Bruker Corp (BRKR) 2024 Q2 法說會逐字稿

Good day and welcome to the Bruker Corporation second-quarter 2024 earnings call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Mr. Joe Kostka. Please go ahead, sir.

Good morning. I would like to welcome everyone to Bruker Corporation's second-quarter 2024 earnings conference call. My name is Joe Kostka, Associate Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our EVP 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.

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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent and pending acquisitions, geopolitical risks, market demand or supply chain.

The company's actual results may differ materially from such statements and 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 ending December 31, 2023, as updated by 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, August 6, 2024. 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 third quarter 2024 financial results expected in early November 2024.

You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the second quarter and first half 2024 in more detail and share our updated full year 2024 financial outlook.

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

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's second-quarter 2024 earnings call. Our teams have delivered excellent revenue growth in the second quarter and a solid first half of 2024, despite soft market conditions.

We continue to execute on our dual strategy of Project Accelerate 2.0 portfolio transformation and operational excellence, posting well above market organic revenue growth and even stronger constant exchange rate or CER revenue growth.

We see mostly good demand for our differentiated scientific instruments and Life Science Solutions. But we acknowledge that biopharma demand has remained weak. And in China customers appear to delay some purchase decisions into the second half of the year. While they apply for more funding from the announced stimulus package.

We now expect mid-single digit organic revenue growth in the third quarter of 2024, and we maintain our guidance of full year organic revenue growth in the range of 5% to 7%. Our well above organic growth is driven by Bruker's differentiated innovation engine as well as our multiyear transformation towards fundamentally favorable secular trends for our unique enabling tools for the post genomic era.

We are also benefiting from strong orders in semiconductor metrology in support of high-performance computing for the AI megatrend, with strength in orders in Pacific Rim countries and North America. On May 17, we hosted an investor webinar in which we provided in-depth look into the three well-timed strategic acquisitions that we completed in the first half of 2024.

These major acquisitions further accelerate our portfolio transformation and addressable market expansion into spatial biology, molecular diagnostics, as well as into laboratory automation and digitization. So far Chemspeed is overperforming our expectations and the performance of ELITech and NanoString. It's reassuringly very much in line with our initial expectations.

Chemspeed is doing quite well, as industry appears to favor CapEx investments in productivity via R&D or QC lab automation and digitization, even at times when industry, including pharma tries to reduce headcount and OpEx.

Moreover, we're very pleased with our ELITech sample-to-answer molecular diagnostics business, where we have added excellent new leadership teams in Italy and the US for our combined Bruker molecular diagnostics business that we are now integrating with our previous molecular diagnostics business in Germany to achieve additional synergies.

ELITech growth in 2024 for the full year, including the periods when we didn't own, it appears to be on track for mid-single digit to high single digit revenue growth. And we are delighted with ahead of plan placements of our ingenious and B Genius sample to answer molecular diagnostics platforms in the first three months, May through July, which is ahead of our expectations and which bodes well for 2025 when these platforms should be at full essay consumables pull through.

In general molecular diagnostics is one of the market bright spots at the moment. So the timing of our ELITech acquisition seems to be very good. Most importantly, perhaps from an investor perspective, I would like to take a moment to provide additional updates on our NanoString business, which we acquired in early May.

I am pleased to report that after exactly three months today of writing the NanoString business, Bruker already has the improved visibility to fully incorporate NanoString into our formal guidance for fiscal year 2024 now rather than in 2025, as contemplated previously during our May 17 investor webinar.

We continue to anticipate about $10 million per month NanoString revenue run rate for fiscal year 2024, and we expect a solid rebound and significant step-up in 2025. On margin improvements for NanoString. As you may recall, the previous NanoString public company had already taken very considerable cost actions in the fourth quarter of 2023 and then again in the first quarter of 2024.

Moreover, Bruker did not acquire the public entity with its cost overhead, but we acquired the NanoString business in a lean asset deal. This will benefit us in the second half of 2024 already. By the end of 2024 and into 2025. We expect to also see the benefits of multiple additional cost actions such as facility consolidation, in-sourcing of [Cognex] production, very meaningful cloud software savings and many other growth and cost benefits of our operational excellence drive at NanoString. We expect the financial benefits in 2025 and beyond.

Finally, we have also taken significant cost actions across other areas of Bruker in order to offset in part some of the initial NanoString margin and EPS solution. I was just in Seattle at NanoString recently, and I'm very pleased to report that our Bruker Nano group has already put in place an aligned, lean and highly motivated NanoString management team, applying our Bruker management process to re-accelerate innovation and growth.

At the same time, we are advancing operational excellence for cost of goods sold and OpEx reduction to drive NanoString margin improvements. Altogether, I'm really quite optimistic that the NanoString acquisition will turn out to be strategically and financially excellent and a high ROIC investment for Bruker.

