Bruker Q1 2023 Earnings Call Transcript

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Provided by Quartr
May 4, 2023

Key Takeaways

  • In Q1, Bruker delivered 17.6% organic revenue growth (15.2% reported) to $685.3 million, with bookings remaining robust and backlog staying above a 1:1 ratio.
  • Non‐GAAP gross margin expanded by 70 bps to 53.4% and operating margin rose 80 bps to 20.3%, driving non‐GAAP EPS up 30.6% to $0.64.
  • The company raised its full‐year 2023 outlook to $2.83–2.88 billion in revenue (9–11% organic growth) and non‐GAAP EPS of $2.55–2.60 (9–11% growth).
  • Two gigahertz‐class NMR systems originally slated for Q2 shipments were delayed due to factory retesting, pushing related revenue into the second half of 2023.
  • Bruker’s Project Accelerate 2.0 high-growth initiatives in proteomics, spatial biology, biopharma and applied markets are gaining traction, highlighted by timsTOF platform enhancements and Preomics sample-prep innovations.
AI Generated. May Contain Errors.
Earnings Conference Call
Bruker Q1 2023
00:00 / 00:00

There are 13 speakers on the call.

Operator

Day, and welcome to the Bruker Corporation First Quarter 2023 Earnings Conference Call. All participants will be in a listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. Would now like to turn the conference over to Mr.

Operator

Justin Ward. Please go ahead, sir.

Speaker 1

Good morning. I would like to welcome everyone to Bruker Corporation's Q1 2023 Earnings Conference Call. My name is Justin Ward, and I am Bruker's Senior Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukien, our President and CEO And Gerald Herman, our Executive Vice President 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 Bruker's Investor Relations website.

Speaker 1

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.bruker.com. Before we begin, I would like to reference Bruker's Safe Harbor statement, which is shown on Slide 2 of the presentation. During this conference call, We will be making forward looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to geopolitical risks and supply chain, logistics and inflation challenges. The company's actual results may differ materially from such statements.

Speaker 1

Factors that might cause such differences include, but are not limited to, Those discussed in today's earnings release and on our Form 10 ks for the period ended December 31, 2022, as updated by our other financial 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, May 4, 2023. We do not intend

Speaker 2

to update our forward looking statements based on

Speaker 1

new information, future events or for other reasons, except as may be required by law, prior to the release of our Q2 2023 financial results expected in early August 2023. You should not rely on these forward looking statements as necessarily representing our views or outlook as of any date after today. With that said, we will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the Q1 in more detail and share our updated fiscal year 2023 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Loughemin.

Speaker 2

Thanks, Justin. Good morning, everyone, and thank you for joining us on today's Q1 2023 earnings call. Rooker achieved an excellent start to the year, and I commend our team members globally for their hard work and contributions. We are advancing our Project Accelerate 2.0 high growth, high margin initiatives with particular focus on the large opportunities in proteomics and spatial biology, while also investing in operational excellence, productivity and our growth capacity for the next 10 years. Turning to Slide 4.

Speaker 2

In the Q1, Bruker posted strong organic revenue growth of 17.6%. The robust demand for our differentiated High value Scientific Instruments and Life Science Solutions was relatively broad based across the portfolio And bookings and backlog for Bruker have remained strong. For the Q1 of 2023, Bruker's Revenues increased 15.2% year over year to 685,300,000 despite a currency headwind of minus 4.5%. On an organic basis, revenues increased 17.6 percent and acquisitions added 2.1% to growth, which implies 1st quarter Constant exchange rate growth of 19.7% year over year. This included 18.4 percent organic growth in our Scientific Instruments segment and 9.7% organic Growth in our BEST segment net of intercompany eliminations.

Speaker 2

Our Q1 'twenty three Non GAAP gross margin increased 70 basis points year over year to 53.4%, while our non GAAP operating margin was 20.3%, an increase of 80 bps year over year. Our strong performance on the top line drove margin expansion from volume leverage despite our stepped up investments in commercial and R and D capabilities. The strong revenue growth combined with margin expansion resulted in non GAAP operating profit growth of 20.4% year over year in the Q1. In the Q1 'twenty three, Bruker reported GAAP Diluted EPS of $0.52 compared to $0.41 reported in the Q1 of 2022. On a non GAAP basis, Q1 'twenty three diluted EPS was $0.64 an increase of 30.6% from $0.49 in the Q1 of 2022.

Speaker 2

Our trailing 12 months return On invested capital was 24%, a metric that reflects well upon the differentiated Bruker management process and our focus on disciplined entrepreneurialism and organic growth supplemented by strategic acquisition, Acquisitions of complementary skills and technologies. In summary, the Q1 of 'twenty three was an excellent quarter with revenue growth across all Bruker Scientific Instruments Groups with continued strong bookings as well as ramping investments in Project Accelerate 2.0, particularly in proteomics. Please turn to Slides 56 now, where we highlight the Q1 'twenty three performance of our 3 Scientific Instruments Groups and of our BEST segment, all on a constant currency and year over year basis. In the Q1 of 'twenty three, the BioSpin Group revenue of $180,000,000 grew in the high teens percentage on a constant currency basis, even without any gigahertz class revenue in the Q1. BioSpin saw robust growth in revenues across its full portfolio, including NMR and MRI preclinical imaging.

