Bruker Corporation

Good afternoon and welcome to the Bruker Corporation third quarter 2021 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by 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 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. Please go ahead.

Thank you, Gary. Good afternoon. I would like to welcome everyone to Brooker's third quarter 2021 earnings conference call. My name is Miroslava Minkova, Senior Director of Investor Relations and Corporate Development at Brooker Corporation. Joining me on today's call are Frank Lauken, our President and CEO, and Gerald Herman, our Executive Vice President and 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 Brokers 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.broecker.com. Before we begin, I would like to reference Broecker's safe harbor statement, which I show on slide two. During the course of this conference call, we'll 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 the ongoing COVID-19 pandemic the spread of the Delta variant, as well as ongoing supply chain challenges, global logistics, and inflationary risks. 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, as updated by our other SEC filings, 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 1st, 2021. We do not intend to update our forward-looking statements based on new information, future events, or for other reasons prior to the release of our fourth quarter 2021 financial results expected in February 2022. Therefore, you should not rely on these forward-looking statements as representing our views or outlook as of any date subsequent to today. We will begin today's call with Frank providing a summary. Gerald will then cover the financials for the third quarter in more detail. Now, I'd like to turn the call over to Brooker's CEO, Frank Laukin.

Thank you, Miroslava. As you may know, this will be Miroslava's last earnings call with us. Gerald and I would like to thank her for her successful work in investor relations and corporate development over the last five years, and we wish her the best going forward. Now, good afternoon, everyone, and thank you for joining us on today's earnings call. As you can see on slide four, Brooker delivered another excellent quarter with sustained momentum in bookings, revenues, margin improvement, and EPS growth. Our teams continued to innovate and to execute very well, managing through well-publicized supply chain challenges. I am confident that Bruker is now well on track for excellent financial and operational progress in 2021. For the third quarter of 2021, Bruker's revenues increased 19.1% year over year to $609 million. On an organic basis, revenues increased 17.8% year-over-year, which included 16.8% organic growth in the broker scientific instruments groups and 29.3% at best net of intercompany eliminations. Our third quarter 21 non-GAAP gross margins expanded 210 basis points year-over-year to 51.7, while our non-GAAP operating margin reached 20.6%, an improvement of 200 bps over 18.6% in the third quarter of 2020. In the third quarter of 2021, Bruker reported GAAP diluted EPS of 57 cents compared to 35 cents reported in the prior year period. On a non-GAAP basis, The third quarter of 21 diluted EPS were 63 cents, an increase of 50% from 42 cents in the third quarter of 2020. And Q3 of 2021 included a tax benefit of approximately 6 cents on certain discrete items, as Gerald will explain later. In summary, It was an excellent third quarter with strong revenue growth, operating leverage, and favorable tax performance, which all dropped through to the bottom line, even as we continue to step up our project Accelerate 2.0 and operational excellence investments. On slide five, we show broker's performance for the first nine months of 2021. Our revenues increased by 374.4 million year over year or by 27.5 to 1.734 billion in the first nine months of 2021. On an organic basis, revenues grew 22.6% year over year, comprised of 22.9% organic growth in scientific instruments and a 19.2% organic increase At best, net of intercompany eliminations. During the third quarter of 2021, we again experienced strong demand and order bookings in both our core and project accelerate businesses. Geographically, we saw excellent order trends in North America and the Asia Pacific region, including China, with slower bookings performance in Europe, primarily due to strong comparisons from the third quarter of 2020. Year to date, third quarter 2021 order bookings for our scientific instruments groups was more than 20%. Bookings growth for our scientific instruments groups was more than 20% on an organic basis, driven by customer demand in our academic and government, life science, diagnostics, biopharma applied industrial, and our semiconductor metrology businesses. Year to date, third quarter 2021 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance all stepped up significantly year over year as our business recovered strongly from the pandemic and accelerated beyond what a recovery would imply. Please turn to slides six and seven now, where we highlight the year-to-date third quarter 2021 performance of our three scientific instruments groups and of our best segment, all on a constant currency and year-over-year basis. Year-to-date, the BioSpin group revenue grew in the low 20s percentage year-over-year to $494.4 million. During the first nine months of 2021, BioSpin saw strength in demand for its NMR, preclinical imaging, and aftermarket offerings, while system installation activities recovered. BioSpin systems revenue was up strongly year over year, including revenue recognition on three gigahertz class NMR systems year to date. During the third quarter, BioSpin achieved revenue recognition of its third gigahertz class system this year, a 1.2 gigahertz NMR installed at Utrecht University in the Netherlands. We continue to expect the fourth gigahertz class system to turn into revenue in the fourth quarter of 2021. In the third quarter, BioSpin revenue benefited from the earlier timing of revenue recognition of certain systems in China previously expected to be delayed to the fourth quarter due to timing of receipt of required paperwork in China. Year-to-date, the CALIT group revenues