Bruker Corporation

Hello, and welcome to the Bruker Corporation Q4 2020 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please sit down with a conference specialist or pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touchtone phone. To try your question, please press star then two. Please note, today's event is being recorded. I would now like to turn the conference over to Miroslava Minkova. Ms. Minkova, please go ahead.

Miroslava Minkova Good morning. I would like to welcome everyone to Brooker's fourth quarter and fiscal year 2020 Earth Conference Call. My name is Miroslava Minkova, Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukeen, our President and CEO, and Gerald Herman, our Chief Financial Officer. In addition to the earnings release we issued earlier this morning, during today's conference call, we will be referencing a slide presentation. The PDF of this presentation can be downloaded from the latest results section on Brokers' 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 they're 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 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. Note that the following information is related to current business conditions and to our outlook as of today, February 16th, 2021. 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 first quarter 2021 financial results expected in May 2021. Therefore, you should not rely on these forward-looking statements as representative of 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 fourth quarter and the fiscal year 2020 in more detail. Now, I'd like to turn the call over to Brooker's CEO, Frank Laukeen.

Thank you, Miroslava, and good morning, everyone. Thank you for joining us on today's call. During the fourth quarter, we saw continued sequential quarter-over-quarter recovery in our financial performance from the revenue and margin dip experienced in the first half of 2020 due to the pandemic and its economic repercussions. Our Q4 2020 revenues were above prior year levels on a reported basis and essentially flat organically compared to Q4 2019. Encouragingly, our Q4 2020 non-GAAP gross margin, operating margin, and EPS, and free cash flow all exceeded the Q4 2019 levels. Over the course of 2020, we stepped up investments and made significant progress in three areas of substantial long-term growth potential. Proteomics, second, spatial and single-cell biology, and third, molecular viral diagnostics. We also initiated further operational excellence programs for productivity improvements, including restructurings in our Bruker Nano Group and INVEST, as well as for capacity expansion, particularly in our BioSpin and CALIT groups. Turning to Q4 results now on slide four, we're pleased with our continued sequential recovery in the fourth quarter of 2020. Q4 2020 revenues of $627.5 million rose $28 million or 4.6% year over year. including favorable foreign currency translation of $27 million or 4.6%. On an organic basis, revenues were just minus 0.4% below the Q4 2019 levels. Our Q4 BSI revenues were flat year-over-year, while best revenues declined minus 6.8% organically, net of intercompany eliminations. Acquisitions added 4%. 0.4% to revenue growth in the quarter. Our Q4 2020 non-GAAP gross margin expanded 80 bps year-over-year to a new high of 51.7%, and our non-GAAP operating margin expanded 40 bps year-over-year to 22.5%. The improvements in non-GAAP growth and operating margins were realized despite significant foreign exchange headwinds and resulted from increasing project accelerate revenues in our mix and continued SG&A expense control in the quarter. In Q4 2020, broker's GAAP diluted EPS were 45 cents compared to 44 cents in Q4 of 2019, and our non-GAAP EPS were 58 cents an increase of 9.4% compared to 53 cents in Q4 of 2019. Continuing on slide five, we show broker's performance for the full year. In 2020, broker's revenue decreased by minus 85 million or minus 4.1% year-over-year to 1.99 billion, reflecting the impact of the pandemic and the related economic slowdown. On an organic basis, revenues declined minus 6% year over year, comprised of a minus 5.5% organic decline in the scientific instruments business and a minus 11% organic decline at best net of intercompany eliminations. Acquisitions added 0.5% to our top line, and foreign currency translation was a benefit of 1.4%. During 2020, our key 4D proteomics, infectious disease diagnostics, ultra high-field NMR, biopharma, and aftermarket initiatives continued to perform strongly. Microelectronics and semiconductor metrology also grew nicely year over year. Other businesses, including our broader academic revenue