Bruker Corporation

Good day and welcome to Bruker Corporation's second quarter 2025 earnings conference 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 presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your questions, please press star then two. Please note, this event is being recorded. I would 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 second quarter 2025 earnings conference call. My name is Joe Koska, and I am the Director of Bruker Investor Relations. Joining me on today's call are our President and CEO, Frank Laukeen, and our EVP and CFO, Gerald Herrmann. 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 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 acquisitions, geopolitical risks, tariffs, foreign currency, 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, 2024, 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 on our outlook as of today, August 4, 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 third quarter 2025 financial results, expected in early November 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 and updated thoughts and assumptions around the U.S. and global funding environment and tariffs. Gerald will then cover the financials for the second quarter of 2025 in more detail and share our updated fiscal year 2025 financial outlook. Now, I'd like to turn the call over to Brooker's CEO, Frank Laukeen.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's second quarter 2025 earnings call. Life science research instruments markets are under pressure at the moment, with expected U.S. academic funding headwinds and China stimulus delays for high-end research instrumentation. In addition, global tariffs, pharma pricing, and economic uncertainty in the second quarter have delayed biopharma and industrial research instrumentation investments. This resulted in lower than anticipated bookings and revenues in the second quarter. Our Bruker Scientific Instruments, or BSI segment, book-to-bill ratio was in the mid .9 range in the quarter, which was not great, but also not too bad. We anticipate that the third quarter will bring additional visibility on U.S. NIH and NSF funding, both for the remainder of fiscal year 25, as well as for fiscal year 26 federal research budgets. We are encouraged by several recent settlements of disputes between major universities and the federal government, and we anticipate additional settlements to allow the resumption of grants for important scientific and medical research. On academic and disease biology research, we believe that our unique postgenomic tools will be in significant demand in all geographies, and in particular also when China releases its stimulus budgets for high-end medical research instrumentation. Moreover, as U.S. tariffs for many major countries and trade blocs get settled in early August, we believe that global biopharma, industrial, and semiconductor companies will accelerate their investments in next-generation drug discovery and development systems, as well as in research and quality control tools for advanced materials, cleantech, and semiconductor research and production. We are observing where U.S. tariffs on Swiss imports will settle, and we anticipate that ultimately it will not be at 39%, the rate communicated last week. In a worst-case scenario for Switzerland, we intend to leverage our other European Union and U.S. factories for products designated for the United States market. Bruker is poised to resume above-market growth, particularly in the next-generation systems needed for disease research and drug discovery in view of the greater biological complexity revealed by the emerging post-genomic view. Similarly, the enormous investments in artificial intelligence are very beneficial for advanced and often unique semiconductor metrology tools. Finally, we have strong positions in microbiology and infection diagnostics with an exciting roadmap of medically needed and differentiated capabilities. Back to our second quarter, the stronger than anticipated organic revenue decline, coupled with higher U.S. tariffs and stiff currency trade winds from a declining U.S. dollar, caused margins and profitability to come in below our expectations. On our first quarter call, we discussed our mitigation, our mitigating price, supply chain, and cost measures, but these take two to three quarters before they fully benefit our operating results. Today, we are announcing a significantly expanded cost savings initiative that is expected to reduce our annual costs for fiscal year 2026 by $100 million to $120 million annualized. These major cost reductions affect all parts of our business, from supply chain and manufacturing to our commercial, administrative, and R&D investments. These are difficult but necessary decisions to right-size our cost structure to match the trough demand levels currently seen in the market. As a result of our weaker second quarter performance, we are lowering our guidance expectations for fiscal year 25. We now expect approximately flat constant exchange rate revenue growth and organic revenue decline to decline minus 2 to minus 4% for the year, with a mid-teens percentage non-GAAP EPS decline year over year. Looking beyond 2025, even in a muted revenue growth scenario in fiscal year 26, it is our intention to deliver very significant margin improvements and double-digit EPS growth just based on our major cost reduction initiatives. If there also is a partial growth recovery in advanced life science research and drug discovery tools in fiscal year 26, then this could provide additional tailwinds. Beyond 2026, we expect to return to our stated goal of organic revenue growth, 200 to 300 bps above market, which we delivered many years in a row. And with rapid margin expansion and double-digit EPS growth, once academic, trade, and economic uncertainty abates. This is driven by our exceptional innovation in next-generation disease research and biopharma drug discovery tools for the post-genomic era. This is also driven by other Bruker-specific growth drivers from semiconductor metrology for the AI revolution to unique applied and diagnostic solutions. Turning to slide 4 for our Q2 2025 performance. As I just detailed in the second quarter of 2025, we faced delays in many end markets, most notably biopharma and industrial, which drove both the top and bottom lines to come in below our expectations. Brooker's second quarter, 25, reported revenues decreased 0.4% year-over-year to $797.4 million, which included an FX tailwind of 2.9%. On an organic basis, revenues decreased 7.0%, which included a 7.2% organic decline in BSI and a 4.8% organic decline at best net of intercompany eliminations. Revenue growth from acquisitions added 3.7%, which implies a constant exchange rate CER revenue decline of 3.3% year-over-year. Book-to-bill in the quarter was in the mid .9 range. Our second quarter 25 non-GAAP operating margin was 9%. a decrease of 480 bps year-over-year as lower revenue absorption, additional tariff costs, and currency headwinds were only partially mitigated in Q2 by our earlier cost and pricing actions. In our second quarter 25, diluted non-GAAP EPS was at 32 cents, down 39% from 52 cents in the second quarter of 2024, on organic revenue decline, impact of tariffs, and foreign exchange headwinds. