.

Cost of revenue for fiscal year 2020 included $0.3 million of restructuring related charges.

Excluding these charges, margins expanded 3.6 percentage points in fiscal year 2021, as compared to fiscal year 2020.

Our gross margin performance for the twelve months ended September 30, 2022, 2021 and 2020 is as follows:

Life Science Products

Life Science Services

Year Ended September 30,

Dollars in thousands

Amortization of completed technology

Other adjustment

Tariff adjustment

Adjusted gross profit

Adjusted gross margin

We reported gross margins of 46.0% for fiscal year 2022 compared to 47.5% for fiscal year 2021, a decrease of 1.5 points.

Gross margin decreased 1.7 percentage points in the Life Sciences Products segment and 1.4 percentage points in the Life Sciences Services segment for fiscal year 2022 compared to the prior fiscal year.

Our Life Sciences Products segment reported gross margins of 44.7% for fiscal year 2022 compared to 46.4% for fiscal year 2021.

The improvement of 3.4 percentage points was primarily driven by volume leverage related to increased sales across all product lines.

Cost of revenue in fiscal year 2021 and 2020 included $1.1 million and $1.2 million, respectively, of amortization related to completed technology.

Excluding these charges, margins expanded 3.1 percentage points in fiscal year 2021, compared to fiscal year 2020.

The contraction of gross margin by 1.7 percentage points was primarily due to unfavorable product mix and inflation during fiscal year 2022.

Cost of revenue in fiscal year 2022 and 2021 both included $1.1 million, of amortization related to completed technology.

Excluding these charges, adjusted gross margins contracted 1.7 percentage points in fiscal year 2022, compared to fiscal year 2021.

Please refer to Note 18, “Segment and Geographic Information”.

Our Life Sciences Services segment reported gross margins of 46.7% for fiscal year 2022 compared to 48.2% for fiscal year 2021.

The improvement of 3.1 points was driven by volume leverage and revenue mix, partially offset by the impact of the $5.5 million of cost accrued for the tariff liabilities as discussed above.

The revenue mix benefit included 2.9 percentage points from the reduction in outsourced genomic services due to the exit of the alliance with RUCDR.

The reduction of 1.4 points was driven by higher costs due to a buildout of our facilities infrastructure and the effects of currency and inflation during fiscal year 2022.

Cost of revenue during fiscal year 2022 included $6.2 million of amortization related to completed technology as compared to $7.0 million incurred during fiscal year 2021.

Cost of revenue for fiscal year 2020 included $0.3 million of restructuring related charges.

Excluding the impact of the amortization related to completed technology, tariff charges and restructuring related charges, as described above, margins expanded 4.3 percentage points in fiscal year 2021, as compared to fiscal year 2020.

Cost of revenue for fiscal year 2021 included $5.4 million of tariff related charges.

Excluding the impact of the amortization related to completed technology and tariff charges, as described above, adjusted gross margins decreased 3.7 percentage points in fiscal year 2022, as compared to fiscal year 2021.

Please refer to Note 18, “Segment and Geographic Information”.

Research and Development Expenses

Research and development expenses were $22.4 million in fiscal year 2021 compared to $17.8 million in fiscal year 2020, which represented 4.4% and 4.6% of revenue for fiscal years 2021 and 2020, respectively.

Research and development expenses in our Life Sciences Products segment were $10.9 million in fiscal 2021 compared to $8.7 million in fiscal year 2020, which represented 5.4% and 6.7% of Life Sciences Products revenue in fiscal years 2021 and 2020, respectively.

The increase in research and development expenses were primarily attributable to investments in our cryogenic product line and outside services costs.

Research and development expenses in our Life Sciences Services segment were $11.5 million in fiscal 2021 compared to $9.1 million in fiscal year 2020 which represented 3.7% and 3.5% of Life Sciences Services revenue for fiscal years 2021 and 2020, respectively.

The increase in research and development expenses was primarily driven by higher payroll related costs and project costs.

Our research and development expense for the twelve months ended September 30, 2022, 2021, and 2020 is as follows:

Year Ended September 30,

Dollars in thousands

Life Sciences Products

Percent Revenue

Life Sciences Services

Percent Revenue

Total research and development expense

Percent Revenue

Research and development expenses in fiscal year 2022 increased $5.1 million as compared fiscal year 2021, driven by a $3.8 million increase in our Life Sciences Products segments and a $1.4 million increase in our Life Sciences Services segment.

Research and development expenses in our Life Sciences Products segment increased $3.8 million in fiscal year 2022 compared to fiscal year 2021.

The increase in research and development expenses were primarily related to continued investment in automated stores, cryogenic stores, and operations associated with the Barkey acquisition.

Research and development expenses in our Life Sciences Services segment increased $1.4 million in fiscal year 2022 compared to fiscal year 2021.

The increase in research and development expenses was primarily driven by higher investments in our genomics services business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $252.1 million in fiscal year 2021 as compared to $190.3 million in fiscal year 2020.

The increase of $61.8 million was driven by $26.2 million from segment selling, general and administrative expenses and $35.6 million from corporate expenses not allocated to our segments.

