Bruker Corporation

Good day and welcome to the Bruker Corporation third quarter 2020 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Miroslava Minkova, Director of Investor Relations and Corporate Development. Please go ahead.

Miroslava Minkova Good afternoon. I would like to welcome everyone to Brooker's third quarter 2020 earnings conference call. My name is Miroslava Minkova, Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukian, our President and CEO, and Gerald Herman, our Chief Financial Officer. In addition to the earnings release we issued earlier today, during today's conference call, we'll be referencing a slide presentation. The PDF of this presentation can be downloaded from the Latest Results section on Brooker's Investor Relations website. During today's call, we'll 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.brooker.com. Before we begin, I would like to reference Brooker's Safe Harbor Statement, which is shown on slide two. During the course of this conference call, we will make forward-looking statements regarding future events and the expected future financial and operational performance of the company that involve risks and uncertainties, including risks and uncertainties related to the COVID-19 pandemic. The company's actual results may differ materially from projections or scenario estimates described in 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 and subsequent Form 10-Q filings, all of which are available on our website and on the SEC's website. Also note that the following information is related to current business conditions and to our outlook as of today, November 2nd, 2020. consistent with our prior practice, we do not intend to update our forward-looking statements based on new information, future events, or other reasons prior to the release of our fourth quarter and full year 2020 financial results expected in February 2021. Therefore, you should not rely on these forward-looking statements as representing our views or outlook as of any date subsequent to today. We'll begin today's call with Frank providing a business summary. Gerald will then cover the financials for the third quarter of 2020 in more detail. Now, I'd like to turn the call over to Brooker's CEO, Frank Laukin.

