Bruker(US:BRKR)2023-08-08 16:00Part I FINANCIAL INFORMATION Item 1: Unaudited Condensed Consolidated Financial Statements This section presents Bruker Corporation's core unaudited financial statements for the period ended June 30, 2023, including balance sheets, income statements, and cash flows, with detailed notes on accounting policies, segment performance, acquisitions, and debt Unaudited Condensed Consolidated Financial Statements This subsection contains the primary financial tables, showing total assets increased to $3.86 billion, Q2 revenue rose 15.9% to $681.9 million, and H1 operating cash flow reached $100.5 million Condensed Consolidated Balance Sheet Data (in millions) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Current Assets | $2,183.3 | $2,113.2 | | Total Assets | $3,857.0 | $3,611.8 | | Total Current Liabilities | $1,050.9 | $914.3 | | Total Liabilities | $2,594.4 | $2,480.0 | | Total Shareholders' Equity | $1,250.7 | $1,125.7 | Condensed Consolidated Income Statement Data (in millions, except per share data) | Metric | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $681.9 | $588.4 | $1,367.2 | $1,183.4 | | Gross Profit | $340.5 | $298.2 | $700.2 | $604.5 | | Operating Income | $86.2 | $73.9 | $208.9 | $170.4 | | Net Income Attributable to Bruker | $57.1 | $49.5 | $133.6 | $111.1 | | Diluted EPS | $0.39 | $0.33 | $0.91 | $0.74 | Condensed Consolidated Cash Flow Data - Six Months Ended June 30 (in millions) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $100.5 | $33.4 | | Net cash used in investing activities | $(134.2) | $(44.7) | | Net cash used in financing activities | $(41.0) | $(297.2) | Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations for the financial statements, covering revenue breakdowns, recent acquisitions, debt obligations, hedging activities, and segment-level operating income to clarify accounting treatments and underlying business events Revenue by Reportable Segment (in millions) | Segment | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | BSI BioSpin | $162.0 | $159.8 | $342.3 | $317.6 | | BSI CALID | $227.2 | $190.3 | $463.9 | $393.5 | | BSI NANO | $225.1 | $182.2 | $434.7 | $360.7 | | BEST | $72.7 | $59.2 | $134.9 | $118.9 | | Total Revenue | $681.9 | $588.4 | $1,367.2 | $1,183.4 | - In Q1 2023, the company acquired 97.15% of Biognosys, AG, a proteomics contract research firm, for approximately $80.1 million79104 - In Q2 2023, it acquired 60% of Zontal Companies, a data management software provider, for approximately $14.8 million79104 Operating Income by Reportable Segment (in millions) | Segment | Q2 2023 | Q2 2022 | H1 2023 | H1 2022 | | :--- | :--- | :--- | :--- | :--- | | BSI BioSpin | $23.8 | $28.0 | $71.2 | $65.8 | | BSI CALID | $44.0 | $42.2 | $101.6 | $90.3 | | BSI NANO | $31.3 | $14.6 | $60.7 | $36.9 | | BEST | $11.1 | $6.6 | $19.1 | $13.2 | | Total Operating Income | $86.2 | $73.9 | $208.9 | $170.4 | - Total debt outstanding was $1.24 billion as of June 30, 2023, an increase from $1.22 billion at year-end 2022115 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management analyzes the company's Q2 and H1 2023 financial performance, highlighting strong revenue growth driven by demand, gross margin pressure from product mix and inflation, and discussions on operational results, liquidity, and capital resources Overview This subsection summarizes financial results, noting Q2 2023 revenue growth of 15.9% to $681.9 million, H1 2023 revenue growth of 15.5% to $1.37 billion, increased diluted EPS, and improved free cash flow to $52.0 million for H1 2023 Q2 2023 vs Q2 2022 Revenue Performance (in millions) | Metric | Q2 2023 | Q2 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $681.9 | $588.4 | $93.5 | 15.9% | | Favorable FX Impact | | | $2.8 | | | Acquisition Impact | | | $11.0 | | | Organic Revenue Increase | | | $79.7 | | H1 2023 vs H1 2022 Revenue Performance (in millions) | Metric | H1 2023 | H1 2022 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $1,367.2 | $1,183.4 | $183.8 | 15.5% | | Unfavorable FX Impact | | | $(24.3) | | | Acquisition Impact | | | $23.7 | | | Organic Revenue Increase | | | $184.4 | | - Gross profit margin decreased to 49.9% in Q2 2023 from 50.7% in Q2 2022, due to unfavorable foreign exchange, acquisition costs, inflation, and product mix36 Diluted Earnings Per Share (EPS) | Period | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Q2 | $0.39 | $0.33 | +$0.06 | | H1 | $0.91 | $0.74 | +$0.17 | Results of Operations This subsection details operational performance for Q2 and H1 2023, showing revenue growth across all segments, a 16.6% increase in Q2 operating income, and varying operating margin trends influenced by mix and inflation - In Q2 2023, revenue growth was strong across all segments: BSI CALID (+19.4%), BSI NANO (+23.5%), and BEST (+22.8%), driven by high demand for differentiated instruments and solutions215 - R&D expenses increased to 10.4% of revenue in Q2 2023 (from 10.1% in Q2 2022) and 10.2% in H1 2023 (from 9.8% in H1 2022) due to increased investment in key 'Project Accelerate 2.0' initiatives216206 - Interest and other expense, net, increased significantly, primarily due to impairment charges on strategic investments ($11.4M in Q2, $18.3M in H1) and higher foreign currency exchange losses220209 - The effective tax rate decreased to 25.7% in Q2 2023 (from 28.6%) and 27.1% in H1 2023 (from 31.7%), mainly due to favorable impacts from U.S tax legislation and changes in jurisdictional mix185233 Liquidity and Capital Resources This subsection outlines the company's financial position and cash management, with cash and equivalents at $574.8 million, operating cash flow for H1 2023 at $100.5 million, and a new $500 million share repurchase program authorized in May 2023 - Cash, cash equivalents, and short-term investments totaled $574.8 million at June 30, 2023, of which $421.1 million was held by foreign subsidiaries213 - Net cash from operating activities increased to $100.5 million in H1 2023 from $33.4 million in H1 2022, primarily due to higher net income and favorable changes in operating assets and liabilities240 - The 2021 share repurchase program expired in May 2023241 - A new $500 million, two-year program was approved in May 2023, with no shares repurchased under it as of quarter-end241251 Total Debt Outstanding (in millions) | Component | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total notes and loans outstanding | $1,223.3 | $1,205.1 | | Finance lease obligations | $20.1 | $14.1 | | Total debt | $1,243.4 | $1,219.2 | Item 3: Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to foreign currency, interest rate, commodity price, and inflation risks, detailing how derivatives are used to mitigate currency and interest rate volatility, and acknowledging inflationary pressures on global operations - A substantial portion of revenue is generated in international markets, exposing the company to foreign currency fluctuations263 - For Q2 2023, currency translation rates had a positive 0.5% impact on revenue, compared to a negative 7.3% impact in Q2 2022263265 - The company uses cross-currency and interest rate swaps to hedge its net investment in foreign operations and manage interest rate risk258 - As of June 30, 2023, these swaps had notional values of $142.9 million (USD/CHF) and $242.9 million (USD/EUR)258 - The company is exposed to commodity price risk for raw materials like copper and niobium-tin used in superconductors269281 - It uses fixed-price commodity contracts to manage this volatility269281 - The company is subject to inflationary cost pressures across its global supply chain, which has impacted and may continue to impact its cost of operations270 Item 4: Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023288 - There were no changes in internal control over financial reporting during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, internal controls274 Part II OTHER INFORMATION Item 1: Legal Proceedings The company is involved in ordinary course lawsuits and claims, none of which are expected to have a material impact, with an update provided on an ongoing patent dispute with Carl Zeiss Microscopy - The company states that no pending legal matters are reasonably likely to have a material impact on its business or financial statements289 - A patent dispute with Carl Zeiss AG is ongoing, with a European patent application still pending at the EPO, though a related German infringement action was terminated289 Item 1A: Risk Factors This section directs investors to the detailed discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive understanding of potential risks affecting the business - The report refers readers to the risk factors section of the Annual Report on Form 10-K for the year ended December 31, 2022286 Item 2: Unregistered Sales of Equity Securities and Use of Proceeds This section discloses that the company did not purchase any common stock during Q2 2023, and no directors or officers adopted or terminated a Rule 10b5-1 trading plan during the quarter - The company did not make any purchases of its common stock during the quarter ended June 30, 2023, under its new $500 million share repurchase program announced in May 2023291 - No directors or officers reported the adoption or termination of a Rule 10b5-1 trading arrangement during the quarter287 Item 5: Other Information There was no other information required to be disclosed under this item for the reporting period - No information was reported under this item292 Item 6: Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications required by the Sarbanes-Oxley Act and Inline XBRL documents for financial data tagging - The exhibits filed with the report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as Inline XBRL files298