Speaker 2

Notably, we received 2 orders from the United Kingdom for 1.2 gigahertz NMRs for Life Science and Greentech Materials Research. Please note that we now do not expect any gigahertz class revenue in the first half of twenty twenty three, But after some system final test delays, we now expect 3 or 4 gigahertz class NMR systems in the revenue for the second half of twenty twenty three. For the Q1 of 2023, The CALI Group revenue of $237,000,000 increased low 20s percentage on a constant currency basis with strong life of science mass spec and vibrational spectroscopy businesses. Our timsTOF platform continues its adoption in 4 d proteomics, EpiPro GeoMx and MultiOmx. In the Q1, we announced key further capability enhancements and had excellent year over year bookings growth.

Speaker 2

Please turn to Slide 6 now. 1st quarter Bruker Nano revenue was 210,000,000 Grew in the low 20s percent on a constant currency basis. Nano's academic, industrial and GreenTech Research and high end semiconductor metrology revenues all remain strong. Revenues for Advanced X-ray and Nano Surfaces tools also delivered strong growth in the quarter. Nano's microelectronics And semiconductorology tools performed well with strong bookings and backlog.

Speaker 2

Life Science Fluorescence Microscopy revenue was up sharply on product innovation and strong research demand as well as our Inscopix acquisition, which we did in the Q4 of last year. Finally, 1st quarter BEST revenues grew in the high single digit percentage net of intercompany eliminations, driven by share gains and strong superconductor demand by MRI OEM customers, but meaningfully constrained by supply chain Moving to Slide 7 and 8 now. On Slide 7, we just Highlight the 2 new orders for 1.2 gigahertz NMRs that we received recently. Interestingly, they're both used for structural functional biology and life science research, but also for a lot of green tech and materials research in the UK. These systems will be placed at the University of Warwick and University of Birmingham, which interestingly also both Already have Bruker 1.0 gigahertz NMRs.

Speaker 2

This is really a U. K. Scientific infrastructure Not only for these 2 universities that host the systems, but really will be used broadly by the U. Scientific community, I think it's really quite exemplary. And it is interesting, of course, to see the life science research, but also How much materials, biofuels, energy storage research is being done at these universities?

Speaker 2

I won't read them, but I draw your To the two quotes that are on Slide 7, they're actually very self explanatory and very good. Moving on to Slide 8, We are having certain sample prep and software innovations that support our timsTOF 40 Proteomics business. On the far on the left, you see an innovation by our Friends and majority owned business, Preomics, out of the Munich area. And it's really a new workflow, but it's a very important one. They're very compact tabletop bench top system.

Speaker 2

The Beatbox is now also qualified Importantly, for tissue, proteomics for an FFPE workflow. And a gentleman from the University of Copenhagen said this Breakthrough now allows us to process large cohorts of FFPE tissues quickly, reproducibly and with greater precision, Enabling large scale tissue biobank projects. The BEAT box gives excellent deep unbiased proteomics results for pathology research in this particular case. So this is an important further enhancement And of our consumables and automation and sample prep business at Preomics. Switching to software in In support of immuno peptidomics, which is very important in research and I think now for the first time has reached We collaborate With an external Canadian company that provides the no more algorithm for AI, Informed and GPU enabled immunoepestidomics for those of you As a reminder, immunopeptides are very important immuno oncology targeting.

Speaker 2

They're also not expressed In the genome, so you really have to sequence and de novo. And doing that at scale with sensitivity and excellent software Is another important area, in this case, in immuno oncology research and in the future, hopefully, also in immuno oncology Right. After this science excursion, I'd like to go back and just summarize Bruker again made excellent progress and continues to experience strong demand for our differentiated instruments and solutions across our portfolio. Our project Accelerate 2.0 high growth, high margin initiatives performed well. We reiterate our intention to ramp investments for accelerated growth, especially in proteomics, Spatial biology, biopharma and applied markets as well as in semicon metrology.

Speaker 2

Very pleased with how well our teams have executed to begin the year. As we move through fiscal year 2023, our high backlog continues to give us very good visibility, and we are raising our revenue Growth and EPS guidance for the full year 2023. So with that, let me turn the call over to our CFO, Gerald Herman, who will review Bruker's Q1 financial performance and raise fiscal year 2023 guidance in more detail. Gerald?

Speaker 3

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide a little more detail on Bruker's Q1 2023 financial performance starting on Slide 10. In the Q1 of 2023, Bruker's reported revenue increased 15.2% to approximately $685,300,000 which reflects an organic revenue increase of 17.6% year over year. We Reported GAAP EPS of $0.52 per share compared to $0.41 in the Q1 of 2022. On a non GAAP basis, Q1 2023 EPS was $0.64 per share, an increase of 30.6 percent from the $0.49 we posted in the Q1 of 2022.

Speaker 3

Our Q1 2023 non GAAP operating income grew 20.4% and our non GAAP operating margin increased 80 basis points year over year to 20.3 percent for the reasons Frank has already reviewed. We finished the Q1 with cash, cash equivalents and short term investments of approximately $600,000,000 During the quarter, we used cash to ramp selected Project Accelerate 2.0 investments, fund capital expenditures, complete a majority acquisition in Proteomics, then fund share repurchases. In the Q1 of 2023, We repurchased approximately 315,000 shares for about $22,000,000 As a reminder, in the full year of 2022, we repurchased 4,200,000 shares for approximately $265,000,000 which continues to favorably impact EPS for the full year of 2023. We generated $87,500,000 of operating cash flow in the Q1 of 2023, partially offset by capital expenditure investments resulting in $62,500,000 of free cash flow in the Q1 of 'twenty 3. Slide 11 shows the revenue bridge for the Q1 of 2023 as discussed earlier.