Our selling, general and administrative expenses for the twelve months ended September 30, 2022, 2021, and 2020 is as follows:

Year Ended September 30,

Dollars in thousands

Life Sciences Products

Percent Revenue

Life Sciences Services

Percent Revenue

Total selling, general and administrative expense

Percent Revenue

Total selling, general and administrative expenses were flat in fiscal year 2022 as compared to fiscal year 2021, driven by an increase of $17.1 million from segment selling, general and administrative expenses and a decrease of $17.2 million from corporate expenses not allocated to our segments.

The segment selling, general and administrative expenses are discussed in further detail below.

The increase in unallocated corporate

expenses was primarily driven by mergers and acquisition related expenses, which were $20.7 million for fiscal year 2021, compared to $0.5 million in fiscal year 2020.

Merger and acquisition expenses for fiscal year 2021 included $18.6 million of costs related to separation activities resulting in the sale of the semiconductor automation business.

Unallocated corporate expenses also include the amortization of intangible assets primarily related to customer relationships, which were $8.1 million for both fiscal years 2021 and 2020.

Fiscal year 2021 also includes $13.4 million of impairment charges to intangible assets related to tradenames.

The charges were driven by the abandonment of tradenames which resulted from the rebranding of our life sciences products and life sciences services business during the fourth quarter of fiscal year 2021 and $0.8 million of costs related to rebranding and transformation efforts.

Selling, general and administrative expenses at the segment level, which are discussed below, include corporate allocations from shared corporate function which include finance, information technology, human resources, legal, executive, governance, logistics and compliance, and variable compensation.

During fiscal year 2021 corporate allocated expenses increased $10.0 million compared to fiscal year 2020, primarily due to higher variable compensation accruals and information technology infrastructure costs.

Selling, general and administrative expenses in our Life Sciences Products segment were $59.7 million in fiscal year 2021 as compared to $51.2 million in fiscal year 2020.

The increase of $8.5 million was due to higher sales commission expenses, variable compensation expense and corporate allocated costs, which were driven by the factors discussed above.

Selling, general and administrative expenses in our Life Sciences Services segment were $129.4 million in fiscal year 2021 as compared to $111.7 million in fiscal year 2020.

The increase of $17.6 million is primarily related to variable compensation expense and costs to support growth, partially offset by lower travel expenses, and lower bad debt expense

The decrease in unallocated corporate expenses in fiscal year 2022 compared to the prior fiscal year was primarily due to $13.4 million of impairment charges to intangible assets related to tradenames recorded in 2021.

Merger and acquisition related expenses decreased by $2.7 million for fiscal year 2022 as compared to fiscal year 2021.

Unallocated corporate expenses also include the amortization of intangible assets primarily related to customer relationships, which were $32.3 million for fiscal year 2022 and $37.4 million for fiscal year 2021.

Selling, general and administrative expenses at the segment level, which are discussed below, include corporate allocations from shared corporate functions which include finance, information technology, human resources, legal, executive, governance, logistics and compliance, and variable compensation.

During fiscal year 2022 corporate allocated expenses decreased $17.2 million compared to fiscal year 2021, primarily due to lower variable compensation accruals.

Selling, general and administrative expenses in our Life Sciences Products segment increased $3.7 million in fiscal year 2022 as compared to fiscal year 2021, due to higher selling costs as we made investments in our commercial resources and capabilities .

Selling, general and administrative expenses in our Life Sciences Services segment increased $13.4 million in fiscal year 2022 as compared to fiscal year 2021 primarily due to selling costs as described above, and support personnel in our laboratories .

Non-Operating Income (Expenses)

Interest income – During fiscal years 2022 and 2021, we recorded interest income of $20.3 million and $0.6 million respectively, which primarily represented interest earned on our marketable securities.

The increase in interest income in fiscal year 2022 from the prior fiscal year is due to interest earned on the proceeds from the sale of the semiconductor automation business, including interest accrued on a net investment hedge.

Interest expense – During fiscal years 2022 and 2021, we recorded interest expense of $4.6 million and $2.0 million, respectively.

Interest expense is primarily related to our term loan.

The interest expense for fiscal year 2022 is primarily related to interest on cash held in one of our German subsidiaries that is denominated in EUR, which carries a negative interest rate.

Interest expense for fiscal year 2021 is primarily related to interest expense on our former term loan.

Other expenses, net – During fiscal years 2022 and 2021 we recorded other expenses, net of $0.3 million and $16.5 million, respectively.

Other expense, net for fiscal year 2022 is primarily due to foreign exchange loss.

Other expense, net for fiscal year 2021 includes a $16.0 million charge related to the release of a tax indemnification asset which is offset in the Income tax benefit line item in our Consolidated Statements of Operations.

Income Tax Benefit

We recorded an income tax benefit on continuing operations of $20.1 million in fiscal year 2021 compared to an income tax benefit of $13.9 million in fiscal year 2020.

The income tax benefit for fiscal year 2021 was primarily driven by uncertain tax position reversals totaling $18.2 million, which includes $16.0 million of uncertain tax positions that were indemnified.

Income Tax Provision (Benefit)

We recorded an income tax provision on continuing operations of $1.4 million in fiscal year 2022 compared to an income tax benefit of $20.1 million in fiscal year 2021.

The changes were the result of fluctuations in global income from operations and one-time tax benefits recorded in the fiscal year 2021.

