Bruker (NASDAQ:BRKR) Corporation (NASDAQ: BRKR), a global scientific instruments company, reported robust revenue growth for the second quarter and first half of 2024, despite a challenging market environment. The company announced a 17.4% increase in revenues for Q2, amounting to $800.7 million, and a 4.5% organic revenue growth for the first half of the year, totaling $1.52 billion. Despite facing headwinds from currency fluctuations and market uncertainties, Bruker maintains its full-year guidance of 5% to 7% organic revenue growth, with a non-GAAP EPS guidance range adjusted to $2.59 to $2.64.
Key Takeaways
- Bruker Corporation reported $800.7 million in revenue for Q2 2024, a 17.4% year-over-year increase.
- Organic revenue growth for the first half of 2024 was 4.5%, with total revenues reaching $1.52 billion.
- The company expects mid-single-digit organic revenue growth in Q3 2024 and maintains full-year guidance of 5% to 7% organic revenue growth.
- Non-GAAP EPS for Q2 2024 was $0.52, with full-year non-GAAP EPS guidance adjusted to $2.59 to $2.64.
- Strategic acquisitions such as Chemspeed, ELITech, and NanoString are contributing to Bruker's market expansion and portfolio transformation.
- Bruker's CEO remains optimistic about the company's future, particularly with the NanoString acquisition.
Company Outlook
- Bruker anticipates mid-single-digit organic revenue growth in Q3 2024 and strong growth in Q4.
- The company expects cumulative reported revenue growth of over 70% from fiscal year 2020 to the midpoint of its 2024 guidance.
Bearish Highlights
- Life Science Fluorescence Microscopy revenues were down.
- The biopharma sector's recovery is slower than expected, potentially not fully recovering until 2025.
- China's revenue is expected to decline for the full year.
Bullish Highlights
- The company's recent strategic acquisitions are successfully contributing to growth.
- Bruker's segments, including BioSpin Group, CALID Group, Bruker Nano, and BEST (NYSE:BEST), all showed growth.
- The semiconductor metrology sector, especially in South Korea and Taiwan, is showing strong growth.
Misses
- Non-GAAP margin decreased by 150 basis points year-over-year to 13.8%.
- A significant year-over-year decrease in non-GAAP EPS is expected in Q3 2024.
Q&A Highlights
- Bruker's strength in the cleantech and semiconductor metrology sectors remains robust.
- The aca/gov sector is up, with the exception of some weakness in U.S. funding.
- Europe performed well in Q2, and the recent strengthening of the yen is not expected to have a significant impact.
- The company is experiencing growth in scientific software and infectious disease diagnostics, with a positive outlook for bookings and revenue in Q3 and Q4.
- Bruker's leadership team is open to further discussions in the third quarter.
Bruker Corporation's CEO, Frank Laukien, expressed confidence in the company's medium-term outlook, attributing its resilience to a diversified portfolio and strategic initiatives. Despite some setbacks in specific sectors like biopharma and the Chinese market, the company is poised for growth, leveraging its acquisitions and innovation. With a focus on operational excellence and integration of new businesses, Bruker is navigating the current economic landscape while setting the stage for future success.
InvestingPro Insights
Bruker Corporation's (NASDAQ: BRKR) recent financial performance showcases a company on the rise, with a robust 17.42% quarterly revenue growth and a total revenue of $3.12 billion over the last twelve months as of Q2 2024. This impressive growth is a testament to the company's strategic initiatives and its ability to capitalize on market opportunities, despite the challenges presented by currency fluctuations and a competitive landscape.
InvestingPro Data metrics reveal Bruker's market capitalization stands at $9.4 billion, reflecting investor confidence in the company's future prospects. The company's P/E ratio, a key indicator of market expectations about growth and profitability, is reported at 25.66. While this might suggest a premium valuation, it is also indicative of the market's belief in Bruker's earnings potential.
An InvestingPro Tip that stands out is the company's ability to sufficiently cover interest payments with its cash flows, suggesting financial stability and a solid foundation for sustained growth. This is particularly important for investors seeking companies with prudent financial management practices.
Additionally, analysts predict Bruker will remain profitable this year, which is corroborated by the company's profitable performance over the last twelve months. Notably, the company's gross profit margin stands at a healthy 50.52%, highlighting the efficiency of its operations and its ability to maintain profitability in a competitive environment.
For readers interested in a deeper dive into Bruker's financial health and future outlook, there are 5 additional InvestingPro Tips available at https://www.investing.com/pro/BRKR, offering insights that could help investors make well-informed decisions.
Full transcript - Bruker Corporation (BRKR) Q2 2024:
Operator: Good day. And welcome to the Bruker Corporation Second Quarter 2024 Earnings Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Joe Kostka. Please go ahead, sir.
Joe Kostka: Good morning. I would like to welcome everyone to Bruker Corporation’s second quarter 2024 earnings conference call. My name is Joe Kostka, Associate Director of Bruker Investor Relations. Joining me on today’s call are Frank Laukien, our President and CEO; and Gerald Herman, our EVP and CFO. In addition to the earnings release we issued earlier today, during today’s conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentation section of Bruker’s Investor Relations website. During today’s call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker’s Safe Harbor statement, which is shown on Slide 2 of the presentation. During this conference call, we will or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent and pending acquisitions, geopolitical risks, market demand or supply chain. The company’s actual results may differ materially from such statements. Factors that might cause such differences include, but are not limited to, those discussed in today’s earnings release and in our Form 10-K for the period ending December 31, 2023, as updated by our other SEC filings, which are available on our website and on the SEC’s website. Also, please note that the following information is based on current business conditions and to our outlook as of today, August 6, 2024. We do not intend to update our forward-looking statements based on new information, future events, or for other reasons, except as may be required by law, prior to the release of our third quarter 2024 financial results expected in early November 2024. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today’s call with Frank providing an overview of our business progress. Gerald will then cover the financials for the second quarter and first half 2024 in more detail and share our updated full year 2024 financial outlook. Now, I’d like to turn the call over to Bruker’s CEO, Frank Laukien.