Speaker 3

1st quarter 2023 BSI Systems revenue increased in the mid-twenty percent range organically, while BSI recurring revenue grew in the high single digits organically compared to the Q1 of 2022. Geographically and on an organic basis in the Q1 of 2023, our Americas and European DSI revenues grew in the low double digits, while our Asia Pacific revenue grew more than 30% all year over year. Our Rest of World Q1 2023 Revenue declined slightly. Slide 12 shows our Q1 2023 P and L performance on a non GAAP basis. Non GAAP gross margin of 53.4 percent increased 70 basis points from 52.7% in the Q1 of 2022, Benefiting from operating leverage from higher volume, higher Project Accelerate mix and tailwinds from pricing and foreign exchange, partially offset by supply chain headwinds.

Speaker 3

1st quarter 2023 non GAAP operating margin of 20.3% Was 80 basis points higher than the 19.5 percent in the Q1 of 2022, driven by solid gross margin expansion and Volume leverage despite a continued Project Acelity 2.0 investment ramp. For purposes of your quarterly modeling, We expect our operating expense ramp in the Q2 of 2023 to moderately outpace our revenue ramp and resulted in operating margin decline sequentially from the Q1 of 2023 before expanding again in the second half of the full year of 'twenty three. This is in part due to 2 gigahertz class NMRs that we previously expected In the Q2 of 2023, revenue are now expected to shift into the second half of twenty twenty three. And with that, we also expect our Q2 2023 non GAAP EPS to be down sequentially, but up by mid- to high single digit percentage compared to the $0.45 non GAAP EPS we posted in the Q2 of 2022. For the Q1 of 2023, our non GAAP effective tax rate was 27.8% compared to the 32.7 percent in the Q1 of 2022.

Speaker 3

Weighted average diluted shares outstanding in the Q1 of 2023 were $147,600,000 a reduction of approximately 3,800,000 shares or 2.5% from the Q1 of 2022, resulting from share repurchases over the past 12 months. Finally, Q1 2023 non GAAP EPS of $0.64 Was up sharply by 30.6% compared to the Q1 of 2022. Turning now to Slide 15. Given the strength in revenue and bookings in the Q1 of 'twenty three and our record backlog, we're increasing our guidance for the year. Our updated outlook for the full year of 2023 includes raising our revenue guidance to a range of $2,830,000,000 to $2,880,000,000 This implies organic revenue growth of 9% to 11% year over year, an increase of 1% from our prior guidance.

Speaker 3

We estimate a foreign currency tailwind of about 1%, down from the 1.5% foreign exchange tailwind we estimated in February. We expect acquisitions to contribute about 2% to growth, up from the 1.5% we estimated earlier. This leads to reported revenue growth in a range of 12% to 14%, an increase of 1% from the prior guidance. We continue to expect to deliver solid gross margin expansion and operating profit growth in 2023 with the previously On the bottom line, we're raising our non GAAP EPS estimated range by $0.03 to $2.55 to $2.60 for the full year of 2023, which would represent non GAAP EPS growth of 9% to 11% compared to 2022, up from our prior guidance range of 8% to 10% EPS growth. We project a non GAAP tax rate of approximately 28% for the full year of 2023.

Speaker 3

Other guidance assumptions are listed on the slide. For our full year 2023 ranges have been updated for foreign currency rates as of March 31, 2023. To wrap up, Bruker delivered excellent financial improvements in the Q1 of 2023 with strong organic revenue growth, continued booking strength and excellent EPS growth. Hopefully, you'll join us in person or virtually on June 15, or planned Investor Day to learn more about Project Accelerate 2.0 key initiatives and how they're expected to drive our medium term growth and profitability outlook. And with that, I'll pass it back to Justin to start the Q and A session.

Speaker 3

Thank you very much.

Speaker 1

Thank you, Gerald. I'd now like to turn the call over to the operator to begin the Q and A portion of the call. As a reminder, to allow everyone time

Operator

We will now begin the question and answer session. And And our first question will come from Derik De Bruin with Bank of America. Please go ahead.

Speaker 4

Hi, good morning. This is Peter on for Derik. Certainly appreciate there's a lot of uncertainty, but given the 1Q organic growth upside and the 2Q comp, could you just elaborate on your to the updated organic growth guidance for 2023. Are you just exercising prudence here by not raising that a bit more? Thanks.

Speaker 2

Yes, of course, we're exercising prudence. Good question. I mean, it's still early in the years, and I I think it's a good raise. So we think that's prudent under the circumstances. You also saw that our Q2 sequentially will be a little bit weaker.

Speaker 2

So that makes sense to us.

Speaker 4

Okay. And can you just kind of Give us an update and remind us how long the orders translate given the nature of products and current state of the supply chain. Is it fair to assume that much of the order growth you saw in the Q1 is going to convert generally to revenue in 2024? Or kind of how would you frame that for us?

Speaker 2

Yes, it very much depends on the product line. I mean, some bench top systems, of course, will still turn into revenue this year. Indeed, some NMR systems or other floor standing or larger semiconductor metrology systems where Orders came in or additional orders came in. Some of that now is actually going into 2024, but different product lines have different delivery times. All of them right now have excellent backlog and have generally seen very strong bookings again in Q1.

Speaker 4

All right. And then do you

Speaker 2

have any update on the status of

Speaker 4

the loan program in China by chance? And then that is it for me. Thank you.