The income tax provision for fiscal year 2022 was primarily driven by the tax provision on earnings in our foreign jurisdictions offset by the tax benefit on the losses in the United States on a continuing operations basis.

The income tax benefit during fiscal year 2021 was driven primarily by uncertain tax position reversals totaling $18.2 million, which includes $16.0 million of uncertain tax positions that were indemnified.

The tax reserve reversal is offset by a $3.4 million tax charge related to the write off a future tax deduction that would have been recognized if the uncertain tax position was settled in an audit.

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The overall benefit for fiscal year 2021 was partially offset by $4.1 million of withholding tax costs related to repatriation of foreign earnings in connection with the planned sale of the semiconductor automation business and the tax provision on earnings in our foreign jurisdictions during the year.

The income tax benefit during fiscal year 2020 was driven primarily by benefits in the U.S.

jurisdiction related to continuing operations losses and stock compensation deductions in excess of book expenses.

The overall benefit for fiscal year 2020 was partially offset by the tax provisions on earnings in our foreign jurisdictions during the year.

Discontinued Operations

Discontinued operations include our semiconductor automation business and our semiconductor cryogenics business.

In the fourth quarter of fiscal year 2021, we entered into a definitive agreement to sell our semiconductor automation business to THL for $3 billion in cash, subject to customary adjustments.

The sale is expected to close in the first half of 2022.

On July 1, 2019, we completed the sale of the semiconductor cryogenics business for $659.8 million in cash.

Revenue from discontinued operations was $680.1 million and $508.7 million, respectively, for fiscal years 2021 and 2020 and relates to the semiconductor automation business.

Net income from discontinued operations was $139.6 million and $91.2 million for fiscal years 2021 and 2020, respectively, and is comprised primarily of the results of operations of our semiconductor automation business.

Discontinued operations in fiscal years 2022 and 2021 consist of the semiconductor automation business.

On February 1, 2022, the Company completed the sale of the semiconductor automation business for $2.9 billion in cash.

Revenue from discontinued operations was $264.4 million and $680.1 million, respectively, for fiscal years 2022 and 2021 related to the semiconductor automation business.

Net income from discontinued operations was $2.1 billion and $139.6 million for fiscal years 2022 and 2021, respectively, and is comprised of the gain on the sale of the semiconductor business in fiscal year 2022, and results of operations of the semiconductor automation business in fiscal year 2021.

The income from discontinued operations only includes direct operating expenses incurred that (1) are clearly identifiable as costs being disposed of upon completion of the sale and (2) will not be continued by our company on an ongoing basis.

Indirect expenses which supported the semiconductor automation business and semiconductor cryogenics business, and which remained as part of the continuing operations, are not reflected in income from discontinued operations.

Fiscal Year Ended September 30, 2020 Compared to Fiscal Year Ended September 30, 2019

We reported revenue of $388.5 million for fiscal year 2020 compared to $334.2 million for fiscal year 2019, an increase of $54.3 million, or 16%.

The COVID-19 pandemic had varying impacts on our business for the fiscal year ended September 30, 2020.

The impacts by segment are discussed below.

Our Life Sciences Products segment reported revenue of $129.8 million for fiscal year 2020 compared to $119.0 million for fiscal year 2019, an increase of $10.7 million or 9%.

The increase in revenue was driven by consumables and instruments, which delivered record revenue levels driven by COVID-19 related demand, and an increase in revenue for our BioStore III Cryo systems, partially offset by decreases in revenue from automated cold sample management systems and infrastructure services revenue which were both impacted by customer site restrictions and schedule delays due to COVID-19.

Our Life Sciences Services segment reported revenue of $258.8 million for fiscal year 2020 compared to $215.2 million for fiscal year 2019, an increase of $43.6 million or 20%.

We reported an increase of $40.2 million from genomic services, which was composed of $20.0 million from the additional time of ownership for fiscal year 2020, compared to the prior fiscal year and $20.2 million from organic growth.

Our genomic services business, which is comprised of the acquisition of GENEWIZ Group, or GENEWIZ, was acquired in November 2018.

We reported an increase in Sample Repository Solutions revenue of $3.4 million primarily driven by informatics services and storage services, partially offset by declines in outsourced genomic services and transportation services, which were negatively impacted by COVID-19.

Informatics revenue was primarily driven by the acquisition of RURO in February 2020.

We estimate that the impact of the COVID-19 pandemic on our revenue for the fiscal year ended September 30, 2020 was a net reduction of approximately $11 million in the aggregate primarily attributable to a slow-down in the marketplace, reflecting the absence of a portion of the workforces within our customers.

This slowdown was first present in the China market in the early part of the second quarter ended March 31, 2020 and began surfacing in the rest of the world in the latter part of March 2020.

Partially offsetting these declines, we experienced an increase in demand for gene synthesis services and consumables and instruments, in support of numerous activities including research and development in the areas of virus detection and vaccines.

During the fourth quarter of fiscal year 2020, demand and shipments for certain products and services in our life sciences businesses which were impacted by COVID-19 recovered to levels we experienced prior to the pandemic.

Revenue generated outside the United States amounted to $135.0 million, or 35% of total revenue, for fiscal year 2020 compared to $81.7 million, or 24% of total revenue, for fiscal year 2019.

