Bruker Corp (BRKR) 2014 Q2 法說會逐字稿

Good day, everyone, and welcome to the Bruker Second-Quarter 2014 Earnings conference call.

(Operator Instructions)

Please also note that today's event is being recorded. At this time, I'd like to turn the conference call over to Mr. Joshua Young.

Sir, you may begin.

Thank you very much, Jamie.

Good afternoon. I'd like to welcome everyone to Bruker's Second-Quarter 2014 Earnings conference call. My name is Joshua Young, and I'm the Vice President of Investor Relations for Bruker. Joining me on today's call are Frank Laukien, our President and CEO, and Charlie Wagner, Bruker's Executive Vice President and Chief Financial Officer. In addition to the earnings release we issued earlier today, we will also be referencing a slide presentation as part of today's conference call. The PDF of this presentation can be downloaded by clicking on the earnings release hyperlink on Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. A reconciliation of our GAAP to our non-GAAP financial statements is included in our earnings release and in our webcast presentation.

Before we begin, I'd like to make the usual Safe Harbor statement, which I show on slide 2. During the course of this conference call, we will make forward-looking statements regarding future events or the financial performance of the Company that involve risks and uncertainties. The Company's actual results may differ materially from the projections described in 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 as well as other subsequent SEC filings.

Also note that the following information is related to current business conditions and our outlook as of today, August 6, 2014. Consistent with our prior practice, we do not intend to update our projections based on new events, new information, future events, or other reasons prior to the release of our third-quarter 2014 financial results in November.

We will begin today's call with Frank providing a business summary of our second-quarter performance and an update on our outlook for the second half of 2014. Charlie will then cover our financials for the second quarter in more detail.

Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thanks Joshua.

Good afternoon and thank you for joining us on the call today. I will begin my presentation on slide 4. We faced a tough year-over-year comparison, as Q2 was a relatively strong quarter in 2013. But we were able to deliver results that were in line with our expectations. We are pleased with our growth in revenues, earnings per share, and free cash flow in both Q2 2014 and for the first half of the year. We reported $457 million in revenue during the second quarter 2014, a 1% increase from the previous year.

From a market perspective, academic research remains healthy while demand from industrial customers remains mixed. From a group perspective, BioSpin Invest drove our revenue growth in Q2 of 2014, while our CALID group was negatively affected by weak CAM performance and delays in our Detection division. Our BMAT group's revenues were flat in Q2 year over year.

We reported $0.21 in non-GAAP EPS in the second quarter of 2014, an increase of 17% from Q2 2013. And finally, we continue to make good progress on improving our free cash flow, as we generated $5 million of cash in the second quarter of 2014 after negative free cash flow in Q2 of 2013.

On slide 5, I show Bruker's performance through the first six months of 2014. Our operating performance was well balanced as we drove revenue growth, higher operating margins and improved non-GAAP EPS and higher free cash flow. Our first-half 2014 year-over-year revenue growth, up 4%, was reasonably balanced among all three of our groups and is consistent with the original guidance that we had provided for the year. Europe and Asia drove most of the year-over-year revenue growth through the six months of 2014.

Our first-half 2014 non-GAAP operating margin expanded by 50 basis points to 9.6%, compared to 9.1% in H1 2013. Our first-half 2014 non-GAAP EPS were $0.32, representing 23% growth over the first half of 2013.

Finally, our free cash flow improved by $71 million through the first six months year over year, which is the result of our focus on working capital in addition to margins and EPS. So in summary, Bruker's results through the first six months of the year were solid, as we demonstrated balanced operational performance with revenue growth translating into higher margins and higher non-GAAP EPS and free cash flow.

Despite our good start to the year, we now expect that the second half of 2014 will be weaker than we originally projected. There are four reasons for our lower outlook in the second half.

First, we expect our CAM division results to be considerably weaker than originally anticipated due to our efforts to restructure or divest two significant product lines. Second, BEST will generate approximately $10 million less in revenue for Q3 of 2014, due to a delay in the customer's ability to accept delivery of our Rosatom pilot line. Third, BioSpin group orders in the first half were weaker than anticipated. While we do foresee a meaningful pickup in BioSpin order growth in the second half of the year, the later order timing results in less revenue than expected in 2014.

Finally, BMAT group orders in the first half were also weaker than expected, as we have not yet seen a meaningful acceleration in demand from our semiconductor, data storage and other microelectronics customers. While the majority of our reduced outlook is related to our CAM restructuring and planned divestitures, we are nevertheless disappointed that other factors are also contributing to our reduced outlook for the full year 2014. We are taking actions to reduce our costs and do what we can to mitigate the impact of the expected second-half 2014 revenue shortfalls.

Please now turn to slides 6 and 7, where I will provide additional details about the Q2 2014 performance of our three BSI segment groups and our BEST segment. And I will also comment on their outlook for the second half of 2014.

I will start with the Bruker BioSpin Group. BioSpin delivered another good quarter of mid-single-digit revenue growth, with the Americas and Asia driving this performance. Our revenue growth in Japan benefited from installations that were being completed as a result of the previous Japanese special supplementary budget or SSB.

One of the exciting developments during the second quarter of 2014 was that we completed the installation of the world's first horizontal 21 Tesla magnet or FT-ICR. This new magnet will provide researchers with the highest resolution mass spectrometry technique available to analyze complex mixtures, including applications in petroleomics, dissolved organic matter, metabolomics, top-down proteomics and multi-imaging.

In the BioSpin Group, both our magnetic resonance spectroscopy, or MRS, and our pre-clinical imaging, or PCI, divisions performed well in Q2 of 2014. The PCI division reported improved performance for its molecular imaging products. As a reminder, we added these molecular imaging products to our portfolio via an acquisition nearly two years ago. And we are pleased that the performance of these products is improving.

Concerning our outlook for the second half of 2014, we now expect that our BioSpin Group will see a higher percentage of its full-year 2014 new order bookings in the second half of 2014. Given the lead times required to install these products, the later order timing means that much of this revenue will shift out of 2014 into 2015. We believe that the market is healthy, given that we are expecting good growth in both revenues and bookings for the full year.

I'd like to now turn to our CALID group, which reported a mid-single-digit revenue decline year over year in the second quarter of 2014. Our Life Science and Clinical, or LSC, division generated low-single-digit growth in the quarter. One of the highlights for the division during the second quarter was the launch of our new Impact II ultra-high resolution QTOF mass spectrometer at ASMS in June. Impact II provides industry-leading sensitivity for proteomics, biomarker research, identification of impurities, and residue screening. We have seen strong interest in Impact II since its launch and are optimistic that this will be one of our faster-growing products.