Speaker 1

Sorry, that was on the loan program in China. Is that right?

Speaker 4

That's correct.

Speaker 2

Yes. We've benefited from that Significantly in orders in Q1 and mostly in our high end instrumentation, NMR mass spec, but also some I end fluorescence microscopy and IR systems. So we really we got good orders from China, very good orders from China in Q1. All right. Thank you, guys.

Operator

The next question will come from John Sorbier with UBS. Please go ahead.

Speaker 5

Hi. Thanks for taking the question. Maybe on the previous question there on the backlog, would you be willing to provide any Color on just what book to bill looked like for the quarter and just the outlook for the year?

Speaker 2

Yes. Book to bill again was above Slightly above 1 and right, I mean, at some point, we need book to bill quarters under with lower than 1, but we haven't achieved that yet so far. So I mean, it's kind of the tongue in cheek remark. Obviously, it was again slightly greater than 1 is the short answer. And despite very good revenue growth, obviously.

Speaker 6

Got it. Appreciate it. And then

Speaker 2

just That is true to take for the Scientific Instruments business. BEST is always at these 5 year orders, so we'll take that out. But for the 90% of our business, which is the Scientific Instruments 3 Scientific Instruments groups, that was true.

Speaker 5

And then just On the updated guidance for the year on the EPS side, just with the R and D investments and some of the Just any additional color just on the margin cadence for the year and how we should think about that?

Speaker 2

Yes. We expect better margins than expected and perhaps even we expected in Q1, obviously, sequential step down in Q2 and then recovery in the second half. And our guidance for margins, you see that on the Slide 15 that the margin guidance, we haven't really changed For the years, that's obviously always not in dollars, but in percentages or bps, so that we've left the same.

Speaker 5

Got it. Thanks for taking the questions.

Operator

Sure. The next question will come from Puneet Souda with SVB Securities. Please go ahead.

Speaker 7

Yes. Hi, Frank, and really congrats here on an impressive quarter. If I could if you could take a bit of a step back and look at the sort of the high end and sort of high ticket items that you have versus what we're seeing as a tougher backdrop of macro. I appreciate the book to bill is Over one and that has continued to stay that way and Amars you are booking those in the second half. But both from sort of Caled and Nano, maybe just give us sort of the visibility that you have, where you have more confidence in Portfolio and maybe where the visibility is a little bit low.

Speaker 7

I mean, we continue to hear that semiconductor headwinds, biotech funding and concerns in healthcare as well. So Just overall, just give us your sense of these strong results and your visibility versus the backdrop.

Speaker 2

Yes. So what's noticeable, I mean, China was noticeable, strong orders. I think we are benefiting from some of that loan stimulus program. Not all of that will be additional business. Some of that will probably be pulled forward where people in China are ordering earlier this year than in other years Because of those incentives that have been created, some of that does look like additional business that we actually did not necessarily expect this year.

Speaker 2

So it's a mix, But it's not all additional business. Some of it is probably pulled forward from later quarters. Europe was quite strong for us. Biopharma was quite I know there's a lot of rumblings about that. Semiconductor metrology orders are softening a little bit, But we still have so much backlog that that's actually quite welcome because our backlog, quite honestly, was too long and still is long.

Speaker 2

So Sort of as expected with China better than expected biopharma perhaps better than expected Proteomics doing great. And yes, Europe also, we expected that, but Not sure everybody else expected that we Europe has really recovered nicely, the academic and also European biopharma A lot of Green Tech Research in Europe, but also worldwide, but also in Europe. So that's kind of a Little bit different from the traditional more cyclical industrial or industrial research demand, and of course, very welcome.

Speaker 7

Got it. No, that's super helpful. In terms of China, what's the duration of this program and wondering if you are hearing about any sort of temporary pause in that program. If you could elaborate that a bit. And Gerald, if you can provide any contribution on the pricing in the quarter, that would be helpful too.

Speaker 7

Thank you.

Speaker 2

All right. I'll take the first part. We don't know. We think most of that goal is of stimulus orders may have come through. We don't expect that to continue.

Speaker 2

So that's It's been good for high end systems, it may. We don't really have visibility, and we hear by reading sell side research reports that the The program may have been paused, but we don't really have our independence data or additional insights that we don't read from reading yours and others. Gerald, do you want to talk about pricinginflation?

Speaker 3

Sure. Puneet, on the pricing side, I guess what I'd say is we continue to see We continue to take action on the pricing side. We continue to do that from the prior year as well as in 2023. We think that The pricing realization is still significant for us. It's about 250 basis points and offsetting that is about a 3 50 basis points of inflation impact, so net drag in the Q1 was about 100 basis points.

Speaker 3

We think that's going to moderate as we march forward into the rest of 2023. Our expectation is around 50 basis points of net drag for 2023. That's our current thinking.

Speaker 2

On margins.

Speaker 4

On margins. Yes. Yes. Sorry.

Speaker 7

Got it. All right. That's great. Thanks guys.

Operator

The next question will come from Josh Wolfman with Cleveland Research. Please go ahead.

Speaker 6

Hey, thanks for taking my questions. A couple for you. Frank, I wondered if you could provide A bit more of an update on timsTOF. It sounds like I had another strong quarter. Just curious if you could provide some additional color on which end markets are the primary drivers to the strength here?

