Bruker Corporation

Good day and welcome to the Bruker Corporation fourth quarter 2024 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal conference specialists 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 your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Mr. Joe Koska. Please go ahead, sir.

Good morning. I would like to welcome everyone to Bruker Corporation's fourth 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 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 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, February 13, 2025. 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 2025 financial results expected in early May 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 fourth quarter and full year of 2024 in more detail and share our full year 2025 financial outlook. Now, I'd like to turn the call over to Brooker's CEO, Frank Lauke.

Thanks, Joe. Good morning, everyone. And thank you for joining us on today's fourth quarter 2024 earnings call. Brooker finished 2024 with another quarter of excellent constant exchange rate, revenue growth, and solid organic revenue growth, both higher than what we had expected for Q4-24, given our very strong Q4-23, which, if you recall, had organic revenue growth of nearly 16%. For the full year 24, we again delivered double-digit CER, constant exchange rate revenue growth, at 14%, and 4% organic revenue growth well above the market, which we estimate was flat to down slightly in fiscal year 24. This is a testament to the strength of our portfolio of innovative solutions, culture of disciplined entrepreneurialism, and our broker management process. In fiscal 24, we added strategic spatial biology, molecular diagnostics, and lab automation platforms to our portfolio continuing our multi-year transformation into a growth-oriented industry leader with scale and position for leadership in the post-genomic era. This transformation is not just focused on growth, but also very much on higher margin potential and more rapid EPS increases going forward. We intentionally accepted initial margin and EPS solution from our strategic M&A, in order to unlock new very large market opportunities and strong secular growth tailwinds, but also in order to further raise the margin potential and EPS growth profile of Bruker. Looking to 2025, we enter the year with good bookings momentum. We start 2025 with solid BSI segment backlog of still over six months of revenue, in part due to our Q4-24 book-to-bill ratio of ended up at 0.99 or essentially 1. We also have begun to receive first orders related to the China stimulus program with over 15 million of China stimulus orders in the second half of 24, most of it in the fourth quarter, and with more on the horizon. We acknowledge U.S. NIH and academic government market uncertainty and have built that into our guidance. But we fundamentally, after some settling, we fundamentally do not expect a reduction in NIH and other life science, medical, and research investment in the U.S. Finally, we experience strong market trends in diagnostics and in semi-metrology, as I will show you later, and we also see signs of a biopharma recovery. Accordingly, we are establishing our fiscal 25 guidance for constant exchange rate revenue growth of 5% to 7% with 3% to 4% organic growth and 2% to 3% contributions from M&A. We are very committed to rapid non-GAAP operating profit margin expansion and assume about 140 bps operating profit margin improvement in fiscal 25 compared to our 24 level of 15.4%, which, by the way, was also a bit higher than what we had expected. Finally, we expect non-GAAP EPS growth of 11 to 13%, with 14 to 16% constant exchange rate EPS growth, all compared to 24. Turning to slide four now, in the fourth quarter of 24, BRUKER delivered strong revenues and stronger operating margins than expected. Brooker's Q4-24 reported revenues increased 14.6% year-over-year to $979.6 million, which included an FX headwind of 1.2%. Constant exchange rate or CER revenue growth of 15.8% year-over-year included organic growth of 3.9%, with 4.5% organic growth in our BSI segment, and an organic decline of minus 2.8% at best, all net of intercompany eliminations. Revenue from acquisitions added 11.9% in the fourth quarter of 24. In the fourth quarter of 24, our non-GAAP operating margin was 18.1%, which actually matched our Q4 23 margin, a strong organic operating margin expansion of 300 bps, fully offset margin dilution from M&A and FX. Our strong organic operating margin expansion is evidence of the progress our operational excellence processes and M&A integration activity initiatives are making. Finally, Q4 non-GAAP diluted EPS was 76 cents, up 8.6% from 70 cents in Q4 of 23, And we are pleased that in the fourth quarter of 24, we were able to resume non-GAAP EPS growth year over year. All right, moving to slide five now, Bruker's strong growth performance amidst challenging marketing conditions in fiscal 24, once again delivered above market organic revenue growth. Fiscal year 24 reported revenues increased by 13.6% to 3.37 billion. with 14% CER revenue growth. On an organic basis, revenues grew 4% year over year, consisting of 4.2% organic growth in scientific instruments and 1.9% organic growth at best, net of eliminations. Acquisitions added 10% revenue growth, and there was a slight 0.4% FX revenue headwind for the year. Our 2024 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five. Margins and EPS were down year over year as a result of the expected initial dilution from our strategic acquisitions that closed in the first half of 24. Please turn to slides five and six now, where we highlight our fiscal year 24 constant