Our MALDI Biotyper solution continues to generate robust growth in the second quarter of 2014. With two quarters under our belt of selling a US FDA-approved version of the Biotyper, we believe that we continue to be the US and worldwide market leader for MALDI identification in microbiology.

Another milestone for the MALDI Biotyper in the second quarter was gaining approval from the Chinese FDA. China is also an untapped and large market for us to penetrate with a Biotyper. And we saw immediate order growth towards the end of the second quarter in China. Finally, we also received regulatory approval in Brazil during the quarter.

Our CAM division posted another quarter of weak performance in Q2. And we expect to see a further slow down in the CAM business after our restructuring announcement. With our decision to stop offering gas chromatography and gas chromatography single quad mass spectrometry systems as of July 23, 2014, we expect the CAM division's financial performance to deteriorate for the remainder of 2014 and until the divestitures and restructuring are complete. We expect that CAMs revenues in 2014 will decline by more than $20 million compared to 2013. And it's non-GAAP operating loss will be a few million higher in 2014 than its full-year 2013 operating loss.

Nearly all of this decline will happen in the second half of this year. This is the single most material driver of our lower guidance for FY14. While CAM's weaker performance hurts us in the second half of 2014, we believe that we are taking the right steps to reduce CAM losses significantly into 2015 and further in 2016.

In the CALID group, our Detection division continued to experience delays in obtaining German export licenses, as Germany has slowed the review and approval process for certain types of products. Since Detections revenues tend to be concentrated among a few large transactions, the continued delays had a material effect on CALID's revenue performance in both Q1 and Q2 of 2014. We were pleased that we generated very strong new order bookings in Detection in the second quarter of 2014, which bodes well for our 2015 and which may help us in Q4 of 2014, depending primarily on the timing of export licenses.

On slide 7, I show performance of our BMAT group and then of our BEST segment. The Bruker Materials group's or BMAT's revenues were flat in Q2 2014 year over year. While research and academic markets remained healthy, we have not seen the uptake in demand from semiconductor data storage and other microelectronics market that we had anticipated.

As a result, we are also expecting weaker-than-originally-expected revenue and margin contributions from the BMAT group in our second half of 2014. The flat performance of our BMAT group is also a contributing factor to our reduced guidance for fiscal year and full year for 2014. Within the BMAT group, our Nano Surfaces division grew as a result of the Q4 2013 Prairie acquisition and helped to off set weaker performance from the AXS and Elemental divisions.

In July, our BNS division acquired Vutara, based in Salt Lake City, Utah. We expect Vutara will generate about $2 million in full-year 2014 revenue. Vutara now adds fast 3D super-resolution technology to our fluorescence microscopy portfolio for cell biology and neuroscience research.

We believe that Vutara is the technology leader here. And they also have a very strong IP position in this area. So we are excited to offer these unique capabilities to our cell biology customers, in addition to multi-photon and fast confocal life cell imaging.

In the second quarter of 2014, our Bruker Energy and Supercon Technologies, or BEST, segment posted its second straight quarter of 12% revenue growth. And BEST also improved non-GAAP operating margins in the second quarter of 2014, if you exclude the effect of the Rosatom license revenue in Q2 of 2013. BEST has been the beneficiary of strong demand for low-temperature superconducting wire, which is used in MRI magnets, as well as for increased delivery for the ITER fusion energy research and Expo large-scale scientific research projects.

BEST was recently informed that the customer for the Rosatom HTS research pilot will not be able to accept delivery and installation in Q3 of 2014, even though we already have everything tested, ready and packed for delivery. This is disappointing as it will push approximately $10 million of revenue out of our third quarter 2014, most likely into 2014. It is not currently clear when we will be able to deliver this pilot line to Russia. This situation is a contributor to our reduced guidance for FY14.

Now I'd like to make a few closing remarks before turning the call over to Charlie. While Bruker generated improved financial results in the first half of 2014, we understand that our lower outlook for the second half of the year, and therefore our reduced guidance for the full year 2014, is disappointing. Much of the reduced expectations for our second half of 2014 are a direct result of the major CAM restructuring and divestiture plan, which will have significant financial benefits in 2015 and beyond.

The key message that I would convey is that we are fully committed to taking the right actions to improve the long-term financial health of Bruker's business. While these decisions are difficult, you can clearly see that they are establishing the path to make our portfolio more profitable. We expect to report year-over-year improvements in our operating profitability, non-GAAP EPS, and cash flow during 2014. And our focus heading into 2015 is setting up Bruker to deliver an attractive combination of revenue growth, operating margin, EPS growth, and cash flow expansion.

With that, I will now turn the call over to Charlie.

Thanks, Frank.

I'll now provide some additional details on our Q2 2014 financial performance. On slide 9, I show a snapshot of our Q2 2014 non-GAAP results. Total revenues were $457 million, an increase of 1% from the second quarter of 2013. Geographically, year-over-year revenue growth in North America and Europe was mostly offset by a revenue decline in Japan. Higher gross margins were offset by higher SG&A spending, as non-GAAP operating margins declined by 20 basis points year over year to 11.5%. Non-GAAP EPS grew approximately 17% over Q2 2013.

One of the highlights of the quarter is that we continue to make good progress in lowering our working capital per dollar of revenue, as our working capital per dollar a revenue declined to $0.42 in Q2 2014 compared to $0.46 in Q2 2013.

Turning to slide 10, I show the revenue bridge for the second quarter of 2014, reported growth of 0.6% reflected in organic revenue decline of 2.2%. We recorded a 0.5% positive effect from acquisitions. And finally, changes in foreign exchange rates increased revenues by 2.3% in the quarter.

Currency had a considerable effect on both our top line and our costs in Q2. This is primarily driven by a stronger euro. The Japanese yen had less Impact on our Q2 than we've seen in recent quarters, as the yen had already weakened substantially in Q2 of 2013. Overall, we lost approximately $0.01 in EPS from year-over-year changes in foreign exchange rates in Q2.

On slide 11, I show our Q2 2014 non-GAAP operating results in more detail. Our Q2 2014 non-GAAP gross margin of 46.3% is an increase of 90 basis points on a year-over-year basis. Our improved gross margin in Q2 benefited from a positive product mix in BioSpin, as well as improvements in BMAT margins as a result of 2013's restructuring programs.

