Bruker Corporation

Good morning, and welcome to Bruker's second quarter 2023 earnings conference call. All participants will be in a listen-only mode. And should you need any 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 touchtone phone. And to withdraw a question, please press star, then two. Please also note that this event is being recorded today. I would now like to turn the conference over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's second quarter 2023 earnings conference call. My name is Justin Ward, and I'm Bruker's Senior Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukeen, our President and CEO, and Gerald Herman, our Executive Vice President and CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the events and presentation section of 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 be making forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to geopolitical risks and 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 for the period ending December 31, 2022, and as updated by other FCC filings, which are available on our website and on the FCC website. Also, please note that the following information is based on current business conditions and to our outlook as of today, August 3rd, 2023. We do not intend to update our forward-looking statements based on new information, future events, or for other reasons, except as may be required by law, prior to the release of our third quarter 2023 financial results, expected in early November 2023. We should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the second quarter and first half of 2023 in more detail and share our updated fiscal year 2023 financial outlook. Now, I'd like to turn the call over to Bruker CEO, Frank Laukeen.

Thank you, Justin. Good morning, everyone, and thank you for joining us on today's second quarter 2023 earnings call. While we acknowledge that general market conditions are becoming softer in more cyclical applied Semicon metrology and industrial markets, Bruker continues to see good demand for our truly differentiated scientific instruments and life science solutions. In the second quarter of 23, we saw continued bookings growth from academia, government, and academic medical centers, and Contrary to industry trends, we are pleased with our continued growth in bookings in biopharma as well as in China, both in the second quarter and in the first half of 2023. We attribute this resiliency to our technologies and solutions, often unique and differentiated capabilities and performance, which can partially shield us from customer budget reductions and market weakness. We expect solid mid-single-digit to high single-digit organic revenue growth in the second half of 2023, but we also intend to be agile in managing our costs in this choppier macro environment. We will continue our strategic investments in our transformative Project Accelerate 2.0, particularly in proteomics and spatial biology. but also in recently acquired additional growth drivers in proteomics consumables, proteomics drug discovery services, neuroscience research tools, applied market solutions, and scientific software. Turning to slide four, in the second quarter of 2023, Bruker delivered another solid quarter with organic revenue growth of 13.5%, and non-GAAP EPS growth of 11.1% year-over-year. Brooker's second quarter 23 reported revenues increased 15.9% year-over-year to $681.9 million, which included a slight currency tailwind of 0.5%. On an organic basis, revenues increased 13.5%, which included 13% organic growth in scientific instruments and 18.4% in our best segment, net of intercompany eliminations, while growth from acquisitions added 1.9%. This implies a constant exchange rate growth of 15.4% year over year. Our second quarter 23 non-GAAP gross margin decreased 90 bps year over year to 50.9%, with a decline attributable both to unfavorable product mix in the quarter, as well as to currency and inflationary headwinds. Our non-GAAP operating margin was 15.3%. a decrease of 130 bps year-over-year due to the decline in gross margin, as well as the already anticipated partially transitory currency and acquisition headwinds to our OPEX, as we had explained when we gave initial 2023 guidance earlier in the year. In the second quarter of 23, Bruker reported gap-diluted EPS of 39 cents, compared to 33 cents in Q2 of 22, an increase of 18.2%. On a non-GAAP basis, second quarter 23 diluted EPS was 50 cents, up 11.1% from 45 cents in the second quarter of 22. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to slide five, you can see Bruker's strong performance and excellent execution in the first half of 2023 with organic revenue growth of 15.6% and non-GAAP EPS growth of 22.3%. More specifically, with our first half 23 revenues, excuse me, our first half 23 revenues increased by 15.5% to 1.367 billion. On an organic basis, first half revenues grew 15.6% year-over-year, consisting of 15.7% organic growth in scientific instruments and 14.1% organic growth at best, net of intercompany eliminations. First half 2023 order bookings for our BSI segment grew double digits year-over-year organically, driven by Brooker BioSpin and CALIT, and our Bruker Scientific Instruments book-to-bill ratio for the first half remained above 1.0. Our first half 23 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide 5, and you can see the strong non-GAAP EPS growth of 22.3%, which we believe is excellent