Earnings Call
Azenta, Inc. (AZTA)
Earnings Call Transcript - AZTA Q3 2021
Operator, Operator
Greetings, and welcome to the Brooks Automation Q3 2021 Financial Results. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. As a reminder, this conference is being recorded, Thursday, August 5, 2021. I will now turn the conference over to Sara Silverman, Director of Investor Relations.
Sara Silverman, Director of Investor Relations
Thank you, operator, and good afternoon to everyone on the line today. We would like to welcome you to our earnings conference call for the third quarter of fiscal year 2021. Our third quarter earnings release was issued after the close of the market today and is available on our Investor Relations website located at brooks.investorroom.com, in addition to the supplementary PowerPoint slides that will be used during the prepared remarks today. I would like to remind everyone that during the course of the call, we will be making a number of forward-looking statements within the meaning of the Private Litigation Securities Act of 1995. There are many factors that may cause actual financial results or other events to differ from those identified in such forward-looking statements. I would refer you to the section of our earnings release titled Safe Harbor Statement, the Safe Harbor slide on the aforementioned PowerPoint presentation on our website, and our various filings with the SEC, including our annual reports on Form 10-K and our quarterly reports on Form 10-Q. We make no obligation to update these statements, should future financial data or events occur that differ from the forward-looking statements presented today. We may refer to a number of non-GAAP financial measures, which are used in addition to and in conjunction with, results presented in accordance with GAAP. We believe the non-GAAP measures provide an additional way of viewing aspects of our operations and performance. But when considered with the GAAP financial results and the reconciliation of GAAP measures, they provide an even more complete understanding of the Brooks' business. Non-GAAP measures should not be relied upon to the exclusion of the GAAP measures themselves. On the call with me today is our President and Chief Executive Officer, Steve Schwartz; and our Executive Vice President and Chief Financial Officer, Lindon Robertson. We will open the call with remarks from Steve and highlights of the third quarter. Then, Lindon will provide a more detailed look into our financial results and our outlook for the fourth fiscal quarter of 2021. We will then take your questions at the end of the prepared remarks. With that, I would like to turn our call over to our CEO, Steve Schwartz.
Stephen Schwartz, CEO
Thank you, Sara, and good afternoon, everyone, and thank you for joining us today as we report on the results of another strong quarter from both Life Sciences and Semiconductor automation businesses. Revenue was $315 million, up 10% sequentially and 43% year-over-year with almost identical organic growth rates from each of the businesses and consistent with the rapid growth trajectory that we've been on for some time. This persistent trend of revenue and profitability expansion is the direct result of our targeted investments in science and technology to satisfy the needs of our customers, especially in what's a robust demand environment for life sciences and semiconductor. As we approach the separation of the businesses, we continue to invest to position ourselves to meet customer needs and market opportunities. We believe that both life sciences and semiconductor automation markets will continue to expand and evolve for years to come, and we intend to lead with our solutions that require sustained investments in new products and technology development, as well as acquisitions. Investments that we are making for which we're being rewarded by our customers, who are not only adopting our solutions but are also guiding our next development initiatives. Although there's a lot to be enthusiastic about, I'll just touch on some highlights from the quarter, starting with Life Sciences. Overall, Life Sciences revenue was up 42% organically year-over-year, and we added more than 300 customers, a reinforcement that not only are our offerings attractive but also paving the foundation for future growth as our business increases with these new accounts. In Life Science Services, revenue was $80 million, up 28% year-over-year with growth delivered from each of the sub-segments. We once again delivered record revenue quarters in each of our three major sub-segments of genomic services, NGS, synthesis, and Sanger Sequencing. Next-generation sequencing was up nearly 60% year-over-year. This service offering continues to grow as a result of our highly skilled NGS case teams, which engage customers early in the experimental design and follow through from there to data. In the quarter, we launched the full complement of capabilities of NGS solutions for gene therapy applications, and this capability has already attracted 20 biopharma and biotech customers in the U.S. alone. The Synthesis business delivered another solid growth quarter, up 33% from Q3 last year. This steady and significant growth comes from pharma and biotech customers. We continue to build out capacity to stay in front of what we see as a sustained healthy demand environment. The Sanger business came in