Our Q2 2014 operating expenses were higher year over year, as investments in SG&A were somewhat offset by lower R&D spending. Nearly $2 million of the increase in SG&A was due to changes in foreign exchange rates. The remaining increase was primarily related to spending in our Life Science and Clinical division, primarily for a MALDI Biotyper system and for investments in corporate functions and corporate projects.

Our non-GAAP operating margin of 11.5% was 20 basis points below our non-GAAP operating margin of 11.7% in Q2 2013. Below operating income, other expense improved by $5 million compared to Q2 2013, due to lower realized foreign exchange losses. As a result, our non-GAAP EPS of $0.21 was $0.03 higher than in Q2 2013 and reflected a tax rate of approximately 30% in Q2 2014, which is in line with our expected full-year 2014 tax rate of 29% to 30%.

On slide 12, I show a reconciliation of our GAAP to our non-GAAP financial results for the second quarter. In Q2 2014, we excluded $17.3 million of operating costs from our non-GAAP results, which were up considerably compared to the previous year. We incurred $10.7 million of restructuring charges in the second quarter of 2014, and these charges relate to previously-announced restructuring programs. After factoring in our recently-announced CAM restructuring, we now expect to incur $50 million in restructuring costs during 2014, including CAM. For programs announced or to be announced in 2014, most of the run rate benefit will begin in 2015.

On slide 13, I show our revenue bridge for the first six months of 2014. Reported revenue growth of 3.9% is in line with where we expected to be after the first six months of the year. We generated 1.9% organic revenue growth in the first half of 2014. Changes in foreign exchange rates added 1.2% to revenues, while the net impact from acquisitions and divestitures added 0.8% to our revenue growth. All three of our BSI groups generated year-over-year revenue growth in the low- to mid-single digits through the first six months of the year.

On slide 14, I show our operating performance through the first six months of 2014. We expanded our non-GAAP operating margin by 50 basis points year over year through the first half of 2014, with most of the net improvement coming from lower R&D spending. Our lower R&D spending primarily relates to reduced investment in lower-growth businesses within the Bruker portfolio.

Keep in mind the changes in foreign exchange rates represent a headwind of over 100 basis points to the first six months of the year. This is primarily the result of a weaker yen versus the US dollar. In the first half of 2014, we reported $0.32 in non-GAAP EPS, which represented 23% growth compared to the first six months of 2013.

On slide 15, I show our non-GAAP reconciliation through the first six months of 2014. We've excluded $28.8 million of operating costs from our non-GAAP results, which was up $7.6 million compared to the first half of last year. All of this increase was driven by higher restructuring and acquisition-related costs.

On slide 16, I show our balance sheet as of June 30, 2014. Our balance sheet continued to strengthen as we worked to reduce our working capital. Working capital decreased by 4% compared to December 31, 2013.

On slide 17, I show our cash flow performance though the first six month of 2014. We recorded free cash flow of $15 million in the first six months of 2014, an improvement of roughly $71 million compared to the first six months of 2013. Improved working capital and lower CapEx spending drove the improvement. We improved our contribution from working capital by $60 million year over year, with the most progress being made in receivables and payables. We're beginning to see improvements in inventory levels as well, but more focus is required to drive our inventory levels down in the second half of the year.

Our cash conversion cycle improved by seven days compared to the previous year, and that's comprised of the following. Our days of inventory outstanding were 229 days, compared to 223 in Q2 2013. Our days sales outstanding were 57 days compared to 58 days last year. Finally, our days payable totaled 42 days compared to 29 days in the previous year.

While our CapEx spending was also down significantly through the first six months of the year, we expect that our capital spending will accelerate somewhat in the second half of the year due to the timing of capital projects. We've now reported four straight quarters of positive free cash flow, which is a considerable improvement from our past. The drivers of this improvement are a higher focus on working capital from the entire organization due to changes in incentives and newly-launched restructuring initiatives specifically aimed at improving working capital.

Now I'll turn to our financial guidance for 2014, which I show on slide 19. As Frank mentioned earlier, Bruker got off to a good start this year, but is now expecting a weaker second half of 2014 than we originally anticipated. The primary reason for the reduced outlook is our CAM division. A key part of our 2014 guidance and business plan was to drive meaningful improvement in the operating performance of the CAM division. Now that we've made the decision to divest or restructure most of the assets within CAM, we need to reset our expectations for 2014 since we stopped taking orders for some of the CAM products in July.

As a result of the restructuring actions, we now expect to generate approximately $20 million less in revenue from CAM in 2014 than the original assumptions in our guidance, with nearly all of this decrease occurring in the second half of the year. In addition, we also now expect that approximately $10 million of revenue from BEST's Rosatom pilot line that was scheduled to occur in Q3 2014 will not be recognized this year.

Finally we slightly lower revenue outlooks for our BioSpin and BMAT groups in the second half of 2014. Both businesses had lower-than-expected orders in the first half of the year. And while stronger order growth is expected in both of these groups in the second half, the later order timing means that some revenues now slip into 2015. The net result is that we now expect our revenues to be approximately flat in the second half of 2014 compared to the second half of 2013. This will result in full-year 2014 revenue growth of 1% to 2%, compared to our previous guidance of growth of 3% to 4%.

As a result of our revise revenue outlook, we are reducing our non-GAAP EPS outlook by $0.07 and expect to be in the range of $0.78 to $0.81 compared to our previous guidance of $0.85 to $0.88. This guidance revision further assumes a very weak Q3 compared to Q3 2013 and a sequentially stronger Q4 2014.

As a reminder, we had a very low tax rate of 20% in Q3 2013, which is also part of the year-over-year weakness we expect to see in Q3 2014. We're making a small update to our currency assumption, as the US dollar to euro rate stood at 1.37 and the yen to dollar rate at 1.01 at the end of the second quarter.

So I'll close by stating that our reduced second-half growth outlook is partly disappointing and partly just the direct consequence of our announced CAM restructuring. But we're still making good progress in transforming Bruker in 2014. We're strengthening our balance sheet and cash flow. We're taking steps to reduce the considerable margin and EPS drag created by CAM. And we're making progress improving our systems and business processes. As a reminder, we expect to reduce CAMS annual revenues by approximately $50 million to $70 million, but improve CAMS profitability by $15 million to $20 million annually, once our plans are fully implemented.

With that, I'd like to turn the call over to Joshua to start the Q&A session.

Jamie, please assemble the Q&A roster.

(Operator Instructions)

Isaac Ro, Goldman Sachs.

