Bruker Corporation

Good day, and welcome to the Bruker Corporation third quarter 2024 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 remarks, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note, this event is being recorded. I'd now like to turn the conference over to Joe Koska, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's third quarter 2024 earnings conference call. My name is Joe Koska, and I am the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukeen, our President and CEO, and Gerald Herman, our EVP 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 Presentations section of the 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 or may 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 our recent acquisitions, geopolitical risks, market demand, or supply chains. 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, as updated by our 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 5, 2024. 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 2024 financial results expected in early February 2025. 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 third quarter and the first nine months of 2024 in more detail and share our updated fiscal year 2024 financial outlook. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukeen.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's third quarter 2024 earnings call. Bruker continues to grow rapidly, and we have once again hosted double-digit year-over-year CER or constant exchange rate revenue, and above-market organic revenue growth in Q3 and year-to-date. Our Q3 24 CER revenue growth was 15.7% year-over-year, including several strategic acquisitions that have closed earlier in the year. Our Q3 24 organic revenue growth of 3.1% and Bruker Scientific Instruments or BSI segment organic revenue growth of 3.8% year-over-year were above market or at the high end of the life science tools market and come on top of our strong organic growth of 10.9% in the prior year, Q3 23, which obviously made for a tougher year-over-year comparison than what our peers typically faced in Q3. This is a testament to our multi-year project accelerate transformation into a fast growth company with increased exposure to many of the most powerful secular trends in our industry. Equally importantly, our broker management process and operational excellence programs are now driving rapid performance improvements in our recent strategic acquisitions in single cell biology, spatial biology, molecular diagnostics, and lab automation and digitization. With that, we have already delivered sequential operating improvements in Q3, which was our first full quarter including all acquisitions, and we also expect further sequential margin improvements in Q4. In this fourth quarter, we expect low single-digit organic revenue growth, in comparison to an exceptional quarter Q4 of 23, when Bruker grew revenues 15.9% organically year over year. So we are not benefiting from easy comps due to revenue declines in the second half of last year, but Bruker continues its sustained organic and fundamentally transformational growth. We again expect double-digit constant exchange rate revenue growth year-over-year in the fourth quarter of 2024. It is encouraging for us that despite delayed recoveries in biopharma and China demand, orders for our differentiated post-genomic, multi-omics, cleantech, Semicon tools, and infectious disease diagnostic solutions are gradually improving. with upper mid-single-digit BSI organic bookings growth in Q3 year-over-year. This has been the strongest organic order growth for BSI in over a year, and we anticipate that this trend will continue, supplemented by our first China stimulus orders in the fourth quarter of 2024. Please recall that for Bruker, there is typically a two-quarter lag between orders and systems revenue, so China's stimulus order could begin to benefit our P&L in the second half of 2025. Stepping back, it also has become evident that nascent recoveries in biopharma, emerging biotech, CRO, and China demand will not significantly benefit our fiscal year 2024 anymore. and accordingly we are lowering our fiscal year 2024 guidance. Integrating and improving our recently acquired businesses is making good progress and will further accelerate Brooker's remarkable transformation. We are confident in our ability to drive above market organic revenue growth with significant margin expansion in 2025 and beyond. If you turn to slide four now, Rupert's Q3-24 reported revenues increased 16.4% year-over-year to $864.4 million, which included a currency tailwind of 0.7%. On an organic basis, revenues increased 3.1%, which included 3.8% organic growth in BSI and a 3.2% organic decline at best net of intercompany eliminations. Revenue growth from acquisitions added 12.5%, which implies constant exchange rate or CER growth of 15.7% year-over-year. Our Q3-24 non-GAAP operating margin was 14.9%, up 110 BIPs Sequentially, but a decrease of 510 bps year-over-year, largely the result of our recent strategic acquisitions, which initially are margin and EPS diluted, but have added close to about $500 million in revenues of scale to broker, and even more importantly, have allowed us to enter or accelerate our presence in key growth markets for the next decade. In Q3 24, Bruker reported GAAP diluted EPS of 27 cents compared to 60 cents reported in Q3 of 23. On a non-GAAP basis, Q3 24 diluted EPS was 60 cents, down 19% from 74 cents in Q3 of 23. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to slide nine, you can see broker's performance for the first nine months of 2024 with above LST market organic revenue growth of 4%, while non-GAAP EPS was down 12.2% as expected due to our transformative acquisitions. As reported, our first nine months of 2024 revenues increased by 13.1% to 2.39 billion with constant exchange rate revenue growth of 13.2% year-to-date. First nine months organic revenue growth consisted of 4.1% organic growth in scientific instruments and 3.7% organic growth at best, net of intercompany eliminations. We continue to work down our elevated backlog and await recoveries in the biopharma and China markets, which we expect to benefit us in the second half of 2025 and beyond. Our first nine months 2024 non-GAAP gross margin and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five. Right, please turn to slide six and seven now, where we highlight the year-to-date third quarter 2024 performance of our three scientific instruments group and of our best segment, all on a constant currency and year-over-year basis. Year-to-date, our Bruker BioSpin group revenue was 633 million and grew in the high teens percentage. There were two gigahertz class NMR systems in revenue in Q3 of 24, bringing us to three year-to-date. In the first nine months of 2024, BioSpin saw growth across academic government and industrial research markets outside of China, as well as strong contributions from our new automation software and services business. BioSpin has seen weaker bookings in China and BioPharma year-to-date, but has growing expectations for China stimulus orders beginning in the fourth quarter of 2024 and into 2025. Year-to-date, our Brooker Kelley Group had revenue of $773 million, and CER revenue increased in the low double-digit percentage, with growth in the optics, IR near IR Raman business, as well as strong growth in microbiology and infectious disease diagnostics, driven by the multi-bio type of franchise, as well as, of course, the recently acquired Elitec molecular diagnostics business. Calic growth was partially offset by slower performance in biopharma and in the applied markets. Please turn to slide 7 now. Year-to-date, broker nano revenue was $780 million, and CER revenue grew in the mid-teens percentage, with strong revenue growth in AgaGov, industrial research, and semiconductor metrology bolstered by the AI megatrend. Our recently acquired Bruker Cellular Analysis and NanoString businesses contributed inorganic growth. However, both of those businesses continue to be impacted by weakness in biopharma and life science instrumentation. Finally, year-to-date 2024 best CER revenues grew in the low single digits, net of intercompany eliminations driven by research instruments, RI, growth in accelerator and fusion research technology, as well as interaction from EUV technologies for OEM semiconductor lithography tools, also in support of AI. This growth was partially offset by softness in China and weak superconductor demand of our clinical MRI MedTech customers. On slide eight and nine, I'll comment on a couple of businesses. We always like to give a couple of case studies or examples, and often we talk about industrial research and clean tech examples. On slide eight, you see the rather broad set of tools and solutions that Brooker has And its various businesses and technologies listed at the bottom offer really across the battery value chain. We're approaching this or have approached this very strategically and really, really look very broadly rather than insertions of just one or two technologies for one or two problems. So cleantech in general, this is just one example. There are others. But this is a particularly good example of our broad strategic approach for industrial research and applied in cleantech, which, as we've said before, really isn't very cyclical and really has been a very nice growth and steady growth element. Something else on... Slide 9, you may be familiar that with our Sierra SPR systems, we had been in the SPR business with a high performance, very sensitive instrument for some time. But we launched earlier in this year the so-called triceratops, a very high sensitivity, high throughput instrument that we think is market leading in its performance. So this was developed over the last two or three years organically, and I think will give us a very strong play in the traditional SPR market for small molecule and large molecule screening. New is the Dynamic Biosensors Edition. That's an innovative company in Munich that joined us during the third quarter, and that has... provides SPR-like but somewhat different technology shown in the middle here. I won't go deeply into detail, but SwitchSense in particular is useful for the novel fields of targeted protein degraders or molecular glues where, in fact, three molecules bind to each other. And this SwitchSense technology has a somewhat unique capability to looking at pre-molecule dynamics, which is actually quite important for the latest trends in protein degraders and molecular glues. And finally, and perhaps the most exciting part of the dynamic biosensors acquisition, is that we really can open up the field of interaction cytometry, not interactions between molecules, but molecules and cells, obviously tremendously important for fundamental research, disease research, and for Target and other cell therapeutics, gene and cell therapies. And doing this at the single cell level is pretty revolutionary and unique. So here is our Helix Cyto opening up and pioneering the field of single cell interaction cytometry. Something you haven't heard before, but you'll be hearing it again. Anyway, moving back to the rest of the earnings call. In summary, Bruker again posted double-digit CER revenue growth and above life science tools market BSI organic growth in Q3 and year to date. However, we are not immune to the delayed recoveries in biopharma and China demand during the first nine months of 2024. Accordingly, as Gerald will explain in more detail, we are adjusting our guidance and we now expect full-year 2024 CER revenue growth of approximately 13% and organic revenue growth for the year of 3 to 4%. We continue to focus on driving improvements in our recently acquired businesses and our core and on providing innovative high-value solutions for the post-genomic era. We expect that our strategic expansion into single-cell, spatial, molecular diagnostics, and lab automation will further contribute to our goal of having profitable above-market growth and significant margin expansion in 2025 and in the years to come. So with that, let me turn the call over to our CFO, Gerald, who will review Brooker's financial performance and updated outlook in more detail. Gerald.