exchange rate performance of our three scientific instruments groups and of our best segment year over year. In 24, BioSpin group revenue was $905.7 million and grew with low teens percentage in constant exchange rate. BioSpin saw strong revenue growth in Europe and the Americas. as well as in industrial research, aka.gov markets, and biopharma, with strong contributions also now from our automation, service, and software business. We had revenue from four gigahertz class NMR systems, each in 24 and 23, and in Q4-24, we had revenue from one 1.2 gigahertz NMR at the University of Zurich in Switzerland. In 424, the Cali group had revenue of $1.1 billion and CR growth in the mid-teens percentage with strong growth in microbiology and infection diagnostics, driven by both the Maldi Biotyper and the newly acquired Elitech Molecular Diagnostics business, as well as our Optics, IR, Near IR, and Raman Molecular Spectroscopy business. This was partially offset by softness in Akagov and in our China business. On slide 7, Bruker Nanos' 24 revenue was also $1.1 billion and grew in the high teens percentage CER, with growth driven by ACAGOV research and semiconductor metrology. The high-performance computing and AI megatrend is a strong tailwind for our semiconductor and advanced packaging tools, and we now have north of 125 million of AI and HPC-related Semicon Nanotool metrology revenues, and more overall for semiconductor metrology, but not all of it is AI-related, as far as we can tell. So anyway, integration of our cellular analysis and spatial biology business is progressing very well, but in 24, we still saw it was moderated by softer demand from biopharma. Finally, 24 best revenues grew in the low single-digit percentage net of intercompany eliminations, driven by growth in accelerator and fusion technologies at our research instruments or our eye business. Our eye is also getting traction in extreme UV or EUV lithography technologies, which are used in manufacturing next-gen semiconductors. This strength was partially offset at best by softness in clinical MRI superconductors. Moving to slide eight, we highlight two of our businesses, namely our microbiology business and Semicon Metrology. Couldn't be more different, but both are doing very, very well, and both also, when they grow, and they do, have above corporate average margins. Microbiology and infectious diagnostics has had growth in the mid-teens in the fourth quarter and high single digits throughout the year, with an installed base of now more than 7,000 multi-biotypers. and also bolstered by the ELITEC molecular diagnostics acquisition, which closed at the end of April in 24. Very pleased with that business. It has very little China, very little NIH, very little biopharma exposure. These businesses are humming along and doing really well. The same is true for semiconductor metrology, where organic revenue growth was actually greater than 20% in the fourth quarter and low teens in fiscal year 24. Our total annual revenue for all semiconductor metrology is north of $250 million. And included within that, maybe half of that goes to high-performance computing and AI. Right. I will not spend a lot of time on slide nine. It is sort of a slide that we showed at the J.P. Morgan Healthcare Conference, but it is sort of the, you know, the really big picture on Bruker. We have attained scale with 70% cumulative revenue growth in the last four years. We're now at above $3.35 billion. We added $400 million in revenue last year, and our four-year constant exchange rate revenue CAGR was 15%. I think that's industry-leading. We've also demonstrated previously, namely in the 2014 to 2022 period, that we have the management process and the team to really drive operating margin expansion. In fact, we drove 1,000 BIPs over eight years. before we then very intentionally did some of the strategic acquisitions that are temporarily dilutive, but I think that ultimately give us not only a bigger platform and scale and get us into key growth markets with very large stamps, but also financially improve the ultimate margin profile of the company. So enough of that. At the very bottom, you'll see that for the next three years' goals, Three years, including 25, of course, we're very committed to an annual greater than 125 BIPs non-GAAP operating margin expansion. As you've heard, this year we're aiming for 140 BIPs. And we're also very committed to 13% to 15% constant exchange rate EPS growth. This year, you'll see we were aiming for 14% to 16%. So we really have executed and continue to execute this very successful multi-year transformation into a growth-oriented industry leader with very attractive margin and EPS opportunities. Right. So in summary, the year 24 was transformational for Brooker. We completed key strategic acquisitions to access very large addressable markets with strong secular growth tailwinds. while bringing additional spatial biology, molecular diagnostics, and lab automation and software platforms into our portfolio. For the fourth year in a row, Bruker has delivered well above market organic and double-digit CER revenue growth. So after approximately 70% cumulative revenue growth in the last four years, We have transformed and we have achieved highly competitive scale, which is an excellent foundation for significant margin expansion and rapid EPS. So we have further transformed our differentiated portfolio to position it not only for growth and margin expansion, but very much to be a leader or the leader in the post-genomic era, which we believe will define the next quarter century in life sciences. So with that high-level outlook, I'll turn things over to our CFO, Gerald.