Bruker(BRKR)2024-08-09 19:45Financial Data and Key Metrics - Q2 2024 reported revenues increased by 17.4% to $800.7 million, with organic revenue growth of 7.4% [11] - Non-GAAP operating margin decreased by 150 bps year-over-year to 13.8% due to acquisition-related headwinds [12] - Q2 2024 GAAP-diluted EPS was $0.05, compared to $0.39 in Q2 2023, while non-GAAP diluted EPS increased by 4% to $0.52 [12] - First half 2024 revenues increased by 11.4% to $1.52 billion, with organic revenue growth of 4.5% [13] - First half 2024 non-GAAP EPS was down 8.7% due to transformative acquisitions [13] Business Line Performance - BioSpin Group revenue grew in the high-teens percentage in H1 2024, driven by academic, government, and industrial research markets [14] - CALID Group revenue increased in the high single digits, driven by molecular spectroscopy, microscopy, and the newly acquired ELITech molecular diagnostics business [15] - Bruker Nano revenue grew in the mid-teens percentage, with strong contributions from the recently acquired Bruker Cellular Analysis and NanoString businesses [15] - BEST segment revenue grew in the high single digits, driven by big science projects and semiconductor lithography tools [16] Market Performance - Americas revenue grew in the low-teens percentage in Q2 2024, while Asia-Pacific revenue was flat [22] - European revenue had low double-digit growth, while EMEA revenue was up low-single digits year-over-year [22] - Semiconductor metrology orders were strong in Pacific RIM countries and North America, driven by AI megatrends [6] Company Strategy and Industry Competition - The company is executing its dual strategy of Project Accelerate 2.0 portfolio transformation and operational excellence, focusing on spatial biology, molecular diagnostics, and lab automation [5][6] - Recent acquisitions (Chemspeed, ELITech, NanoString) are performing well, with Chemspeed exceeding expectations and ELITech showing mid-to-high single-digit revenue growth [6][7] - The company expects a solid rebound in NanoString revenue in 2025, with significant cost actions and operational improvements already underway [9][10] Management Commentary on Operating Environment and Future Outlook - Management expects mid-single-digit organic revenue growth in Q3 2024 and maintains full-year organic revenue growth guidance of 5% to 7% [5] - The company anticipates a strong Q4 2024, driven by backlog and new orders, with EPS growth expected to reaccelerate in Q4 [27][52] - Management remains optimistic about the long-term growth potential of the semiconductor metrology and molecular diagnostics businesses [36][47] Other Important Information - The company completed $1.3 billion in funding for the ELITech and NanoString acquisitions, with $0.9 billion financed through fixed low-interest rates and $400 million through a follow-on equity offering [20] - Free cash outflow in Q2 2024 was $25.1 million, compared to $10.5 million in Q2 2023, due to acquisition-related expenses [20] Q&A Session Summary Question: Operating margin expectations for Q3 and factors driving it [30] - Management expects around 16% operating profit margin for the full year, with a 300 bps headwind from M&A and FX [31] - Continued strength in diagnostics and semiconductor metrology is offsetting weakness in biopharma and China [31] Question: Bruker's ability to outperform the market post-acquisitions [33] - The company has repositioned itself for the post-genomic era, focusing on spatial biology, proteomics, and multiomics, which are driving organic growth [35][36] - Semiconductor metrology and molecular diagnostics are key growth drivers, with semiconductor metrology expected to approach 10-15% of revenue in the coming years [36] Question: Order trends and backlog for BSI in Q2 [40] - BSI book-to-bill was in the mid-0.9 range, with organic order growth in the mid-single digits [40] - Backlog is expected to normalize over the next two years, with strong demand in academic/government markets outside of China [41] Question: 2025 setup and yen impact [43] - Management remains confident in the medium-term outlook presented in May 2024, with no changes to the 2025-2027 EPS targets [64] - The yen's recent strengthening has minimal impact on Bruker, as Japan's business volume has declined [44] Question: China stimulus impact on Q3 and Q4 [49] - China orders were muted in Q2, with customers delaying purchases while awaiting stimulus funding, which is expected to benefit 2025 more than 2024 [50][67] - Q4 is expected to be strong, driven by backlog and new orders, with mid-single-digit growth in Q3 [52] Question: M&A step-up and IP situation [55][57] - The incremental $90 million revenue step-up is driven by multiple small factors across acquisitions, with no single standout driver [56] - The IP situation with NanoString remains stable, with no new developments, and the company expects further clarity in 2025 [58] Question: Segment performance in H2 2024 [59] - Semiconductor metrology orders were stronger than expected in H1, but revenue realization may extend into 2025 due to long lead times [60] - Biopharma and China remain weak, while other segments like diagnostics and industrial research are performing well [60] Question: Backlog and 2025-2027 EPS targets [62] - Backlog is normalizing as expected, with no significant changes to the 2024 guidance or medium-term outlook [63][64] Question: Growth assumptions by segment and organic growth range [70] - Biopharma and China are the main culprits for lower growth expectations, while semiconductor metrology and diagnostics are performing better than expected [71] - The wider organic growth range reflects market uncertainties, with the company likely to land in the lower half of the 5-7% range [72] Question: timsTOF Ultra 2 rollout and franchise outlook [73] - The timsTOF Ultra 2 has improved the company's competitive position, with strong bookings and customer interest, although revenue growth remains modest [74]