Getting into the financial leads now and turning to slide 4. In the second-quarter of 2024, Bruker delivered a very good growth quarter as our innovative products remained resilient, despite choppier conditions in certain markets.

Bruker's second-quarter 2024 reported revenues increased 17.4% to $800.7 million, which included a currency headwind of 1.1%. On an organic basis, revenues increased 7.4%, which included 8.6% organic revenue growth in BSI and a 2.8%-minus organic decline in our best segment net of intercompany eliminations.

Revenue growth from acquisitions added 11.1%, which implies constant exchange rate or CER growth of 18.5% year-over-year in the second quarter. Our second quarter 2024 non-GAAP margin was 13.8%, a decrease of minus 150 bps year-over-year as significant organic operating margin expansion was more than offset by the expected initial headwinds from recent acquisitions, as explained in our investor webinar in mid-May.

In the second quarter of 2024, Bruker reported GAAP diluted EPS of $0.05 per share compared to $0.39 reported in the second quarter of 2023. On a non-GAAP basis second quarter 2024 diluted EPS was $0.52, up 4% from $0.50 in the second quarter of 2023. Gerald will discuss the drivers for margins and EPS later in more detail.

Moving to the first half 2024 performance on slide 5. You can see Bruker's solid performance and execution in the first half of 2024. With organic revenue growth of 4.5%, while non-GAAP EPS was down 8.7%-minus as expected, due to our transformative acquisitions.

More specifically, our first half 2024 revenues increased by 11.4% to $1.52 million. First half organic revenue growth consisted of 4.2% organic growth in scientific instruments and 7.3% organic growth at best net of intercompany eliminations.

First half 2024 BSI book-to-bill ratio was below 1, but well above 0.9. We were able to buffer this with our significant backlog as we prepare for a more extended period without a robust biopharma recovery yet or the immediate benefits of the China stimulus package, which we now expect to benefit us in 2025 and beyond.

Our first half 2024 non-GAAP gross margins and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide 5.

Please turn to slide 6 and 7. Now where we highlight the first half 2024 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 half 2024, BioSpin Group revenue was about $400 million and grew in the high teens percentage.

There was one gigahertz class NMR system in revenue in the second quarter of 2024. And we do expect two more gigahertz class NMRs in revenue in the second half of 2024. In the first half of 2024, BioSpin saw growth across academic government and industrial research markets, as well as the Integrated Data Solutions division for biopharma Process Analytical Technologies and our vendor-agnostic Skywise scientific software platform.

For the first half of 2024, CALID Group had revenue growth of $494 million and increased in the high single digit percentage with growth in the optics, molecular spectroscopy and microscopy business as well as in microbiology and infectious disease driven by the MALDI Biotyper franchise.

And finally, as well by the addition of the newly acquired ELITech molecular diagnostics business that we closed at the end of April.

In the second quarter at ASMS, we launched two exciting timsTOF Ultra2 spectrometers, and I'll come back on to that with a separate slides.

Please turn to slide 7. Now for the first half 2024, Bruker NANO revenue was $493 million and grew in the mid-teens percentage with strong revenue growth in aca/gov, academic government and industrial research markets. We also saw solid growth contributions from our recently acquired Bruker Cellular Analysis, the former PhenomeX and they just recently acquired NanoString business.

Our Advanced X-Ray, and Nano Analytics tools businesses delivered strong revenue growth in the first half, while life science fluorescence microscopy revenues were down. Finally, first half 2024 BEST revenues grew in the high single digits net of intercompany eliminations, driven by growth in big science and Fusion research projects as well as our RI, EUV technologies for OEM, semiconductor lithography tools. This is different from metrology. These are semiconductor lithography tools also in support of AI.

Moving to slide 8 and 9. Now we highlight the transformative growth and portfolio repositioning that, over a four year period are expected to lead to an impressive cumulative reported revenue growth of greater than 70% and greater than 14% CAGR from fiscal year 2020 to the midpoint of our 2024 guidance. This is rather good compared to other mature companies in the life science tool space, which did not have significant COVID revenue overshoot and which typically grew in the mid-20%-s.

Our 70% cumulative reported revenue growth, which we call transformative over those four years, incidentally, had about 58% cumulative organic revenue growth and the remainder was acquisitions. So we rather pleased and I think it highlights how four years later, Bruker is really a transformed fast-growth company.

If I may take your attention to slide 9, it's a quick summary. I won't talk through all the bullets, but we had rather important launches on the consumable side, but also in the mass spectrometry instruments side at the recent ASMS, with the flagship timsTOF Ultra to launch, that takes sensitivity to the next level for even better single-cell proteomics and immunopeptidomics. And it opens a new window on subcellular proteomics, very remarkable and highly, very timely for biological research.