Frank Laukien: Thank you, Joe. Good morning, everyone. And thank you for joining us on today’s second quarter 2024 earnings call. Our teams have delivered excellent revenue growth in the second quarter and a solid first half of 2024 despite soft market conditions. We continue to execute on our dual strategy of Project Accelerate 2.0 portfolio transformation and operational excellence, posting well above market organic revenue growth and even stronger constant exchange rate or CER revenue growth. We see mostly good demand for our differentiated Scientific Instruments and Life Science Solutions, but we acknowledge that biopharma demand has remained weak, and in China, customers appear to delay some purchase decisions into the second half of the year while they apply for more funding from the announced stimulus package. We now expect mid-single-digit organic revenue growth in the third quarter of 2024 and we maintain our guidance of full year organic revenue growth in the range of 5% to 7%. Our well-above organic growth is driven by Bruker’s differentiated innovation engine, as well as our multiyear transformation towards fundamentally favorable secular trends for our unique enabling tools for the post-genomic era. We are also benefiting from strong orders in semiconductor metrology in support of high performance computing for the AI megatrend, with strength in orders in Pacific RIM countries and North America. On May 17th, we hosted an Investor Webinar in which we provided in-depth looks into the three well-timed strategic acquisitions that we completed in the first half of 2024. These major acquisitions further accelerate our portfolio transformation and addressable market expansion into spatial biology, molecular diagnostics, as well as into laboratory automation and digitization. So far, Chemspeed is over performing our expectations and the performance of ELITech and NanoString is reassuringly very much in line with our initial expectations. Chemspeed is doing quite well as industry appears to favor CapEx investments in productivity via R&D or QC lab automation and digitization, even at times when industry, including pharma, tries to reduce headcount and OpEx. Moreover, we are very pleased with our ELITech sample-to-answer molecular diagnostics business, where we have added excellent new leadership teams in Italy and the U.S. for our combined Bruker molecular diagnostics business that we are now integrating with our previous molecular diagnostics business in Germany to achieve additional synergies. ELITech growth in 2024, for the full year including the periods when we didn’t own it, appears to be on track for mid-single-digit to high-single-digit revenue growth, and we are delighted with ahead-of-plan placements of our InGenius and BeGenius sample-to-answer molecular diagnostics platforms in the first three months, May through July, which is ahead of our expectations and which bodes well for 2025, when these platforms should be at full SA consumables pull-through. In general, molecular diagnostics is one of the market bright spots at the moment, so the timing of our ELITech acquisition seems to be very good. Most importantly, perhaps from an investor perspective, I would like to take a moment to provide additional updates on our NanoString business, which we acquired in early May. I am pleased to report that after exactly three months today of running the NanoString business, Bruker already has the improved visibility to fully incorporate NanoString into our formal guidance for fiscal year 2024 now rather than in 2025 as contemplated previously during our May 17th investor webinar. We continue to anticipate about $10 million per month NanoString revenue run rate for fiscal year 2024 and we expect a solid rebound and significant step-up in 2025. On margin improvements for NanoString, as you may recall, the previous NanoString public company had already taken very considerable cost actions in the fourth quarter of 2023, and then again in the first quarter of 2024. Moreover, Bruker did not acquire the public entity with its cost overhead, but we acquired the NanoString business in a lean assets deal. This will benefit us in the second half of 2024 already. By the end of 2024 and into 2025, we expect to also see the benefits of multiple additional cost actions, such as facility consolidation, insourcing of CosMx production, very meaningful cloud software savings, and many other growth and cost benefits of our operational excellence drive at NanoString. We expect the financial benefits in 2025 and beyond. Finally, we have also taken significant cost actions across other areas of Bruker in order to offset in part some of the initial NanoString margin and EPS dilution. I was just in Seattle at NanoString recently, and I am very pleased to report that our Bruker Nano Group has already put in place an aligned, lean, and highly motivated NanoString management team applying our Bruker management process to reaccelerate innovation and growth. At the same time, we are advancing operational excellence for cost of goods sold and OpEx reduction to drive NanoString margin improvements. Altogether, I am really quite optimistic that the NanoString acquisition will turn out to be strategically and financially excellent and a high ROIC investment for Bruker. Getting into the financial weeds now and turning to Slide 4, in the second quarter of 2024, Bruker delivered a very good growth quarter as our innovative products remained resilient despite choppier conditions in certain markets. Bruker’s second quarter 2024 reported revenues increased 17.4% to $800.7 million, which included a currency headwind of 1.1%. On an organic basis, revenues increased 7.4%, which included 8.6% organic revenue growth in BSI and a minus 2.8% organic decline in our BEST segment net of intercompany eliminations. Revenue growth from acquisitions added 11.1%, which implies constant exchange rate or CER growth of 18.5% year-over-year in the second quarter. Our second quarter 2024 non-GAAP margin was 13.8%, a decrease of minus 150 bps year-over-year. A significant organic operating margin expansion was more than offset by the expected initial headwinds from recent acquisitions, as explained in our Investor Webinar in mid-May. In the second quarter of 2024, Bruker reported GAAP-diluted EPS of $0.05 per share, compared to $0.39 reported in the second quarter of 23. On a non-GAAP basis, second quarter 2024 diluted EPS was $0.52, up 4% from $0.50 in the second quarter of 2023. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to the first half 2024 performance on Slide 5, you can see Bruker’s solid performance and execution in the first half of 2024, with organic revenue growth of 4.5%, while non-GAAP EPS was down minus 8.7% as expected due to our transformative acquisitions. More specifically, our first half 2024 revenues increased by 11.4% to $1.52 billion. First half organic revenue growth consisted of 4.2% organic growth in Scientific Instruments and 7.3% organic growth at BEST, net of intercompany eliminations. First half 2024 BSI book-to-bill ratio was below 1, but well above 0.9. We were able to buffer this with our significant backlog as we prepare for a more extended period without a robust biopharma recovery yet or the immediate benefits of a China stimulus package, which we now expect to benefit us in 2025 and beyond. Our first half 2024 non-GAAP gross margins and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide, excuse me, on Slide 5. Please turn to Slide 6 and 7 now, where we highlight the first half 2024 performance of our three Scientific Instrument groups and of our BEST segments, all on a constant currency and year-over-year basis. In the first half of 2024, BioSpin Group revenue was about $400 million and grew in the high-teens percentage. There was 1 gigahertz class NMR system in revenue in the second quarter of 2024, and we do expect two more gigahertz class NMRs in revenue in the second half of 2024. In the first half of 2024, BioSpin saw growth across academic government and industrial research markets, as well as in its integrated data solutions division for biopharma process analytical technologies, and our vendor agnostic SciY scientific software platform. For the first half of 2024, CALID Group had revenue growth of $494 million and increased in the high single digits percentage, with growth in the optics, molecular spectroscopy and microscopy business, as well as in microbiology and infectious disease, driven by the MALDI Biotyper franchise, and finally, as well, by the addition of the newly acquired ELITech molecular diagnostics business that we closed at the end of April. In the second quarter at ASMS, we launched two exciting new mass spectrometers and I will come back on to that with a separate Slide. Please turn to Slide 7 now. For the first half of 2024, Bruker Nano revenue was $493 million and grew in the mid-teens percentage, with strong revenue growth in aca/gov, academic/government, and industrial research markets. We also saw solid growth contributions from our recently acquired Bruker Cellular Analysis, the former PhenomeX, and the recently acquired NanoString business. Our Advanced X-Ray and Nano Analytics businesses delivered strong revenue growth in the first half, while Life Science Fluorescence Microscopy revenues were down. Finally, first half 2024 BEST revenues grew in the high single-digit net of intercompany eliminations, driven by growth in big science and fusion research projects, as well as our RI, EUV technologies for OEM semiconductor lithography tools. This is different from metrology. These are semiconductor lithography tools, also in support of AI. All right. Moving to Slides 8 and 9, we highlight the transformative growth and portfolio repositioning that over a four-year period are expected to lead to an impressive cumulative reported revenue growth of greater than 70% and greater than 14% CAGR from 2020 to 20 -- from fiscal year 2020 to the midpoint of our 2024 guidance. This is rather good compared to other mature companies in the Life Science tool space, which did not have significant revenue, COVID revenue overshoot, and which typically grew in the mid-20s percentage. Our 70% cumulative reported revenue growth, which we call transformative over those four years, incidentally had about 58% organic revenue -- cumulative organic revenue growth and the remainder was acquisitions. So we are rather pleased and I think it highlights how four years later, Bruker is really a transformed fast growth company. If I may take your attention to Slide 9, it’s a quick summary. I won’t talk through all the bullets, but we had rather important launches on the consumable side, but also in the mass spectrometry instrument side at the recent ASMS with the flagship timsTOF Ultra 2 launch that takes sensitivity to the next level for even better single-cell proteomics and immunopeptidomics, and it opens a new window on subcellular proteomics. Very remarkable and highly, very timely for biological research. Moreover, we launched a multiomic Mass Spec Imaging Benchtop System, the neofleX MALDI-TOF, which I think will be very, very well received, and it uniquely enables multiomic colocalization on tissue of proteins, lipids, metabolites, and glycosylation. It’s really very, very popular and a very unique product. So in summary, Bruker continues to see well above market organic revenue growth and even more significant constant exchange rate revenue growth for our instruments and solutions across our portfolio. We have further accelerated our portfolio transformation and addressable market expansion into spatial biology, molecular diagnostics, as well as lab automation with recent M&A. We are confident that applying our proven Bruker management process and culture of disciplined entrepreneurialism will lead to operational excellence, profitable growth and significant margin expansion in our recently acquired businesses over the next three years and beyond. With that, let me turn the call over to our CFO, Gerald Herman, who will review Bruker’s Q2 and fiscal year 2024 outlook in more detail. Gerald?