Hi, thanks. Good afternoon, sorry. Wanted to just ask sort of bigger-picture question to both Frank and Charlie regarding the CAM restructuring.

Generally speaking, I think of that business as having been pretty important to the Company over the last few years and obviously the results there were not what you wanted, so I have to imagine it was a difficult decision. So just how important it the grand scheme of the long-term restructuring of the Company? Is this sort of something we can look at as a turning point that will help you guys kind of deliver on long-term growth and profitability goals that you have? I'm just trying to put this in context with all the decisions that have been made over the last 12 months.

This is Frank, Isaac. This is certainly one of our major decisions, or the major decision, and indeed it was a difficult decision. But I feel that's the right decision after we've really gone through a very thorough and pretty comprehensive bottom-up strategy review for the first five months of the year.

As you have seen, we have been pretty judicious in our decisions. There is GC triple-quad technology and LC triple-quad technology that we've determine are strategically important and where we could overtime reach satisfactory financial results, we believe. Those we will retain as our combined Bruker Deltonics mass spec division. And there were other areas where we felt that others might have a better focus or a broader set of products for trace elemental analysis, for instance, or areas where we felt that the market was -- where we were not sufficiently differentiated and therefore chose to either divest or discontinue and restructure some of those operations.

But it's a very rational decision, obviously. I would've preferred three and half years ago that it didn't come to that point but it was clear that, that's what makes sense for the business at this point. Also, as you look around Bruker elsewhere, there's so many other opportunities in many of our other divisions in groups. It's not that we've -- I think actually it will be a healthy process in addition to what's needed on the financial side.

Great. And just a follow-up if I could. On the overall demand outlook. It sounded like the majority of the lower revenue guidance was a function of the specific actions you are taking in CAM.

But can you just maybe help us with some confidence that the overall demand outlook the rest of the portfolio remains healthy, whether it be in terms of orders in bookings -- I think this quarter you probably didn't get as much color around the order book as you might've in the past. If you could put a minute or two of color around the demand outlook for the business in the back half of this year, that would be great.

I feel the demand outlook for the full year and for the back half of the year for Bruker BioSpin, for the BioSpin group and for the CALID group excluding CAM, is actually pretty -- is really quite healthy. We did comment that it is -- that orders and demand are not that healthy for the BMAT group. In fact, the flat Q2 orders year-over-year are contributing to our reduced revenue expectations in the BMAT group.

Interestingly for that group, which had a flat start and where I'd say that it's not just timing but there is less -- weaker demand environment that what we had anticipated, especially in the industrial and semiconductor space by the middle of this year. We do see a pickup in the second half, or we do anticipate a pickup in the second half of the year.

But I wouldn't call the BMAT markets healthy, although I do expect a sequential improvement of second half orders versus first half orders. And back to BioSpin and CALID, I think those markets are reasonably healthy and our demand and our competitive position and demand for our product in these markets look reasonably healthy to me.

Got it. Thanks guys.

Steve Willoughby, Cleveland Research Company.

Hi. Thanks for taking my question.

I was wondering if you could just help us quantify for the EPS guidance reduction how much is related to CAM, how much is related to BEST and how much is related to the softer orders in the two different businesses? If there is any way to quantify those impacts.

Yes, I think we outlined in our prepared comments that from a revenue reduction -- revenue guidance reduction, CAM is about half of the revenue guidance reduction. It ends up being, I guess I would describe it as a disproportionately larger share of the EPS reduction. A lot of the CAM -- the increased CAM losses are going to occur in the US for us. We don't get a tax benefit on those losses so the hit on EPS is disproportionately large.

We do have a little bit of an impact on the other revenue reductions but we also have some benefits. I commented on foreign exchange losses coming in lower than they did last year, at least in the current currency environment. Think of it as a big hit from CAM on the EPS line, a smaller hit on the other pieces of the guidance reduction, with those being, then, partially offset by an improvement in foreign exchange losses.

Okay. Just one follow-up, then.

Has anything happened with CAM in the two weeks since you announced the restructuring that's different than what you had anticipated? Or are you just try to figure out what's been going on more recently.

No. We stopped taking orders for some of the products in July. We commented on that in the script. Aside from that, no.

We have conversations ongoing with folks who are potentially interested in acquiring some of the assets of the business. I have no comment at this point on whether we will be successful with those discussions but they are ongoing. Aside from that, nothing new to report. We're just now working through the implementation of some of the decisions that we announced.

Okay. Thanks very much.

Brandon Couillard, Jefferies.

Thanks, good morning -- or afternoon. Excuse me.

Frank, would be curious to hear your general thoughts on the global academic market. Sounds like your commentary is little more constructed than what we've heard from others in the period. Just some thoughts there.

Yes, Brandon. Gladly. Europe remains reasonably strong with Germany and the UK particularly strong. Eastern Europe and Russia very weak and to nonexistent right now.

The US is quite strong. US demands patterns this year for most of our divisions are pretty strong growth. That's delightful. Of course, it also comes from a weaker basis, last year.

Japan is quite weak, but that's because of course there is no special supplementary budget or on the de-minimus special supplementary budget compared to a year ago. And I think those are the major drivers. We think India's coming back a little bit, Brazil coming back a little bit after weak start to the year.

But I think strong US, weak Japan, and overall in the aggregate a reasonable academic plus non-academic plus medical research pattern, also government research. So overall those are, in the aggregate, not bad, with the US really being remarkably strong and Japan being weak year-over-year because of last year's SSB.

Thanks. And then one for Charlie. On the balance sheet and cash flow, I guess a two-part question. As you go through this process with CAM, are there any working capital effects that we should consider in the second half of the year? And then, what does the business look like from a working capital profile perspective if we took CAM out of it altogether?

So there will be some -- obviously, there will be some impact from CAM. Probably the biggest impact will be in inventory, whether we move forward with divestitures or ultimately with restructuring, quite a bit of inventory should come off the balance sheet. Obviously, it will only be a source of cash if we're able to achieve the divestitures. Otherwise, it would essentially be a write-down and contribute to the restructuring charges.

So I think there's a cleanup period that we're going to have to go through over the next six months or so that will have some impact on working capital. CAM's working capital consumption I would say is slightly worse than the Bruker average, but not so much worse that the portfolio looks radically different without it.

We're continuing to move forward with working capital reduction initiatives in every region and in every business. As I mentioned, we've had some good success this year on the receivables side and the payable side. We had a good step forward on inventory in Q1, a little bit of a step back in Q2, but the focus is clearly there. And we've got a lot of programs identified to drive inventory down further towards the second half of the year.