Speaker 6

And then I think this was a system that had maybe bigger supply chain issues last year. Just curious how supply chain and production capacity Now and just how you're thinking about this portfolio as a contribution to growth going forward? Is it one that could grow 20% to 30% here in the medium term, say 23% and 24%.

Speaker 2

Yes. We don't give that granularity, But the timsTOF orders have continued to be very strong. To your question, that's, of course, Various flavors or types of proteomics from cell line proteomics to tissue proteomics to Chemical proteomics in the biopharma industry to plasma proteomics to single cell proteomics. As you once you get Deeper into proteomics, there are so many different subfields and they're actually all doing pretty well and are pretty strong and the fact that we have more and more of these We have a TeamTalk platform, but we have multiple product points and product performance points and of course, different types of software for different applications. It's so one has to be one begins to see the greater granularity, the market segmentation, not to forget, of course, the targeted Tissue proteomics that we do with MALDI Imaging, as well as with non team stuff with our Cellscape microscopy product line I mean, in spatial biology.

Speaker 2

So in that sense, they're broadly all doing very well, and there's a lot of demand. I think this is the decade or a decade and a half of proteomics and we're in the early days of that and it's all pretty healthy. We're addressing more and more of those Points, I mean, earlier I mentioned immunoparctedomics, earlier I mentioned FFPE pathology, Road research by proteomics, it's really it's all good. Sorry, there was an yes, we don't break out the growth rates. And yes, we did have some acknowledge and acknowledge some previous and also some Continued supply issues, mostly on the chromatography actually, but still you need that for the overall system.

Speaker 2

We're modeling through it, But yes, that's not perfect yet on the supply chain. But we're fixing it by other means, Right, where there's all the chromatography systems on the market. So we're sorting it out, kind of details that are not that important. Okay. You're not wrong with your question.

Speaker 6

Okay. And then looking at, I guess, total portfolio again, Wondering if you could update us on where the backlog stands today and how you're thinking about normalization. I think you had previously said you had something like 8 plus months and you would work that down to maybe more like 6 months over 2 years. Just curious If that's still thinking about it.

Speaker 2

We're sticking to that story. No, that's the reality. And We thought our backlog would begin to come down a little bit, but in fact, it went up further, which is a Wonderful problems to have. And yes, so it looks very healthy, but yes, it's not going to resolve itself over a few quarters. This will be over 2 perhaps over 2 plus years, but we're continuing to invest in capacity and supply chain While still with meaningful issues, it's getting better, fewer new problems come up, some areas are improving.

Speaker 2

And yes, But our orders have been strong and really quite strong in Q1 as well. So the short answer Yes, greater than 8 months is still true. And that this will take 2 years plus to normalize, if you like, is also still correct, Josh.

Speaker 6

Got it. Thanks, Frank.

Operator

The next question will come from Dan Ares with Stifel. Please go ahead.

Speaker 8

Good morning, guys. Thanks for the questions. Frank, obviously, a lot of moving parts in China right now. Can you just maybe update us on biotype or performance in that region and just How placements and utilization are comparing to what's going on in U. S.

Speaker 8

And Europe?

Speaker 2

MultiBioTypher Is somewhat more recurring revenue, services, database Then of course consumables including reagents and systems. The systems business has slowed down for us. The multibyter for the hypersystems business has slowed down. However, also in comparison to a very, very strong comparison, it has slowed down Significantly, in China, it's doing quite well in Europe. Also the replacement systems are there's a meaningful replacement Market now for replacement of our and other company systems and we're doing very well with that.

Speaker 2

U. S. Has picked up a little bit, But U. S. Still has a lot of potential.

Speaker 2

Keep in mind that we have almost twice as many multi bio fibers in Europe as in the U. S. And Over time, that should equalize. So the consumables business has continued to grow in the double digits And has the better margins as you might expect. So the usage of these systems, I don't know, probably approaching 200,000,000 Vacations per year on these about 6,000 systems that are out there is just very strong.

Speaker 2

So it's a really useful tool in the clinical and non clinical Microbiology lab is extensively being used and we're investing also more into additional workflows, additional consumable software, sepsitide or and eventually, although that's still in the research phase in selected antibiotic susceptibility testing on that platform. So it's a nice flywheel, but the instrument placement that's getting into a little bit the later part of the S curve, that's not as Deeply growing anymore as it used to be over the last 15 years.

Speaker 8

Okay, helpful. Maybe just staying inside the Accelerate program with the spatial business Canopy, Vuittaro, Acuity, what's the right growth rate that you would attach to that portfolio this year within the overall outlook for you guys. And then obviously, there's a lot going on in that space. So where are you seeing the most interest? And then on Acuity, is there anything you can tell us about the product launch timing there?

Speaker 8

Yes.

Speaker 2

I'll take the easy way out and say, listen in or Better yet, join our Investor Day on June 15 because that's going to be a topic and Mark Munch, my colleague Mark Munch will give you much more We'll probably address many of those questions. Acuity is a 24 events, so that won't launch till 2024. Canopy, the CellScape is getting tremendous interest in the spatial proteomics End of the spatial biology market. We're also doing well with tissue imaging using MALDI imaging. That's not single cell per se, but it's Tissue imaging with multiomics including metabolites and lipids and glycosylation, that's a bit of a different niche.

Speaker 2

And then that spatial biology business also broadly includes a little bit more of the cell biology and high end fluorescence microscopy Markets, those are growing. Those are maybe somewhat adjacent markets, include things like in scopics, the in vivo Rodent, neuroscience, imaging, microscopy, obviously, it's more tissue rather than single cell. But there's a lot of elements that come together and Mark will do a much better job than I just have, with a pretty I think really we'll explain that much better to The Street during our Investor Day that's coming up in June.