Gerald Herman: Thank you, Frank, and thank you everyone for joining us today. I am pleased to provide more detail on Bruker’s second quarter and first half 2024 financial performance starting on Slide 11. In the second quarter of 2024, Bruker’s reported revenue increased 17.4% to approximately $801 million, which reflects an organic revenue increase of 7.4% and BSI organic growth of 8.6% all year-over-year. We reported GAAP EPS of about $0.05 per share, compared to $0.39 in the second quarter of 2023. On a non-GAAP basis, Q2 2024 EPS was $0.52 per share, an increase of 4% from the $0.50 we posted in the second quarter of 2023. Our Q2 2024 non-GAAP operating income increased 6.3% and non-GAAP operating margin decreased 150 basis points year-over-year to 13.8% as higher gross margins and strong organic operating margin expansion was more than offset by operating margin headwinds from our recent acquisitions. We finished the second quarter with cash, cash equivalents, and short-term investments of approximately $170 million. Our second quarter treasury program was very active as we completed $1.3 billion in funding of the ELITech and NanoString acquisitions with about $0.9 billion of financing through fixed low interest rates, Swiss franc debt, and the balance through a $400 million follow-on equity offering. We also funded selected Project Accelerate 2.0 investments, as well as capital expenditures in the quarter. We generated $0.9 million of operating cash in the second quarter of 2024, compared to $13 million in the second quarter of 2023. Capital expenditure investments were $26 million resulting in free cash outflow of $25.1 million in the second quarter of 2024, compared to $10.5 million in the second quarter of 2023. In the second quarter of 2024 as a result of our volume of M&A in the quarter, we incurred and paid additional acquisition-related expenses. Just as a reminder, Bruker’s second quarter seasonally tends to have the lowest cash flow of our four quarters. Slide 12 shows the revenue bridge for the second quarter of 2024 as Frank has reviewed earlier. Compared to Q2 2023, BioSpin Q2 2024 organic revenue was up in the mid-20% range, driven by strength in our preclinical imaging and our software businesses. Additionally, we had one 1.2 gigahertz system in the second quarter of 2024 revenue, while there were no gigahertz class systems recognized in revenue in the second quarter of 2023. Nano organic revenue was flat, as strength in electron microscopy and Advanced X-Ray was largely offset by softness in fluorescent microscopy. CALID organic revenue grew mid-single digits percentage with strong performance from the MALDI Biotyper and molecular spectroscopy. We delivered solid growth in the second quarter of 2024 in BSI systems and aftermarket revenue with low double-digit CER growth in systems and strong double-digit growth in aftermarket. Geographically and on an organic basis in the second quarter of 2024, our Americas revenue grew in the low-teens percentage. Asia-Pacific revenue was essentially flat, while European revenue had low double-digit percentage growth all year-over-year. For our EMEA region, Q2 2024 revenue was up low-single digits year-over-year. Slide 13 shows our Q2 2024 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 51.3% increased 40 basis points from 50.9% in the second quarter of 2023 due to favorable product mix and select pricing actions. For the second quarter of 2024, our non-GAAP effective tax rate was up 320 basis points to 28.4%, impacted by jurisdictional mix and an unfavorable discrete item in the quarter. Weighted-average diluted shares outstanding in the second quarter of 2024 were $148 million, an increase of about 0.3 million shares from Q2 of 2023, modestly impacted by our follow on offering at the end of May. Finally, Q2 2024 non-GAAP EPS of $0.52 was up 4% compared to the second quarter of 2023. Slide 14 shows the year-over-year revenue bridge for the first half of 2024. Revenue was up $155.2 million or 11.4%, reflecting organic growth of 4.5%. Acquisitions added 7.4% to our topline, while foreign exchange was a 0.5% headwind and Frank has already covered the drivers for the first half of 2024. Non-GAAP P&L results for the first half of 2024 are summarized on Slide 15, with the drivers largely similar to the second quarter of 2024 as explained on the slide. Turning to Slide 16, we had $24.7 million of free cash outflow in the first half of 2024, down $76.7 million compared to the first half of 2023, driven principally by acquisition expenses, lower profitability and the timing of advances, taxes and other items. Turning now to Slide 18, now that we have improved visibility to NanoString performance and outlook, we have now included NanoString and all closed acquisitions in our formal 2024 guidance. Our outlook for fiscal year 2024, now assumes increasing our revenue estimates to a range of $3.38 billion to $3.44 billion and maintaining organic revenue guidance of 5% to 7% for fiscal year 2024. We now expect the contribution from acquisitions to be approximately 10%, up from prior guidance of 7% and we continue to expect a foreign currency headwind of about 1%. This leads to updated reported revenue growth in a range of 14% to 16%, up from our prior guidance of 11% to 13%. For operating margins in 2024, we continue to expect greater than 50 basis points of organic operating margin expansion, more than offset by greater than 300 basis points of headwind from our recent acquisitions and foreign exchange. On the bottomline, we are tightening our fiscal year 2024 non-GAAP EPS guidance range to $2.59 to $2.64. Despite significant EPS dilution from the recent acquisitions, this guidance implies non-GAAP EPS flat or up low single-digit percentage from fiscal year 2023. Other guidance assumptions are listed on the slide. Our fiscal year 2024 ranges have been updated for foreign currency rates 2024. Now some color on the third quarter of 2024. Against a strong prior year comparable, we now anticipate mid-single-digit organic revenue growth in the third quarter. We expect third quarter 2024 non-GAAP EPS to be down meaningfully year-over-year, but up sequentially over the second quarter of 2024 with a reacceleration of year-over-year EPS growth expected in the fourth quarter. Against the backdrop of mixed macroeconomic conditions and ongoing geopolitical risks, it’s important for me to confirm that we are proactively managing costs across all of our businesses. And finally, thanks to the remarkable work of my colleagues, integration actions are progressing well in each of our recent acquisitions. I remain very confident in our ability to establish our Bruker management process, drive operational excellence to strengthen operating margin performance and drive rapid EPS growth over the next three years and beyond. To wrap up, Bruker delivered solid organic revenue growth and organic operating margin expansion in the second quarter of 2024. Our businesses continue to execute well under muted market conditions and we look forward to updating you again on our third-quarter progress in November. And with that, I now turn the call over to the Operator to begin the Q&A portion of the call. Just as a reminder, to allow everyone time for questions, we ask you to limit yourself to one question and one follow-up. Thank you for your support and interest in the transform Bruker. Operator?
Operator: [Operator Instructions] And the first question will come from Puneet Souda with Leerink Partners. Please go ahead.
Puneet Souda: Hi, Frank, Gerald. Thanks for taking my question. So maybe just a financial one first and then a broader question. So I appreciate the organic growth guide remain the same for the year, but op margin was slightly lower, and Gerald, I think, you were expecting a lower op margin in the third quarter. Just maybe talk to us about what’s your expectation there and what can drive that higher or lower. What’s in your assumptions for NanoString and any weakness as you pointed out in the market, just broadly speaking, given sort of the hard landing concerns and what are you things that could materialize in the market?