at $15 million, up 72% against a weak Q3 2020, but it was another all-time record and quite meaningfully up 10% sequentially, which is a strong sequential growth indicator compared to what was also a record prior quarter. In the sample and repository solutions portion of our services business, we maintained our growth momentum and we're pleased with the number of commercial wins that landed late in the quarter, each of which will contribute meaningfully to more growth in the second half of the calendar year. We were granted the certificate of occupancy for our Cleveland Clinic bio-repository, and our sample management contract initiated last month. All of us are delighted to have this up and running, and the benefits to us and the Cleveland Clinic have already begun. We were awarded a contract for the management of vaccines as part of a federal government program that will run for many years. This is not a COVID-19 project but rather one that takes advantage of our ability to manage vaccines and manufactured product, something that we've proven over the past year to be a strong capability. In addition, we won another sample management contract to manage millions of samples for another large global pharmaceutical company. Our personnel are already on site, beginning the curation of samples for the customer. This activity will be in full swing by the end of the current quarter, and sample relocation from the customer sites to our bio-repositories should commence before the end of the calendar year. Finally, in the quarter, we took in another 1 million sample tranche from the large pharmaceutical company we mentioned on our previous call. Our momentum continues to build, and we are seeing more momentum behind the outsourcing of these large and valuable collections of samples, which are only increasing in value to our customers but have become unwieldy because of size and complexity; a perfect spot for us to apply our core skills to sustain and add value to these collections. In the Life Sciences products segment, business remains robust. Revenue was up 60% year-over-year, but down modestly from Q2 as we experienced a decrease in consumables revenue quarter-to-quarter as COVID testing has slowed. As we've mentioned to you, the COVID-related demand has been a tailwind for Life Sciences products, but it's also been difficult to predict. We still maintain that the boost to our consumables and instruments business will net out to be a positive long-term impact. The acceleration of automation and laboratory workflows, as well as a worldwide shortage of consumables and instruments that was driven by high-volume testing, was the catalyst for us to have many new customers, customers we believe we can maintain post-COVID. We believe our premise still holds, but even in this environment, our long-term position has strengthened, because in the quarter, we added more than 50 new consumables and instruments customers. Thus far, we've retained more than 80% of new COVID customers who continue to buy from us even as the availability of supply of consumables has improved worldwide. We'll continue to monitor this closely, but we believe that our service levels and quality of product will be the reasons these customers will remain. In stores, we saw strong momentum across the product lines, including large automated stores, cryogenic stores, and clinical stores. We saw strong demand for our BioStore Cryo systems, continuing the pattern of adoption of this critical technology for use in cell and gene therapy. To date, 38 different customers have purchased multiple BioStore III Cryo units, and we're beginning to feel the momentum building for this innovative and enabling technology. Q3 was another period of validation that our products business is exactly on target for the Life Sciences Sample Management market requirements. We'll remain vigilant as to the vagaries of the COVID-19 related market segment, but we're pushing forward with full confidence that our products are necessary in enabling across the life sciences field and not simply a COVID phenomenon. As a life sciences company, we're at a meaningful juncture as we take the next step in our journey. We're ready to not only stand as an independent company but a company capable of growth and investment to meet the needs of a market and customer base that needs us to grow. Specifically, across our services portfolio, we're landing larger commitments from larger customers. This is not only a testament to the capability we've proven over the years to be a dependable supplier of extremely high-quality services but also the fact that we've earned the right to be able to serve large volume needs of the world's most demanding pharma and biopharma companies. In our Life Science products segment, we've always had a high market share of automated stores at large customers. But now because of the rapid increase in cell and gene therapy applications, our innovative cryogenic product offerings are quickly gaining traction with companies that incorporate our solutions into their designated workflows and securely embed them into their standard operating procedures. This is a critical role for which we are now completely ready. We're proving ourselves to be up to these responsibilities and challenges, and we're maximizing this position. We're energized by the feeling that we are in the earliest days of this exciting opportunity