Speaker 8

Okay. Very good. Thanks, Frank. Congrats.

Speaker 2

Sure, Dan.

Operator

The next question will come from Patrick Donnelly with Citi. Please go ahead.

Speaker 9

Hey, guys. Thanks for taking the questions. Frank, maybe one on the U. S. Business.

Speaker 9

The NIH Budget has gotten some more attention recently. Can you guys just talk through remind us on your exposure? I think it's mid single, maybe even high single digits to that. And how sensitive you actually are to changes in the budget? And then at the end, just what you're hearing there, any visibility into your expectations?

Speaker 2

Yes, we're reading the same publications and on information that you're reading. So I don't think I have any Bruker specific insights, you are correct, Patrick, and our exposure is in the single digits obviously to that. For us, it's always much, much more. It doesn't whether it goes up 3% or 5% or 8%, it's much more important what the priorities are and that it Strongly prioritizes tools that relate to proteomics and to spatial biology It's a much more important effect than the exact raise or in any given year. So For us, those fundamental trends, those secular trends have been very strong, right?

Speaker 2

And I think as a lot of genomics And sequencing gets into the later part of the S curve, pro telomex and, of course, in parallel and partly related spatial biology Are getting into the steeper part of the S curve. And then for us, that's just very, very good. That's very good for our positioning probably for the next decade.

Speaker 9

Okay. That's helpful. And then we're just getting a few questions on the 2Q setup. Just the organic growth side, I know previously you had suggested that was going to be Maybe the high watermark for the year coming off this quarter, maybe that's no longer the case, obviously. But how do you think about the step down there, Just given again, the bookings very healthy, is it just a timing issue given the easy comp?

Speaker 9

And then should it still be in the double digits? I'm just trying to kind of frame up the numbers as

Speaker 2

Yes. No, as Gerald said earlier, yes, Q2 is sequential step down because we did have a little bit Almost inadvertent pull ins in Q1, not that. And then we have 2 ultra high field systems That we had anticipated in Q2 that we now know will be that we now know will not be And we expect them in the second half of the year. So it's really just a timing thing. With that, I think we've Looked at, with the specific color that you've given, Gerald, on Q2, I think you've Indicated mid to high single digit.

Speaker 3

Yes, exactly. We'll still on the comparison EPS

Speaker 2

growth right now.

Speaker 3

EPS growth. And I think it's pretty much what Frank just described. We have some puts and takes in the individual quarter and it seems as if More takes in the case of the Q2 experience. So yes, I think it's all our view is that the overall full year Story is pretty much the same. It's more about timing.

Speaker 2

Well, we're freight for the full year, right?

Speaker 10

Yes. Right.

Speaker 2

But yes, Q2 sequentially will be down.

Speaker 1

I'll also maybe Point out that in 2Q of 2022, we had 1 ultra high field in revenues. And so we're having we have none this quarter, yet our prior guidance of Commenting that we thought it would be the organic growth high watermark for the year, assume that we'd have those 2 ultrahigh fuel. So that's the big swing factor.

Speaker 2

Understood. Thank you, guys. So a little bit more of a shift to the second half, and yes, and with a strong start in the Q1. Right. Got it.

Speaker 2

Thanks, Frank.

Speaker 10

Thank you, Patrick.

Operator

The next question will come from Rachel Van Stel with JPMorgan. Please go ahead.

Speaker 11

Hi. Thanks for taking questions and congrats on the quarter you guys. And so a lot of talk here about China and some of the outpaced strength in 1Q. Can you just tell us what was growth in China during this quarter. And then I wanted to dig into some of those earlier comments around the China stimulus package.

Speaker 11

Can you characterize a bit further around some of that Pull forward versus new win dynamic that you flagged. How much of the China performance was really driven by that pull forward dynamic that you mentioned? Thanks.

Speaker 1

Yes. Hi, Rachel. This is Justin. So we really want to delineate between the orders and the revenue impact In China in the Q1. So the orders were very strong.

Speaker 1

We're not going to quantify what those were in China, Obviously, but there wasn't much conversion of those orders into revenues in the quarter given the lead times in the backlog we have. But that being said, Revenues in the Q1 in China were still robust. And on an organic basis, it was a higher organic growth rate

Speaker 2

And the dynamics, Rachel, to as I said earlier, there is Some apparent order pull forward in China that seems to be encouraged by that loanstimulus program. So we don't think this was All incremental business, but there is some incremental business that we that our teams did not necessarily expect this year where people just saw The opportunity to buy, get additional budgets and particularly buy high end big ticket items that they when they get an extra $1,000,000 They don't fill their fridge with reagents. They buy big ticket items that they otherwise might not get a grant for many years. So, there was additional it's difficult for us to say how much of that was pulled forward Versus a real additional business, it certainly is a mix. I don't know whether it's a fifty-fifty mix, but since I don't know that might be Not a bad modeling first approximation.

Speaker 2

So meaningful means some acceleration, meaningful additional business tended to favor NMR and Big Mass specs, but also some other product lines, especially those where we are very unique.

Speaker 11

Great. And then next one for me is just on supply chain. So can you walk us through which specific segments you're seeing the most supply chain constraints still? And then what's your level of visibility Or when you expect those constraints to really ease. And then follow-up to that, is supply chain really becoming the limiting factor in terms of guidance for the rest of the year?