Moreover, we launched a multiomics Mass Spec Imaging benchtop system, the neofleX MALDI-TOF, which I think will be very well received. And it uniquely enables multiomics co-localization on tissue of proteins, lipid metabolites and glycosylation. It's really very popular and a very unique product.

So in summary, Bruker continues to see well above market organic revenue growth and even more significant constant exchange rate revenue growth for our instruments and solutions across our portfolio. We have further accelerated our portfolio transformation and addressable market expansion into spatial biology, molecular diagnostics as well as lab automation with recent M&A.

We are confident that applying our proven Bruker management process and culture of disciplined entrepreneurial-ism will lead to operational excellence, profitable growth, and significant margin expansion in our recently acquired businesses over the next three years and beyond.

With that, let me turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 and fiscal year 2024 outlook in more detail. Gerald?

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide more detail on Bruker's second-quarter and first half 2024 financial performance, starting on slide 11.

In the second quarter of 2024, Bruker's reported revenue increased 17.4% to approximately $801 million, which reflects an organic revenue increase of 7.4% and BSI organic growth of 8.6% all year-over-year. We reported GAAP EPS of about $0.05 per share compared to $0.39 in the second quarter of 2023. On a non-GAAP basis, Q2 2024 EPS was $0.52 per share, an increase of 4% from the $0.50 we posted in the second quarter of 2023.

Our Q2 2024 non-GAAP operating income increased 6.3% and non-GAAP operating margin decreased 150 basis points year-over-year to 13.8% as higher gross margins and strong organic operating margin expansion was more than offset by operating margin headwinds from our recent acquisitions.

We finished the second quarter with cash, cash equivalents and short-term investments of approximately $170 million. Our second quarter treasury program was very active as we completed $1.3 billion in funding of the ELITech and NanoString acquisitions with about $0.9 billion of financing through fixed low interest rates, -- debt and the balance through the $400 million follow-on equity offering.

We also funded selected Project Accelerate 2.0 investments as well as capital expenditures in the quarter. We generated $0.9 million of operating cash in the second quarter of 2024 compared to $13 million in the second quarter of 2023.

Capital expenditure investments were $26 million, resulting in free cash outflow of $25.1 million in the second quarter of 2024, compared to $10.5 million in the second quarter of 2023. In the second quarter of 2024 as a result of our volume of M&A in the quarter, we incurred and paid additional acquisition related expenses.

Just as a reminder, Bruker's second quarter seasonally tends to have the lowest cash flow of our four quarters.

Slide 12, shows the revenue bridge for the second quarter of 2024 as Frank as reviewed earlier, compared to Q2 2023, BioSpin Q2 2024 organic revenue was up in the mid-20% range, driven by strength in our preclinical imaging and our software businesses.

Additionally, we had 1 and 1.2 gigahertz system in the second quarter 2024 revenue. While there were no gigahertz class systems recognized in revenue in the second quarter of 2023. Nano organic revenue was flat as strength in electron microscopy and Advanced X-Ray was largely offset by softness in for fluorescence microscopy.

CALID organic revenue grew mid-single digits percentage with strong performance from the multi Biotyper and molecular spectroscopy. We delivered solid growth in the second quarter of 2024 in BSI systems and aftermarket revenue with low double digits ER growth in systems and strong double digit growth in aftermarket.

Geographically and on an organic basis in the second quarter of 2024, our Americas, revenue grew in the low teens percentage. Asia Pacific revenue was essentially flat, while the European revenue had low double-digit percentage growth all year-over-year. For our EMEA region, Q2 2024 revenue was up low single digits year-over-year.

Slide 13 shows our Q2 2024 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 51.3% decreased 40 basis points from 50.9% in the second quarter of 2023 due to favorable product mix and select pricing actions.

For the second quarter of 2024, our non-GAAP effective tax rate was up 320 basis points to 28.4%, impacted by jurisdictional mix and an unfavorable discrete item in the quarter. Weighted average diluted shares outstanding in the second quarter of 2024 for 148 million, an increase of about 0.3 million shares from Q2 2023, modestly impacted by our follow-on offering at the end of May. Finally, Q2 2024 non-GAAP EPS of $0.52 was up 4%, compared to the second quarter of 2023.

Slide 14 shows the year-over-year revenue bridge for the first half of 2024. Revenue was up $155.2 million or 11.4%, reflecting organic growth of 4.5%. Acquisitions added 7.4% to our top line, while foreign exchange was a 0.5% headwind. And Frank has already covered the drivers for the first half of 2024. Non-GAAP P&L results for the first half of 2024 are summarized on slide 15, with the drivers largely similar to the second quarter of 2024, as explained on the slide.