Operating Income (Loss)

We reported an operating loss of $36.6 million for fiscal year 2020 compared to $47.4 million for fiscal year 2019.

The decrease in operating loss of $10.8 million was driven by higher revenue and gross profit, partially offset by an increase in both selling, general and administrative expenses and research and development expenses compared to the prior fiscal year.

Drivers of the increases to research and development and selling, general and administrative expenses are described below.

Operating loss for our Life Sciences Products segment was $4.2 million for fiscal year 2020 compared to an operating loss of $22.1 million for fiscal year 2019.

Operating income for our Life Sciences Products segment includes charges for amortization related to completed technology of $1.2 million in each of the fiscal years 2020 and 2019.

Adjusted operating loss for our Life Sciences Products segment, which excludes the charges mentioned above, was $3.0 million for fiscal year 2020 compared to an adjusted operating loss of $20.9 million in fiscal year 2019.

Please refer to Note 19, “Segment and Geographic Information”.

Operating loss for our Life Sciences Services segment was $4.4 million for fiscal year 2020 compared to operating income of $3.1 million for fiscal year 2019.

Operating loss for our Life Sciences Services segment includes charges for amortization related to completed technology of $6.9 million and $5.6 million for fiscal years 2020 and 2019, respectively, and restructuring related charges of $0.3 million in each of the fiscal years 2020 and 2019.

Adjusted operating income for our Life Sciences Services segment, which excludes the charges mentioned above, was $2.9 million for fiscal year 2020 compared to $9.0 million in fiscal year 2019.

Please refer to Note 19, “Segment and Geographic Information”.

We reported gross margins of 44.3% for fiscal year 2020 compared to 40.3% for fiscal year 2019, an increase of 4.0 points.

Gross margin increased 6.2 percentage points in the Life Sciences Products segment and 2.7 percentage points in the Life Sciences Services segment.

Cost of revenue for fiscal year 2020 included $8.1 million of charges for amortization related to completed technology as compared to $6.8 million in fiscal year 2019.

Cost of revenue for both fiscal year 2020 and 2019 included $0.3 million of restructuring related charges.

Excluding these charges, margins expanded 1.7 percentage points in fiscal year 2020, as compared to fiscal year 2019.

Our Life Sciences Products segment reported gross margins of 42.9% for fiscal year 2020 compared to 36.6% for fiscal year 2019.

The improvement of 6.3 percentage points was driven by material and labor cost reductions related to large stores and BIII Cryo systems, efficiencies realized installing large stores and performing infrastructure services, and volume leverage.

Cost of revenue in each of the fiscal years 2020 and 2019 included $1.2 million of amortization related to completed technology.

Excluding these charges, margins expanded 6.2 percentage points in fiscal year 2020, as compared to fiscal year 2019.

Our Life Sciences Services segment reported gross margins of 45.0% for fiscal year 2020 compared to 42.3% for fiscal year 2019.

The improvement of 2.7 percentage points is due to volume leverage, cost performance, and favorable service mix.

Cost of revenue during fiscal year 2020 included $6.9 million of amortization related to completed technology as compared to $5.6 million incurred during fiscal year 2019.

Cost of revenue for both fiscal year 2020 and 2019 included $0.3 million of restructuring related charges.

Excluding these charges, margins expanded 2.8 percentage points in fiscal year 2020, as compared to fiscal year 2019.

Research and Development Expenses

Research and development expenses were $17.8 million in fiscal year 2020 compared to $17.3 million in fiscal year 2019, which represented 4.6% and 5.2% of revenue, for fiscal years 2020 and 2019, respectively.

Research and development expenses in our Life Sciences Products segment were $8.7 million in fiscal 2020 compared to $10.8 million in fiscal year 2019, which represented 6.7% and 9.1% of Life Sciences Products revenue for fiscal years 2020 and 2019, respectively.

The decline in research and development expenses were primarily attributable to lower outside service costs and lower temporary employee costs supporting product development initiatives.

Research and development expenses in our Life Sciences Services segment were $9.1 million in fiscal 2020 compared to $6.5 million in fiscal year 2019, which represented 3.5% and 3.0% of Life Sciences Services revenue for fiscal years 2020 and 2019, respectively.

The increase in research and development expenses was primarily driven by acquisitions.

The timing of the GENEWIZ acquisition added an additional $1.1 million of expense in fiscal year 2020 and the acquisition of RURO, Inc.

in February 2020 added $0.6 million of additional expense.

Investments in employee related costs and outside services to support development initiatives in our service offerings drove the remainder of the increase.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $190.3 million in fiscal year 2020 as compared to $163.3 million in fiscal year 2019.

The increase of $26.9 million was driven by $26.6 million from segment selling, general and administrative expenses and $0.3 million from corporate expenses not allocated to our segments.

During fiscal year 2020 corporate allocated expenses increased $33.8 million compared to fiscal year 2019, primarily due to the integration of the shared corporate functions from our acquisitions.

Selling, general and administrative expenses in our Life Sciences Products segment were $51.2 million in fiscal year 2020 as compared to $54.9 million in fiscal year 2019.

The decrease of $3.7 million is primarily due to decreases in employee related costs from restructuring actions taken in 2019 and 2020 and decreases in expenses related to employee travel, trade shows, and conferences, partially offset by higher corporate allocated costs and higher sales commissions.