increased in the mid-20s percentage to $579.9 million, with continued growth in our mass spectrometry and microbiology businesses and very strong performance in our FTIR, NIRR, Raman molecular spectroscopy product lines. We again saw strong revenue growth for our TIMSTOF unbiased 4D proteomics platform, while revenue for other life science mass spec products like our research Malditoft product line rebounded as well. Please note that tomorrow, Bruker will host an ASMS 2021 scientific press conference at 11 a.m. Eastern Time, and that next week we will have the International EUPO Conference, both with significant Bruker proteomic solutions innovations, including in unbiased single-cell proteomics. Microbiology and molecular diagnostics revenue grew year over year, driven by healthy demand for multi-biotyper instruments and consumables, including accelerated growth in the U.S. This was coupled with continued recovery of Brooker Heinz tuberculosis diagnostics products, while during the third quarter of 2021, our revenue from SARS-CoV-2 PCR testing has declined further to about $5 million. Year-to-date revenues for our FTIR, NEAR-IR, and Raman molecular spectroscopy products were substantially higher year-over-year, with strong execution and a rebound from 2020 on strong global industrial applied and academic demand. Turning to slide seven now, year-to-date broker nano revenues grew in the mid-20s percentage to 504.6 million. Nano's industrial and academic businesses rebounded strongly, with industrial research outperforming our recovery expectations. Revenues for advanced X-ray, nano surfaces, and nano analysis tools all stepped up substantially versus the year-ago period. Nano's microelectronics and Semicon metrology tools continue to perform very well on a year-to-date basis with ongoing strong bookings and backlog. Life science, fluorescence microscopy revenue was up sharply year-over-year on product innovation and strong academic demand. Year-to-date, Nano revenue included a contribution from our September 2020 acquisition of Canopy Biosciences single-cell targeted proteomics tools and CRO services. Late in the third quarter of 2020, the Bruker Nano Group closed two small acquisitions, adding X-ray inspection and film thickness measurement tools to its microelectronics advanced packaging and semiconductor metrology portfolio with relatively small revenue contributions expected in the fourth quarter. Turning to best year-to-date, best revenue grew in the high teens percentage, net of intercompany eliminations, driven by contributions from big science projects and a recovery in MRI superconductor demand by our MedTech OEM customers. Best superconductor demand appears healthy, but we have seen supply chain challenges due to material shortages, and slow logistics. Moving to slides 8 and 9 now, we continue to make good progress with many of our Project Accelerate 2.0 initiatives. On slide 8, I highlight progress with our multi-biotyper franchise in the U.S. As many of you are aware, our penetration with a multibiotyper in the U.S. lags the European markets. And as you can tell here, as of June 2021, we had more than twice as many multibiotypers installed in Europe than in the U.S., so we have a lot more potential in the U.S. Since our sepsityper FDA clearance late in December 2021, we're delighted that more than 100 U.S. customers or nearly 100 U.S. customers have already obtained the workflow adoption training at the end of the third quarter, with many more scheduled for the fourth quarter. If you recall, our multibiotyper sepsityper kit for clinical microbiology provides rapid and affordable identification of more than 400 microorganisms from positive blood culture, very relevant for sepsis when every hour counts and time matters, for outcomes and survival. Year-to-date, as of the end of the third quarter of 21, this has resulted, or this has helped, with greater than 50% year-over-year multi-biotype or order growth in the U.S., including recovery from COVID, including recovery, of course, from the COVID impact in 2020. But again, it seems like it's more than just a recovery. As shown on slide nine and discussed on our second quarter 2021 conference call, in June of this year, the U.S. National Science Foundation announced a $40 million award to establish a Network for Advanced NMR, or NAN, among three U.S. academic institutions, the University of Connecticut School of Medicine, the University of Georgia Complex Carbohydrate Research Center, and the University of Wisconsin in Madison's National Magnetic Resonance Facility. Recently, we announced receipt of a second 1.1 gigahertz NMR order funded by this NSF NAN grant. The second system was ordered by the University of Georgia and will be used for solution state NMR. This follows the initial NAN-funded order for a 1.1 gigahertz NMR at the University of Wisconsin-Madison for solid state NMR. We're very encouraged by the growing interest in gigahertz class NMRs in the US, which will benefit research into a diverse set of scientific problems in functional structural biology, disease biology, and material science. So in summary, during the third quarter and the first nine months of 2021, Gruker delivered excellent progress against our strategic and financial objectives. Our core businesses have rebounded very strongly, and our project accelerate high growth, high margin initiatives continue to do well. Operationally, our teams continue to successfully navigate a challenging supply chain and logistics environment where we have invested in increased buffer inventories and vendor commitments to protect our revenue growth and our P&L. For the remainder of the year and as we move into fiscal year 2022, our high backlog flexibility positions us well to manage supply chain and logistics challenges although risks remain. We also made further investments in our dual strategy of Project Accelerate 2.0 and operational excellence. I'm very pleased with our performance year to date, and we are now well on track for an excellent year, and we are further raising our guidance for the full year 2021. Let me now turn the call over to our CFO, Gerald Herrmann, who will review our financial performance and outlook in more detail. Gerald.