to add tremendous value to this market. I'll now move to the Semiconductor business, where we delivered another record quarter with revenue of $186 million, up 43% organically from one year ago and 47% overall, including a contribution from precise automation, which we acquired partway into the quarter. Overall, the semiconductor market continues to be robust with bullish near-term and medium-range projections. This demand goes far beyond making up for a chip shortage in the automotive space, but is driven by myriad new applications that are driving a new level of demand that will not be completely satisfied by a one-year boost of capacity but rather will be met both by the acceleration of new capacity at the leading edge and by capacity additions in existing and mature technology nodes. There are numerous positive indicators of a healthy semiconductor environment. Each of the top three capital spending chip companies have declared extraordinarily high levels of capital expansion over multiple years. We had another standout bookings quarter with $250 million in new orders. Demand forecasts continue to remain solid with larger OEMs scrutinizing their supply chains for the ability to ramp for the foreseeable future, and we foresee more continued expansion in the memory market, including DRAM, which will add even more growth to this environment. Although the market is very strong, we will continue to extend our leadership position by investing in the future aggressively. Our market presence and penetration continue to grow at a torrid pace, supported by our high level of design activity, aggressive hiring across engineering and technology areas, and significant additions to our manufacturing capacity. In the quarter, we had another 50 design wins, equivalent to the elevated pace we experienced in Q2, expanding our footprint not only with existing customers but with new customers as well. This accelerated demand for front-end semiconductor capital equipment, combined with our significant market position, lifted our automation business by 13% sequentially and 47% year-over-year. I'd like to make a special note that, included in this number is the contribution from wafer-handling robots, products sold directly to equipment OEMs, which was up 73% year-over-year, a validation of our continued share gains with OEMs. The Contamination Control Solutions business continues to strengthen. Revenue at $51 million was up 36% sequentially and 46% year-over-year, further emphasizing the necessity of this technology, which has become a crucial capability in all manner of semiconductor manufacturing. It's important to note that this has also not plateaued in terms of adoption as, in Q3, we added 13 new design wins in the quarter, and five of those design wins were for new customers. Finally, we are rapidly assimilating the precise automation team and getting ramped on the promise for this exciting new growth vector. We've already doubled the size of the technical team to allow us to more quickly realize some of the ambitions for multi-market applications that take advantage of collaborative robot capability in high-value-added systems. We've begun to bring the precise robot manufacturing in-house, leveraging our operational capability while alleviating some of the manufacturing bottlenecks they had experienced. Before we wrap up, I want to take a moment to comment on the current supply chain dynamics as we see them. You've been hearing a lot about challenges in the supply chain, which are expected to continue for the foreseeable future. To date, our strong partnership with suppliers and customers has enabled us to proactively mitigate many risks and increase factory shipments. As we look forward, we will continue to apply our risk mitigation strategies with a heightened focus on delivering for our customers. We remain diligent as the supply chain environment is dynamic, and our ability to largely mitigate these headwinds could be impacted. Overall, the semiconductor automation market remains strong and vibrant. By all our indicators, we are strengthening our position in advancing our technologies to be in front of what is necessary for the continued expansion of this market. Our relationships with our customers are closer and more interdependent, which leads to a shared end point and unprecedented collaboration and trust. We are keen to expand our methods, business model, and our technical expertise into other market sectors that will benefit from the same types of engagement and innovation in the collaborative workflow space. You'll hear more about this in the near future. To conclude, our strategic direction for each of the businesses is clear. Our investments are consistent with these roadmaps. Our profitability continues to outpace our revenue growth, and our balance sheet is clean and healthy. All of these elements make us confident in each of the businesses and our ability to allow each to stand as independent companies. I want to thank all of the Brooks' employees, whose hard work makes all of this possible. The entire team is working full steam ahead to complete the separation, which we continue to expect to be complete by the end of the calendar year. We thank you for your continued interest and support of Brooks, and we hope to maintain your trust and interest in the next configuration of this powerful capability. I'll now turn the call over to Lindon.