base, industrial research, and the applied market stabilized and improved further in the fourth quarter. Fiscal year 2020 order bookings for broker scientific instruments groups increased low single digits organically. Our BSI orders continue to strengthen sequentially, and in the fourth quarter of 2020, BSI achieved approximately 10% organic order growth year-over-year. The strong Q4 2020 bookings likely included some catch-up from delayed activity early in the year, particularly in our academic, industrial, and applied businesses. Our Q4 2020 order rates also reflected continued strong performance in our proteomics, microbiology, and molecular diagnostics, biopharma, and microelectronics and semiconductor metrology businesses. Fiscal year 2020 non-GAAP gross margin decreased 130 basis points year over year, while non-GAAP operating margin declined 160 basis points. Growth and operating margins benefited from expense controls and cost reduction measures taken earlier in the year, but this was more than offset by lower volume and revenues in 2020 compared to 2019. As noted earlier, as noted already, both growth and operating margins recovered in the back half of 2020 and, in fact, finished above prior year levels. On a GAAP basis, Bruker reported EPS of $1.02 in 2020 compared to $1.26 in 2019. Fiscal year 2020 non-GAAP EPS was $1.35 compared to $1.57 in 2019. Please turn to slides 6 and 7 now, where we provide further highlights on the 2020 performance of our three scientific instruments groups and of our best segments, all on a constant currency basis and in comparison to 2019. Fiscal year 2020, BioSpin group revenue declined mid-single digits to $600 million. The revenue decline at BioSpin was due to COVID-19-related customer disruption and installation delays. mostly in the first half of 2020. In fiscal year 2020, BioSpin's NMR and PCI systems revenues declined year over year. In the fourth quarter, we received customer acceptance of an additional 1.2 gigahertz NMR system, ending with three 1.2 gigahertz systems accepted in 2020, a major achievement and development milestone for us. BioSpin's aftermarket grew slightly year over year, whereas BioSpin's scientific software revenues were substantially higher, although from a modest base. Moving on to the CALIT group, fiscal year 2020 revenues of $654 million grew mid-single digits compared to 2019. CALIT's performance accelerated sequentially with low teens growth in the fourth quarter. Calix Beltonics, microbiology and molecular diagnostics, and life science mass spectrometry businesses delivered double-digit revenue growth in the full year. This reflected in part the uptake of nucleic acid extraction and SARS-CoV-2 PCR kits, as well as of multi-biotyper consumables, which all grew significantly year over year. Q4 2020 COVID-19, nucleic acid extraction and PCR test kit revenues totaled just under $14 million. For the full year 2020, we grew our COVID-19 PCR business to approximately $30 million in revenue, virtually all in Europe and other countries. In December, we introduced our fluorotype winter four-plex, as we call it, PCR panel in Europe, detecting COVID-19, flu A, flu B, and RSV. And we also began to market two different types of fast antigen tests in Europe in collaboration with partner companies. In late December, we received U.S. FDA clearance for the Maldi Biotyper Sepsityper Kit, The MBT Sepsityper allows for rapid identification of more than 425 microorganisms, bacteria, and yeasts from a positive blood culture on our multibiotyper platform. The Sepsityper workflow typically takes less than 30 minutes from a positive blood culture to identification, saving valuable time in the diagnosis and treatment of critically ill sepsis patients. We anticipate that this will provide a meaningful tailwind to our MALDI biotyper business in the US in 2021 and beyond. Our TIMSTOF unbiased 4D proteomics business had strong revenue growth in 2020, despite the challenging conditions in academia. We exited 2020 with very strong order and revenue growth and an installed customer base of more than 250 TIMSTOF instruments globally. Arcalit molecular spectroscopy revenues declined year-over-year due to the weakened FTIR and NIRR markets earlier in 2020. FTIR, NIRR, and Raman molecular spectroscopy demands strengthened substantially in the fourth quarter of 2020. Please turn to slide seven now. Bruker Nano revenues declined low teens year-over-year to $556 million in fiscal year 2020. This reflects last year's academic market slowdown and weakened industrial and industrial research demand. The nanogroup's X-ray, nanosurface, nanoanalysis tools revenues all declined in 2020 