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to review Broker's third quarter and year-to-date 2021 financial highlights, starting on slide 11. Broker's revenue increased 19.1 percent to approximately $609 million in the third quarter of 2021, which includes an organic revenue increase of 17.8 percent year-over-year. We reported gap EPS 57 cents per share compared to 35 cents in the third quarter of 2020. On a non-GAAP basis, third quarter 2021 EPS was 63 cents per share, an increase of 50% compared to 42 cents in the third quarter of 2020. Our third quarter 2021 non-GAAP operating income grew 32.1% from a still somewhat softer comparison in the third quarter of 2020 when our recovery from the pandemic began. Third quarter 2021 non-GAAP operating margin expanded 200 basis points year-over-year to 20.6%, driven by our strong revenue and volume growth. These results also include continued investments in our Project Accelerate 2.0 initiatives and operational excellence programs. Our teams executed very well in the third quarter, handling significantly higher volume despite supply chain shortages and logistics delays that may ultimately result in some shipments slipping into 2022. But thus far, these issues have been well managed as we operate with increased buffer inventories and make longer term vendor commitments with down payments to protect our revenue growth and P&L. We finished the third quarter with cash, cash equivalents and short term investments of approximately $670 million. During the quarter, We used cash to fund strategic investments in our business, two small acquisitions in the Nano Group, and our dividend program. In May of 2021, our board approved a new two-year share repurchase authorization of up to $500 million, valid until May 2023. There were no share repurchases under the program in the third quarter of 2021. Year-to-date, our share repurchases have totaled 1.1 million shares, for approximately $71 million. We generated $23.9 million of operating cash flow in the third quarter, which was substantially offset by our CapEx investments, resulting in $7.6 million in free cash flow for the third quarter. This was impacted by a buildup of buffer inventories, the timing and scale of income tax payments, customer and vendor deposits. Our working capital to revenue ratio nonetheless improved substantially from the third quarter of 2020 due to higher revenue and efficiency gains. Slide 12 shows the revenue bridge for the third quarter of 2021. As noted earlier, organic revenue in the quarter increased 17.8%. We had a positive revenue contribution from acquisitions of 0.3% and a foreign currency tailwind of 1.0%. From an organic revenue growth perspective and compared to the third quarter of 2020, BioSpin's Q3 2021 revenue increased in the low 20% range. BioSpin's performance reflects revenue recognition of a gigahertz NMR class system in this quarter and also benefited from the revenue recognition of certain systems in China, which had been delayed due to paperwork challenges and were previously forecast to be in the fourth quarter revenue. Nano organic revenue grew in the high teens percent range on strength in nano's industrial research and academic businesses. Caled grew low double digits with continued strong performance in life science mass spectrometry and the multibiotyper franchise, partially offset by a year-over-year decline in SARS-CoV-2 testing revenue. Best revenue increased in the high 20% range nat of any company eliminations. Overall, we estimate that approximately $15 million of Brooker's third quarter 2021 revenue, which was previously expected in the fourth quarter of 2021, was recognized in the third quarter. This was related primarily to the BioSpin China import paperwork acceleration noted above. Third quarter 2021 BSI systems revenue increased in the low 20% range organically. while BSI aftermarket revenue grew in the mid-single digits organically compared to the third quarter of 2020. Geographically, and on an organic basis in the third quarter of 2021, our European revenue increased high single digits. North America grew in the low 30% range, off a still weak prior year comparison, and Asia-Pacific grew in the high teens percent year over year, driven by strong performance in China and other APEC markets, excluding Japan. Rest of the world third quarter 2021 revenue was slightly higher year over year. Slide 13 shows our third quarter 2021 P&L performance on a non-GAAP basis. Q3 2021 non-GAAP gross margin, 51.7%, increased 210 basis points from 49.6% in the third quarter of 2020. driven by higher revenue and volume leverage. Third quarter 2021 non-GAAP operating expenses were up 19.5% compared to the third quarter of 2020, reflecting more normalized expense run rates following the curtailment of temporary cost reductions that we introduced in 2020 to address pandemic economic conditions. Third quarter 2021 operating expenses also included the expected step up in certain project accelerate 2.0 investments. Our third quarter 2021 non-GAAP operating margin of 20.6% was 200 basis points above the 18.6% in the third quarter of 2020. This was driven principally by our revenue growth, volume, and strong operating leverage in the quarter. For the