Lindon Robertson, CFO
Thank you, Steve. I now refer you back to the slide deck available on our website. Turning to Slide 3, I want to reiterate for everyone that we will continue to reflect the total company results as you are accustomed to seeing them until the separation culminates, which we still expect to occur by the end of the calendar year. The third quarter was another record quarter for us on the top and bottom-line, with revenue of $315 million, and 43% year-over-year growth and non-GAAP earnings per share of $0.72. Both sides of the business continued to show strong growth and profitability. Cash flow from operations was $45 million in the quarter and $175 million over the past 12 months. On a trailing 12-month basis, we are now at $1.1 billion and $2.27 of non-GAAP earnings per share. Moving on to Slide 4. Let's get into the details. Revenue was up 10% sequentially and 43% year-over-year, resulting in GAAP earnings per share from continuing operations of $0.53, up $0.34 year-over-year and up $0.20 quarter-over-quarter. Operating margins were up 530 basis points sequentially. The gross margin of 45.8% shows a 140 basis point improvement. Recall that in the prior quarter, we recognized a $5 million increased liability for tariffs due to a change in estimate for the value of past intercompany imports. In the operating expense section, SG&A was down quarter-over-quarter, primarily due to lower spending with advisers and legal support in the preparation for the separation of the company. This spending remains at $6 million in the third fiscal quarter. All in, the GAAP earnings per share was $0.53 for the quarter, up 184% year-over-year. Let's look to the right side for the non-GAAP results. Gross margins were 46.9%, expanding 340 basis points year-over-year, driven by Life Sciences, up 540 basis points and semiconductor, up 200 basis points year-over-year. The revenue growth and gross margin expansion drove operating income upward 127%. Operating margin was 21.5%, up 790 basis points year-over-year. Adjusted EBITDA margin was 24.8%, up 650 basis points. Below operating income, the non-GAAP tax rate in the quarter was 18.9%. When you combine it all, we saw 127% growth in the non-GAAP earnings per share demonstrating the profit leverage and strengthen the business model underlying both businesses. Now please turn to page 5 for the results in our Life Sciences business. In the third quarter, our Life Sciences business generated revenue of $129 million, an increase of 38% year-over-year and flat on a sequential basis. The COVID-related revenue in this quarter was again primarily in the products business, which delivered an estimated $9 million of COVID-related orders in consumables and instruments. This was approximately $5 million less than the second quarter. The total Life Science business offset the softness with sequential expansion in the services segment and strength in store systems within the products business. The products business in total was $49 million and grew a meaningful 60% year-over-year. The increase was driven with 67% growth in consumables and instruments and strong growth across the other product areas. As mentioned, the C&I business continued to see the benefit from COVID-related demand but at a lower level compared to the second quarter. We continue to see COVID-related research orders but fewer orders for tubes used in COVID testing. Except for the softer COVID-related demand in consumables and instruments, the products business expanded sequentially with strength in systems. The total product revenue, excluding the benefit of COVID revenue this quarter, provided 30% year-over-year growth. The Life Science Services revenue was $80 million, which was growth of 4% sequentially. When excluding the impact of unwinding the alliance, it grew 43% year-over-year. This business is comprised of our GENEWIZ genomic services business and our Sample Repository Solutions offerings. The genomic services business grew 56% year-over-year and accelerated 7% quarter-over-quarter. Q3 of last year was our most severely impacted quarter from COVID for the GENEWIZ business primarily in the Sanger business. Excluding our estimate of last year's COVID impact, the business still grew an impressive 26%. Growth was driven by NGS and synthesis, as well as strength in Sanger and our other services business. Excluding the alliance revenue stream, Sample Repository Solutions also reported strong growth of 21% year-over-year. The growth was primarily due to sample storage and logistics. Moving on to gross margin, the total of Life Sciences was 50% for the quarter, up 540 basis points year-over-year. Approximately half of this gross margin is driven by performance improvements in current business operations, and approximately half was driven by the exit of the lower-margin alliance contract with RUCDR in the fourth quarter of 2020. The Life Sciences products business gross margin was 47.5%, a 300 basis point improvement year-over-year, driven primarily by the strength and volume of our consumables and instruments and margin improvement in our automated cryo stores business. The Life Sciences services business provided 51.5% gross margin in the quarter, up 680 basis points year-over-year. Approximately 250 basis points of this improvement were driven by the performance of our current business streams, and the remaining 430 basis points were driven by the exit of the alliance contract. In total, the Q3 operating margin of 17.8% expanded 10.7 percentage points over last year's results. On the last 12-month basis, adjusted EBITDA margin