Selling, general and administrative expenses in our Life Sciences Services segment were $111.7 million in fiscal year 2020 as compared to $81.4 million in fiscal year 2019.

The increase of $30.4 million is primarily related to acquisitions, corporate allocations, and bad debt expense, partially offset by lower employee travel expense.

The timing of the GENEWIZ acquisition added an additional $5.1 million of expense and the RURO acquisition added $1.2 million of additional expense in fiscal year 2020.

Non-Operating Income (Expenses)

Interest income – During fiscal years 2020 and 2019, we recorded interest income of $0.8 million and $1.4 million respectively, which primarily represented interest earned on our marketable securities.

Interest expense – During fiscal years 2020 and 2019, we recorded interest expense of $2.9 million and $22.2 million, respectively.

The decrease in interest expense in the fiscal year 2020 compared to the prior fiscal year is due to carrying less debt.

We extinguished $495.3 million of debt during the fourth quarter of fiscal year 2019.

Loss on extinguishment of debt - During fiscal year 2019, we recorded losses on extinguishment of debt of $14.3 million of which $9.1 million was in connection with the syndication of the incremental term loan secured during the first quarter of fiscal 2019.

The syndication to a new group of lenders during the second quarter of fiscal 2019 met the criteria of a debt extinguishment and therefore the amortization of the deferred financing costs associated with the origination of the incremental term loan was accelerated and recorded as a loss on extinguishment of debt in our Consolidated Statement of Operations.

In addition, as a result of the $495.3 million extinguishment of debt during the fourth quarter of fiscal year 2019, we recorded an additional $5.2 million loss on extinguishment of debt.

Other expenses, net – During fiscal years 2020 and 2019 we recorded other expenses, net of $1.6 million and $1.4 million, respectively.

Income Tax Benefit

We recorded an income tax benefit on continuing operations of $13.9 million in fiscal year 2020 compared to an income tax benefit of $22.8 million in fiscal year 2019.

The income tax benefit during fiscal year 2020 was driven primarily by benefits in the U.S.

jurisdiction related to continuing operations losses and stock compensation deductions

in excess of book expenses.

The overall benefit for fiscal year 2020 was partially offset by the tax provisions on earnings in our foreign jurisdictions during the year.

The income tax benefit during fiscal year 2019 was driven primarily by benefits in the U.S.

jurisdiction related to continuing operations losses, research tax credits, and stock compensation deductions in excess of book expenses.

We also recorded a $1.4 million benefit due to a state tax change that resulted from the acquisition of GENEWIZ.

We also recorded a tax provision of $3.0 million during the year related to changes in the toll charge based on a change in tax legislation and the completion of all accounting of the charge under SAB 118.

The overall benefit for fiscal year 2019 was partially offset by the tax provisions on earnings in our foreign jurisdictions during the year.

Discontinued Operations

As discussed above, discontinued operations include the results of the semiconductor automation business and the results of the semiconductor cryogenics business, which was sold on July 1, 2019.

The sale of the semiconductor automation business is expected to be completed during the first half of the calendar year 2022.

Revenue from discontinued operations was $508.7 million and $556.2 million, respectively, for fiscal years 2020 and 2019, respectively.

Revenue from discontinued operations for fiscal year 2020 relates to the semiconductor automation business.

Revenue from discontinued operations for fiscal year 2019 includes $446.7 million related to the semiconductor automation business and $109.5 million related to the semiconductor cryogenics business.

Net income from discontinued operations was $91.2 million for fiscal year 2020 and is comprised primarily of our semiconductor automation business.

Net income for fiscal 2019 was $498.5 million and includes the net gain on sale of the semiconductor cryogenics business of $408.6 million.

The net income for fiscal year 2019 is also inclusive of income from the ULVAC Cryogenics, Inc.

joint venture.

Indirect expenses which supported the semiconductor automation business and cryogenics business, and which remained as part of the continuing operations, are not reflected in income from discontinued operations.

LIQUIDITY AND CAPITAL RESOURCES

We believe that we have adequate resources to satisfy our working capital, financing activities, debt service and capital expenditure requirements for the next twelve months.

The current global economic environment, including the uncertainty related to the short and long-term impacts of the COVID-19 pandemic, make it difficult for us to predict longer-term liquidity requirements with sufficient certainty.

The current global economic environment, including the uncertainty related to the short and long-term impacts of the COVID-19 pandemic, make it difficult for us to predict

longer-term liquidity requirements with sufficient certainty.

We may be unable to obtain any required additional financing on terms favorable to us, if at all.

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Cash and cash equivalents included in assets held for sale

Our cash and cash equivalents, restricted cash and marketable securities were $244.0 million as of September 30, 2021 and exclude $45 million of cash included within assets held for sale related to the semiconductor automation business.

As of September 30, 2021, we had cash, cash equivalents and restricted cash including cash in assets held for sale of $285.3 million, of which $169.6 million was held outside of the United States.

If these funds are needed for the United States operations, we would need to repatriate these funds.

Our cash and cash equivalents, restricted cash and marketable securities were $2.3 billion as of September 30, 2022.