third quarter of 2021, our non-GAAP effective tax rate was favorable at 19.2% compared to 26.5% in the third quarter of 2020. The lower third quarter 2021 tax rate reflects significant rate favorability from stock compensation activity in the quarter, as well as other favorable discrete tax items. We estimate that stock compensation activity resulted in an approximate 0.6 sorry, six cents discrete tax benefit to our third quarter 2021 non-GAAP EPS. Weighted average diluted shares outstanding in the third quarter of 2021 were 152.8 million, a reduction of approximately 1.5 million shares, or 1%, from the third quarter of 2020, resulting from our share repurchase activity over the past year. Bob White- Finally, third quarter 2021 non gap EPS 63 cents rose 50% compared to 42 cents in the third quarter of 2020 driven primarily by higher revenue improves improved growth and operating margins and the favorable tax rate in the third quarter of 2021. Bob White- slide 14 shows the year over year revenue bridge for the first nine months of 2021. Revenue was up $374 million, or 27.5%, including organic growth of 22.6%. Acquisitions added 0.5% to our top line, while foreign exchange was a 4.4% tailwind. And Frank has already covered the drivers for the first nine months of 2021. P&L results for the first nine months of 2021 are summarized on slide 15, with drivers similar to the third quarter. Turning to slide 16, in the first nine months of 2021, we generated $80.2 million of free cash flow, approximately $19.4 million higher than in the first nine months of 2020. Year-to-date third quarter 2021 free cash flow benefited from higher net income, partially offset by higher inventory levels to support further growth and to address supply chain risks, the timing of shipments, and the timing and scale of customer deposits and higher vendor advances. Our capex spending in the quarter reflects our continued investments in growth capacity and productivity as part of our operational excellence initiative. Our cash conversion cycle at the end of the third quarter of 2021 was 236 days, a reduction of 27 days compared to the third quarter of 2020, reflecting gradual improvement in our working capital cycle. Turning now to slide 18, given our strong financial performance and demand for our products and solutions during the third quarter, we're once again raising our outlook for 2021 revenue growth, non-GAAP operating margin expansion, and non-GAAP EPS. For fiscal year 2021, we now expect organic revenue growth of 16.5 to 17.5% year over year. We now estimate a combined tailwind from foreign currency and acquisitions to revenue growth of approximately 3%. This is expected to lead to reported revenue growth for 2021 in a range of 19.5% to 20.5% compared to 2020. Non-GAAP operating margin for 2021 is now expected to expand 350 to 400 basis points to 19.5% to 20%. compared to 16 percent reported in 2020. On the bottom line, this all adds up to non-GAAP EPS for 2021 in an estimated range of 205 to 209, which would represent non-GAAP EPS growth of 52 to 55 percent compared to 2020. This also represents 31 to 33 percent growth from our $1.57 pre-pandemic non-GAAP EPS level in fiscal year 2019. After the favorability we experienced in the third quarter, we now project a non-GAAP tax rate of approximately 29% for full year 2021. Other guidance assumptions are listed on the slide. Our full year 2021 ranges have been updated for foreign currency rates as of September 30th, 2021. For the fourth quarter of 2021, This outlook implies organic revenue growth in the mid single digits. We expect the quarter to be impacted by a number of factors, including, first, the shift of some BioSpin China revenue from the fourth quarter into the third quarter, as explained earlier. Second, supply chain and logistics delays, which may result in the push out of certain shipments into 2022. Third, a headwind of approximately $8 million. from higher SARS-CoV-2 testing revenue in the fourth quarter of 2020. And finally, all compared to a fourth quarter of 2020 when our revenues were more normalized than in the second and third quarters of 2020. These factors, together with our continuing investments in key Project ACCELERATE 2.0 initiatives, including proteomics and spatial biology, are expected to result in fourth quarter 2021 non-GAAP operating profit margin and EPS slightly down or approximately flat year over year. To conclude, Bruker delivered another excellent quarter with meaningful improvements in our revenue margins and EPS. We are raising fiscal year 2021 guidance significantly, reflecting our strong financial performance through the first nine months and the robust market demand we see for our products and solutions. Our nine-month year-to-date 2021 revenue now exceeds the comparable pre-pandemic 2019 period by approximately 13% organically. We're well positioned to enter 2022 with good momentum and strong backlog. Finally, I'd like to add my appreciation to Miroslava for her insights and dedication in shaping and advancing Bruker's investor relations program over the past five years. We wish her all the best in the future. And with that, I'd like to turn the call back over to Miroslava to start the Q&A session. Thank you very much.