Frank Laukien: Well, it’s all in, right? There’s many moving pieces. You have cited many of them, right, and so that’s why that, I mean, we don’t do this by quarter, but for the full year, you see our four -- if you go to our Slide 18 with the assumptions that go into our revenue and non-GAAP EPS guidance. For instance, on the operating profit margin that implies that it’s around 16% for the year up organically more than 50 bps. So we continue to make progress in our core business. That’s good. And this year as expected, with a headwind of about 300 bps from M&A, a little bit of FX, mostly M&A, all while maintaining our R&D OpEx at about 10% of revenue. So that’s how it all comes together. NanoString China, biopharma and all, right, including the very good thing. I mean, we do have continued aca/gov demand growth at least outside of China, that’s up. We had good diagnostics growth, very solid business is a highlight right now, probably on a -- from a macro grows faster than the Life Science tools market right now and yes, we did have very nice semiconductor metrology and a little bit of lithography growth in orders. So that’s the beauty of our portfolio, right? There are many things and this year it’s more mixed. But still overall, looking at that 5% to 7% organic revenue growth, and of course, 15% to 17% CER growth for the full year, that’s how it all comes together, all the pieces.
Puneet Souda: Okay. That’s helpful, Frank. And that’s a good segue into my broader question. I mean, if you can take a step back and help us understand where Bruker can continue to outperform the market, both in the topline and in earnings once the acquisitions are baked-in. I think there are some sort of near-term questions, but once you emerge from that. I mean, I think you pointed out that on the Slide 8, some, but just wanted to see if you could elaborate a bit more on the strength and the differentiation at Bruker. I mean, you are a heavy -- instrumentation heavy company, but you continue to deliver significantly outsized growth versus your peers and instrumentation is the concern in the market. So just help us educate a bit on how you are positioned in the market and the overall continued growth and how to think about that for Bruker in context of the backlog as well? Thank you.
Frank Laukien: Yeah. Right. Yes. Of that 70% cumulative growth, well over 55% was organic and indeed, while this year, it’s no longer double-digit organic revenue growth at Bruker, it’s still very good. And if the LS tools market this year organically is flat or perhaps down a couple of percent, obviously, the differential is still much higher than the 200 bps to 300 bps differential that we have in our -- that we aim for on average or hopefully every year in terms of outgrowing the market. Well, that’s because we fundamentally repositioned. We are not a -- we are not your traditional Life Science tools or analytical instruments company anymore. Our positioning for the post-genomic era with spatial biology, with single cell, with proteomics, with multiomics, with protein, protein interactions, binding structure, that’s where the funding gets allocated. So even in a weaker environment, we are still doing quite well. We are also really in terms of cleantech and industrial research, it’s really not bad for us. Diagnostics is very defensible. Our clinical microbiology, our new or much increased molecular diagnostics business with ELITech being the larger piece and we had a bit within Bruker already that gets now integrated. Those are all good demand drivers that support our organic growth guidance this year and our medium-term, well, not just aspiration, but really plan to outgrow the market -- continue to outgrow the market over the next few years. We expect that on average, we will outgrow that 20 bps to 300 bps. We have this more and more meaningful semiconductor metrology, a little bit of lithography. I mean, it was 8% of revenue, but it’s going to clearly approach 10% and maybe, it will go to 15% in the next few years. And I mean, AI is real. There might be some stock market overshoot, but who cares, right? The AI and high-performance demand for the unique semiconductor metrology tools in our Nano Group is there and so that’s an extra bonus that not a lot of -- I think there’s one other company, pretty large company that also has some benefit from that, but we are unique in that. So our portfolio is really -- it’s really not comparable to anybody else anymore. There isn’t a closed peer. There are peers for parts of what we are doing and then we have really just become a really differentiated company and I think the proof is in the pudding, but I don’t mean to belabor it. I think it’s evident. We hope that the clarity or the greater clarity that we now have around NanoString, as well as ELITech and Chemspeed and so on. It takes that slight confusion, we weren’t confused, but we did cause some confusion admittedly with these multiple acquisitions. I think people hopefully cannot see through that and look at the performance again this year, core and with acquisitions, however, you want to look at it. So anyway, I don’t mean to that so that’s up. There’s nothing new here that transformation started with Project Accelerate in 2017, Accelerated with 2.0 in 2000 and now, of course, after three years of double-digit organic revenue growth recently, now this year, we are adding a lot of well-timed strategic acquisitions that really transformed the company very intentionally.
Puneet Souda: That’s great. Super helpful. Thanks for the perspective, Frank.
Frank Laukien: Thank you, Puneet. All right.
Operator: The next question will come from Patrick Donnelly with Citi. Please go ahead.
Patrick Donnelly: Hey, guys. Thank you for taking the questions. Frank, maybe on the BSI side, I think you said the first half book-to-bill was somewhere above 0.9, a little bit below 1. Can I pin you down a little bit on the 2Q trends on the order front, book-to-bill will be great, and then certainly if orders, if you could give any sort of growth range for the 2Q orders, that would be helpful. Just trying to feel out the back -- the backdrop here and the implications for backlog as we move forward. So, again, if you could frame up the 2Q order dynamic, that would be helpful?
Frank Laukien: All right. Tighten it up a little bit, Patrick. Fair enough. Yeah. It’s in the mid-0.9 range. So sort of half -- pretty much halfway between 1 and 0.9. So mid-0.9 book-to-bill for BSI, up organically, which was because we still had good China orders last year in the second quarter. So, BSI organic order growth was still up mid-single digits. So, nothing to write home about, but really not so bad. And that along with our backlog, which is now at about 7 times, 0.7 months -- sorry, seven months, down from 7.5. So it’s coming down a little bit. It will probably also end up. Now that we have ELITech is 80% consumable, spatial biology single cell is as these instruments get out there is more than 50% consumables and aftermarket. So in the future, we probably still have two years of roughly of backlog normalization buffering these choppier general markets and then just fundamentally, our orders are decent given and we have enough of our portfolio with the post-genomic era with some of this cleantech and semiconductor metrology, we still have strength in the portfolio. And fundamentally, if you take out China, aca/gov is up for us as well, obviously, an important driver for us and there is some weakness in U.S. funding here, here and there but overall, it’s up. Europe, for instance, did really quite well in the second quarter with a weak comp last year, but many, many moving pieces, but overall, very, very resilient.
