Bruker Corporation

Good morning, everyone, and welcome to the Bruker Corporation fourth quarter 2023 earnings conference call. All participants will be in a 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 and then one on your touchtone telephones. To withdraw your questions, you may press star and two. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead.

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's fourth quarter 2023 earnings conference call. My name is Justin Ward, and I am 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 the Brooker 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. To 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 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, those discussed in today's earnings release and in our Form 10-K for the period ending December 31, 2023, and as updated by our other SEC filings, which are available on our website and on the SEC's websites. Also, please note that the following information is based on current business conditions and to our outlook as of today, February 13th, 2024. We do not intend to update the 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 2024 financial results expected in early May 2024. You 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 fourth quarter and full year 2023 in more detail and share our newly established full year 2024 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 fourth quarter 2023 earnings call. Brooker finished 2023 with another quarter of excellent revenue growth, including 15.9% organic revenue growth year-over-year. For the full year 2023, we delivered industry-leading 14.5% organic revenue growth, which shows remarkable resiliency and consistency under difficult market conditions. Moreover, 2023 was our third consecutive year of double-digit organic revenue growth, a testament to the strong execution of our broker colleagues across the globe and to our differentiated innovation strategy and culture of disciplined entrepreneurialism. Importantly, in fiscal 2023, we also delivered a solid 10.3% non-GAAP EPS growth year over year, all while investing significantly in R&D, capacity, and productivity, and in selected strategic bolt-on acquisitions. For those keeping track of our new Brooker Cellular Analysis business, which we refer to as BCA and formerly known as Phenomex, as forecasted in fiscal 23, we had a fourth quarter bolus of 10 cents of non-GAAP EPS dilution. Excluding BCA, our fiscal year 23 pro forma non-GAAP EPS grew 14.5%. In Q4 of 23, we did major restructuring and cost cutting at BCA almost immediately after the acquisition closed on October 2, 2023. Accordingly, in fiscal year 24, We expect the quarterly BCA non-GAAP EPS dilution to be significantly reduced to just two to three cents per quarter, with a significant further drop in dilution expected in fiscal year 25 and BCA profitability anticipated in fiscal year 26. As we look at the fiscal year 2024, we enter the year with solid bookings momentum a strong backlog, and a positive outlook for Brooker to emerge as a leader of the post-genomic era, and financially to again achieve above-market organic revenue and non-GAAP EPS growth. Accordingly, we are today announcing our fiscal year 24 guidance for organic revenue growth of 5% to 7% and non-GAAP EPS growth of 5% to 7%. both compared to fiscal year 23. Turning now to slide 4, in the fourth quarter of 23, Bruker delivered excellent organic revenue growth of 15.9% and solid pro forma non-GAAP EPS growth. Bruker's Q4 23 reported revenues increased 20.6% year-over-year to $854.5 million, which included a currency tailwind of 2%. On an organic basis, revenues increased 15.9%, which included 15.5% organic growth in BSI, our scientific instrument segment, and 20.3% in our best segment. Net of intercompany eliminations while growth from acquisitions added 2.7 percent. This implies constant exchange rate, or CER, revenue growth of 18.6 percent year over year. Our fourth quarter 23 non-GAAP operating margin was 18.1 percent, which was down 290 bps primarily due to the diluted Phenom X acquisition into 4.23, as well as headwinds from other M&A and currency. Altogether, this combined effect more than offset our organic operating margin expansion of plus 270 bps. Our strong organic operating margin expansion is evidence of the success of our Project Accelerate and Operational Excellence initiatives. In Q4 of 23, Bruker reported gap diluted EPS of $1.41 compared to $0.66 in Q4 of 22. Our Q4 23 included an acquisition gain of $0.99 from our Fenomex acquisition. On a non-gap basis, Q4 23 diluted EPS was $0.70, down 5.4% from 74 cents in the fourth quarter of 22, primarily due to the Phenomex acquisition in Q4 23. Excluding the initial minus 10 cents BCA dilution in Q4 23, Bruker delivered pro forma non-GAAP EPS growth of plus 8.1% year over year in Q4 of 23. Moving to our full year 23 performance on slide 5, you can see Bruker's strong performance and excellent execution in 2023, with industry-leading organic revenue growth of 14.5%, solid non-GAAP EPS growth of plus 10.3%, and excluding BCA, even pro forma non-GAAP EPS growth of plus 14.5%. More specifically, for fiscal year 23, revenues increased by 17.1% to $2.96 billion. On an organic basis, revenues grew 14.5% year over year, consisting of 14.5% organic growth in scientific instruments and 14.7% organic growth at best, net of intercompany eliminations. Our 2023 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five, and you can see solid non-GAAP EPS growth of 10.3%, despite a 10 cents headwind from BCA in the fourth