Thank you, Gerald, and thank you both for recognizing me. I'd now like to turn the call over to the operator to begin the Q&A portion. As a reminder, in order to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up.

We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Punit Sudha with SVB Lyric. Please go ahead.

Yeah. Hi, Frank. Thanks for taking the question and congrats on the quarter. And Miroslava, really great working with you. Really best wishes for the next role. So, Frank, my first question is really on the guide. You know, there's a beat in the quarter here. Obviously, great to see that. But, you know, when we put that in, obviously, midpoint, we're already reaching to the midpoint of the organic guidance range versus what we were modeling. So, I'm just trying to understand On one hand, there is a backdrop of the strong quarter you had. The demand is strong. You highlighted more than 20% bookings growth year to date. You're getting another gigahertz placement. Maldi Biotyper is strong here. So the question is really the conservatism. Is it coming from supply chain mostly? Or is it a softer budget flush? Just if you could walk us through the components here. And on the supply chain side, if you could just maybe help us understand Is it worse than what you had highlighted in the second quarter? I just wanted to get a sense of where things stand today.

Yeah, hi, Puneet. So I think the guide's appropriate. I mean, obviously, we took up our guidance for the full year very significantly and are seeing terrific improvements just about in every category throughout for the full year. And so that's really what we're driving and managing at, right? Gerald explained some of it already. We had this sort of 15 million that we thought would end up in Q4 already coming into Q3. And we have an 8 million headwind from COVID testing in Q4 compared to year over year. And then we're just really very, very happy with how our year is shaping up, obviously. Looking at the midpoints, I realize that we always give a range at 17% organic growth and a big step up in margins, more than 50% EPS growth. I think that's just going to be a perfect ending to the year. And indeed, I think supply chain, to your question, Um, you know, it's not no dramatic shift, but you know, they're pervasive. They're everywhere. Our teams are working very, very hard, very successfully so far. And, uh, you know, our, some of our delivery times have become longer and that's how we're quoting systems to customers. And, and, you know, that gets accepted because I think they're seeing it everywhere. So most, most things that come in now as orders, I mean, they, you know, there's almost all of that would go into Q1 or Q2 or even later of next year. So it's no dramatic changes, but on the other hand, our Q3 was, if you like, somewhat better than we had even expected, and the full-year growth rate and all the other metrics, I think, are terrific. So we're looking forward to entering 2022, then also with a rather strong and flexible backlog and hopefully continued momentum. Obviously, we'll comment on that when we report Q4 sometime in February of next year.

Okay. That's helpful. And in terms of inflation, in terms of cost increases from suppliers, could you just update us on your ability to potentially push that to the customers and maybe just give us a sense of what you're seeing out there in terms of inflationary sort of expectations that are obviously happening with a number of companies, but just wanted to get your view since, you know, broker has significant capital equipment.

Right. I mean, inflationary pressure is clearly out there and it's also rather pervasive. I mean, and, you know, many areas we have long-term contracts, many areas we have very, very good vendor relationships and significant influence. We're doing redesign by cost in many areas. We're, you know, we're enhanced. We're making significant enhancements in productivity. But the inflationary pressures are still there and, of course, greater than certainly at any time in the last decade. So, you know, we're looking at that proactively. Of course, also in our pricing, you know, this pricing and price increases are – are something that will be higher than in other years. That's clear. But I'll also say that our number one priority at Bruker is customer satisfaction, long-term customer satisfaction. So we're not going to try to pass on every price or logistics spike onto our customers, but we will also cushion some of that for them. And I think that's a good long-term customer strategy that gets honored by demand and by long-term customer loyalty. So I'm not trying to suggest that all short-term inflationary pressures or spikes will be simply passed on. But we have enough other things in the pipeline so that I'm quite confident that we will manage differently, but we'll manage well in this new environment with more to be seen and obviously when we give guidance for 2022. So far, it has obviously with terrific, you know, 350 bps or more non-operating margin expansion and gross margin expansion. So far, we're doing extremely well in that environment.

Got it. Okay. And last one for me.

I think we have three questions, so I think we need to also leave some time for other questions because we usually have one or two.

I'm sorry, Puneet. The next question is from Derek DeBruin with Bank of America. Please go ahead.

Hi, thanks for taking the question. This is Mike Liskin on for Derek. I want to talk briefly about the NSF orders you called out. We've talked about it in the past, but I want to sort of get an update of your thoughts on, you know, when this could start contributing to revenues. Could this be 2022 or close to 2023 or beyond? And just sort of at a high level, if you could provide us an update on the ultra high field order book and how we should think about the cadence of some of those deliveries in 2022?

Yeah, I understood. So, no, these NSF orders, these NAN orders will certainly not be delivered in 2022. That goes into 2023 and beyond. I don't have the exact target quarter. But our order book for ultra high field, the gigahertz class NMR, you know, is at least two years out. I don't have the exact numbers right now. And so these orders, it used to be delivery times of four to five years. They've certainly come down to three years or more typically or three years or less. And we've made good progress this year in 2022. And sorry, in 2021. And we expect to place one more. Well, we've placed already, but we hope to have in revenue one more system in the fourth quarter. So I'm not going to comment on 2022 expectations, but the order book is pretty much full for the next two years. And, you know, more demand hopefully will come up during that time period.

Okay, great. Appreciate that. And then if I can get a follow up on some of the margin profile and sort of the flow through. Really strong beat both on gross margin and operating. Um, in the third quarter, I'm just wondering if you could parse that apart, sort of, you know, what was the contribution or the benefit from the 15 million pull forward? I imagine that probably came through at a pretty nice margin. Um, and then, you know, the supply chain issues you talked about, uh, potentially affecting some delays into 2022. So you could just quantify that. Thanks.

Well, I'll take, I'll take that one. It's Gerald. So relative to the, um, the performance on the margin side at the operating margin and gross margin performance, as I've said on other calls, You know, when we get this level of revenue growth and the volume, we tend to see very good operating margin performance. It drops down to our bottom line more quickly. That's driven, in this particular case, not only by good, strong performance in our BioSpin group, which this event of $15 million certainly helped that situation. But furthermore, you know, we've seen very good strong demand from a revenue perspective in the third quarter in a number of different market segments. It's true for our industrial, industrial research, our academic markets, our biopharma markets, applied markets, semi-metrology as well. So all of those are carrying pretty solid margin performance at the gross margin line. So generally speaking, that helps significantly, and that's what you see here. I might also mention, you asked about items that might fall into 2022. We won't comment specifically on that, but with the fact that we have logistics delays, we have supply chain challenges, you know, with Bruker, the way this works is, particularly for large, high-value pieces of equipment, we really only need one or two units to fall naturally into, you know, be delayed for some reason, either customer or customer acceptance issues or just, you know, facilities not being ready. And in those cases, we ultimately, it just falls into the next quarter. So I think we'll see some of that, particularly with some logistics delays. And that's probably the high-level view from my perspective on it.