Thank you, Miroslava. Good afternoon, everyone, and thank you for joining us on today's call. I hope you and your families are well. We continue to navigate a challenging environment among a global pandemic. While the majority of our academic and research customers worldwide have returned to business under a new normal, some still operate at productivity levels that are below pre-pandemic levels in an effort to accommodate safety protocols. Against this backdrop, Bruker delivered a good third quarter with sequentially strengthened financial performance compared to the first two quarters of 2020. In Q3 2020, our revenues still declined slightly year over year, but our non-GAAP operating margins and non-GAAP EPS improved significantly compared to Q2 or Q1 of 2020 and approached prior year Q3 19 levels. We are pleased with the way our teams have delivered under the circumstances. During Q3, we continued to support initiatives to understand the SARS-CoV-2 virus and the COVID-19 disease. These include functional structural biology studies by Highfield NMR, so-called long COVID patient studies by NMR and MassSpec Metabolomics, as well as viral protein and disease patient proteomics research by mass spectrometry. And finally, we support the discovery and development of diagnostics, therapies, and vaccines with our tools. Moreover, our Bruker Hein Diagnostics business continues to serve the COVID-19 PCR testing market with nucleic acid extraction and PCR test kits and equipment. In Q3 of 2020, this grew further and we generated about 8.5 million of revenues from these PCR products, primarily in Europe. Together with partners, we also have been piloting COVID-19 rapid antigen tests at some of our own European sites and in customer labs with a goal to broaden our COVID-19 test portfolio further. From an operational standpoint, our major factory sites in the US, Europe, and Malaysia are operating at their new normal. We are currently not facing any significant operational constraints, although we are monitoring the resurgence of the virus in Europe and the US carefully. Turning to financial results, our third quarter 2020 revenues rebounded sequentially as academic customers returned. Q3 2020 revenues were still slightly below prior year levels, down minus 1.9% year-over-year and down 4.6% organically. Sequentially, we generated 20% more revenue in Q3 compared to Q2 of 2020. We continue to carefully manage expenses and monitor our cost structure. As a result, our Q3 2020 non-GAAP operating margin even improved year over year, while our diluted non-GAAP EPS approached Q3 2019 levels. Year-to-date, and including the third quarter, our key proteomics, diagnostics, and biopharma initiatives continued to grow nicely, and we now anticipate that Bruker will return to healthy year-over-year revenue growth and margin expansion in 2021. I now go to slide four, where we show the financial highlights for the third quarter of 2020. Q3 2020 revenues declined 1.9% year-over-year to $511.4 million. Acquisitions added 0.3% to revenue growth in foreign currency. Translation was favorable by plus 2.4%. On an organic basis, brokers' Q320 revenues declined 4.6% year over year, which was comprised of a 3% organic decline in the three broker scientific instrument groups and an approximate increase 20% organic decline at best net of intercompany eliminations, with best negatively impacted by reduced demand for superconductors by MRI OEM companies. Our Q320 non-GAAP gross margin decreased 90 bps year-over-year to 49.6, while our non-GAAP operating margin improved 30 bps year-over-year to 18.6%. Lower volume at nano and best, together with unfavorable foreign currency translation, negatively impacted the gross margin performance year over year, while meaningful OPEX savings resulted in an operating margin gain relative to Q3 of 2019. In Q3-20, Bruker reported gap-diluted EPS of $0.35 per share compared to $0.39 in Q3-19, and on a non-gap basis, Q3-20, EPS was $0.42 compared to $0.43 in Q3 of 2019. On slide 5, we show brokers' performance for the first nine months of 2020. Revenues decreased by $113 million or minus 7.7% year-over-year to $1.36 billion. On an organic basis, Revenues declined 8.3% year-over-year in the first nine months, comprised of a 7.9% organic decline in the scientific instruments groups and a 12.6% organic decline at best net of intercompany eliminations. Acquisitions added 0.5% to our top line, and foreign exchange was insignificant, up 0.1%. Year-to-date 2020 order bookings for Bruker Scientific Instruments Group declined low single digits organically. Order rates improved sequentially and had positive year-over-year growth in the third quarter as customers returned to labs and research activities continued to recover. During Q3 of 2020, BSI's biopharma and diagnostic markets remained solid and and academic markets continued to recover, while industrial research and applied markets continued to show softer trends due to the pandemic-driven economic slowdown. On the brighter side, BSI semiconductor metrology markets remain in an upswing. Year-to-date 2020 non-GAAP gross margin decreased 240%. compared to the same period in 2019, while non-GAAP operating margins declined 280 BIPs. As Gerald will discuss, both growth and operating margins improved significantly when we look at them sequentially from Q2 to Q3 2020. On a GAAP basis, Bruker reported EPS of $0.57 in the first nine months of 2020 compared to $0.82 in the first nine months of 2019, And year-to-date 2020 non-GAAP EPS was 77 cents compared to $1.04 in the same period in 2019. Please turn to slide six and seven now, where we provide further highlights on the year-to-date 2020 performance of our three scientific instruments, groups, and of our best segment, all on a constant currency basis and in comparison to the same period in 2019. Year-to-date 2020 BioSpin group revenue declined mid-single digits to $398 million. The revenue decline at BioSpin was due to COVID-19-related customer lab closures and installation delays, primarily in the first half of 2020. BioSpin's performance improved sequentially, and revenues were up year-over-year in the low single digits in the third quarter as the academic market recovery continued and biopharma remained robust. During the third quarter, BioSpin received customer acceptance for a second 1.2 GHz NMR system, which was successfully installed at the ETH in Zurich, Switzerland. BioSpin continues to ramp up its manufacturing and shipment activities for GHz systems. During the first nine months of the year, BioSpin's NMR and PCI systems revenue declined year-over-year due to the delayed order and installation activity as expected. BioSpin's aftermarket revenue increased slightly year-over-year, and scientific software revenues were higher, although of a low basis. Turning to the CalEd group, year-to-date 2020 revenues of $445 million were approximately flat compared to the same period in 2019. Molecular spectroscopy revenues declined year-over-year as FTIR and NIRR markets were affected by the pandemic and economic slowdown. However, this was more than offset by solid growth in CALIT's Daltonics microbiology and diagnostics and its life science mass spectrometry business. CALIT's performance also strengthened sequentially with revenues growing mid-single digits in the third quarter of 2020 year-over-year. For the first nine months of 2020, CALIT's microbiology and COVID PCR testing consumables grew significantly year-over-year, Our TIMSTOF proteomics business had a solid uptake in revenue growth year-to-date, despite the challenging conditions for instruments and customer installation delays. Finally, revenues for our FT-IR, NIR-IR, and Raman molecular spectroscopy products declined year-to-date, with weakened applied and academic demand. Please turn to slide seven now. Bruker Nano revenues declined mid-teens to $393 million in the first nine months of 2020, reflecting slower academic, industrial, and industrial research demand. This is all true for nanos X-ray, nanosurface, nanoanalysis tools, and they all declined in revenue year-to-date. Year-to-date semiconductor metrology revenue for the nano group grew year-over-year, as semi-markets remain in a rebound. Finally, year-to-date 2020 best revenue declined low teens net of intercompany eliminations on reduced superconductor demand by MRI companies. Turning to slide eight now, Bruker continues to make investments in innovation that we believe will position the company for long-term profitable growth. This September, we acquired Canopy Biosciences, a leader in HyPlex biomarker imaging for immunophenotyping using multiplexed fluorescence microscopy. Canopy's offering strengthens Bruker's position in spatial omics and targeted multi-omics research. It complements Bruker's fluorescence microscopy portfolio and also helps our Bruker Nano Group expand its life science footprint. Canopy's chip cytometry manual and automated platforms and related consumables and services provide high-resolution, multiplexed imaging of peripheral blood mononuclear cells, or PBMCs, or of tissue and again with applications in immunology, immuno-oncology, cell therapy, and targeted proteomics research. The CellCraftWork chip cytometry platform, that's our trademark, CellCraftWork, which is part of Canopy, has advantages listed on the slide. We are very pleased to have the Canopy and CellCraftWork team join Bruker. Please remember that for high-resolution spatial biology, we also recently had a very important new product introduction as we launched our Butara Voxel super-resolution fluorescence microscope for industry-leading single-molecule localization and for subcellular targeted multi-omics imaging. Turning to slide 9, we continue to make excellent progress with TIMSTOF 4D proteomics. At the recent Human Proteome Organization, or UPO World Congress, Brookers Melvin Park and Oliver Rater were awarded the UPO Science and Technology Award for the commercialization of TIMS trapped ion mobility spectrometry and of the passive proteomics method. We also announced significant additional innovations at UPO, including the PACER proteomics search engine, new work in progress, true single-cell 4D proteomics workflow, this was the first, the PRM passive method for targeted quantitative proteomics for translational applications, and the CAPS passive workflow for cross-linking in structural 4D proteomics. We remain very excited about Tim Stoff and our opportunities in 4D proteomics. So in conclusion, Bruker's performance strengthened sequentially in Q3 as academic markets and customer research activity continued to recover. Our core growth and margin initiatives are progressing well, and we are excited about our opportunities in biopharma, microbiology, and viral diagnostics, in proteomics, targeted multiomics, ultra-high-field NMR, software, and aftermarket. Brooker remains fundamentally healthy, and we expect to return to solid year-over-year revenue growth and margin expansion in 2021. And with that, I'll turn the call over to our CFO, Gerald Herman, who will review our financial performance in more detail.