climbed to 24%. As we look into our fourth quarter of 2021, we expect Life Sciences revenue to be in the range of $127 million to $137 million. This range supports approximately 17% to 27% growth year-over-year. Let's turn to the Semiconductor business on Slide 6. Semiconductor Solutions revenue of $186 million in the quarter increased 47% compared to the third quarter of 2020 and was up 19% sequentially with strong performance across the portfolio. Automation products grew 47% year-over-year. Precise Automation, our new collaborative automation product line acquired in April, provided $3 million of this revenue. Excluding this revenue from Precise Automation, the segment growth was 43%. While all areas of the automation product group provided strong growth, the group was led by vacuum automation, including robots and systems with 71% growth year-over-year. Revenue in our Contamination Control Solutions business increased to a record $51 million in the quarter and an impressive 46% year-over-year performance and was up $13 million or 36% sequentially. The strength in the business was supported with high year-over-year growth in both of the product sets, wafer carrier cleaners, and reticle stockers. This business has produced $150 million in revenue on a trailing 12-month basis. Semiconductor operating margins were 24.1%, up 560 basis points year-over-year and up 280 basis points sequentially. Gross margins were strong at 44.7%, up 200 basis points year-over-year and up 30 basis points sequentially driven by leverage and cost improvement across all business lines. The precise automation product line provided modest accretion to the gross margin line with gross margins higher than our average gross margin. I can also confirm precise automation was accretive to bottom-line earnings on GAAP and non-GAAP basis in the quarter. The last 12-month metrics on the right show strong comparative performance and significant profit leverage with 29% top-line growth and 70% adjusted EBITDA growth. The momentum in the business also becomes clear as you assess the current quarter run rate exceeding $700 million on an annual basis and continues to drive a higher accumulated adjusted EBITDA margin. As we look toward our fourth and final fiscal quarter of 2021, we expect semiconductor revenue to be in the range of $201 million to $211 million. This guidance reflects another expansion of $15 million to $25 million sequentially and supports year-over-year growth of 46% to 53%. Let's turn over to Slide 7 for a summary of cash flow for the quarter. Operating cash flow in the third quarter was $45 million. Over the past year, we have generated operating cash flow of $175 million. Capital expenditures for this quarter totaled $9 million, including $2 million for the GENEWIZ China building project. As an update to the building project, the COVID environment has caused logistical delays at various times across the past year and have accumulated now to a point to shift our estimated completion date to the first calendar quarter of 2022 and to be transitioned operationally by June of 2022. Delays will not cause operational disruptions as we have secured appropriate extensions on the current lease sites. After providing $7 million of dividends back to shareholders in the quarter, we closed with $286 million of total cash, including approximately $50 million of debt and $236 million of net cash. Let's turn to Slide 8 for a quick view of the balance sheet. As just noted, at the end of the third quarter, we had $286 million of cash, restricted cash, and marketable securities. We added $83 million to goodwill and intangibles in the quarter driven by M&A. It is notable that inventory increased $27 million and payables $20 million with it. Like many, we have made aggressive moves to secure inventory where we foresee long lead times or industry shortages to support our ability to meet the continued growing demand for our products and services. Our supply chain management has a sharp competitive edge and managed this well for us with a variety of thoughtful actions. With debt stable at $50 million, we finished the quarter with $236 million of net cash. Let's turn to Slide 9 for our guidance on the fourth fiscal quarter of 2021. Revenue is expected to be in the range of $328 million to $348 million with year-to-year growth in the 33% to 41% range. Semiconductor revenue is expected to range between $201 million to $211 million, and Life Sciences revenue is expected to be $127 million to $137 million. Adjusted EBITDA is anticipated to be $79 million to $89 million, non-GAAP earnings per share is expected to be $0.71 to $0.81 per share, and the GAAP earnings per share is expected to be $0.50 to $0.60. For the full year, we expect capital expenditures of approximately $60 million and our non-GAAP tax rate to be in the range of 20% to 22%. Finally, as an update, we continue to make progress in our work to separate into two independent companies. All functions in our business are working towards this objective, and all plans are on track to complete the separation by the end of the calendar year. As you can see from the performance picture, both businesses are performing with high growth and have significant profit leverage as the top line progresses. Each business will launch with a strong balance sheet, affording ample capacity to pursue their additional growth vectors. When we have a clearer line of sight to the separation date, we will announce an Investor Day event. This concludes our prepared remarks. I will now turn the call back over to the operator to take your questions.