Turning to slide 16, we had $24.7 million of free cash outflow in the first half of 2024, down $76.7 million compared to the first half of 2023, driven principally by acquisition expenses, lower profitability and the timing of advances, taxes and other items.

Turning now to slide 18, now that we have improved visibility to NanoString performance and outlook, we've now included NanoString and all closed acquisitions in our formal 2024 guidance.

Our outlook for fiscal year 2024 now assumes increasing our revenue estimates to a range of $3.38 billion to $3.44 billion and maintaining organic revenue guidance of 5% to 7% for fiscal year 2024. We now expect the contribution from acquisitions to be approximately 10%, up from prior guidance of 7%, and we continue to expect a foreign currency headwind of about 1%.

This leads to updated reported revenue growth in our guide in a range of 14% to 16%, up from our prior guidance of 11% to 13%. For operating margins in 2024, we continue to expect greater than 50 basis points of organic operating margin expansion more than offset by greater than 300 basis points of headwind from our recent acquisitions and foreign exchange.

On the bottom line, we're tightening our fiscal year 2024 non-GAAP EPS guidance range $2.59 to $2.64 despite significant EPS dilution from the recent acquisitions. This guidance implies non-GAAP EPS flat or up low single digit percentage from fiscal year 2023.

Other guidance assumptions are listed on the slide. Our fiscal year 2024 ranges have been updated for foreign currency rates 2024. Now some color on the third quarter of 2024 against a strong prior year comparable, we now anticipate mid-single digit organic revenue growth in the third quarter.

We expect third quarter 2024 non-GAAP EPS to be down meaningfully year-over-year, but up sequentially over the second quarter of 2024, with the reacceleration of year-over-year EPS growth expected in the fourth quarter. Against the backdrop of mixed macro-economic conditions and ongoing geopolitical risks. It's important for me to confirm that we are proactively managing costs across all of our businesses.

And finally, thanks to the remarkable work of my colleagues, integration actions are progressing well in each of our recent acquisitions. I remain very confident in our ability to establish our Bruker management process, drive operational excellence to strengthen operating margin performance and drive rapid EPS growth over the next three years and beyond.

To wrap up, Bruker delivered solid organic revenue growth and organic operating margin expansion in the second quarter of 2024. Our businesses continue to execute well under muted market conditions, and we look forward to updating you again on our third quarter progress in November.

And with that, I now turn the call over to the operator to begin the Q&A portion of the call.

(Event Instructions) Thank you for your support and interest in transform Bruker.

We will now begin the question-and-answer session. (Operator Instructions)

Puneet Souda, Leerink Partners.

So maybe just a financial one first and then a broader question. So I appreciate the organic growth guide remain the same for the year, but -- margin was slightly lower. And Gerald, I think you're expecting a lower up margin than third quarter. Just maybe talk to us about what's your expectation there and what can drive that higher or lower? What's in your assumptions for NanoString? And any weakness, as you pointed out in the market just broadly speaking, given sort of the hard landing concerns and things that could materialize in the market?

Well, it's all in right, there's many moving pieces. You've cited many of them, right. And so that's why, I mean, we don't do that by quarter, but for the full year. If you go to our slide 18, with the assumptions that go into our revenue and non-GAAP EPS guidance, for instance, on the operating profit margin that implies that it's around 16% for the year, up organically more than 50 bps. So we continue to make progress in our core business. That's good.

And this year, as expected, with a headwind of about 300 bps on M&A, a little bit of FX, mostly M&A, all while maintaining our R&D OpEx at about 10% of revenue. So that's how it all comes together. NanoString, China, biopharma and all right, including the very good thing. I mean, we do have continued lack of demand growth at least outside of China, and that's up.

We had good diagnostics growth, very solid business is the highlight right now probably on from a macro grows faster than the life science tools market right now and yes, we did have very nice semiconductor metrology and a little bit of lithography growth in orders.

So that's the beauty of our portfolio, right. There are many things. And this year it's more mix, but still overall, looking at that 5% to 7% organic revenue growth and of course 15% to 17% CER growth for the full year. That's how it all comes together, all the pieces.

And that's a good segue into my broader question. I mean, if you can take a step back and help us understand where Bruker can continue to outperform the market, both in the top line and in earnings once the acquisitions are baked in. And I think there is some sort of near term questions. But once you emerged from that, I mean, I think you pointed out that on the slide 8 some.

But just wanted to see if you could elaborate a bit more on the strength and the differentiation at Bruker. I mean, you're heavy instrumentation, heavy company, but you continue to deliver significantly outsized growth versus your peers. And instrumentation is the concern in the market. So just help us educate a bit on how you're positioned in the market and the overall continued growth and how to think about that for Bruker in context of the backlog as well? Thank you.