quarter. I'll also note that our 2023 free cash flow increased by 98 million year over year. Our trailing 12 months return on invested capital, a non-GAAP measure was 20.6%, a metric that highlights our differentiated broker management process and focus on disciplined entrepreneurialism. Innovation and organic growth supplemented by selected strategic bolt-on or early stage technology acquisitions. Please turn to slide 6 and 7, where we highlight the fiscal year 23 constant exchange rate or CER performance of our three scientific instruments groups and of our best segment year over year. In 23, BioSpin group revenue was $799 million and grew in the team's percentages in constant exchange rate. BioSpin saw growth across biopharma, academic government, industrial research, and applied markets, as well as in our new integrated data solutions, or IDS, division. We had revenue from four gigahertz-class NMR systems each in fiscal 23 and fiscal 22. And in the fourth quarter of 23, we installed the first 1.2 gigahertz NMR in the United States. at the Ohio State University and the 1.1 gigahertz NMR at the University of Wisconsin at Madison. For 23, our CALI group had revenue of $960 million and constant exchange rate growth in the high teens percentage, with strong growth in life science mass spectrometry driven by the TIMSOFT platform and aftermarket business, as well as strong growth in applied mass spectrometry and our optics infrared, near-infrared, and Raman business. Microbiology and infectious disease revenue was up slightly, as solid demand for multi-biotype consumables was offset by a final drop of our modest COVID-19 molecular diagnostics revenue to near zero. Please turn to slide seven now. Fiscal year 23, Bruker Nano revenue was $942 million, And in constant exchange rate, nano grew in the high-teens percentage, with strong revenue growth across markets, including academic government, industrial, and semiconductor metrology. The artificial intelligence megatrend is a strong tailwind for our semiconductor metrology and advanced packaging tools. Revenues for our advanced X-ray solutions and nano surfaces core tools also showed strong growth. Fluorescence microscopy revenue was up on solid growth in academic government research, as well as contributions from RQ422 acquisition of the Inscopix neuroscience research tools. Finally, 2023 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 by growth in big science fusion research and key new extreme ultraviolet EUV technologies for semiconductor lithography tools by large OEM customers, all in support of the strong AI or artificial intelligence demand. Let me now move to slide eight, which is a slide that's familiar to those of you who saw our presentation at the J.P. Morgan Healthcare Conference, where we're outlining what we mean by leadership, emerging leadership in the post-genomic era, which of course includes many different fields of multiomics beyond genomics, but including genomics, as well as solutions for single-cell, spatial, structural, quantitative, and interaction biology. I will not dwell on this, but I invite you to read this slide in more detail at your leisure. On slide nine, you have quick summaries of two technology acquisitions that we closed in early February and which both filled gaps that we had in our portfolio and therefore strengthened our portfolio. On the left, you will see that we acquired Nanophoton in Osaka, Japan, a company with about $5 million in fiscal year 23 revenue. They are a specialist in research from microscopy systems. So far, primarily or only offered in Japan and Korea, but we think these products will do very well outside of Japan and Korea as well since they're really performance leading with exceptional speed, sensitivity, spatial resolution, and user-friendly workflows in research Raman microscopy. Applications are going from inspecting semiconductors and nanomaterials, battery research, as well as academic and industrial research. Differently, here in the United States, in Tucson, Arizona, we acquired Spectral Instruments Imaging, LLC, to fill, to complement our preclinical product lines with preclinical optical imaging for bioluminescence and fluorescence, in vivo imaging, and optional X-ray imaging. This enhances our preclinical imaging or PCI solutions for in vivo disease research and should be welcomed by our customers. So, let me wrap things up. In summary, Bruker delivered excellent organic revenue growth and solid EPS growth in 23. Even as we have accelerated our strategic investments, in the project Accelerate 2.0 for transformation, as well as in production capacity and productivity to meet our growing demands. Bruker's strong growth is the result of his fundamental commitment to innovating in high-value solutions, as well as of our ongoing portfolio transformation. Our technology and biological applications leadership in many areas, combined with world-class execution and an excellent Bruker management process positioned us well for continued outperformance as a leader in the emerging post-genomic era. Now, given our strong growth in 23, our healthy fiscal year 24 guidance, as well as our recent selected strategic bolt-on acquisitions, we are now optimistic that we can achieve our previously communicated fiscal year 26 medium-term outlook for revenue and non-GAAP EPS already one year earlier in fiscal year 2025. With that, let me now turn the call over to our CFO, Gerald Ehrman, who will review Brokers Q4 and full year 23 financial performance in more detail and provide our fiscal year 24 outlook and assumptions. Gerald.