Operator, Operator
The first question is from David Saxon with Needham. Please go ahead.
David Saxon, Analyst
Hi Steve and Lindon. Thanks so much for taking our questions and congrats on the quarter. I guess I'll start with the Life Sciences business. I mean a question I get a lot is just around this COVID-driven demand, particularly in the products category and kind of how quickly and how much that tails off. So, I know it's probably a hard question to answer, but can you just talk through about how you're thinking about that? And then relative to the fourth quarter guidance, total life science could be down. Is that kind of more about this COVID-related demand falling off quicker than maybe what you're seeing currently? And then I have a follow-up.
Stephen Schwartz, CEO
Okay. Hi, David, it's Steve. So, thanks for the question. I think you had it right in terms of the dynamics that took place between Q2 and Q3. We had approximately $5 million out of $14 million that was COVID consumables and instruments related, and it's really tough for us from a visibility standpoint. But in all other aspects of the business, we saw growth. We saw it in all services portions of the business and on the remainder of the product side. So, from that standpoint, also the guide we have going forward, if there's anything that's down quarter-on-quarter, if we did come in at the lower end, it would be related to the consumables and instruments because we think we have a solid understanding of everything else. And it would certainly be because of COVID demand. But business feels healthy. All the services, all the other portions of the product line continue to grow. We're really pleased by that. Yes, I think you can sense from us a little bit of uncertainty, nothing that we can envision, but just the fact that we went through that from Q2 to Q3, I think it's good just to be a little cautious there. But we anticipate at this moment sustaining kind of the levels that we have right now for the consumables and instruments quarter-to-quarter.
David Saxon, Analyst
And then I guess my second question is just on CCS. I mean, it's really nice to see that kind of return to growth. I think last quarter, you kind of called out $45 million as base. So, just wondering kind of what's driving that demand. Should we kind of expect sequential growth in that category? And thanks so much for taking the questions.
Stephen Schwartz, CEO
Sure. So, the CCS business is as healthy as you said. We have enough capacity that when customers need us to accelerate something, we've been able to satisfy. At this moment, yes, we anticipate sequential growth in the fourth quarter in the CCS business.
Operator, Operator
Next question is from Paul Knight with KeyBanc Capital Markets. Please go ahead.
Unidentified Analyst, Analyst
Mike on for Paul. Just a quick question on the GENEWIZ China delay. I mean, where are you guys at with capacity now with GENEWIZ? And the delay until 2022, does that impact growth at all looking forward into 2022? I know I'm trying to get guidance on 2022, but just your thoughts on the delay of the GENEWIZ facility?
Stephen Schwartz, CEO
No, it's really manageable for us. As we've described, the current lease buildings are of good size, and we've gained productivity. So we manage with some buffer in these things, and we have flexible leasing partners that we deal with there and have been able to extend those sites. We're equally excited, as we always have been, in terms of what the project looks like. I'll share with you that we're moving into the fit-up stages here. We see what the outside of the building looks like from the street view. Everything is looking good. I think the employees and the company are getting very excited about what's about to come. But the COVID issues are real in that environment, and we've had periods of just delays. Early on, it was a little about labor moving from one province to another or them being able to sustain people on site. We had that cushion built in. We've had other delays, sometimes on materials. Just as it accumulated, it moved from the final calendar quarter completion and moved into first calendar quarter completion. The move-in will occur between then and the month of June. I think we're in solid shape operationally. We're not concerned about constraints.
