Bruker Corporation

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's third 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, Mark Munch, President of the Bruker Nano Group and Corporate Executive Vice President, 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 Booker'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 wars, as well as to supply chain, logistics, and inflation. The company's actual results may differ materially from such statements. Factors that might cause such differences include, but are not limited to, both discussed in today's earnings release and in our Form 10-K for the period ending December 31, 2022, as updated by other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and to our outlook as of today, November 2, 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 fourth quarter 2023 financial results expected in early February 2024. You should not rely on these forward-looking statements as necessarily representing our views or outlooks 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 third quarter and the first nine months 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's CEO, Frank Laukeen.

Thank you, Justin, and good morning, everyone. Thank you for joining us on today's third quarter 2023 earnings call. In the third quarter, Bruker has continued to deliver excellent revenue growth with three consecutive quarters of double-digit organic revenue growth year to date. For the fourth quarter of 23, we anticipate high single-digit organic revenue growth, which puts us on track for three years of double-digit organic revenue growth in 2021 to 2023. In the first nine months of 2023, we have demonstrated great resilience in difficult market conditions with what we believe is industry-leading organic revenue growth of 13.9%, and non-GAAP EPS growth of 17.5% year-to-date. Given our strong year-to-date financial results, solid backlog, and positive outlook for the fourth quarter, we are raising our organic revenue growth guidance for fiscal year 2023 again, this time by 150 bps at the midpoint. We are pleased to report solid financial results in the third quarter of 2023. We attribute this resiliency to our innovation strategy, which yields products and solutions with unique capabilities, as well as to our differentiated portfolio, which is now resulting from our ongoing Project Accelerate 2.0 transformation. These core elements of our strategy are to a significant extent shielding us from the present demand weakness, for example, in COVID testing, CROs, biopharma, bioprocessing, et cetera. We remain positive about demand for Bruker Scientific Instruments and Life Science Solutions, which gives us confidence in the fourth quarter and also for continued solid growth in 2024. In fiscal year 2023, we have accelerated our investments in our transformative project Accelerate 2.0 initiatives, as well as in operational excellence and productivity. We're making further investments in recently acquired growth drivers in single cell biology, and my colleague Mark will talk about that, as well as in previously acquired proteomics consumables, proteomics drug discovery services, neuroscience research tools applied solutions and scientific software right let's get to it turning to slide four now in the third quarter of 2023 brooker delivered another good quarter with excellent organic growth of 10.9 percent and non-gap eps growth of 12.1 percent year over year brookers Third quarter 23 reported revenues increased 16.3% year over year to $742.8 million, which included an FX tailwind of 3.3%. On an organic basis, revenues increased 10.9%, which included 10.9% organic growth in our broker scientific instruments, BSI segment, and 10.2% at best net of intercompany eliminations, while growth from acquisitions added 2.1%. This implies constant exchange rate growth of 13.0% year-over-year. Our third quarter 23 non-GAAP operating margin was 20.0%, which is a good level for our third quarter, albeit a decrease of 240 bps year-over-year compared to a very strong operating profit margin in the third quarter of 2022. In the third quarter of 23, Brooker reported gap diluted EPS of 60 cents compared to 59 cents in the third quarter of 22. On a non-gap basis, third quarter 23 diluted EPS was 74 cents, up 12.1% from 66 cents in Q3 22. This had a five cent tax tailwind pretty much exactly offsetting a minus 5 cent currency headwind in the quarter. Gerald will discuss the drivers of margins in EPS later in more detail. Moving to the first nine months on slide five, you can see broker strong performance and excellent execution in the first nine months of 2023, with industry-leading organic revenue growth of 13.9% and non-GAAP EPS growth of 17.5%. More specifically, our first nine months of 2023 revenues increased by 15.8% to $2.11 billion. On an organic basis, first nine months revenues grew 13.9% year-over-year, consisting of 14.0% organic revenue growth in scientific instruments and 12.8% organic growth at best, net of intercompany elimination. First nine months 2023 order bookings for BSI grew in the upper mid-single digits year-over-year organically, driven by Broecker-Biosman and Kellett. Also, our BSI book-to-bill ratio year-to-date remained above 1.0, and our backlog at the end of the third quarter remained strong and elevated, in fact. Our first nine months, 2023 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five. And you can see the strong non-GAAP EPS growth of 17.5% despite a 14 cents headwind from currency. Our trailing 12 months return on invested capital at non-GAAP measure was 23.2%. a metric that highlights our differentiated broker management process and focus on disciplined entrepreneurialism and organic growth supplemented by selected attractive acquisitions. Please turn to slide six and seven where we highlight the year-to-date third quarter 23 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 bioswing group revenue was $541 million and grew in the high single-digit percentage. This included revenue from just one gigahertz class NMR so far this year, namely in Q3 23, and for comparison, we also had one in Q3 of 22. In the fourth quarter of 23, we expect to book revenue on one or two gigahertz class NMRs, by the way. In the first nine months of 2023, Bruker saw growth across biopharma, academic and government markets, industrial research and applied markets, as well as in the new integrated data solutions software division with its SciWi scientific and lab software platform, something that's relatively new to Bruker. All right, first nine months of 2023, our Cali group had revenue of $703 million and growth in the high teens percentage, with strong growth in life science mass spectrometry, driven by the TIMSTOCK platform and aftermarket business, as well as strong growth in our applied mass spec business and the optics, infrared, near-infrared Raman business. Our optics business, in our optics business, we know two recent tender wins, Very nice, for eventually over 250 so-called DE-tector explosive trace detectors for the Frankfurt and Zurich airports, both of which were explained in recent press releases. At ASMS this year, we launched the Timstop Ultra, and at the EUPO Congress in Korea in September, we announced further advances, in TIMSTOF methods, consumables, and software for this next-generation, unbiased, high-fidelity, four-dimensional of 4D proteomics and 4D multiomics. That's quite unique on the TIMSTOF platform and very advantageous. Microbiology and infectious disease revenue was up slightly as solid demand for the multi-biotype or consumables was offset by a final drop of our modest COVID-19 molecular diagnostics revenue to now near zero. Please turn to slide seven now. Year-to-date, broker nano revenue was 673 million and grew in the low 20s percentage, with strong revenue growth across end markets, including ACAGOV, industrial semiconductor metrology. The global investments in AI, artificial intelligence, are strong tailwinds for our semiconductor and advanced packaging metrology tools. Revenues at advanced x-ray and nanosurface tools all delivered strong revenue growth in the first nine months. Life science fluorescence microscopy was up on product innovation and now includes a strong contribution also from our fourth quarter 22 acquisition of the InScopix neuroscience research tools. Finally, year-to-date 23 best revenues grew in the mid-teens percentage. Net of intercompany eliminations driven by share gains and superconductor demand by our MRI OEM customers, as well as from revenue growth in advanced technologies for big science, fusion research, and key extreme UV, EUV semiconductor technologies for semiconductor lithography tools by other large OEM customers, again, often driven by strong growth in AI demand. Right, moving to slides eight and nine, I'll take a pause and we highlight the new Bruker Cellular Analysis business. And I'm delighted to hand this part over to Dr. Mark Munch, our Bruker Nano Group President, who drove the Phenomex acquisition, now renamed to Bruker Cellular Analysis. And Mark is now resetting the strategy and right-sizing the business. Over to you, Mark.