As of September 30, 2022, we had cash, cash equivalents and restricted cash of $1.0 billion, of which $867.6 million was held outside of the United States and included $379 million of short-term restricted cash in Luxembourg as of September 30, 2022, to complete the purchase of B Medical on October 3, 2022.

If the funds held outside the United States are needed for the United States operations, including for use in our recently approved share repurchase program, we would need to repatriate these funds.

As a result of recent changes in U.S.

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federal income tax.

During the quarter ended September 30, 2021 we repatriated foreign cash to the U.S.

in planning for the sale of the discontinued operation and recognized all related tax costs.

We have provided immaterial deferred income taxes for the impact of these future repatriations.

Aside from these actions, our intent is to reinvest the remaining foreign cash.

Aside from these actions, our intent is to reinvest the remaining foreign cash outside of the United States and our current operating plans do not demonstrate a need to repatriate these funds for our U.S.

We had marketable securities of $3.7 million and $3.2 million as of September 30, 2021 and 2020, respectively.

Our intent is to reinvest our foreign cash outside of the United States and our current operating plans do not demonstrate a need to repatriate these funds for our U.S.

We had marketable securities of $1.3 billion and $3.7 million as of September 30, 2022 and 2021, respectively.

Our marketable securities are generally readily convertible to cash without an adverse impact.

Fiscal Year Ended September 30, 2022 Compared to Fiscal Year Ended September 30, 2021

Cash Flows and Liquidity - Cash and cash equivalents and restricted cash as presented on our Consolidated Statements of Cash Flows is on a total company basis and were $285.3 million as of September 30, 2021 compared to $302.5 million as of September 30, 2020.

Cash Flows and Liquidity - Cash and cash equivalents and restricted cash as presented on our Consolidated Statements of Cash Flows is on a total company basis and were $1.0 billion as of September 30, 2022 compared to $285.3 million as of September 30, 2021.

$63 million of cash outflow from financing activities, and $466 million of cash outflows from operating activities.

The cash outflow from operating activities includes $431.6 million of taxes and $52.5 million of fees related to the sale of the semiconductor automation business.

The effects of foreign exchange positively impacted the annual change in balances by $180.8 million.

Divestiture and Extinguishment of Debt

On February 1, 2022, we completed the sale of our semiconductor automation business for $2.9 billion in cash.

Net cash proceeds from the divestiture were $2.5 billion after estimated taxes payable and other items, such as closing costs.

Upon closure of the sale on February 1, 2022, we utilized $49.7 million of proceeds to extinguish outstanding debt

related to our term loan.

We also terminated our revolving line of credit, which had no borrowings outstanding.

As of September 30, 2022, we have no outstanding debt on our balance sheet.

Operating Activities

Cash flows from operating activities can fluctuate significantly from period to period as earnings, working capital needs and the timing of payments for income taxes, restructuring activities and other charges impact reported cash flows.

Cash flows from operating activities of $149.9 million for the fiscal year ended September 30, 2021, resulted from net income $110.7 million, adjusted to exclude the effect of non-cash operating charges of $90.3 million, partially offset by an increase in net operating assets of $51.2 million.

Cash outflows from the increase in net operating assets were primarily driven by increases in accounts receivable, inventory, and prepaids and other assets partially offset by increases in accounts payable, accrued expenses, and other liabilities and accrued compensation and tax withholdings.

Cash flows from operating activities of $37.9 million for the fiscal year ended September 30, 2020, resulted from net income of $64.9 million, adjusted to exclude the effect of non-cash operating charges of $77.2 million, partially

offset by an increase in net operating assets of $12.7 million.

Additionally, the company paid $91.5 million in cash taxes related to the sale of the semiconductor cryogenics business.

Cash outflows from operating activities of $466 million for the fiscal year ended September 30, 2022, resulted from net income of $2.1 billion, adjusted to exclude the effect of non operating items of $2.5 billion, and an increase in net operating assets of $507 million.

This includes $431.6 million of taxes and $52.5 million of fees related to the sale of the semiconductor automation business.

$72.1 million of cash outflows from the increase in net operating assets were primarily driven by increases in accounts receivable, inventory, and prepaids and other assets partially offset by increases in accrued expenses, and accrued compensation and tax withholdings.

Cash flows from operating activities of $149.9 million for the fiscal year ended September 30, 2021, resulted from net income of $110.7 million, adjusted to exclude the effect of non-cash operating charges of $90.3 million, partially offset by an increase in net operating assets of $51.2 million.

Cash outflows related to the increase in net operating assets were primarily driven by increases in accounts receivable, inventory, and decreases in accrued expenses and other liabilities, partially offset by increased accrued compensation and tax withholdings.

Discontinued operations contributed $139.6 million of net income to fiscal year 2021 and $91.2 million of net income to fiscal year 2020 referenced above.

The pending sale of the semiconductor automation business may have a negative impact on cash flows from operations in future periods after the sale is completed.

Discontinued operations contributed $2.1 billion of net income to fiscal year 2022 and $139.6 million of net income to fiscal year 2021 referenced above.

Investing Activities

Cash used in investing activities was $146.3 million during fiscal year 2021 and consisted of $95.5 million for acquisitions and $52.8 million for capital expenditures, partially offset by $2.0 million of proceeds from the collection of loans receivable.

