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Operator: Good day, and welcome to the Bruker Corporation First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Mr. Justin Ward. Please go ahead, sir.

Justin Ward: Good morning. I would like to welcome everyone to Bruker Corporation’s first quarter 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 & Presentations section of Bruker’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.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. 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 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 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 second quarter 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 first quarter 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 Laukien.

Frank Laukien: Thanks, Justin. Good morning, everyone, and thank you for joining us on today’s first quarter 2023 earnings call. Bruker 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. In the first quarter, 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 first quarter of 2023, Bruker’s revenues increased 15.2% year-over-year to $685.3 million, despite a currency headwind of minus 4.5%. On an organic basis, revenues increased 17.6% and acquisitions added 2.1% to growth, which implies first quarter constant exchange rate growth of 19.7% year-over-year. This included 18.4% organic growth in our Scientific Instruments segment and 9.7% organic growth in our BEST segment, net of intercompany eliminations. Our first quarter ’23 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&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 first quarter. In the first quarter ’23, Bruker reported GAAP diluted EPS of $0.52 compared to $0.41 reported in the first quarter of 2022. On a non-GAAP basis, first quarter ’23 diluted EPS was $0.64, an increase of 30.6% from $0.49 in the first quarter of ’22. 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 acquisitions, acquisitions of complementary skills, and technologies. In summary, the first quarter of ’23 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 5 and 6 now, where we highlight the first quarter ’23 performance of our three scientific instruments groups and of our BEST segment, all on a constant currency and year-over-year basis. In the first quarter of ’23, the BioSpin Group revenue of $180 million grew in the high-teens percentage on a constant currency basis, even without any gigahertz-class revenue in the first quarter. BioSpin saw robust growth in revenues across its full portfolio including NMR and MRI preclinical imaging. Notably, we received two 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 ’23, 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 ’23.

For the first quarter of ’23, the CALID Group revenue of $237 million 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 4D proteomics, epiproteomics and multiomics. In the first quarter, we announced key further capability enhancements and had excellent year-over-year bookings growth. Please turn to Slide 6 now. First quarter Bruker NANO revenue was $210 million and grew in the low 20% on a constant currency basis. NANO’s academic, industrial and GreenTech Research and high-end semiconductor metrology revenues, all remain strong. Revenues for our advanced X-ray and Nano Surfaces tools also delivered strong growth in the quarter.

NANO’s microelectronics and semicon metrology tools performed well with strong bookings and backlog. 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 fourth quarter of last year. Finally, first 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 challenges. Moving to Slide 7 and 8 now. On Slide 7, we just highlight the two new orders for 1.2 gigahertz NMRs that we received recently. They’re both — interestingly, they’re both used for our structural functional biology and life-science research, but also for a lot of GreenTech 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. This is really UK scientific infrastructure investment, not only for these two universities that host the systems but really will be used broadly by the UK 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. I won’t read them, but I draw your attention 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 timsTO0046 for the 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, benchtop system. The BeatBox is now also qualified for 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 BeatBox gives excellent, deep, unbiased proteomics results for pathology research in this particular case. So this is an important further enhancement of our consumables and automation and sample prep business at PreOmics.

Switching to software in support of immunopeptidomics, which is very important in research and I think now for the first time has reached the sensitivity and throughput levels, where it could really be used on small tumor biopsy samples, we collaborate with an external Canadian company that provides the Novor algorithm for AI, informed and GPU enabled immunopeptidomics. For those of you — as a reminder, immunopeptides are very important immuno-oncology targeting. They are also not expressed in the genome. So you really have to sequence some 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 applications in the clinic.

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. 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 first quarter financial performance and raised fiscal year 2023 guidance in more detail.

Gerald?

Gerald Herman: Thank you, Frank, and thank you, everyone, for joining us today. I’m pleased to provide a little more detail on Bruker’s first quarter 2023 financial performance starting on Slide 10. In the first quarter of 2023, Bruker’s reported revenue increased 15.2% to approximately $685.3 million, 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 first quarter of 2022. On a non-GAAP basis, Q1 2023 EPS was $0.64 per share, an increase of 30.6% from the $0.49 we posted in the first quarter of 2022. 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% for the reasons Frank has already reviewed.

