Bruker Corporation

Good day, and welcome to the Bruker Corporation fourth quarter 2021 earnings 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. Please note this event is being recorded. I'd now like to turn the conference over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you, Jason, and good morning, everyone. I would like to welcome everyone to Bruker Corporation's fourth quarter and full year 2021 earnings conference call. My name is Justin Ward, and I am Bruker's new Senior Director of Investor Relations and Corporate Development. I joined Bruker in January, and I'm looking forward to meeting many of you in early 2022. Joining me on today's call are Frank Laukeen, 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 will be referencing a slide presentation that can be downloaded from the events and presentations section of Brooker'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.brooker.com. Before we begin, I would like to reference Brooker's safe harbor statement, which is shown on slide two of the presentation. During this conference call, we will 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, as well as ongoing supply chain, logistics, and inflation challenges. 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 based on current business conditions and to our outlook as of today, February 11th, 2022. 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 first quarter 2022 financial results expected in early May 2022. You should not rely on these forward-looking statements as 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 fourth quarter and full year 2021 in more detail and share our fiscal year 2022 financial outlook. Now, I'd like to turn the call over to Bruker CEO, Frank Laukeen.

Thanks, Justin. Great to have you at Bruker. As some of you know, we welcomed Justin a few weeks ago as our new Senior Director of Investor Relations and Corporate Development. And this is his first earnings call with us. Now, good morning, everyone, and thank you for joining us on today's earnings call. As you can see on slide four, Brooker's solid 11% organic revenue growth in the fourth quarter capped off a year of outstanding progress for the company. Robust demand for our differentiated high-value instruments and solutions resulted in continued strong momentum in bookings and revenues, despite meaningful supply chain challenges. In fiscal year 2021, our BSI segment organic bookings and backlog both increased in the high teens percentage year over year. Accordingly, we are ramping up significant CapEx investments for capacity and productivity, as well as substantial OpEx investments in commercial organizations and R&D for our project Accelerate 2.0 High Growth, High Margin Initiatives. For the fourth quarter of 2021, BSI segment order bookings growth year-over-year was about 10% on an organic basis, driven by broad-based customer demand, with the U.S. demand being particularly strong. Brooker's Q4 2021 revenues increased approximately 9% year-over-year to $684 million, and in comparison to a strong prior year, Q4 2020. On an organic basis, revenues increased 11.4% year-over-year, which included 11.8% organic growth in the BSI, Brooker Scientific Instruments Groups, and 6.8% at-best net of intercompany eliminations. Our Q421 non-GAAP gross margin decreased 50 BIPs year-over-year to 51.2%, while our non-GAAP operating margin was 21.0%, a decline of 150 bps from 22.5% in Q4 2020 due to accelerated commercial investments, unfavorable revenue mix, as well as supply chain challenges and inflation. In Q4, Bruker reported GAAP-diluted EPS of 50 cents compared to 45 cents reported in the prior year period. On a non-GAAP basis, Q4 21 diluted EPS was 59 cents, an increase of one cent from 58 cents in Q4 2020. In summary, Q4 21 was a quarter with continued momentum in bookings and backlog with strong organic revenue growth and ramping investments in our project accelerate initiatives and operational excellence drive. On slide five, We show broker's performance for the full year 2021. Our revenues increased by 430 million year over year, or by 21.7% to 2.42 billion. On an organic basis, fiscal year 21 revenues grew 19.1% year over year, comprised of 19.4% organic growth in BSI, and a 15.5% organic increase at best net of intercompany eliminations. Full year 2021 growth and operating margin, as well as GAAP and non-GAAP EPS performance, all stepped up significantly year over year as our business recovered from the pandemic and accelerated strongly beyond pre-pandemic levels. In fiscal year 21, we experienced particularly strong organic growth in our proteomics, microbiology, biopharma, and industrial research markets. We are very pleased with our 19% organic revenue growth, 240 bps year over year gross profit margin expansion, and 340 bps year over year operating profit margin expansion, and more than 50% EPS growth in 2021. Our return on invested capital of 27.6% in 21 was well above our long-term target of ROIC greater 20%. And it illustrates our differentiated business philosophy and entrepreneurial management process and culture, which we believe will resonate in times with higher inflation and increasing cost of capital. Please turn to slide six and seven. where we highlight the full year 21 performance of our three BSI groups and our best segment, all on a constant currency and year-over-year basis. In 2021, the BioSpin group revenue grew in the mid-teens percentage year-over-year to $691 million. BioSpin saw strength in demand for its NMR, preclinical imaging, and aftermarket offerings, while system installation activities recovered. BioSpin systems revenue were up strongly year over year, including revenue recognition on four gigahertz class NMR instruments. In the fourth quarter, BioSpin's PCI division acquired Molekubes, a Belgian company with innovative benchtop preclinical nuclear molecular imaging systems. For the full year 2021, Cali group revenues increased in the low 20s percentage to $819.6 million, with continued growth in our mass spectrometry and microbiology businesses and very strong performance