Super. Thank you.

Doug Schenkel, Cowen and Company.

Good afternoon. Thanks for taking my questions. I have two.

First question, just some clarifying math. You reduced revenue guidance by just over $35 million at the midpoint. $10 million of this is Rosatom, $20 million of this is CAM, so it looks like net of FX you're reducing guidance for everything other than Rosatom and CAM by just over $5 million. Keeping in mind, the former of these two dynamics, Rosatom, was described as a timing issue and CAM is something that, that decision clearly improves the business over time. Is this math right, Charlie?

I'd say the reduction is more like $40 million, so you remainder there is closer to $10 million than $5 million.

That gets me to the second question. We're talking about a $5 million to $10 million cut, excluding Rosatom and CAM.

Can you just explain why you seem to be emphasizing so much the challenges beyond CAM and Rosatom, given this math? Really, what we're talking about here is just over 30 basis points of growth, which in the grand scheme of things is a rounding error. I'm just trying to get at, are there concerns about your ability to hit these numbers and that's why you sound the way you do, or you just continuing this trend of going -- to really keep expectations low?

It's a couple of things. Orders were soft in the first half and as we commented we're expecting a weak Q3 followed by a strong Q4. And so while CAM and the BEST revenue push out contribute to the weaker second half and the weak Q3, BioSpin and BMAT also contribute to the weak Q3. So we are going out of our way to signal the weak Q3 followed by the strong Q4.

I think we've always tried to give pretty good color on the demand that we're seeing. And so our guidance coming down from 3% to 4% to 1% to 2% is pretty meaningful in our eyes and we wanted to characterize all the drivers of that.

Tim Evans from Wells Fargo.

Hi. Thank you. Frank, what are the factors that you think created the lower BioSpin orders in the first half? And do you -- how much confidence do you have that those will resolve themselves in the second half?

Tim, we've analyzed this a little bit and to some extent it's actually the factor, it's almost last year. Last year we had a bit of an unusual order pin at BioSpin and the first time I can remember we actually had more than half of the orders in the first half of the year.

This year I think we're closer to a more typical pattern with more than half, maybe 54%, 55% of orders in the second half of the year. We only have three years of data on that and the rest is more experience from prior years that we didn't have consolidated data at the time. And indeed, as we were budgeting the year, we probably that a little to even throughout the year, so our orders in the first half of the year were weaker than what we had expected in BioSpin.

We have reasonable visibility and obviously not perfect in that business and we're pretty optimistic about orders. We have a lot of not quite orders yet, but cases that are decided. We pretty much know we're going to get these deals. But no, we don't have a written contract yet so we're -- it is a more typical order pattern and it is delayed compared to what we A, experienced last year and how we had modeled this year and how we had gotten the bottoms up forecasts for this year.

In BioSpin, I would argue that these are timing issues and there's nothing really wrong with that market. The PCI markets are growing quite nicely and the MRS markets are low- to mid-single-digit growth for the full year and look healthy. But there is a timing issue. BMAT, I have conceded and said that this is not just timing, the markets still are weaker there than what we had anticipated for this group.

Okay, thank you. And are you willing to offer any more commentary on the MALDI Biotyper rollout? Should we be looking for a bolus of placements here in the second half or maybe early 2015, given the recent regulatory approvals?

I wouldn't call it a bolus but it's steadily improving. The MALDI Biotyper certainly is seeing double-digit revenue growth and it's growing a little bit faster in the first half of the year than what we had anticipated. I don't know that there is a bolus, but it adds up nicely and that's how I would characterize it.

Okay thanks.

(Operator Instructions)

John Groberg, Macquarie Research Equities.

Thanks. Good afternoon. Jeremy, how come, I guess since you guys have announced that you're exiting CAM, why wouldn't you just move that into discontinued operations?

John, we're not exiting CAM entirely. We're, obviously, we're exiting some unprofitable product lines and that doesn't qualify for discontinued ops accounting.

Okay. And on the Rosatom revenue, is that a function of the -- some of the impacts on what's happening in the Ukraine and some of the new rules that have been passed or is it something else that's delaying that $10 million?

We think it something else and not directed related. It is clearly a customer issue. They cannot presently import. The reasons that have been cited are not directly related to the well-known crises.

But giving that entire background, while we hope that we can deliver it in 2015, I'd have to say we're -- it's a little bit indefinitely delayed. It may be 2015. It may be hard -- we cannot ascertain right now if and when we can deliver this, due to be geopolitical environment.

It presently, as best as we can read, does not fall under any export restrictions or limitations so I think -- this doesn't fall into any of the categories where there's additional sanctions or embargoes. It is a research product line. It doesn't going to certain bad sectors from the European or US perspective, as far as we can read this. So we -- at this point, it's a customer issue and it may be that the customer can sort this out.

It doesn't seem to be primarily related to the crisis, but it's a little bit murky for us to figure out what exactly all the -- how this all hangs together, quite honestly. At this point we're ready to go. It's been on trucks and we've taken it off the trucks and put it in a warehouse but at this point the customer cannot accept delivery and cannot import the equipment.

If I could just follow up on that, generally in Russia, are you seeing some of the impact of some of the sanctions and things going on? How is your general business in Russia outside of this particular product?

And then Charlie, just for you, you seem to be going out of your way to be -- I know you don't give quarterly guidance, but trying to be pretty explicit about Q3 and Q4. So would you be willing to give any more explicit guidance on what you expect for Q3 and Q4? Thanks.

Let me start with the first part of your question. Russia, there's a couple of things going on, independent of Ukraine and Crimea and all of that. It turns out that the major restructuring in the Russian Academy of Science, which is the number one driver for research equipment demand, as they decentralize a little bit and give more purchasing power to their universities, which are not part of the Academy of Science system, there are delays in research orders in Russia this year, no matter what. You compound that with extreme caution by Russian industrial customers to invest in CapEx right now, because they probably don't know what the economic outlook is other than it doesn't get better.

It's a weak demand picture. It doesn't look like any of our products are effected. There might be certain sectors -- we're not selling much into the oil sector there. But other than that, our products aren't really formally effected.

But the Russian economic weakness plus independent of all of that, a long-planned restructuring of the Russian Academy of Science makes for a weak demand. However, there is some ongoing demand in Russia, but it is quite a bit weaker than what anybody had expected at the beginning of the year. And with that, I think part two of your question -- Charlie?