Speaker 11

And how much did that really play into the decision to not lift the guidance further versus some of that prudence around the macro backdrop that you flagged? Thanks.

Speaker 2

I was pretty satisfied with our guidance rates, but the main reason I mean, it's also still early, right? And we have Slightly weaker Q2. So that's I think it makes sense right now. Supply chain Is the best group still has there are some long they're doing very well comparatively within their industry. They've really planned ahead and invested in capacity and supply chain probably more strategically than anybody else in their industry.

Speaker 2

But so that's probably relatively even medium to long term that they need to that this will be somewhat constrained in the Superconductor In other areas, those are things that the incidents of new supply Chain problems that sometimes came without warning is down significantly. There's still some areas in The same stuff area and a few other areas in NMR, in some of the semiconductor equipment areas, we're improving, But I wouldn't say we're out of the woods yet. Things generally like electronics and packaging and logistics, that's all Mostly with a few very topical exceptions much improved.

Operator

The next question will come from Jack Meehan with Nephron Research. Please go ahead.

Speaker 12

Thank you. Good morning. Good morning. I wanted to dig a little bit more into This China result really, really strong. So APAC up over 30%.

Speaker 12

Was China well above that. Can you just provide a little bit more color on the regional revenue growth? And then just what does guidance assume in terms of revenue growth in the region for the rest of the year.

Speaker 1

Yes, Jack, this is Justin. So we're not going to break out Certainly by country within APAC, but I would say that the strength is pretty broad throughout APAC, really Strong growth in Japan, in fact, which is the leader in terms of the growth rate in APAC. But I don't think we'll comment Much more on sort of the regional breakout or what's factored in the guidance.

Speaker 2

And Jack, that was a revenue comment by Justin. Revenue comment. On orders, China was the standout. Yes.

Speaker 12

Great. Okay. And then just as a follow-up, I think previously we've talked about sort of the export restriction issues in China. Is that Where does that stand? And obviously, it doesn't seem like it had any impact here, but just any update on that would be helpful.

Speaker 2

Well, as you may recall already in Q4, certain semiconductor metrology pieces of equipment that We will either no longer be able to export to China or that would have perhaps very long Times to get permits, to get we've taken those out of our backlog already, I think, in Q4, at the end of Q4. And so in that sense, there is no further change since then. Life Science and Bio Pharma and applied market food testing and so on, they're really sometimes things get slower So you get permission, for instance, also from the German authorities. They tend to be slower on China Export permits, but they come through eventually, but that also sometimes is gating a little bit in how fast you can grow and your order Sometimes grow faster because of that. But no significant further change Since about 5, 6 months ago.

Speaker 12

Thank you, Frank.

Speaker 2

Sure.

Operator

The next question will come from Daniel Brennan with Cowen. Please go ahead.

Speaker 10

Great. Thanks. Thanks for taking the question, Frank. It's Gerald. Maybe just one on the guide and then one on timsTOF.

Speaker 10

Just back to the guide. Gerald and Frank, how much of the Q1 strength was from The order slip it from 4Q to 1Q because I get it we're very early in the year, but after the 18% growth and the easing comps in the backlog, It looks like your guide implies a pretty material deceleration, still healthy, but just trying to reconcile how much of that's conservatism and how much of it's just maybe 1 quarter phenomenon where you benefited from the slippage?

Speaker 2

Yes. It's Even we don't fully know early in the year, so a little bit of conservatism is hopefully it's absolutely prudent and sometimes It ends up not being conservative, right? But we feel it's appropriate, given the cadence of The first two quarters, which we and the assumed, and we believe we'll have a second a strong second half then. So it makes a lot of sense to us. And it is really quite good organic revenue growth and good And then now also and despite very, very significant investments, I mean, our R and D really has reached about 10% now in the Q1 as As a percentage of revenue as we had predicted and so the investments are very significant and we're of course pleased that Therefore, we still deliver EPS growth and you've seen our margin guidance for the year.

Speaker 2

We've left the same as before, But we did well in Q1. We did a little better in Q1 than we even internally expected. So it's a good sign of leverage and pricing and the value of our systems. So I don't know that I really nailed your question here, but that's kind of what comes to mind.

Speaker 3

Yes. I might just add that there's still quite a bit of uncertainty Okay. You have geopolitical uncertainty related to China and Taiwan. We have the Ukrainian conflict. We have recession In some way, shape or form around the globe, there's still supply chain constraints.

Speaker 3

There's still quite a bit of issues floating around in the mix. So I Our position on the guide, I think, is we took that into consideration of those ups and downs.

Speaker 2

Yes. We also look what others are saying. If others are saying that they see less I mean, that's Not surprising that there's less early stage biotech funding and those companies will be tightening their belts a little bit. Of course, they will be. Some of our NMR and some of our Soft sales, I mean, a lot of them could go into biopharma.

Speaker 2

It's actually remarkably strong before the team saw The 3rd or so goes into biopharma. We have not seen in our data any slowdown. It's probably Less the macro for these early stage biotechs and more the value of the and the need for the kind of Information that our systems can provide, but one cannot ignore what's going on around us. So Keeping all in, we think that's about that's a prudent raise. We're in a position to do that.

Speaker 2

Hopefully, we're not, as my Canadian CFO would say, getting ahead of our Steve.