And as we've all taken into account in the guidance for the full year and the implied guidance or color for the fourth quarter, of course.

Great. Thanks so much. And congrats, Nick.

Thank you. Thank you. The next question is from Tycho Peterson with JP Morgan. Please go ahead.

Hi, this is Rachel Vattenstallen for Tycho. Thanks for taking the question. So first up on China, can you guys just walk us through your expectations on the recent procurement initiatives that seem to emphasize local players in the market? And also, do you see any risks since Brooker doesn't manufacture in the region?

Right.

Yeah, I mean, in most of the product areas where we are active, we are really very, very differentiated and unique and very often globally and including even in China. So it's not that our products are easily displaced by something that's made locally. I mean, we're aware of that. We see those preferences for sure. And You know, we have really excellent applications and sales and service support in China, so Chinese customers generally are very satisfied with the products and the support that they're getting from Bruker, and very often our products are almost always, our products are just very differentiated. I think I'll leave it at that, but we're well aware of, you know, some of these political tendencies. They do not affect us primarily. They do not affect us all that strongly.

Understood. And then last one from me. So last quarter you guys flagged some broad weakness in Japan and you called it out a little bit on this call as well. So can you just give us an update about the demand trends you're seeing in the region and outlook for 4Q as well?

Did you say Japan? Was that the question?

Yes, Japan.

Yeah. I believe Japan had been weak, and I think Japan had seen somewhat better bookings than there had been. I'm aware from the NMR side that there had been some sort of a special supplementary budget, and we have seen and I think are also expecting some decent bookings in Japan because some extra monies have become available after the Olympics. but I have to say I'd rather get another quarter of visibility into Japan orders before I comment. Right now, I don't really have any. After a slow start for most of the year, there are now some signs of hope, but I wouldn't call it data yet. Let us comment more after the fourth quarter.

Great. Thanks for taking the questions.

Sure. The next question is from Dan Arias with Stifel. Please go ahead. Thanks for the questions.

Frank, anything to add to the comment that industrial research is a bit beyond what you were thinking for the quarter? Was that focused on a particular geography or application or was it just sort of across the board?

It's really quite broad and even in our more industrial and applied businesses like the molecular spectroscopy or x-ray tools or other surface tools, surface analysis tools, It's particularly strong, of course, in advanced packaging and semiconductor that serves broadly the microelectronics industry. So, you know, chip scarcities in a way are also good for broker because they drive demand and investment. Of course, there's a lot of political factors or geopolitical factors of why investment in that space is likely to be driven by demand trends, but also by trends towards more profitable geopolitical independence in that area in particular. But in general, in industrial and applied markets have really been just very strong and almost without exception. So for very many of our product lines, our core products, we really have continued innovation. We work on not only on productivity, but also on performance, on next generation product line refresh. So very often we found ourselves to be in a very good competitive position. So also our core businesses have done really quite well in bookings and now also in revenue. So it's pretty broad-based.

Okay. Thanks. Maybe just a follow-up on BioSpin. I was wondering whether you could just sort of update us on the color that you might have on lead times in BioSpin and just where things sit when it comes to installation timing for some of the big ticket items. I mean, how should we think about the timeline there relative to some of the earlier days in the pandemic? And maybe overall, how are you finding the access today?

That's a good question. And those delays where maybe we couldn't access a lab or couldn't go to a certain country, there still are some countries, but in the bigger, you know, it's obviously gotten better and better. On the other hand, you know, some countries in Asia Pacific or Australia, New Zealand are still difficult to access. It's getting better, but it's, and we're working in this new, you know, obviously a lot more is done by virtual effects. So, and, and so, so we're, we're dealing, it's an improving situation and we have new tools and methods that work reasonably well that have allowed us to show this strong growth, obviously. despite some remaining restrictions. In Western Europe, in North America, these things are now, you know, obviously in much better shape. But there's still parts of the world where we can ship, we can deliver, we can get revenue, but we're doing it differently. So it's improving and we have better processes. We really do some very complicated installations these days and customer trainings. via augmented virtual reality and things like that. It's actually quite remarkable how much progress we have been making. So it's not holding us back, as you can see from the results and from the guidance.

Okay, thanks very much.

Sure. The next question is from Patrick Donnelly with Citi. Please go ahead.

Hi, thanks for taking my question. This is Lizzie Spire on for Patrick Donnelly. I was wondering if you guys could talk a little bit about the European recovery that you're seeing. I know we've talked about China, but I'm curious about Europe and those end markets as well.