Yes, right. Of that 70% cumulative growth, well over 55% was organic. And indeed, while this year is no longer double digit organic revenue growth at Bruker, it's still very good. And, if the LS tools market this year organically is flat or perhaps down a couple of percent. Obviously, the differential is still much higher than the 200 bps to 300 bps differential that we have in our, that we aim for on average or hopefully every year in terms of outgrowing the market.

First, because we fundamentally reposition, we're not your traditional life science tools or analytical instruments company anymore, our positioning for the post genomic era with spatial biology with single-cell with proteomics with multiomics. With protein-protein interactions, binding structure, that's where the funding gets allocated. So even in a weaker environment, we're still doing quite well for also really in terms of clean tech and industrial research. It's really not bad for us.

Diagnostics is very defensible. Our clinical microbiology, our new or much increased molecular diagnostics business with ELITech being the larger piece, and we had a bit within Bruker already that gets now integrated.

Those are all good demand drivers that support our organic growth guidance this year and our medium term, well, not just aspiration, but really plan to continue to outgrow the market over the next few years, we expect that on average, will outgrow that to the 300 bps.

We have this more and more meaningful semiconductor metrology, a little bit of lithography. I mean, it was 8% of revenue, but it's going to clearly approach 10%. Then maybe it will go to 15% in the next few years. And I mean, AI is really and there might be some stock market overshoot, but who cares, right.

The AI and high performance demand for the unique semiconductor metrology tools in our Nano Group is there and so that's an extra bonus that and not a lot of it. I think there's one other company pretty large company that also had some benefit from that, but we're unique in that.

So our portfolio it's really not comparable to anybody else anymore or there isn't a close peer, their peers for parts of what we're doing and then we've really just become a really differentiated company. And I think the proof is in the pudding. But I don't mean to belabor it, I think it's evident.

We hope that the clarity or the greater clarity that we now have around Nano streaming as well as ELITech and can speed and so on takes that, slight confusion, we weren't confused, but we did cause some confusion, admittedly with these multiple acquisitions. I think people hopeful they can now see through that and look at our performance again, this year, core and with acquisitions hiring when I look at it. So anyway, I don't mean to that. So that's up.

There's nothing new here. That transformation started with Project Accelerate in 2017, Accelerate 2.0 in 2000 and now of course, after three years of double-digit organic revenue growth recently now this year, we're adding a lot of well-timed strategic acquisitions that really transformed the company very intentionally.

Patrick Donnelly, Citi.

Thank you for taking the question. Frank, maybe on the BSI side, I think you said the first half book-to-bill was somewhere above 0.9 a little bit below 1. I pin you down a little bit on the 2Q trends on the order front, your book-to-bill rate and then certainly it's orders. If you could give any sort of rate range for the 2Q orders would be helpful. Just trying to feel out there and the backdrop here and the implications for backlog as we move forward. So again, if you could frame up the 2Q order dynamic, that would be helpful? (technical difficulty)

Yes, it's at the mid-0.9 range. So, it sort of has pretty much halfway between 1 and 0.9, so mid-0.9, book to bill for BSI, up organically, which was because we still had good China orders last year in the second quarter. So BSI organic order growth was still up mid-single digits. So, nothing to write home about, but really not so bad. And that along with our backlog, which is now at about -- seven months down from 7.5 months. So it's coming down a little bit.

It will probably also end up now that we have ELITech is, 80% consumables, spatial biology, single-cell is as these instruments get out, there is more than 50% consumables and aftermarket.

So in the future, we probably still have two years of roughly of backlog normalization buffering these choppier general markets. And then just fundamentally our orders are decent given, you know, and we have enough of a portion of our portfolio with the post genomic era with some of these clean tech and semiconductor metrology, we still have strengthened the portfolio.

And fundamentally, if you take out China from -- is up for us as well. Obviously, an important driver for us, and there's some weakness in US funding area here and there. But overall, it's up Europe, for instance, did really quite well in the second quarter with a weak comp last year, but many, many moving pieces, but overall very resilient.

And then Gerald, maybe one for you. We get a lot of questions just about the 2025 set up and you guys kind of apply the 310 earnings number for next year, at Analyst Day. Can you just talk about, I guess the moving pieces, the confidence level, there's a lot of focus on the NanoString dilution margins, which again, for me touched on there.

And then, just if you could remind us the Yen impact. That's been a question. We've gotten obviously this week with some of the moves there. I know you guys the guidance, I think uses a little bit of a stale number, certainly given how quickly that's moved. So just refresh us on that.