Speaker 10

Super helpful. And then Maybe just one on timsTOF. Can you just remind us like how big is that business today? What kind of share of like the discovery mass spec market like do you have? And Just wondering like is there any expectation that Thermo refreshes Orbi or is there anything on the competitive response there?

Speaker 10

I'm sure they're not sitting idly by as timsop Take share of that market.

Speaker 2

Well, I'm sure they're not sitting idly by and there may very well be some launches from Them at ASMS, I wouldn't be surprised. We are also not sitting by. And what was the last thing we said? We said, I think, that we have now an installed base of over 600 systems. It certainly has been growing in the double digit Orders, revenue, you name it.

Speaker 2

I mean, healthy double digits. And We've been gaining market share for sure since we launched that product 5 years ago. I'm Sure, well above a 10% market share and possibly above a 20% market share in proteomics. Now in mass spec, the mass spec market is larger and The Thermo also with their Orbitrap plays in a lot of small molecule applied and metabolomics and other markets We're getting traction with the tims top, but it's really primarily a 4 d proteomics play with the many submarkets that proteomics So I think we're doing really well. Also KOL, capture is not a nice word, but KOL enthusiasm, I would call it for that technology.

Speaker 2

It's really very strong.

Speaker 10

Yes. No, same thing we've heard. Great. Thanks, guys.

Operator

The next question will come from Brandon Couillard with Jefferies. Please go ahead.

Speaker 9

Thanks for taking the question. Just one clarification, Frank, in terms of the Q1 orders. If we exclude the 2 NMR Orders in the U. K, with the book to bill has still been north of 1 and the gigahertz Installations planned for the second half, is that delayed manufacturing related or more customer timing?

Speaker 2

Good questions, Brandon. So yes, without the 2 UK, 1.2 gigahertz book to bill would have still been above 1. And the second question, yes, that was more factory related. We needed on a couple of systems. We needed a bit of rework in the factory, And that always requires retesting and the time lines for a rework and retesting of one of these magnets easily is 4 to 6 months.

Speaker 2

So we incurred some Internal delays, which is why they got pushed to they're now getting pushed as best as we can tell to the second half of the year. We were able to ship 1, so one successfully passed. We just don't think it's going to maybe in Q2 revenue, hopefully in Q3. And others look so there's a factory delay, is the short answer. So very advanced complicated system, So not every system will work in the factory sort of out of the box.

Speaker 2

Sometimes some rework and retesting is needed. We've always acknowledged that. And yes, it's affecting us a little bit in Q2, but not for the year. Got you.

Speaker 4

And then You raised

Speaker 9

the M and A revenue contribution outlook for the year, looks to be about $10,000,000 improvement. Which assets are getting better or outperforming Your expectations?

Speaker 2

I'm sorry, was that an M and A related question or?

Speaker 9

Yes. Your Yes. The revenue contribution from M and A for the year went up. So I'm just curious which assets are outperforming Or contributing most of that improved

Speaker 2

outlook? Good question. Even I don't have that granularity.

Speaker 1

Yes. We had an additional Small deal in the quarter that's partially contributing to that. But, yes, I don't think we're necessarily going to break out the forecast for each individual asset and the contributions to the guidance.

Speaker 2

So nothing stands out. It wasn't The one thing that we'd like to highlight, it's additional small acquisitions and it's generally, they're Performing to plan and maybe a little bit ahead of plan, but there's one thing that stands out that's noteworthy.

Speaker 9

Got you. Very helpful. Thank you.

Operator

The next question will come from Matt Sykes with Goldman Sachs. Please go ahead.

Speaker 10

Thanks for taking my questions. I'll just leave it to 1. And Frank, maybe a high level question. As you think about the backlog and Additional investments in capacity and supply chain mitigation, how do you think about measuring those investments? You obviously want to deliver the products to your customers And reduce that backlog, but at the same time not over invest.

Speaker 10

If we get some level of normalization, in this sort of out year, so how are you thinking about balancing those investments To solve for that backlog, but at the same time solve for a future supply demand environment.

Speaker 2

Well, good question. Matt, it's really more of a almost Pay though planning rather than for the next year or 2. So we're pretty optimistic about our growth for the next decade and have Seeing good growth recently at least since the depth of the pandemic, right? And so we've you've seen our CapEx is high this year. Our CapEx has been quite high and elevated in the last 2 or 3 years.

Speaker 2

That's really kind of building capacity for the next decade plus with a new mass spec factory and Integrated biospin facilities facility. It's also for productivity. It's not only for capacity as we consolidated 2 biospin factories In the same geographical area near Karlsruhe, Germany, that, of course, is going to be a lot more productive as well. Plus, it generated The capacity capabilities hopefully for the for not only For the next 10 years, not only for the remainder of this decade. And there we've built up pretty significant additional capacity buffers, because we think we're going to grow Substantially during that period.

Speaker 10

Great. Thank you very much.

Speaker 2

I'm not just investing for that backlog and is it a 2 year reach or 3 year reach or whatever it is. We're really investing for the decade. Got it. Thank you.

Speaker 6

All right, operator, with that,

Speaker 1

we're at 9:30, so we'd like to close the call here.

Operator

Yes, sir. I'll pass the call along to you for closing remarks.

Speaker 1

Excellent. Well, thank you, everybody, for joining us today. As a reminder, Bruker has scheduled an in person hybridinvestorday@ourhelrica, Mass headquarters for June 15, which will focus primarily on proteomics and spatial biology. Also, please feel free to reach out to me to arrange any follow-up discussions. Thank you, and have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now

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