Thank you, Frank. We're excited about our acquisition of PhenomX. This new business, as Frank mentioned, we now call Bruker Cellular Analysis, perfectly fits our Project Accelerate 2.0 initiative. PhenomX was a Q1 2023 merger of Berkeley Light and IsoPlexus, which brought together two unique and valuable platforms, the Beacon OptoFluidics platform and the IsoSpark platform. Together, these technologies address rapidly growing market segments in antibody discovery, cell line development, cell therapy, and gene therapy, amongst others. This helps also our Project Celery 2.0 initiative in expanding our footprint in translation research, clinical research, and biopharma. This is also complementary to our Bruker cellular analysis and subcellular analysis tools. For example, our Canopy CellScape tool, which is an important tool for spatial biology as well as examining phenotypes and cell suspensions. And so this brings a lot of opportunity for commercial synergies. Moving to slide nine, just to give some financial details on the acquisition, Phenomex was acquired for $122 million, which included a $14 million bridge loan, which therefore was an attractive valuation of roughly two times revenue. We closed this transaction on October 2nd, 2023, and immediately started our work on right-sizing the business and optimizing cost structures, which is mostly going to happen here in Q4 2023. Initial run rate is expected for the business to be greater than $60 million per year, given the strong attractive potential of the market segments that I spoke of and that we addressed with this. Many of these segments are somewhat new to Bruker, and so we're excited about that. And as mentioned, we see cross-selling opportunities with our existing spatial biology and cellular analysis tools. In terms of Bruker non-GAP EPS impact, we anticipate 12 cents dilutive to Q4 2023, a one-quarter significant impact as we work through the rapid right-sizing and cost structure optimization, and being slightly dilutive for 2024 and accretive by 2026. And we expect long-term double-digit ROIC. We encourage you to visit the links shown here to help get familiar with these businesses. We are very excited about the potential here in these very valuable technology platforms. Thank you, Frank. Back to you.