On the 2025, sorry, we can't offer too much. We'll talk more about that in February. We haven't moved off of our in term outlook numbers that we presented two months ago. So I think generally speaking, we won't talk more about that. On the yen, as I think most people know, the M&A strengthened relative to the USD recently, actually even just this week. So our Japanese business is not the same size that it was many years back.

So fundamentally, it's not going to have much impact on Bruker owned. There was a time several years back where it was critically important for us. It's still an important market, but unfortunately, the overall volume activity for Japan has declined. So I would say, hope to see a bounce back in the Japanese business.

So maybe a little bit of [anecdotal] color. I mean, a lot of our growth, including semiconductor metrology, fantastic bookings growth in the second quarter also in the first half year-over-year comes from, other Pacific Rim. I mean, notably South Korea and Taiwan are just amazing. And then, of course, the US finally is investing in semiconductor metrology. So that's all strong. Japan is indeed in less important for us right now. It's also not very strong in terms of growth and orders. So plus it has some currency issues. Yes, that's a headwind, but we have enough other tailwinds to put it all together.

I think, I'm actually I think all three acquisitions that I mentioned Chemspeed, they have probably enough backlog even for 2025, a lot of backlog, a lot of execution. So that business and investing in automation and lab automation with CapEx industry seems to be willing to do that, if they think they can do with less OpEx, less headcount well played this molecular diagnostics business.

I was delighted we were at our placement rate for the first three months. I know, it's only three months that we've owned them. This is now including July, which I know technically is in Q3, but the placements for these are ingenious, B genius for those three months that we've owned it where something like come 20% ahead of what we hope to do. That's not a lot of revenue this year, but that pull-through of consumables revenue next year, so that's on top of a solid molecular diagnostics business to begin with.

And I'm actually quite optimistic about NanoString having a nice, snapback or whatever and not macro driven, but driven by obviously taking the damper this year after the Chapter 11 and the various by now all removed injunctions and so on and rebuilding that team. That team is coming together quickly and really even after three months. We have our arms around that. We were running with very good management processes and a very fired up leadership team with a lot of not just aspiration and a lot of concrete pipeline and opportunity building and things in the pipeline that they're doing and rebuilding the team. NanoString will be a good grower next year, I'm convinced.

Rachel Marie Olson, JPMorgan.

First, I just wanted to push on the 3Q guide. You mentioned that you expect 3Q to grow mid-single digit organic, which is a little below consensus. But you also mentioned that you started to see an air pocket related to China stimulus, where customers are starting to pull back on orders as they just wait for funding. So could you unpack about mid-single digit 3Q guide for us abit. How much of it was really due to the China dynamic? Can you break out for us what you expect to grow organically in China and excluding China in 3Q, as well?

Fair question, Rachel. So you saw that our Q1 was below average growth. Q2 was above this year's average growth. Q3 will be more in line, right with roughly the organic growth that we're expecting mid-single digits indeed. A little bit muted China orders in Q2, for sure. I wouldn't call it an air pocket. That's too strong, but muted and of course, absence of a clear evidence of any biopharma recovery, seeing a little bit of a step up in the US, but that might just be fluctuations.

So, that seems prudent then for Q3 to think that it's mid-single digit, some marginal, but not far from the full year trend, whereas Q2 was better than the full year trend and Q1 was weaker than the full year trend in terms of organic growth, right.

And then maybe just closing that out on the 4Q implied. Can you walk us through what you're assuming from a budget flush dynamic into 4Q? It looks like guidance really implies like a high single digit organic growth number in 4Q, often a 16% comp from last year or so. How are the conversations around year-end budget flush dynamics and trending with customers and what are you assuming in that?

We're not a budget flush type of company. We don't get it. We don't use that. It doesn't really do that much because of our backlog, I think budget flush maybe more if you have more turns, when you have a lost consumables business. Nonetheless, fundamentally, you're right. We're looking for a strong Q4. So, Q4 is going to be as far as we can tell.

There's going to be a very strong quarter for us, and it's just not necessarily the budget flush dynamics. It's simply that the buildup of orders and backlog and new orders this year and we expect continued good orders in Q4 as well. So Q4 looks to be strong and Q3, not bad.

But you know, I think with a mid-single digit growth in Q3, we're comfortable with that. And of course, because of the acquisitions, as Gerald explained already Q3 EPS will be down year-over-year, but up sequentially from Q2 this year.

That's kind of normally we don't talk about sequential much, but now that we have all these acquisitions actually keeping track of Q3 sequential improvements and then Q4 sequential improvements will be a somewhat of a good dynamic to watch this year.

Tycho Peterson, Jefferies.