We finished the first quarter with cash, cash equivalents, and short-term investments of approximately $600 million. During the quarter, we used cash to ramp selected Project Accelerate 2.0 investments, fund capital expenditures, complete a majority acquisition in proteomics and fund share repurchases. In the first quarter of 2023, we repurchased approximately 315,000 shares for about $22 million. As a reminder, in the full year of 2022, we repurchased 4.2 million shares for approximately $265 million, which continues to favorably impact EPS for the full year of 2023. We generated $87.5 million of operating cash flow in the first quarter of 2023, partially offset by capital expenditure investments resulting in $62.5 million of free cash flow in the first quarter of ’23.

Slide 11, shows the revenue bridge for the first quarter of 2023 as discussed earlier. First quarter 2023 BSI systems revenue increased in the mid 20% range, organically. While, BSI recurring revenue grew in the high-single-digits organically compared to the first quarter of 2022. Geographically, and on an organic basis in the first quarter of 2023, our Americas and European BSI revenues grew in the low-double-digits. While our Asia-Pacific revenue grew more than 30% all year-over-year. Our Rest of World first quarter 2023 revenue declined slightly. Slide 12, shows our first quarter 2023 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 53.4% increased 70 basis points from 52.7% in the first quarter 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.

First quarter 2023 non-GAAP operating margin of 20.3% was 80 basis points higher than the 19.5% in the first quarter of 2022, driven by solid gross margin expansion and volume leverage, despite a continued Project Accelerate 2.0 investment ramp. For purposes of your quarterly modeling, we expect our operating expense ramp in the second quarter of 2023 to moderately outpaced our revenue ramp and result in an operating margin decline sequentially from the first quarter of 2023 before expanding again in the second half of the full year ’23. This is in part due to 2 gigahertz-class NMRs that we previously expected in the second quarter of 2023 revenue are now expected to shift into the second half of 2023. And with that, we also expect our second quarter 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 second quarter of 2022.

For the first quarter of 2023, our non-GAAP effective tax rate was 27.8%, compared to the 32.7% in the first quarter of 2022. Weighted average diluted shares outstanding in the first quarter of 2023 were 147.6 million, a reduction of approximately 3.8 million shares or 2.5% from the first quarter of ’22, resulting from share repurchases over the past 12 months. Finally, first quarter 2023 non-GAAP EPS were $0.64 was up sharply by 30.6%, compared to the first quarter of 2022. Turning now to Slide 15, given the strength in revenue and bookings in the first quarter ’23 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 $2.83 billion to $2.88 billion.

This implies organic revenue growth of 9% to 11% year-over-year, an increase of 1% from our prior guidance. We estimate a foreign currency tailwind of about 1% and 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 the 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 explained transitional decline in operating profit margin. 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. 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 first quarter 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, our planned Investor Day to learn more about Project Accelerate 2.0 key initiatives and how they are expected to drive our medium-term growth and profitability outlook. And with that, I’ll pass it back to Justin to start the Q&A session. Thank you very much.

Justin Ward: Thank you, Gerald. I’d now like to turn the call over to the operator to begin the Q&A portion of the call. As a reminder, to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up. Operator?

Operator: We will now begin the question-and-answer session. [Operator Instructions] And again, please limit yourself to one question and one follow-up. And if you have further questions, you may re-enter the question queue. And our first question will come from Derik De Bruin with Bank of America. Please go ahead.

Operator: The next question will come from John Sourbeer with UBS. Please go ahead.

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

Operator: The next question will come from Josh Waldman with Cleveland Research. Please go ahead.

Operator: The next question will come from Dan Arias with Stifel. Please go ahead.

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

Operator: The next question will come from Rachel Vatnsdal with J.P. Morgan. Please go ahead.

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

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

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

Operator: Your next question will come from Matt Sykes with Goldman Sachs. Please go ahead.

Operator: Yes, sir, I’ll pass the call along to you for closing remarks.

Justin Ward: Excellent. Well, thank you, everybody, for joining us today. As a reminder, Bruker has scheduled an in-person/hybrid Investor Day at our Billerica, Massachusetts 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 disconnect.