Cash flows provided by investing activities consist primarily of proceeds from divestitures, cash used for acquisitions, capital expenditures and purchase of marketable securities as well as cash proceeds generated from sales and maturities of marketable securities.

Cash provided by investing activities was $1.5 billion during fiscal year 2022 and consisted of $2.9 billion of proceeds from the sale of the semiconductor automation business on February 1, 2022, net of the cash transferred;

offset by $125.9 million of acquisitions, $73.4 million of capital expenditures, and $1.3 billion of net investments in marketable securities.

The acquisitions comprised the purchase of a technology intangible of $4 million related to the semiconductor automation business, $84 million for Barkey and $43 million to prepay the debt for the B Medical acquisition prior to September 30, 2022.

Capital expenditures were made primarily to increase capacity, support new product development, and enhance information technology infrastructure.

Capital expenditures for the fiscal year 2021 included $35.6 million for construction in process of a building site in Suzhou, China.

The site is intended to consolidate operations of three leased sites in the same region, while expanding operational capacity.

Cash used in investing activities was $146.3 million during fiscal year 2021 and consisted of $95.5 million for capital expenditures and $52.8 million for acquisitions, partially offset by $2.0 million of net proceeds from the net purchases, sales, and maturities of marketable securities.

Financing Activities

Cash used for financing activities was $25.9 million during fiscal year 2021 and included net cash outflows for cash dividends paid of $29.7 million, $1.2 million in payment of finance leases and $0.8 million of debt principal payments.

Partially offsetting these cash outflows was $5.8 million related to the proceeds from issuance of common stock.

Cash outflows for financing activities were $62.8 million for the year ended September 30, 2022 which primarily consisted of cash outflows of $49.7 million to extinguish the term loan, $10.4 million for the payments of acquisition related contingent consideration, $7.5 million related to dividend payments, $0.4 million payment of finance leases, partially offset by $5.2 million of proceeds from the issuance of common stock.

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The facility is being constructed in two phases.

We have incurred $35.6 million of capital expenditures to date related to the construction of the facility, which includes $26.0 million and $8.3 million, respectively, for fiscal years 2021 and 2020, respectively.

During the third fiscal quarter of 2022, we completed the construction of phase one of the facility.

The total cost

transferred from construction in progress to fixed assets as of September 30, 2022 was $42.4 million, which includes $16.4 million and $26.0 million for fiscal years 2022 and 2021, respectively.

Capital Resources

Term Loans and Line of Credit

On October 4, 2017, we entered into a $200.0 million term loan with Morgan Stanley Senior Funding, Inc., JPMorgan Chase Bank, N.A.

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The term loan was issued at $197.6 million, or 98.8% of its par value, resulting in a discount of $2.4 million, or 1.2%, which represented loan origination fees paid at the closing.

The loan principal amount may be increased by an aggregate amount equal to $75.0 million plus any voluntary repayments of the term loan plus any additional amount such that our secured leverage ratio is less than 3.00 to 1.00.

The term loan matures and becomes fully payable on October 4, 2024.

Installment principal payments equal to 0.25% of the initial principal amount of the term loan are payable on the last day of each quarter, with any remaining principal amount becoming due and payable on the maturity date.

Subject to certain conditions stated in the credit agreement, we may redeem the term loan at any time at our option without a significant premium or penalty, except for a repricing transaction, as defined in the credit agreement.

We are required to redeem the term loan at the principal amount then outstanding upon the occurrence of certain events, as set forth in the credit agreement.

On November 15, 2018, we entered into an incremental amendment to the credit agreement under which we obtained an incremental term loan in an aggregate principal amount of $350.0 million, issued at $340.5 million.

The proceeds of the incremental term loan were used to pay a portion of the purchase price for our acquisition of GENEWIZ.

On February 15, 2019, we entered into the second amendment to the credit agreement and syndicated the incremental term loan to a group of new lenders.

The syndicated incremental term loan was issued at $345.2 million.

Except as provided for in the amendments, the incremental term loan was subject to the same terms and conditions of the initial term loan.

On July 1, 2019, in connection with the completion of the sale of our semiconductor cryogenics business, we used $348.3 million of the cash proceeds from the transaction to extinguish the outstanding balance at July 1, 2019 of the incremental term loan and $147.0 million of the cash proceeds from the transaction to extinguish a portion of the outstanding balance at July 1, 2019 of the term loan.

The total amount of debt extinguished on July 1, 2019 was $495.3 million.

The credit agreement, as amended, for contains certain customary representations and warranties, covenants and events of default.

As of September 30, 2021, we were in compliance with all covenants and conditions under the credit agreement, as amended.

In connection with our acquisition of GENEWIZ in November 2018, we assumed three five-year term loans and two one-year term loans.

The two one-year short term loans matured and were repaid in full as of September 30, 2020.

The three five-year term loans matured and were repaid in full during fiscal year 2021.

At September 30, 2021, the aggregate outstanding principal balance of all outstanding term loans was $49.7 million, excluding unamortized deferred financing costs of $0.3 million.

Borrowings under the term loans bear variable interest rates.

As a result, we may experience exposure to interest rate risk due to the potential volatility associated with the variable interest rates on the term loans.

If rates increase, we may be subject to higher costs of servicing the loans which could reduce our profitability and cash flows.

During the year ended September 30, 2021, the weighted average stated interest rate on the term loans was 2.8%.