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to slide five, our first half 25 revenues increased by 5.0% to 1.60 billion. First half organic revenue declined 2.3%, consisting of a 1.4% organic decline in scientific instruments, or BSI, and an 11.5% organic decline at best, net of intercompany eliminations. Our first half 2025 non-GAAP growth and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five. Please turn to slide six and seven, where we highlight the first half 2025 performance of our three scientific instruments group and of our best segment, all on a constant currency and year-over-year basis. In the first half of 2025, BioSpin group Revenue was $403 million and was roughly flat year-over-year. BioSpin saw contributions from NMR, preclinical imaging, and lab automation, while the scientific software business was soft. BioSpin saw weakness in biopharma revenues and softness in orders both in academic and applied markets. For the first half of 25, Calig Group revenue of $566 million increased in the low teens percentage. with strong growth in microbiology and infection diagnostics, driven by the MALDI Biotyper and the Bruker Elitec molecular diagnostics business. Our applied mass spectrometry business saw robust growth, which offset some softness in the life science mass spectrometry business. Turn to slide seven now. First half 25, Bruker Nano revenue was $509 million and grew in the low single-digit percentage. Spatial biology contributed growth in the first half of 25, while revenues from advanced x-ray were down year over year. Strength in pyelopharma was partially offset by weakness in industrial markets. Finally, first half 25 best revenues declined in the low teens percentage, net of intercompany eliminations due to softness in the clinical MRI market as well as a strong priority comparison for the research instruments business. Moving to slide eight, we highlight some of our recent innovations in the second quarter at ASMS. Obviously, an almost unprecedented lineup of new and market-changing instruments from our TIMSS product line, as well as in NanoLC. I won't go into these in detail today, but they significantly enhance our competitive position in traditional bottom-up proteomics while also getting us ushering in a new era of functional proteomics and proteoform analysis with the Tim Zomni. We had very good orders since ASMS already. And finally, a very serious play in benchtop 40 metabolomics, with the TIMSS Metabo launch with very high sensitivity and because of the four dimensions and unprecedented annotation continents being very well received in the market. Let me move to slide nine, probably the key theme for today. How are we navigating through this macro and research instruments weakness? You are aware of the U.S. academic funding disruption. For high-end research instrumentation for academic and medical research, China stimulus continues to be delayed, although our customers remain optimistic for release in the second half. And in the second quarter, we saw that drug discovery and industrial research tools saw CapEx delays and weakness in both of these segments. We're looking forward to more visibility on what time frames they'll recover once tariffs and other items settle in. We also had more tariffs and FX cost headwinds, so a lot of headwinds in this second quarter. We focus on our industry-leading innovation and continue our strategy to reaccelerate growth. and enhance market share in the post-genomic era in academic and medical research, but also very much in biopharma drug discovery tools when they come back. Very importantly, we're broadly expanding our cost reductions, which we had begun previously, but we're expanding those with a goal of $100 million to $120 million of annualized cost reductions to improve margins and profitability, and we're obviously looking for a very significant step up in fiscal year of 26, driven just by the cost reductions and hopefully some emerging recovery in the markets. Of course, we are seizing new opportunities in spatial biology and multiomics, our very large growth drivers, even if they're muted at the moment, as well as new growth drivers in lab automation, scientific software, India improving semiconductor metrology for AI being an incredible opportunity. Emerging growth in European chemical and explosives detection, airport security, airline security. And finally, our industrial research business in clean tech, batteries, fusion. And we are adding to our consumables business organically and inorganically. So, To wrap up the second quarter was a challenging one for broker and we are aggressively executing on our expanded cost reduction initiatives, with a goal of delivering strong margin expansion and EPS growth in 2026 even in a flat to low growth scenario. We are, however, cautiously optimistic for a fiscal year 26 partial recovery and point to Bruker's successful track record of rebounding very strongly from previous market disruptions in 2008, 2009, and in 2020, from which Bruker emerged with multiple years of double-digit organic revenue growth in each scenario. We remain confident. that Brooker's innovation engine will continue to drive differentiated, high-value solutions in attractive markets. Our culture of disciplined entrepreneurialism and our Brooker management process will position us well for sustained financial success in the years to come. Let me now turn the call over to our CFO, Gerald Herman, who will review Brooker's Q2 financial performance and updated fiscal year 25 outlook in more detail. Gerald.