Unidentified Analyst, Analyst
And Steve, just on the vaccine contract with the federal government, can you kind of unpack that a little bit more? I mean, I know you did some work with Catalent, helping Moderna for their vaccine storage and logistics. But maybe a little bit deeper. Is this a new opportunity for you guys to expand this into also a commercial customer base as well?
Stephen Schwartz, CEO
Yes, it is. It's different from COVID, certainly unrelated, and it's something that has been in motion for quite some time. We have the ability to manage the logistics and the care of vaccines that need to be cold and ultimately get them distributed. This happens to be for service. It's a significant program that will run a long time. It has the kind of complexity and care that we're prepared for, and we've been geared up for this for quite some time.
Operator, Operator
Next question is from Patrick Ho with Stifel. Please go ahead.
Patrick Ho, Analyst
Thank you very much. Steve, maybe first on the semiconductor side of things. Based on your results and outlook, it looks like you managed the industry supply constraints very well. One, can you just qualitatively give a little more color on the situation for you guys because I'm sure you're experiencing some challenges? Secondly, what are you doing on your end to mitigate the situation as best as possible? During this earnings season, we've seen mixed results in terms of some companies managing it well and some companies poorly managing it. I'm just trying to get a little color on your end given the strong results and outlook.
Stephen Schwartz, CEO
Yes. Thanks, Patrick. A few things. There are always supply issues even in any environment, but they're particularly acute now, as you're aware and everybody in this industry is aware. Very specifically, when you have thousands of parts, anyone can hold up a manufacturing line. But I think the team has done a great job, and they're geared for it. In terms of managing the environment, we've anticipated supply uses by doing supplier checks about their capacity and capability. Some are volume-related, and some are related to their ability to operate in a COVID environment. I think our team has done an exceptional job. I'll give you a couple of examples: sometimes when a facility is not capable of providing a part or a subassembly, our teams have qualified additional vendors, and this has been ongoing for the past quarter. We've been conveying large demand to our suppliers for some time now, anticipating significant volume ramp. I think we've got that part right and geared our suppliers up well. On the chip shortage, those exist, too. As an example, we talk about our relationships with our customers and suppliers; we've had to go to alternate sources of chips and redesign boards to get equivalent functionality. Our engineering teams have validated these designs with customers. They've been acutely aware of the situation and trusted the validation process. We've managed our supply chain well; anything we could foresee, we’ve been proactive. It doesn’t mean there won’t be bumps. The supply chain team deserves credit; they were on high alert since early days of COVID, and we’ve never let up. We remain sensitive to issues that may arise but are confident in our management approach.
Patrick Ho, Analyst
Great. That's really helpful. As my follow-up question, I apologize I missed some of your initial remarks on the Life Sciences business. Given the fluidity and moving parts right now with COVID, can you characterize the near term on COVID-related business? Are some of your traditional kind of research and analysis businesses coming back, both on the products and services side?
Stephen Schwartz, CEO
Yes. Sure, Patrick. On the services side, the researchers who focused on COVID have continued to use us. We really believe the shift towards COVID treatment and vaccine, as researchers go back to their other activity, will sustain, and we’ve seen it in steady growth of the services business. We feel pretty confident that's the situation. If you weren't here for some of the comments, we had a $5 million reduction in some consumables and instruments related to COVID, especially on the consumables side, from Q2 to Q3. The services business propped it up. The other parts of the products business have continued their momentum, but we did see a $5 million drop quarter-on-quarter as a result of COVID consumables.
Lindon Robertson, CFO
Patrick, I’ll add some data points we think might be interesting. In terms of impacts in 2020 versus 2021, we dealt with COVID's impact mostly last year from customers being absent. What we shared is that this year, GENEWIZ had an easier comparison, as they are on a nice ramp. The significant growth, if we estimate last year’s COVID impact out of the quarter, would mean the business grew about 26%. We're really pleased with the trajectory and continued customer base expansion this year. We highlighted earlier that Sanger experienced record levels and displayed 10% growth. So it's really solid. As Steve mentioned, we see the slowdown in COVID-related demand this quarter, with what we see as COVID demand at around $9 million. Without those, the products business still grew at about 30% year-over-year. We're seeing strong growth on both sides.
Operator, Operator
Next question is from Jacob Johnson with Stephens. Your line is open.