Patrick Donnelly: Yeah. No. That would be positive from our side too. Yeah. No, no, Frank. And then, Gerald, maybe one for you. We get a lot of questions just about the 2025 setup. I know you guys kind of implied the 310 earnings number for next year at the Analyst Day. Can you just talk about, I guess, the moving pieces, the confidence level there? I think a lot of focus on the NanoString dilution, the margins, which again, touched on there. And then just if you could remind us the yen impact, that’s been a question we have been getting obviously this week with some of the moves there. I know you guys in the guidance, I think, uses a little bit of a stale number certainly given how quickly that’s moving. So just refresh us on that would be helpful. Thank you, guys.
Gerald Herman: Yeah. Patrick, nice to hear from you. I mean -- on the 2025, sorry, we can’t offer too much. We will talk more about that in February. We haven’t moved off of our medium-term outlook numbers that we presented two months ago. So I think, generally speaking, we will talk more about that. On the yen, as I think most people know, the yen has strengthened relative to the U.S. dollar recently, actually even just this week. So our -- unfortunately, our Japanese business is not the same size that it was many years back. So fundamentally, it’s not going to have much impact on Bruker. There was a time several years back where it was critically important for us. It’s still an important market, but unfortunately, the overall volume activity for Japan has declined. So I would say, hope to see a bounce back in the Japanese business over time.
Frank Laukien: Yeah. Maybe a little bit of anecdotal color? I mean, a lot of our growth, including semiconductor metrology, fantastic bookings growth in the second quarter and also in the first half year-over-year comes from other Pacific RIM. I mean, notably, South Korea and Taiwan are just amazing. And then, of course, the U.S. finally is investing in semiconductor metrology. So that’s all strong. Japan is indeed less important for us right now. It’s also not very strong in terms of growth and orders. So plus it has some currency issues. Yeah, that’s a headwind, but we have enough other tailwinds to put it all together. I think the Chem -- I am actually, I think all three acquisitions that I mentioned, Chemspeed, they have probably enough backlog even for 2025, a lot of backlog, a lot of execution. So that business and investing in automation and lab automation with CapEx, industry seems to be willing to do that. If they think they can do with less OpEx, less headcount, well-placed with this molecular diagnostics business, I was delighted. We were at our placement rate for the first three months, I know it’s only three months that we have owned them. This is now including July, which I know technically is in Q3, but the placements for these InGenius, BeGenius for those three months that we have owned it were something like 20% ahead of what we hope to do. That’s not a lot of revenue this year, but that pull-through of consumables revenue next year. So that -- that’s on top of a solid molecular diagnostics business to begin with and I am actually quite optimistic about NanoString having a nice, you know, snapback or whatever, not macro-driven, but driven by obviously it’s taking a damper this year-after the Chapter 11 and the various by now all removed injunctions and so on and rebuilding that team. That team is coming together quickly and really even after three months, we have a -- we have our arms around that. We were running with very good management processes and a very fired-up leadership team with a lot of not just aspiration and rah-rah-rah, but a lot of concrete pipeline and opportunity building and things in the pipeline that they are doing and rebuilding the team. NanoString will be a good grower next year, I am convinced.
Patrick Donnelly: Very helpful. Thank you guys.
Operator: The next question will come from Rachel Vatnsdal with JPMorgan (NYSE:JPM). Please go ahead.
Rachel Vatnsdal: Perfect. Good morning to you guys. Thanks so much for taking the question. First, I just wanted to push on the 3Q guide. You mentioned that you expect 3Q to grow mid-single-digit organic, which is a little below consensus, but you also mentioned that you started to see an air pocket related to China stimulus where customers are starting to hold back on orders as they just wait for funding. So could you unpack that mid-single-digit 3Q guide for us a bit? How much of it was really due to this China dynamic? Could you breakout for us what you expect to grow organically in China and excluding China in 3Q as well?
Frank Laukien: Yeah. Fair question, Rachel. So, yeah, you saw that our Q1 was below average growth. Q2 was above this year’s average growth. Q3 will be more in line, right, with roughly the organic growth that we are expecting. Mid-single digits indeed, yeah, a little muted China orders in Q2 for sure. I wouldn’t call it an air pocket that’s too strong but muted and, of course, absence of a clear evidence of any biopharma recovery, seeing a little bit of a step-up in the U.S., but that might just be fluctuations. So, yes, so that seems prudent then for Q3 to think that it’s mid-single-digit somewhat not far from the full year trend whereas Q2 was better than the full year trend and Q1 was weaker than the full year trend in terms of organic growth, right? That’s what I am referring to.
Rachel Vatnsdal: Helpful. And then maybe just closing that out on the 4Q implied. Could you walk us through what you are assuming from a budget dynamic into 4Q? It looks like guidance really implies like a high single-digit organic growth number in 4Q off of 16% comp from last year. So how are those conversations around your end budget flush dynamics been trending with customers and what are you assuming in that?
Frank Laukien: Yeah. Another fair question. We are not a budget flush type of company. We don’t get -- we don’t use that. It doesn’t really do that much because of our backlogs. I think budget flush maybe more if you have more turns when you have a lot of consumables business. Nonetheless, fundamentally, you are right, we are looking for a strong Q4. So, yeah, Q4 is going to be, as far as we can tell, very going to be a very strong quarter for us and it’s just not necessarily the budget flush dynamics. It’s simply the buildup of orders and backlog and new orders this year and we expect continued good orders in Q4 as well. So Q4 looks to be strong in Q3, not bad. But I think with a mid-single-digit growth in Q3, we are comfortable with that. And of course, because of the acquisitions, as Gerald explained already, Q3 EPS will be down year-over-year, but up sequentially from Q2 this year. That’s kind of normally we don’t talk about sequential much, but now that we have all these acquisitions, actually keeping track of Q3 sequential improvements and then Q4 sequential improvements will be a somewhat of a good dynamic to watch this year. Okay.