John, not too much other color. Q3 is likely to look -- from a revenue standpoint, is likely look flat year-over-year. And then keep in mind that last year we had an unusually low tax rate of 20% in the third quarter whereas this year were running closer to 30%.

Thanks.

Derik de Bruin, Bank of America.

Hi, good afternoon. You've done a better job in terms of -- or a good job in terms of controlling R&D.

I'm just curious, in the R&D is down like 6% first half of the year, first half of the year comparison. How much of that is tied to CAM? I'm curious in terms of -- where you're basically doing the R&D focus?

Probably the biggest year-over-year reductions were in CAM and BEST. We've also been, I guess, more prudent with some decisions in some other businesses as well. Obviously, late last year we did some right-sizing across the BMAT portfolio as well, and so that has some follow-on benefits into 2014.

So I guess the important point is it's not we're kind of slashing 5% or 6% across the board. We are pretty selectively either reducing investments that we don't think were going to yield commercial benefits in a reasonable amount of time or and businesses that went through a right-sizing last year.

That's a very strategic process. It's also a process driven so as we have now really implemented pretty well this product lifecycle process. Some projects that are smallish and don't have a good ROIC may just not be continued or maybe put on ice for a year put aside for a while or something they fail at an advanced stage, but fail rather than discontinue with further expenses for another year or two. There is -- in a way it's a good sign of our process improvement in addition to some strategic choices were to invest in more dynamic allocation of expense investment.

I was getting at this in terms of that. That's sort of the answer I thought you were going to give, but I just was curious in terms of how we sort of think of R&D growth as we going to 2015? Are you going to keep that savings or are you going to invested in some of the other projects?

Were in the middle of our strategy process which will finalize in September and then go into the budgeting. It's a little too early for us to make any -- it will be -- we use the same processes and the overall strategic dynamic allocation approach that is a little bit new to -- that is new to Bruker in the last year perhaps. And -- but I cannot predict yet the results and the choices that we will make for 2015.

Can we think about what sort of is going to be the impact on the gross margin for ramping down CAM? And so how should we -- how should we sort of think about that modeling in the second half of the year. And then once again as we sort -- assuming that you're able to divest it, how should we think about the margin impact in 2015?

Qualitatively, CAM clearly had among the worst gross margins, certainly within the BSI segment and I think it'll be more of a 2015 impact than I think -- were not quite prepared to quantify that yet for 2015.

Okay. And on the BMAT business, some of the -- you say similar things about the semiconductor and some of the electronics maybe versus the other companies that sell into that market. But I'm just curious, are you seeing anything from competition in Japan?

Also, in there you do have some of your x-ray businesses where you do have competition (inaudible) companies. I'm just wondering if the Japanese companies have been a little bit more aggressive.

Yes, they have. And the answer is correct. AXS is facing one of its two big competitors is a Japanese company. And they are, of course, benefiting from a -- over 1.5 year 40% lower yen versus euro in this particular case and they're using -- there trying to use that.

We see that a little bit in Amara as well with JOL, and so that is a contributor, yes. There is -- clearly, it's not only that it hurts our margins for the business we get but the lower yen but it also has those implications that you have outlined. That's correct.

Ross Muken, ISI Group.

Good afternoon, guys. As we think about, I mean, this business has now done somewhere between, I don't know, $0.70 to $0.80 of earnings since I think 2010. If you think about the challenges you've faced and sort of the efforts you've made to obviously improve the profitability and sort of create some shareholder value here.

Do you feel like there are some -- maybe in the more recent time since you began the restructuring, there are things that you pushed in the business maybe that you could've phased in differently? Or maybe you could of identified the CAM asset is something that would be a challenge earlier and then focused on that.

It feels like every few quarters here something pops up that kind of resets the earnings back to a normalized rate and that sort of high 70%s low 80%s. I'm just trying to get a sense for as you've graded how you've done the last one to two years since you sort of embarked on this. Is there anything you really wish you would've done differently? Is there anything, when you look at it, that probably maybe had a more impact on the business than you would've thought?

I feel really good about the leadership and the process changes and the transformational steps that were taking here. Clearly in hindsight, if I could do the CAM acquisition 3.5 years, 4 years ago exactly, a little bit more over 4 years ago, I would do it again but I would be much, much more selective in the markets and product lines that we tackle. I'm obviously pleased that we got the triple-quad technology and that's a really great addition and very complementary to a lot of other things were doing.

But other things were too ambitious at the time, strategically. And we tried to initially, I tried to initially, fix that with the more gradual restructuring, exit a site, do this, invest in R&D. And if there's -- if I could do it over again, I would take the major CAM more radical step that were taking now a year or two earlier. That's simply a lesson learned, I hope.

I think the other things I think we're on track. There is a significant currency headwind that we been facing last year that were still facing this year. Were getting improvements in lieu of that.

There's a lot of things that are happening in restructuring and outsourcing and lean transformation that I think will have a good continued ongoing buildup of margin effect from gross profit margin and of course OpEx control. So there's a lot more work to be done but I think one mistake, if you like, where by not acting earlier and trying to do it more with gradual restructuring was on the CAM side.

Okay. I guess what I'm trying to gauge is, sort of, Frank, what's your level of frustration with how things have transpired? I'm trying to get a sense for -- I know when Charlie and others came and in there was sort of a view of improving operational excellence. This has always been a great R&D organization and you taken some at a working cap and we've seen some efforts done on the SG&A line.

Do you feel like when you look at sort of what's been accomplished, do you feel like, you know what, this is going to be -- we've been telling the street this is a long-term transition. And so ultimately what's happened is sort of explainable. Ar do you feel like the level of frustration with sort of the lack of responsiveness of the organization, I guess, or the choppiness the business has seen sometimes maybe it's been a little bit frustrating?

I don't get frustrated that easily and I do know with currency and with the weakness in the BMAT sector there are some headwinds, or it's steeper uphill, at least temporarily but some of these things also don't last forever. We will not be an industrial or semiconductor low point forever, although it has taken longer and that is somewhat frustrating, I agree. I feel good about the steps that we are taking and I think we're taking the right steps and I think the team is also actually reasonably upbeat. I think there is some improvements in the markets that we are seeing. I think we're excited about our product.

I think we're excited about the transformation, the outsourcing, so I think we're taken the right steps. I do agree that in CAM now that it -- well, it's not done yet, now it's being implemented, but now that the fundamental decision is there that should of been done at an earlier stage. But of course that's with the benefit of hindsight and the clarity after the decision.

Dan Leonard, Leerink Partners.