Thank you. Sure. You know, there's certainly different timing. China recovered first, already began to recover already in late Q2 of last year. Europe began to recover earlier than the U.S., and Europe was already getting stronger in Q3 and Q4 of last year in terms of bookings. and then it took a while for the U.S., especially academic and government spending, to really get going, but right now that's the strongest growth driver in terms of bookings for sure. So Europe, yeah, I don't know that there's much more to say. European revenue growth was good, European bookings growth, in the third quarter, year over year, a little bit weaker, but really because Q3 of last year wasn't so bad, and there were some sizable proteomics initiatives in Germany and some other countries last year. So, yes, China first, Europe second, America's, and well, I should say North America, US third, with Japan and some parts of the rest of the world only really now hopefully beginning to recover. I hope that helps you.

Great. Thank you. That does.

The next question is from Sungji Nam with BTIG. Please go ahead.

Hi. Thanks for taking my questions, and I would like to add thanks to Miroslava as well for all your help. Just two quick ones. One is, I'm sorry if I missed it, but Frank, what percentage of the MALDI biotyper install base in Europe currently has adopted BTIG? the sepsityper workflow?

Right. No, we didn't. I don't think I have that number at my fingertips. It is not. Yeah, it's not. So first of all, it's only for clinical, right? It's not. Sepsis inherently is a clinical. About two-thirds of our multibiotipers worldwide are clinical. One-third are non-clinical. So they would never have it. In Europe, there has been adaptation, but low reimbursement. the reimbursement environment for the sepsi type or type capability in the U.S. is much, much stronger in the U.S., so we think it's a much bigger driver in the U.S., and we are indeed seeing that. I cannot answer your specific question because I do not have that number.

Oh, no worries. Thank you. And then just curious about your molecular diagnostics business, such as Hein, where you might be seeing growth kind of beyond the COVID testing opportunities. Thank you.

Well, I would say it's mostly recovery of their TB, their tuberculosis, PCR testing, including the PCR multiplexing that looks at many, many different resistance patterns. For a while, that clearly did play and probably still continues to play second fiddle to COVID testing, but it is now coming back like so many other diagnostic procedures. It is recovering and we have some strong products there. that obviously were overshadowed by COVID testing. So mostly in tuberculosis testing. And as you know, we're focusing on Europe, Africa, and India in those markets. This is not something we sell in the Americas or in Japan or China. So it has regional specializations.

Great. Thank you so much.

The next question is from Josh Waldman with Cleveland Research. Please go ahead.

Thanks for taking my questions. Frank, I think I heard you comment orders were up 20% year-to-date, but wondered if you could comment on order growth here in the third quarter overall. And then I believe the longer-term growth outlook you laid out back at the analyst meeting incorporates something like 8% to 10% annual organic growth through 2024. Frank or Gerald, I wonder if you could provide any context on how we should be thinking about 2022. I guess given the comp, is obviously more difficult. Should we be assuming something below that for next year?

So, Josh, a lot of questions embedded here. I think Gerald will start real quick with the BSI year-to-date or Q3 order bookings. We're very similar, right? Around 20%, right?

Actually, it's over 20% order bookings growth for BSI groups for the third quarter and actually for the full year-to-date nine months.

And those were organic numbers, right?

Organic bookings performance. Yeah.

It's very strong actually. Was the third quarter stronger than year to day trends?

Very similar.

Similar I'd say, yeah.

But in the third quarter, keep in mind that we got the two 1.1 gigahertz orders in the third quarter from this NAND. They both came in in the third quarter. If I recall correctly. So that was a bit of a step up. But if you disregard, well, I mean, they're very nice orders, obviously. But the trends have been very similar and very strong for the first three quarters. I wouldn't read anything into that. So year-to-date, 20%, and that's very close to the quarterly. That average for over three quarters is also close to the quarter.

I was just going to add one other thing, Josh. It's across all the groups. So each of those groups is performing very well on the order booking side. So that's important. It's not simply one group. We're firing on those cylinders. I'm talking about the groups, not the VSI groups.

And I'm sorry, some of your other questions. I mean, we're not going to go into 2022, trying to forecast 2022. But what were some of the other elements of your question, Josh, if you could repeat, remind us, please?

Yeah, more just kind of context on 2022 in light of the longer-term guide. Obviously, the comps step up significantly. Should we automatically be assuming something below that?

I mean, you know, just at a very high level, we obviously, in June, as you recall, we set our 2024 multi-year targets, right? And... I mean, we're clearly de-risking that with a strong of 2021 if it comes out near our guidance, right? And so this year is sort of not only a recovery, but this year is really a big step up in many aspects, which is wonderful. So, you know, as you know, we'll give 2022 guidance and outlook in February when we report the fourth quarter. and have a better overall picture. So 2021, strong, but really also a very good step up and de-risking the targets that we had given. We have great momentum. Got it.

Thanks, guys. Sure.

Thank you. The next question is from Jack Meehan with Nefron Research.

Please go ahead. Thanks. Good afternoon. was wondering if you could give some more color on TIMSTOF performance in the quarter, how uptake is in terms of shipments, or maybe just even more broadly, just how the performance of the TIMSTOF Pro did in the quarter relative to CALID overall would be helpful.