Gerald Herman: Thanks, Rachel.
Frank Laukien: All right.
Operator: The next question will come from Tycho Peterson with Jefferies. Please go ahead.
Tycho Peterson: Hey. Thanks. Frank, can you help us bridge the gap on the M&A step-up here, the incremental $90 million, I think you said NanoString previously $80 million, Chemspeed about $10 million a quarter and ELITech over $150 million for the year. So is that incremental step-up all NanoString or maybe just give us a little bit more color?
Frank Laukien: Good question, Tycho. It’s a lot of small pieces, quite honestly. There isn’t the $10 million chunk out there that it’s a lot of small pieces. There isn’t a single answer. It’s -- yeah, that’s the answer. The answer is it’s nothing remarkable. It just comes together this way.
Tycho Peterson: I guess it’s your view on…
Frank Laukien: It’s only 10 million higher for the year, right, and there isn’t drivers what I am saying. I don’t mean to be evasive here. There isn’t any no there, so to speak, there isn’t the one thing that made up that $10 million, many small pieces just trending a little better.
Tycho Peterson: And then I guess as your view on the kind of IP situation evolved post the injunction in Germany and how are you thinking about kind of next steps in the U.S.
Frank Laukien: Yeah. No. There’s nothing new there that you don’t know. So the -- nothing new, no new developments. Yeah, you saw the last press release a few weeks ago that we had now put out some bond. Even though we had invalidated that patent in Germany, we still needed to put up a bond in order to lift the injunction. We have done that. And of course, the injunction had been lifted in the rest of Europe some time ago. So presently, there is no injunction anywhere. And the -- I think it’s going to be September or later in the year that there might be additional rulings in Europe or in the U.S. and then any of the bigger trials and things like that, if we get that far would be in 2025, possibly into 2026. So it’s been quiet on that front, all.
Gerald Herman: That may be good.
Frank Laukien: Yeah. So not…
Tycho Peterson: And then for…
Frank Laukien: Sorry.
Tycho Peterson: But just one last one…
Frank Laukien: Yeah.
Tycho Peterson: … for the back half of the year, just any more kind of color by sub-segment if we think about kind of BSI, Nano BioSpin and CALID for the back half of the year guidance?
Frank Laukien: It’s -- I feel bad, Tycho and I don’t have any crisp answers for you today, but it’s not one standout group or product line or so. I mean semiconductor metrology was really quite a bit -- surprised us in the first half with the strength of orders that was stronger than what we had predicted. And yeah, on the other hand, biopharma, we would have liked to see more of a recovery, but maybe that’s more of a 2025 thing now, also looking at what other companies are reporting. So it’s just it’s -- yes, it’s some of the acquisitions, of course, they are only about 10%. It’s strength in MALDI Biotyper or diagnostics, it’s strength in industrial research, proteomics, NMR, all solid. A solid execution of the strength of the portfolio is really the message here rather than one particular product line with, yes, I mean, we expect China to be down in revenue for the full year. We expect biopharma to be weak or down. So those are the bad guys for this year and the rest is all pretty good and semiconductor perhaps very good with a very nice order recovery. Although there the lead times are so long that a lot of the strong semiconductor recovery may not then turn into revenue till 2025 but that’s good too. People want us to deliver growth in 2025.
Tycho Peterson: Understood. Thanks.
Frank Laukien: And we do too, of course. Yeah. So I gave you three non-answers, Tycho. I apologize. It’s really the message is strength of the -- strength and resilience of the portfolio more than one group or one product line or one market.
Tycho Peterson: Thanks, Frank. I appreciate it.
Frank Laukien: Yeah.
Gerald Herman: Thanks, Tycho.
Operator: The next question will come from Doug Schenkel with Wolfe Research. Please go ahead.
Doug Schenkel: Hey. Good morning, guys, and thank you for taking the questions. Just a couple of cleanup questions. I want to confirm as we sit here today that one, you aren’t accelerating anything relative to your original plans in terms of working through backlog to get the guidance for the year based on how orders are tracking. It sounds like things are just kind of on track with some different puts and takes, but I just want to make sure that’s the case. And then secondly, I want to make sure you remain comfortable with EPS targets for 2025 through 2027, the ones that you outlined on May 17. Gerald, I think you said, obviously, you are not going to update guidance or set guidance for next year as we sit here at the beginning of August, but I just want to make sure there’s no change in thinking at this point.
Gerald Herman: Yeah. Doug, thanks for the questions. It’s Gerald. So, on the cleanup question around the overall performance. I don’t see any significant change. Our existing backlog, as Frank has mentioned, came down to about seven months versus 7.5. It’s not really affecting dramatically. We have good strong organic revenue growth in the business already. We are pulling -- we would be -- I would actually be happy to see some backlog come down. As some of you know, I am really interested in moving that down to a more normalized level. So we are not expecting to see anything different from a guidance perspective for 2024 on the backlog. It’s coming down, as well as we would have hoped. And then on the other point related to medium-term outlook, as I said earlier, we won’t comment specifically in guidance for 2025, but we don’t see any obstacles or roadblocks in the way with respect to our medium-term outlook that we laid out on May 17 in the Investor Webinar.
Frank Laukien: Yeah. Medium-term outlook remains as described, no changes there implied here at all and yeah, maybe at the -- maybe within two years from now or thereabouts will be more at a five months of backlog and a more normalized level within the BSI segment. So you -- so that’s also as expected. So yeah, we are on track in a choppier year, but with a strong portfolio, and of course, very nice. I mean the pull-through, the reallocations under the hood from more traditional instruments and towards to that post-genomic era and that where we have positioned ourselves is just really, really working with a little bit on that semiconductor chairing on top.