performance in the life science tool space. Our trailing 12 months return on invested capital, a non-GAAP measure was 23.7%, a metric that highlights our strong broker management process and our focus on disciplined entrepreneurialism and organic growth supplemented by selected and smart acquisitions. Please turn to slide six and seven now, where we highlight the first half 23 performance of our three scientific instrument groups and of our best segment, all on a constant currency and year-over-year basis. In the first half of 23, the BioSping Group revenue was $342 million and grew in the high single digits. Please note that there were no gigahertz class NMR systems in revenue in the first half of 23 compared to one 1.2 gigahertz in the first half of 22. We now expect two or three gigahertz class NMRs in revenue in the second half of 23 with some gigahertz revenue shifts into early 24. In the first half of 2023, BioSpin saw strong growth across academic government, industrial research, and applied markets, as well as in its new integrated data solutions division with its novel SciWise scientific and lab software platform, which we explained in a recent press release. For the first half of 23, Kellogg Group had revenue of $464 million and increased in the low 20s percentage with strong growth in life science mass spectrometry driven by the TIMSTOF platform and aftermarket business, as well as the optics, IR, near IR, and Raman business. Our TIMSTOF platform saw robust demand for applications in 4D proteomics, epiproteomics, and metabolomics, and more. In Q2 at ASMS, we launched the Timstop Ultra, which provides market-leading sensitivity and throughput with expanded peptide coverage and more accurate quantitation in unbiased, 4D, single-cell, cell line, and tissue proteomics. Microbiology and infectious disease revenue was up slightly as solid demand for multi-biotype or consumables was offset by a final drop of our modest COVID-19 molecular diagnostics revenue now to near zero. Please turn to slide seven now, the first half 23 Bruker Nano revenues. Revenue was 435 million and grew in the low 20s percentage with strong revenue growth across its end markets, including academic and government, industrial and semiconductor metrology. Revenues for our advanced X-ray and nanosurfaces tools all delivered strong revenue growth in the first half. Life science fluorescence microscopy revenue was up on product innovation and research demand and now also includes a strong contribution from our recent acquisition of the InScopix neuroscience research tools. Finally, first half 23 best revenues grew in the mid-teens percentage, net of intercompany eliminations driven by share gains and strong superconductor demand by MRI OEM customers, as well as from growth in advanced technology revenues for big science, fusion research, and extreme UV semiconductor tools for key OEM customers. Moving to slides 8 and 9. On slide 8, we wanted to highlight something that you don't usually look at so closely probably, namely our rather unique metrology tools and how they serve leading artificial intelligence AI, chip R&D, and production. I will let you read this slide. There's obviously many insertion points where our broker plays a key role in chip development and manufacturing. CPU chips, GPU chips, this tends to be the NVIDIA or similar, high bandwidth memory systems on a chip, FPGAs, something that some of you are familiar with. The take-home overall message is that approximately 75 million of our estimated 2023 revenue is driven by AI trends, and we think this will keep increasing. Of course, there's other trends, from clouds to more pervasive computing that make the fundamentals in the semiconductor metrology space very, very strong, especially for us as we're much less exposed to memory and much more exposed to the, or have much more opportunity, I should say, in the novel techniques and the latest generation chips. This is highlighted here. Switching over to life science and proteomics, of course, on slide 9, you may have already heard about the really transformative, we believe, best-in-class sensitivity for 4D proteomics of our new TIMSSoft Ultra that we launched at ASMS23, and which raises the bar further for sensitivity in unbiased proteomics with new technologies, next-generation ion source and next-generation TIMSS technology. More importantly, this brings significant performance advantages for low sample amounts, including single-cell proteomics and single-cell lipidomics, immunopeptidomics, phosphoproteomics, all types of post-translational modification analysis, which is so important in cancer and other diseases, as well as in protein-protein interactions, all cutting-edge drug discovery and clinical research fields. In summary, Bruker continues to experience solid demand for our differentiated instruments and solutions across our portfolio. We continue to make investments in R&D and on our commercial infrastructure in compelling Project Accelerate 2.0 opportunity areas while also staying agile and disciplined with our cost. Our technology and biological applications leadership in many areas, combined with world-class execution, and our unique broker management process culture of disciplined entrepreneurialism provide us well for continued outperformance. Let me now turn the call over to our CFO, Gerald Herman, who will review Broker's Q2 financial performance and fiscal year 23 outlook in more detail.