in our FTIR near IR Raman molecular spectroscopy product lines. We saw strong revenue growth for our TIMSTOF unbiased 4D proteomics and multiomics platform, which, as we mentioned in our J.P. Morgan presentation in early January, exceeded $100 million in revenues in 2021. Revenue for other life science mass spec products, like our research MALDI-TOF product line, rebounded as well. Microbiology and molecular diagnostics revenue grew year over year, driven by high demand for multi-biotyper instruments and consumables. This was coupled with the recovery of our tuberculosis or TB diagnostics products, While during Q4 2021 revenue from our SARS-CoV-2 PCR testing of 6 million, approximately 6 million was down year over year from Q4 2020 as expected. Full year 21 revenues for our IR near IR Raman molecular spectroscopy products were substantially higher year over year with strong execution as the global industrial applied and academic markets rebounded from 2020 and grew further. Please turn to slide seven. Full year 2021 broker nano revenues grew in the mid-20s percentage to $697.5 million. Nano's industrial research, industrial and academic businesses rebounded strongly, with industrial research outperforming. Revenues of our advanced X-ray, nano surfaces, and nano analysis tools all stepped up substantially versus 2020. Nano's microelectronics and semiconductor metrology tools performed very well in 2021 with ongoing strong bookings and backlog. Life science fluorescence microscopy revenue was up sharply year over year on product innovation and strong academic demand. Nano's 2021 revenue included an M&A contribution from our September September 2020 acquisition of Canobie Biosciences spatial biology targeted proteomics tools and CRO services. Finally, full year best revenue grew in the mid-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 continue to experience supply chain challenges due to material shortages and slow logistics. Moving to slides eight and nine. Eight and nine, we continue to make good progress with our Project Accelerate 2.0 initiatives, which now represent about 54% of our total revenues. On slide eight, we highlight a recent majority in investment that closed in January 2022, and which enhances our proteomics solutions. Preomics has developed innovative automation and sample preparation tools and consumables for use in unbiased, deep proteomics. Preomics' new beatbox device, in combination with Bruker's TIMSTUFF platform, provides accelerated, deep, and unbiased proteomics workflows for tissue biobanks or biopsy research. On slide 9, we show two other recent technology acquisitions that closed in January and also enhance our proteomics initiative. ProLab specializes in precision pumps, autosamplers, and nanoflow to capillary LC or cap-LC systems to increase performance and robustness of 4D proteomics and 4D metabolomics. Brooker also acquired PEPCEP, a company specializing in nano-LC columns and components to optimize proteomics, which are used in Brooker's nano-ELUT nano-LC system and by other manufacturers. The expected fiscal year 2022 revenue from these three proteomics acquisitions is less than $10 million, but we believe these acquisitions have excellent growth potential, and because it's primarily consumable, they have high gross margin potential in the future. and allow Bruker to offer more complete, unbiased 40 proteomics and multiomics solutions, including consumables, as well as higher performance in the future. As we intend to invest in these separation and sample prep technologies, we expect these proteomics acquisitions to be approximately $0.03 to $0.04 dilutive in fiscal year 2022, which is incorporated in our fiscal year 2022 guidance. Slide 10 illustrates a historical perspective of our transformation over the last several years with expanding operating margins, accelerating organic revenue growth, and double-digit EPS CAGR, all while maintaining return on invested capital greater than 20%, which has resulted in robust stakeholder and shareholder value creations. This is a result of our entrepreneurial focus on innovating high-value instruments and solutions combined with a continuous operational excellence drive. As a result, Bruker enters 2022 in its strongest position ever. We intend to further ramp our investments in the Project Accelerate 2.0 high-growth, high-margin initiatives to ensure those opportunities continue to drive profitable growth in the years to come. Specifically, to facilitate growth in our key opportunities in proteomics, spatial biology, biopharma, and semiconductorology, we plan to add incremental commercial and R&D investments of 20 to 25 million in 2022, included in our guidance and, of course, including the three proteomics acquisitions that I mentioned a moment ago. This also includes... investments in Acuity and Canopy, if you recall, our spatial biology ventures and previous acquisitions, as well as into the two smaller Semicon metrology acquisitions we did in the second half of last year. As the revenue contributions from these Project Accelerate 2.0 initiatives increases further, they are expected to pull up our operating margins and revenue growth rate further, first towards our 2024 medium-term financial goals, and then beyond. Finally, we have substantial balance sheet capacity to pursue disciplined strategic M&A with the right opportunities. In summary, during 2021, Bruker delivered excellent progress towards its strategic and financial objectives. Our core businesses have rebounded strongly, and our Project Accelerate high-growth, high-margin initiatives have performed well. very well. I am pleased with how well our teams responded to a challenging supply chain and logistics environment. As we move through fiscal year 2022, our high backlog gives us good visibility on growth. We see meaningful areas for Bruker to develop market leading positions with our innovative technology and commitment to serving our customers. Let me now turn the call over to our CFO, Gerald Herman, who will review Brooker's financial performance and outlook in more detail. Gerald.