Jacob Johnson, Analyst
Good afternoon, everybody. Just to start off and sticking with the COVID questioning. Lindon, on the $127 million to $137 million of Life Sciences revenues you're guiding to in the fourth quarter, should we expect the composition of the fourth quarter to kind of look like the third quarter, meaning strength in GENEWIZ and SRS and maybe a little bit weaker Life Sciences products revenues in the fourth quarter? If you can or want to, can you just talk about the COVID assumptions embedded in the fourth quarter guidance?
Stephen Schwartz, CEO
Yes. Not to pin me down on line-by-line guidance here, but I’ll provide some color. We see momentum on both products and services that could support expansion on both fronts. But on the downside, if there's no expansion, I want to emphasize that the midpoint shows expansion sequentially and significant growth year-over-year. If there's anything at the lower end, it likely accounts for a bit of softness in the consumables. We have some uncertainty, and I keep a cushion there because certain geographies are experiencing COVID spikes that sometimes constrain customer installs. Both product and service lines have the potential to expand sequentially, with demand remaining strong.
Jacob Johnson, Analyst
Got it. Super helpful. Thanks for that, Lindon. And then, for Steve or Lindon. On the SRS side, you had a large pharma win earlier this year. It sounds like you had a couple more wins this quarter. When we think about the growth of the SRS business, is it being driven more by growing samples under management? Or are you also finding ways to increase your revenue per sample, thinking about things like synergies with GENEWIZ?
Stephen Schwartz, CEO
Yes. Right now, Jacob, it's both. We mostly see growth in samples under management, increasing the size of the collection. But the right initiatives are beginning to develop synergy-wise. The sales teams and customers truly understand the potential for alleviation, but it's modest yet. We're doing the right things.
Operator, Operator
Next question is from Amanda Scarnati with Citi. Please, go ahead.
Amanda Scarnati, Analyst
The first question I have is on the non-COVID-related business with your consumable instruments companies. You mentioned that some of your COVID-related customers have been purchasing more even as the supply chain is loosening up. Are they starting to purchase non-COVID related products? Or is it still really just in that COVID footprint?
Lindon Robertson, CFO
Yes. We added 50 customers in the quarter in the consumable space. We continue to deliver to some of those customers on other opportunities aside from COVID. Where there are supply shortfalls, we can delight some customers with supply so they experience us and like our service. We have retention efforts with those customers. What we see is some COVID demand coming down, but we're seeing opportunities here and now, meeting demands and being a reliable supplier.
Stephen Schwartz, CEO
And Amanda, this is Steve. I’d add one more thing. The automation lines, for any lab work, tools are staying at a relatively elevated level compared to pre-COVID. Even if some consumables are down, the instruments business remains strong.
Amanda Scarnati, Analyst
And then just on the semiconductor side, can you put a finer point on the supply side? Are you able to ship to full demand? Are you seeing any issues in meeting demand? Any changes in the dynamics there on the demand side?
Stephen Schwartz, CEO
Right now, we're meeting all customer demand, and we're in regular conversations because they want to know if we can satisfy. I won’t say it’s easy, Amanda. It’s been quite a ramp, but we've been ahead on hiring and training. We manage our supply base well. If we had more free-flowing parts, we could possibly build a bit more, but we’re on a good path satisfying customers. It hasn't been easy, but we think we have our supply chain managed well and are prepared to meet the demand ramp.
Operator, Operator
We have nothing further from the phones. I'll turn it back to our presenters.
Stephen Schwartz, CEO
All right. We appreciate everyone's attention and support. These are high momentum days for us where the team around the world has been really responsive to customer needs, and our customers have been responding to our capabilities. We can’t be more proud. We look forward to delivering on the fourth fiscal quarter, which is the end of our fiscal year, September 30. We’ll keep you up to date on the outlook regarding a potential Investor Day as we see a clear line of sight to our effective separation, which we're excited about—launching two strong companies: the semiconductor automation company and the new life sciences company. With that, thank you very much. I hope you have a good evening.
Operator, Operator
That does conclude our call for today. We thank everyone for participating, and you may now disconnect.