Frank, can you help us bridge the gap on the M&A step up here? The incremental $90 million, I think you said NanoString previously, the $80 million, Chemspeed about $10 million a quarter and ELITech over $150 million for the year. So is that incremental step-up all NanoString or maybe just give us a little more color.

Good question, Tycho. It's a lot of small pieces, but honestly, there isn't the $10 million chunks out there that. It's all a lot of small pieces. There isn't a single answer, it -- that's the answer. The answer is it's nothing remarkable. It just comes together this way.

It's only $10 million higher for the year, right. And there is [investment in the drivers], what I'm saying, I don't mean to be evasive here. There isn't -- to speak. There isn't one thing that made up the $10 million many, small pieces just trending a little better.

And then I guess, is your view on the kind of IP situation evolved post the injunction in Germany? And how are you thinking about kind of next steps in the US?

No, there's nothing there's nothing new there that you don't know. So, not nothing new, no new developments. You saw the last press release a few weeks ago, that we had not put out some bond even though we had invalidated the patent in Germany, we still needed to put up a bond in order to lift the injunction. We've done that.

And of course, the injunction had been lifted in the rest of Europe some time ago. So presently, there is no injunction anywhere and, I think it's going to be September or later in the year that there might be additional rulings in Europe and the US. And then any of the bigger trials and things like that if we get that far would be in 2025, possibly into 2026. So it's been quiet on that front.

Just one last one for the back half of the year. Just any more kind of color by subsegment, if we think about kind of BSI Nano. -- for the back half of the year guidance.

I feel bad, Tycho. I don't have any crisp answers for you today, but it's one standout group or product line or so. I mean, semiconductor metrology was really quite a bit surprised us in the first half with the strength of orders, and that was stronger than what we had predicted.

And, on the other end, biopharma, we would have liked to see more of a recovery, but maybe that's more of a 2025 thing now. Also in looking at what other companies are reporting. So it's just, it's some of the acquisitions. Of course, they're only about 10% strength in MALDI Biotyper diagnostics is strengthening industrial research, proteomics, NMR, all solid, solid execution of -- . The strength of the portfolio is really the message here rather than one particular product line with.

I mean, we expect China to be down in revenue for the full year. We expect biopharma to be weaker down. So those are the bad guys for this year and the rest is all pretty good. And semiconductor, perhaps very good with a very nice order recovery, although they are the lead times are so long that a lot of the strong semiconductor recovery may not then turn into revenue until 2025. But that's going too, people want to deliver growth in 2025. -- And we do too, of course.

So I gave you three non-answers, Tycho, I apologize. -- it's really the message strength and resilience of the portfolio more than one group or one product line or one market.

Doug Schenkel, Wolfe Research.

Just a couple cleanup questions. I wanted to confirm as we sit here today that one you aren't accelerating anything relative to your original plans in terms of working through backlog to get the guidance for the year based on how orders are tracking it? It sounds like things are just kind of on track with some different puts and takes. But I just want to make sure that's the case.

And then secondly, I want to make sure you remain comfortable with EPS targets for 2025 to 2027, the ones that you've outlined on May 17. Gerald, I think you said, obviously you're not going to update guidance or set guidance for next year as we sit here at the beginning of August. But I just want to make sure there's no change in thinking at this point.

So on the cleanup question around the overall performance, I don't see any significant change. Our existing backlog, as Frank mentioned, came down to about seven months versus 7.5. It's not really affecting dramatically. And we have good strong organic revenue growth in the business already.

We're pulling, we'd be I would actually be happy to see some backlog come down. As some of you know, I'm really interested in moving that down to a more normalized level. So we're not expecting to see anything different from a guidance perspective for 2024 on the backlog, it's coming down is as well as we would have hoped.

And then on the other point related to medium term outlook. As I said earlier, we won't comment specifically on guidance for 2025, but we don't see any obstacles or roadblocks in the way with respect to our medium term outlook that we laid out on May 17 in the investor webinar.

Yes, medium-term outlook remains as described and no changes there implied here at all. And yes, maybe within two years from now or thereabouts will be more at a five months of backlog and a more normalized level within the BSI segment. So you know, so that's also as expected. So, we're on track in a choppier year. But, with a strong portfolio and of course, the very nice I mean, the pull through the re-allocations under the hood from more traditional instruments and in outsourcing to that post genomic era. That where we've positioned ourselves, it's just really working with a little bit on that semiconductor carry on top.

And one quick follow-up. You acknowledged some stalling of the market in China due to stimulus. I happened to catch up with you guys. You're good enough to sit down with me for a little bit at the beginning of June, you were and it didn't seem like you were seeing this at that point. So my guess is and I just wanted to confirm this. That dynamic picked up towards the end of the quarter and maybe carried into Q3. Is that right? And if so, it seems like you've probably just widened the error bars in China to account for some risk that lingers into the back half of the year. Is that the right way to think about things. Thank you.