against a backdrop of reduced academic and industrial research demand. Revenue for nano's microelectronics and semiconductor metrology products grew double digits as semi-markets were strong. In the fourth quarter of 2020, we initiated additional restructuring and cost actions within the Nano Group to improve the fundamental cost structure while investing in Nano's spatial biology and targeted multiomics strategy. We anticipate these restructuring actions to benefit Nano's financial performance in late 2021 and in 2022. Finally, fiscal year 2020, best revenue declined low double digits net of intercompany eliminations on reduced superconductor demand by MRI companies. This was partially offset by growth in best big science projects. We also took restructuring and cost actions in best in Q4 of 2020, which are expected to benefit best performance in 2021. Turning to slide 8 now, during 2020, we further expanded investments in our Project Accelerate high-growth, high-margin initiative programs, which we now refer to as Project Accelerate 2.0. We have broadened our proteomics initiatives to include plasma proteomics, cancer proteomics translational research, emerging true single-cell proteomics, targeted proteomics, and multiomics. as well as biomolecular condensate research by NMR and fluorescence microscopy. Our microbiology and diagnostics initiative now also covers viral molecular diagnostics primarily with a fast growing PCR business and emerging antigen detection. Importantly, we launched a spatial biology and single cell biology initiative in our nano group. As presented at the recent JPMorgan Healthcare Conference, each of proteomics, spatial biology, and microbiology and molecular diagnostics addresses large, additional, total addressable markets or TAMs. In 2020, for the first time, our six Project Accelerate initiatives together comprised more than 50% of our revenues, And on average, they grew in the highest single digits organically year over year. Turning to slide nine, we continue to make excellent progress with TIMSSTOFF40 proteomics as our workflows and capabilities keep expanding and publications increase rapidly. We are currently serving a $750 million to $1 billion served addressable market, or SAM, with TIMSTOF within a $5 to $6 billion overall proteomics instrumentation, Instruments 10. We exited 2020 with an default base of greater than 250 TIMSTOF instruments and significant growth. In 2020, we also made substantial progress with our ultra high field NMR program for functional structural biology and biomolecular condensate research, receiving customer acceptance of our first three 1.2 gigahertz systems. New capabilities of gigahertz class NMR enable research discoveries in diseases with significant societal impacts, such as COVID-19, Alzheimer's, and other neurodegenerative diseases, cancer, and cardiovascular disease. For example, a recently published example of a structure and intrinsically disordered regions of the SARS-CoV-2N, or nucleocapsid protein, which contribute to membrane-less organelles, also known as biological condensates, which enable viral RNA replication in host cells. Interestingly, without these biological condensates, there would be no COVID-19 pandemic. But unfortunately, there also would be no life to begin with, as in recent years, science has learned that these ubiquitous biological condensates that we can study with NMR and fluorescence microscopy are really crucial for many key cell biology functions. in healthy cell biology as well as in many disease processes. Very exciting new area for us. In 2021, we anticipate continued ultra-high field NMR growth with customer acceptances of 4 to 5 gigahertz class systems. So in conclusion, brokers' performance strengthened sequentially in Q4 as customer activity continued to recover. Our high growth initiatives have expanded with Project Accelerate 2.0. and our core margin initiatives are progressing with ongoing and additional operational excellence programs underway. We are very excited about our future opportunities in proteomics, structural functional biology, spatial and single cell biology, as well as in microbiology and molecular diagnostics. We enter 2021 with BSI order momentum and a solid backlog and we anticipate high single-digit organic revenue growth at our BioSpin and Nano Groups and low double-digit organic revenue growth at our CALIT Group. We also expect healthy non-GAAP operating margin expansion and very strong non-GAAP EPS growth in 2021 for Brucker overall. And with that, I'd like to turn the call over to our CFO, Gerald Herrmann, who will review our financial performance in more detail. Gerald.