Doug Schenkel: Okay. And one quick follow-up. You acknowledged some stalling of the market in China due to stimulus. I happen to catch up with you guys. You were good enough to sit down with me for a little bit at the beginning of June. You weren’t -- it didn’t seem like you were seeing this at that point. So my guess is, and I just want to confirm this that dynamic picked up towards the end of the quarter and maybe carried into Q3, is that right? And if so, it seems like you have probably just widened the error bars in China to account for some risk that lingers into the back half of the year. Is that the right way to think about things? Thank you.
Frank Laukien: A completely -- I mean, sales cycle lengthening in China, especially in aca/gov, is something that became apparent, orders that we may expect or opportunities that look good, but they just moved to later in the year. People are now looking for bigger budgets and then making a bigger splash rather than spending their original budget right away, it makes sense, and I think you are thinking about it exactly the right way. We still think that the stimulus, particularly perhaps for BioSpin with NMR and high-end systems, but other high-end systems, perhaps as well could be really quite good, but it takes -- it’s just not moving fast like it was in Q1 of 2023. This is going through the provinces and many more decision layers, perhaps more scrutiny as well. It’s taking longer or actually, I mean, this is not a big surprise to us. We already a few months ago that this will probably be a 2025 beneficial effect and tailwind, and yes, that has confirmed -- that has been confirmed now. So, yes, there was muted demand and muted orders in China in Q2 and a lot of that seems to suggest, especially in academia that these orders may come or perhaps larger orders may come in the second half or some also in 2025. So that’s correct. I think you are thinking about it exactly the right way to Doug from what I heard.
Gerald Herman: Doug, what I have heard also is there is activity, but there are no orders. So, I think this is the -- this is important to clarify that it’s very clear that there’s a lot of movement, but no orders have been placed related to that at this stage.
Doug Schenkel: Great. Thank you, again.
Gerald Herman: You are welcome.
Frank Laukien: Time for one more question.
Operator: And our last question for today will come from Josh Waldman with Cleveland Research. Please go ahead.
Josh Waldman: Hey. Good morning, guys. Thanks for taking my questions. A couple for you. First, a follow-up on Tycho’s question, I believe. Any changes to growth assumptions by segment for the year versus the prior guide framework. And then within the reiterated 5% to 7% organic outlook for total company, it seems like there’s a wider-than-normal range for the second half. I guess, is that wider range a reflection of market uncertainties in pharma in China? And I guess, like any context you can provide on what gets you to the low-end, what gets you to the high-end, like do you need to see improvement from those end markets to get to the high-end?
Frank Laukien: Yeah. So on segments, as we said, biopharma, obviously, less expectations than we may have had at the beginning of the year. Semiconductor, it goes up, although this although total turns into revenue. It takes a little bit longer. China sort of as expected, but we didn’t know exactly in Q1 2023, wow, this -- we were surprised how quickly those stimulus orders came through. We were -- wow; we almost didn’t see that coming. So that just doesn’t repeat itself. It seems to be a longer, bigger wave, not this one-quarter bolus. So China and biopharma, not a surprise, I guess, from what we are hearing from others, we would lower our expectations for this year and we are upping them in just about everything else in or at least keeping them the same, upping them in semiconductor metrology for sure, upping them in automation -- lab automation, although that’s still a relatively new business and it’s not organic yet, upping them in scientific software, smaller drivers, and yeah, and really quite pleased with what more like infectious disease diagnostics is doing for us acquired and the existing MALDI Biotyper franchise. So some incremental changes, nothing dramatic, I would say, but biopharma, China, the culprits and other good guys. To the second half of 2024, I mean, I would say, given the uncertainty and that we all read the Wall Street Journal and yesterday wasn’t a good day, who knows what happens today. I think it’s fair to think about maybe the -- within our guidance of 5% to 7% organic that maybe this is not prudent to maybe model it that we would be in the lower half of that guidance, but we are still in that guidance range and we are pretty optimistic also about our bookings in Q3 and Q4 in addition to our revenue forecast. So yeah, this is the -- this is the environment, the macro environment and our concern about the correction or recession perhaps are not helping and China being delayed and biopharma recovery being delayed are not helping. But, yeah, I mean, we are damn resilient and I think we are still pretty exceptional in terms of our growth for the year. So that’s -- incrementally, the macro environment has probably gotten a little weaker than when we spoke three months ago, right? If I see what’s going on around us, but we are not just a macro company as you have seen by now many times. Does that help at all?
Josh Waldman: Yeah. Frank. Yeah. That helps, Frank. I appreciate that. And then I guess for my follow-up, I thought I’d ask one on timsTOF. I was curious if you could comment on how the Ultra 2 rollout is going. And then more broadly for the timsTOF franchise, I wondered if there’s any change in kind of near- or medium-term outlook. I mean I don’t think you called it out as the driver in CALID. I wonder how you are thinking about growth in that franchise kind of burst the broader…
Frank Laukien: Yes. Its growth was slowed -- its growth in orders was slowed a little bit when the Astral showed up being very competitive a year ago. We have since improved our competitive position significantly then with our launch of the timsTOF Ultra 2 and some other important workflows, for instance, for plasma proteomics is not an instrument, but very amazing plasma proteomics performance with our timsTOF -- other models of our timsTOF platform. So, in terms of revenue, it’s not a big growth driver in year-over-year. But in terms of bookings and competitive position, I think, the trend is now -- it’s still competitive. But I think we are in a -- in much better competitive position, quite honestly again. And so, that’s a -- timsTOF order and customers and opportunities are all really doing quite well again.
Josh Waldman: Got it. Thanks for the detail.
Frank Laukien: All right.
Gerald Herman: Thank you, Josh.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Joe Kostka for any closing remarks. Please go ahead.
Joe Kostka: Thank you for joining us today. Bruker’s leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Feel free to reach out to me to arrange any follow-up and have a good day.
Operator: The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.
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