So Frank or Charlie, it's unclear to me what CAM profitability is going to look like after the restructuring. Is CAM still going to be losing money?

Dan, on a direct basis, CAM is going to be close to breakeven immediately after the restructuring activities are done. The reason we worded the profitability improvement the way we did is because there's an amount of fixed cost, essentially, that are Bruker infrastructure, G&A, offices, et cetera that are allocated on CAM right now that don't kind of easily go away as a result of this restructuring. Kind of the profitability of CAM improves quite a bit, but it's going to need to continue to improve even beyond the end of these restructuring efforts.

Got it. And Charlie, do you expect to conclude the CAM divestiture or wind downs by the end of 2014, or could any of this activity going to bleed into 2015?

It could bleed into 2015. Keep in mind that financially, obviously, we have a great incentive to go as fast as possible. But we're dealing with employees and we're dealing with customers who -- customers in particular who need to know what the future holds for them in terms of service and support for instruments that they've purchased.

We can't -- believe me, we're going to go as fast as we possibly can. But there are some -- there are some employee and customer considerations and then also we're trying to work some divestiture transactions as well. All of those things could result in some of this -- some of this work spilling over into 2015 but clearly we're going to go as fast as we can.

I think the bulk of the restructuring and restructuring charges will be in this half -- in the first, second half of 2014.

Should be.

Got it. Thank you.

Dan Arias, Citi.

Afternoon. Thanks for fitting me in.

Frank, within CAM, and just thinking about the stuff that you're keeping there, you made a comment on triple-quad so hoping maybe you could just give an up take on how uptick is been there since the launch of the evo systems.

Right. We're keeping the basically the LC technology, which we don't use as to be an LC company but to build LC-MS systems that we didn't even mention because that already been integrated fully in a way so as no further a restructuring to be done there. And the triple-quads, both GC and LC triple-quad.

And I think since our launch of the evo series of LC triple-quads, I think we got a nice markets, a small market toehold, I would say. But I think I'm really pleased with how this product has now become stabilized in terms of it is really a robust product, it has great hardware, great source technology.

So I think the productivity of these products in the customer acceptance by and large has been really quite good. And when you get into a completely new field like this, you expect to have some teething problems. We had some but overall I think we've overcome those and I think we have a small but satisfied customer base now that will provide good word of mouth and references and follow-on orders.

And we're now getting into the phase where were looking at more workflow and applications-driven development. There's always incremental improvements on the hardware and of course software development never ends. But I think there's a lot of market and workflow vertical market, if you like, that we are now pursuing where we think will also get even more differentiation in certain vertical segments. So I'm pleased with that. It's a good fit with everything else we're doing with high resolution, accurate map, QTOF and other systems, so that is a really good fit.

Got it. And then just to go back to the Biotyper, curious if you're seeing uptick from the community hospital setting as well as some of the larger academic centers? And then maybe just on the menu, a comment on the current in terms of timing for getting gram positive and use approval. Thanks.

Yes. So community hospital is not -- no, not in this country at this point. But in Europe in some countries we really are at that level, where much smaller hospitals than we had perhaps ever anticipated just need their own MALDI Biotyper because it's becoming a standard of care.

In the US, were not at that level yet. It's too early. The market penetrations beginning and predictably so with the larger hospitals. And of course also others, like regulators and pharma companies and other types of customers.

FDA -- US FDA, claim two. We're in clinical trials and we've would hope to have that second claim before the end of the year.

Thank you.

Tycho Peterson, JPMorgan.

Thanks. Question on spending on SG&A in particular.

You guys were up $6 million sequentially. I think, Charlie, you said $2 million and that was back half. A lot of the rest was related to the MALDI Biotypers. Can you maybe just talk about, was there some upfront cost that you embedded here and should you start to see a little bit more SG&A leverage in the back half of the year.

And then as we think about MALDI Biotypers, there's obviously a lot of competitors trying to come in culture, pre-method. If you could just touch on the competitive dynamics, that would be helpful.

Sure. On spending, the year-over-year increase, Q2 last year was, I would say was exceptionally low. Sequentially, you're right, we're up about $6 million on SG&A. Q2 is, in addition to kind of currency change year-over-year, sequentially Q2 is a very heavy period for trade shows.

Bruker was represented at a lot of trade shows and did a lot of marketing in Q2. A lot of that related to life science and the MALDI Biotyper but not exclusively that. So just kind of marketing and trade shows in general were up quite a bit in Q2.

And then as I mentioned there's been some spending in rounding out the corporate infrastructure and some of the projects we have ongoing around some of our systems. And some of that hit in the second quarter as well.

And I would simply -- that's all correct, obviously, and I would add that the regulatory part and the regulatory spending on MALDI Biotyper in multiple countries for multiple claims that is clearly increasing. But it's a well worthwhile investment. This is a good gross margin product and it obviously has very good growth in still large untapped markets and further legs as we add additional capabilities to the base platform.

Can you touch on the competitive dynamics as well, Frank, for the MALDI Biotyper? Just as you think about some of the new systems coming to market.

Well having been at recent conferences, I didn't see any change in the competitive dynamics. And we believe we continue to, if anything, extend the capabilities and performance gap which I think positions us to be an overall leader in the capabilities of that solution for MALDI identification and increasingly, at least as work in progress also for selected (available) susceptibility assays.

I think our competitive position has been improving. And I think commercially, I think we continue to be the market leader in this in just about any country and certainly any region in the world that I'm aware of where I have data. I felt very good about our competitive position for this product.

And then you, last quarter you had called out pricing dynamic, I think lower pricing for certain products. Can you maybe just touch on the impact on pricing in the quarter and what you're embedding for the back half of the year?

I think the pricing discipline that we are -- I think it's taking hold. In certain areas in the earlier in the year, or also last year, we did see some pricing pressures in the industrial areas where demand had been weaker. And in some of the industrial areas demand has picked up, it's just in microelectronics in particular it has not picked up -- Microelectronics including data storage and semi conductor.

There is pricing discipline. There's new features, where we try to get higher average selling prices and better gross margins. The biggest driver of pricing pressure is the lower yen.

Amanda Murphy, William Blair.

Is actually JP in for Amanda. I have a quick one on if you could talk about maybe outside of the CAM restructuring, how the other operational improvements are going?

They're going well. Were making progress there. The LSC division is doing a lot of the high level assembly outsourcing of some of its -- some of its MALDI product line and that's going very well.

We have -- it's obviously a lot of things that you've got to get right and so far we haven't had any supply issues and the quality is there so we're pleased with that. That sets up nicely for one of our larger product lines.

Debio, where a lot of the Bruker BioSpin with a lot of their electronics connectics, as they call it, and other outsourcing, where a major supplier had been picked already last year. But it's now, it's like really something like a six-quarter project to transfer more and more and more subunits over to that major supplier and contract manufacturer.

That's all ready much going according to plan and there's many other initiatives in each and every division. Every division has outsourcing and lean projects. Not all of them are visible and large but there are making good progress on that.

Actually, I'm pretty pleased with these things in addition to the major CAM restructuring piece. I think we're really on track and we're executing and we have more projects for the year and more projects for next year so I think is a good healthy ongoing process with steady progress.

Bryan Brokmeier, Maxim Group.

Hi, good afternoon. You mentioned that CAM utilized some of the corporate offices and other G&A of the business, but beyond that I guess I'm thinking of manufacturing facilities and sales force. How integrated was CAM with the rest of the business?

Manufacturing, not really at all. It's got its own location. You recall that we actually closed a CAM manufacturing facility last year so I think there is pretty separable.

From a sales force standpoint, also pretty separable, but again keep in mind that we're keeping the triple-quad products so some of the CAM sales force is going to be staying with us and continuing to grow that product line. Overall, I think the direct cost in sales and marketing, manufacturing, even in overhead to some extent, there's a large chunk that is very easily separable and identifiable. And the amount that's allocated and not separate is proportionately relatively small, but harder to eliminate.

And you also, you expect the CAM division to be around breakeven, so will margin extension come from growing the new smaller CAM business? Or what are sort of the next steps to further improve that division profitability?

Were restructuring the factory and the location. Were consolidated factories with our other larger Daltonics factories, so they'll be factory footprint consolidation. And we also expect to gain a lot of -- we expect to gain a lot of efficiency there.

Plus further redesign to cost and taking out some expensive components. So it's by design from the R&D department and it's also by for the restructuring of the piece that we do keep and footprint consolidation.

Sung Ji Nam, Cantor Fitzgerald.

Hi. Thanks for the questions. Frank, you talked about some competitive dynamics I think for BMAT and maybe Biotyper as well. But was curious what you're seeing our BioSpin or other Daltonics in terms of competitive dynamics.

BioSpin, you're all aware that in preclinical imaging in MRI there is less competition than there was in the past that has been announced and well-publicized. It's also -- the same is true is for the ultra-high field segment of the NMR market, which may only be 10% of the NMR market, but it does help.

I think, in the overall NMR market, I think it's at least outside of Japan I think it's a more rational market where everybody -- all public companies that want to have decent gross margins and the overall margin, operating margin improvements. So I think it's rational competition.

In Daltonics I believe a similar trend by and large with very capable competitors all having some new products. We're pretty excited about what we launched this year. And either in microbiology with the Biotyper or elsewhere I think companies are primarily focused on profitable growth.

So nothing unusual there on the competitive dynamics, I would say. It's a vigorous competition with capable competitors but I don't think there's anything -- the AXS piece and a little bit the BioSpin currency piece, I think that maybe the area that I highlighted as a negative. But I think the rest is actually the ones that I didn't mention are -- I think a reasonable competitive dynamics and reasonable pricing discipline, by and large.

Peter Lawson, Mizuho Securities USA.

Frank and Charlie, so ex CAM and BEST, would you have lowered the guidance for the bios in BMAT or would that have been captured the prior guidance?

I think the Rosatom and BioSpin and BMAT we would have to bring down the guidance a little bit as well. Obviously to a lesser -- much lesser extent.

So even kind of BEST -- ex BEST Rosa business just for the BioSpin and BMAT, would that not been captured in prior guidance?

No. Listen, we talked about, the reduction in guidance on the revenue line is roughly half CAM and then you've got the BEST component. The remainder is a mix of puts and takes, right?

The biggest negative that we talked about is the timing of demand in BioSpin and BMAT. There are some positive that offset the that partially. So in this hypothetical example, if all the other issues or other adjustments didn't need to be made, would we reduce it for BioSpin and BMAT alone? We would, yes.

And then the CAM contribution and impact on revenues and EPS in 2013, what was that? Or can you give us kind of a picture of what organic and EPS growth would look like ex CAM?

We can't do that reconciliation right now.

Got you. Okay. Thank you.

Paul Knight from Janney Capital Markets.

Hi, guys. It's actually Brian Kipp on behalf Paul. Thanks for taking my questions. Just two quick ones.

I think you highlighted 200 to 250 people reduced employee side in CAM in context with the $50 million to $70 million in reduction which suggests 50% to 70% reduction. How is that? Is that about the same, in that same range? Or is it a little bit less there?

You're going to have to repeat the question. I didn't understand.

So the $100 million in reduction overall, or the $100 million in CAM revenues last year, you're citing 50% to 70% in reduction from the divestitures. You also mentioned in your 8-K release that you're going to reduce headcount by approximately 200 to 250 people. Is that equitable to the reduction in revenues or is it a little bit less? I know you kind of alluded keeping some people online but just kind of want to get color there.

I see. I see. It's a little bit less, I would say, proportionately a little bit less.

And then the restructuring charges are, I'd say, disproportionately larger, because there are a lot of non-personnel costs that we are anticipating in the restructuring charges, including facility leases, fixed asset and inventory write-downs as well. So those restructuring causes aren't solely for employee costs.

Perfect. And then the other one (multiple speakers) --

It's not far from out of line. About two-thirds of the revenue and about two-thirds of the employees. It's more or less in line.

I was just kind of thinking in context down the road as well if there, if there is additional leverage in that side. Appreciate it.

And the other one's just another quick one on BioSpin. I know you guys have alluded to back half order growth of probably 50% to 55%. Can you give some visibility there, because I know -- ?

No, as the percentage of our orders we expect more than half, more than 50% in the second half. We did not say 50% order growth. Sorry if I was misunderstood. Last year, it turns out we had more than 50% of our orders in the first half, which was actually the unusual year at BioSpin. Normally more than 50% of the orders come in the second half.

Ladies and gentlemen, at this time we have reached the end of the allotted time for today's question-and-answer session. I would like to turn the conference call back over to Joshua Young.

Thank you, Jamie. Thank you for joining us this evening. We encourage you to visit us at our headquarters in Billerica, Massachusetts. Thank you for your attention and have a nice day.

Ladies and gentlemen that does conclude today's conference call. We would thank you -- like to thank you for attending. You may now's disconnect your telephone lines.