That's completely, yeah. I mean, sales cycle lengthening in China, especially in [archive golf] is something that became apparent orders that we may expect or opportunities that look good, but they just move to later in the year, people are now looking for bigger budgets and then making a bigger splash rather than spending their original budget right away. It makes sense.

And I think you're thinking about it exactly the right way. We still think that the stimulus, particularly perhaps for BioSpin with NMR and high end systems, but other high end systems perhaps as well could be really quite good. But it takes, it's just not moving fast like it was in Q1 of 2023. This is going through the provinces and many more decision layers, perhaps more scrutiny as well.

It's taking longer or actually, I mean, this is not a big surprise to us. We already a few months ago that this will probably be at 2025 beneficial effects and tailwinds. And yes, that has been confirmed now. So yes, there was muted demand, muted orders in China in Q2. And a lot of that seems to suggest, especially in Academia that these orders may come or Perhaps larger orders may come in the second half or some also in 2025. So that's correct. I think you're thinking about it exactly the right way to, Doug, from what I heard.

Doug, what I heard it also is there is activity, but there are no orders. So I think this important to clarify that it's very clear that there's a lot of movement, but no orders have been placed related to that at this stage.

Josh Waldman, Cleveland Research.

A couple of for you. First, a follow-up on Tycho's question. I believe any changes to growth assumptions by segment for the year versus the prior guide framework? And then within that reiterated five to seven organic outlook for the total company, it seems like there's a wider than normal range for the second half. I guess is that wider range, or reflection of in market uncertainties in pharma and China? I guess, like any context you can provide on what gets you to the low end, what gets you to the high end? Do you need to see improvement from those end markets to get to the high end?

So on segments that we said biopharma obviously less expectations than we may have had at the beginning of the year. Semiconductor, it goes up all of this, although all those sold into revenue takes a little bit longer. China sort of as expected, but we didn't know exactly, in Q1 2023, while the system we were surprised how quickly those stimulus orders came through. We were, while we almost didn't see that coming.

So that just didn't repeat itself. That seems to be of a longer bigger wave, not this one quarter bolus. So China and biopharma not a surprise, I guess from what we're hearing from others, we would lower our expectations for this year, and we're hopping them in just about everything else in or at least keeping them the same are paying them in semiconductor metrology for store, upping them in automation, lab automation, although that's still a relatively new business.

And it's not organic yet. Hopping them in scientific software, smaller drivers. And really, quite pleased with what molecular infectious disease diagnostics is doing for us acquired and the existing MALDI Biotyper franchise. So some incremental changes, nothing dramatic, I would say. But biopharma, China, the culprits and other good guys.

To the second half of 2024, I mean, I would say, given the uncertainty and that we all read the Wall Street Journal yesterday wasn't a good day. Who knows what happens today? I think it's fair to think about, you know, maybe within our guidance of 5% to 7% organic, that maybe analysis is not prudent to maybe model that we would be in the lower half of that guidance, but we're still in that guidance range.

And we are pretty optimistic also about our bookings in Q3 and Q4. In addition to our revenue forecast so yes, this is the environment, the macro environment and our concern about the correction or recession perhaps are not helping. And China being delayed and biopharma recovery being delayed or not helping.

But yes, I mean, we're damn resilience, and I think we're still pretty exceptional in terms of our growth for the year. So that's incrementally the macro environment has probably gotten a little weaker than when we spoke three months ago, right. If I see what's going on around us, but we're not just a macro company as you've seen by now many times.

And then I guess for my follow-up, I thought I'd ask one on timsTOF was curious if you could comment on how the offer to rollout is going. And then more broadly for the timsTOF franchise. You wondered if there's any change in kind of near medium term outlook. I mean, I don't think you called it out as the driver and CALID. Wonder how you're thinking about growth in that and it's kind of versus the broader?

Its growth was slowed. Its growth in orders was slowed a little bit when the astral showed up being very competitive a year ago. We sense improved our competitive position significantly then with our launch of the timsTOF Ultra2 and some other important workflows, for instance, for plasma proteomics, it is not an instrument, but very amazing plasma proteomics performance with our timsTOF, -- other models of our timsTOF platform.

So in terms of revenue, it's not a big growth driver in year-over-year, but in terms of bookings and competitive position. I think the trend is now, it's still competitive, but I think we're in much better competitive position, quite honestly, again. And so that's a timsTOF ordering customers and opportunities are all really doing quite well again.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Joe Kostka for any closing remarks. Please go ahead.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Feel free to reach out to me to arrange any follow-up and have a good day.

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