Yeah. So, Jack, so shipments slash revenue for TIMSTOF have been strong all year and the third quarter was no exception. You know, also beginning to already see some bookings for the new Timstuff SCP in addition, which is really an additional growth driver. The single cell proteomic system that we launched on June 1st, even though it's essentially a million dollar system, there were some budgets that, you know, were that people simply found because they thought they needed to have that unique capability. for unbiased proteomics as an additional quantitative spatial biology technology, so quite encouraged by the early orders of these more expensive systems. And while the TIMSTOF Pro and now the TIMSTOF Pro2 that we're shipping now has really been growing very nicely all three quarters, including the third quarter, nice revenue, nice shipments. And I'll just put out the teaser. that tomorrow morning we'll have our ASMS press release. A lot of that will relate to new, we just introduced the two systems, so we're not launching systems tomorrow. We introduced them at the original ASMS timing of early June. But a lot of very significant further workflow and software and other capability enhancements developed by ourselves and very often by our key customers. but being beneficial also for other customers. So I think we'll have some exciting proteomics and other mass spec news tomorrow morning. And then we have an 11 o'clock press release for, you know, that's more scientifically oriented. We're not going to talk about EPS, but happy to talk about protein identifications and single cell proteomics tomorrow. But it's doing very well. And I mean, the interest by more and more key opinion leaders, but also not only key opinion leaders, also what I would say the early majority is really very positive. And it's just a new category. This 40 proteomics that CCS or collision cross-section enabled is a new take on the field, and it has so many advantages when you can do that at scale. And we'll just have so many examples of that tomorrow again. Great.

Looking forward to it. Uh, I also just had one clarification, the 15 million related to paperwork. Um, you know, can you just elaborate on that? So these sales were expected in the fourth quarter pulled forward. You were able to generate in the third quarter.

Is that the paperwork stuff was about 10 of the 15 million, about 15 million that we thought would go into Q4 ended up already coming through in Q3. Wonderful. About 10 million of that was China paperwork related. And it wasn't the tax or import certificate. It was something very NMR specific about some samples that we need for NMR as qualifier and calibration samples. And that had held up things that we thought would get delayed into Q4, and then they ended up not getting delayed. So it was very Bruker and very NMR specific. I wouldn't read anything into that onto other parts of the business or other companies. So $15 million came in, was not delayed, I should say, which is great. And of that $10 million was paperwork, China, NMR related, but very broker specific, very NMR specific.

Got it. Sorry, just to follow up. Does your fourth quarter guidance have any additional pressure related to any one-off things that we should know about?

Well, you know, we have one gigahertz, I think a 1.0 gigahertz system in Europe in our forecast. You know, but we have, we've guided in a way that, I mean, that has a high chance of happening. But even if it doesn't, that's, you know, don't you worry about that. We think we've got that covered. I mean, you know, we... We look at some contingency plans, if not A, then B or C. So there's nothing worth pointing out unless some major shutdown in December occurs because of some new variant or so. But I think we've been good at taking things into account. I think we're in good shape to meet our implied guidance for Q4 and our full-year guidance.

Thank you. The next question is from Matt Sykes with Goldman Sachs. Please go ahead.

Oh, hi. Thanks for taking my question and squeezing me in. I'll just leave it to one question. I just wanted to go back to the Maldi biotyper install base, that chart that you had on slide eight where you show the Americans versus Europe. Is there any obstacles within the U.S. market that would prevent you from getting to what the European install base looks like? And what impact do you think that would have on just your consumables revenue stream and overall recurring revenue if you were to grow it to sort of a European size installed base?

Okay. So we've been a good, very good question. Um, I think we have the opportunity for substantial growth in the Americas. I wouldn't say that America's well, first of all, this is America. So maybe 75 to 80% of the thousand 20 systems you see here would be us. The rest is Latin America and Canada and Mexico. So there's even more growth potential in the U.S. The U.S. has been slower to adopt than Europe, that's for sure. So we think the U.S. could be a pretty sustainable part of the multi-biotyper growth. To what's implied in your question, which is actually quite insightful, the U.S. consumables pull-through and reimbursement for assays is quite a bit better than in Europe. So, on average, systems in the U.S. pull through more long-term revenue than in Europe, so that would be even quite beneficial, and maybe that's what you were aiming for with that question. As the U.S. probably will grow faster than Europe in multi-biotyper systems installations, we expect an even better consumables pull-through in the U.S. than in Europe or in APAC.

Great. Thank you very much, guys. Appreciate it. Sure. This concludes our question and answer session. I would like to turn the conference back over to Miroslava Minkova for any closing remarks.

Thank you for joining us today. If you wish to join us at our ASMS 2021 Scientific Press Conference tomorrow at 11 a.m. Eastern Daylight Time, and if you have not yet received an invite, please send a note to our Investor Relations Inbox, investor.relationsatbrooker.com. During the fourth quarter, Brooker will participate in the 2021 Jeffries London Healthcare Conference. Brooker will also attend the J.P. Morgan Healthcare Conference in San Francisco in early January. Brooker's leadership team looks forward to meeting you at an event or speaking with you directly during the quarter. Thank you all for your support of Brooker over the past five years. It's been a great pleasure working with you all. Have a nice evening.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.