During the year ended September 30, 2021, we incurred aggregate interest expense of $1.7 million on the term loans, including $0.2 million of deferred financing costs amortization.

Our debt service requirements are expected to be funded through our existing sources of liquidity and operating cash flows.

Line of Credit Facility

We maintain a revolving line of credit under a credit agreement with Wells Fargo Bank, N.A.

and JPMorgan Chase Bank, N.A that provides for a revolving credit facility of up to $75.0 million, subject to borrowing base availability, as defined in the credit agreement.

The line of credit matures on October 4, 2022.

The proceeds from the line of credit are available for permitted acquisitions and general corporate purposes.

As of September 30, 2021, we had approximately $57.7 million available for borrowing under the line of credit.

There were no amounts outstanding pursuant to the line of credit as of September 30, 2021.

The amount of funds available for borrowing under the credit agreement may fluctuate each period based on our borrowing base availability.

The credit agreement contains certain customary representations and warranties, a financial covenant, affirmative and negative covenants, as well as events of default.

We were in compliance with the credit agreement as of September 30, 2021.

Although we believe we will be able to generate sufficient cash in the United States and foreign jurisdictions to fund future operating costs, we secured the revolving line of credit as an additional assurance for maintaining liquidity in the United States for strategic investments and acquisitions.

On February 1, 2022, we settled the term loan using proceeds from the sale of the semiconductor automation business.

We also maintained a revolving line of credit with Wells Fargo Bank, N.A.

and JPMorgan Chase Bank, N.A.

that provided for a revolving credit facility of up to $75.0 million.

On February 1, 2022, we also terminated the revolving line of credit, which had no borrowings outstanding.

Our Board of Directors declared the following dividends during the fiscal years 2022 and 2021(in thousands, except per share data):

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December 23, 2021

January 25, 2021

March 5, 2021

March 26, 2021

April 27, 2021

June 25, 2021

August 3, 2021

September 3, 2021

September 24, 2021

Fiscal Year Ended September 30, 2021

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June 25, 2021

July 29, 2020

August 3, 2021

September 3, 2021

September 24, 2021

On November 2, 2021, our Board of Directors approved a cash dividend of $0.10 per share of our common stock.

The total dividend of approximately $7.5 million will be paid on December 23, 2021 to shareholders of record at the close of business on December 3, 2021.

Dividends are declared at the discretion of our Board of Directors and depend on actual cash flow from operations, our financial condition, debt service and capital requirements and any other factors our Board of Directors may consider relevant.

On November 16, 2021 at our investor day conference, we disclosed that we intend to discontinue paying a quarterly dividend upon the completion of the sale of our semiconductor automation business.

Since the completion of the sale of the semiconductor automation business on February 1, 2022, we have not paid a quarterly dividend and do not have plans to pay any dividends at this time.

Share Repurchase Program

On September 29, 2015, our Board of Directors approved a share repurchase program for up to $50.0 million worth of our common stock.

The timing and amount of any shares repurchased are based on market and business conditions, legal requirements and other factors and may be commenced or suspended at any time at our discretion.

There were no shares repurchased under this program during fiscal year 2021.

On September 29, 2015, our Board of Directors approved a share repurchase program for up to $50 million of our common stock, or the 2015 Repurchase Program.

On November 4, 2022, our Board of Directors terminated the 2015 Repurchase Program and approved a new share repurchase program authorizing the repurchase of up to $1.5 billion of our common stock, or the 2022 Repurchase Program.

Repurchases under the 2022 Repurchase Program may be made in the open market or through privately negotiated transactions (including under an accelerated share repurchase, or ASR, agreement), or by other means, including through the use of trading plans intended to qualify under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended, subject to market and business conditions, legal requirements, and other factors.

We are not obligated to acquire any particular amount of common stock under the 2022 Repurchase Program, and share repurchases may be commenced or suspended at any time at our discretion.

As part of the 2022 Repurchase Program, we expect to enter into an ASR agreement for the repurchase of up to $500 million of our common stock.

There were no repurchases of our common stock during the fiscal year ended September 30, 2022.

Contractual Obligations and Requirements

At September 30, 2021, we had non-cancelable commitments of $65.9 million, including purchase orders for inventory of $44.0 million, information technology related commitments of $15.9 million and China facility commitments of $6.0 million related to the construction of our facility in China discussed above.

At September 30, 2021, the Company had $1.3 million of letters of credit outstanding related primarily to customer advances and other performance obligations.

These arrangements guarantee the refund of advance payments received from our customers in the event that the product is not delivered, or warranty obligations are not fulfilled in accordance with the contract terms.

These obligations could be called by the beneficiaries at any time before the expiration date of the particular letter of credit if we fail to meet certain contractual requirements.

None of these obligations were called during fiscal year 2021, and we currently do not anticipate any of these obligations to be called in the near future.

At September 30, 2022, we had non-cancelable commitments of $66.6 million, including purchase orders for inventory of $55.6 million, and information technology related commitments of $10.9 million

As of September 30, 2022, the total amount of net unrecognized tax benefits for uncertain tax positions and the accrual for the related interest was $1.7 million, all of which represents a potential future cash outlay, in comparison to September 30, 2021 where the balance was $2.0 million.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis