Bruker Corp (BRKR) 2025 Q4 法說會逐字稿

Good morning, everyone, and welcome to the Bruker Corporation fourth quarter 2025 earnings conference call. (Operator Instructions) Also note today's event is being recorded.

At this time, I'd like to turn the floor over to Joe Kostka, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's fourth quarter 2025 earnings conference call. My name is Joe Kostka, and I am the 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 acquisitions, geopolitical risks, market demands, tariffs, currency exchange rates, competitive dynamics or supply chains.

The company's actual results may differ materially from such statements. Factors that may 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, 2024, 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 and to our outlook as of today, February 12, 2026. 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 first quarter 2026 financial results expected in early May 2026.

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 fourth quarter and full year of 2025 in more detail and share our full year 2026 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 fourth quarter '25 earnings call. At the conclusion of a difficult year 2025 with headwinds from academic funding, tariffs and currencies, we are pleased that in the fourth quarter, we delivered revenues ahead of our expectations. BSI or Bruker Scientific Instruments book-to-bill in the fourth quarter was again over 1.0x, providing more confidence that we are past the trough in demand seen in the middle of 2025.

We also saw a strong free cash flow in Q4 over $200 million after admittedly weaker cash flow earlier in 2025. The year 2025 was the first full year of ownership for the three large strategic acquisitions that we completed in the first half of '24.

Both ELITech and Chemspeed delivered robust mid- to high single-digit percentage organic revenue growth year-over-year. While NanoString was approximately flat due to pressure on US academic funding in fiscal year '25. Encouragingly, spatial biology, including NanoString, orders were up in the double-digit percentages organically in the fourth quarter of 25% year-over-year.

Our innovation engine continued to shine in 2025 with outstanding and very competitive product launches at the AGBT, AACR and ASMS conferences last year. Many of these recent launches have seen strong initial demand, which we expect to drive revenue growth in fiscal year '26 and beyond.

Looking to 2026, we expect continued improvements in our markets to drive demand for our differentiated post-genomic discovery, translational and diagnostic solutions. We start the year with solid BSI segment backlog of over 7 months of revenue and good bookings momentum resulting from two consecutive quarters with BSI book-to-bill greater than 1.0.

We are pleased to see the fiscal year '26 NIH budget passed Congress with an increase in funding year-over-year and barriers to grant overhead cuts and multi-year grant funding. But for now, there is still some lingering uncertainty in the US like ACA/GOV market. The second half improvement in '25 in biopharma and industrial research order trends and robust semi-metrology orders in Q4 positioned these end markets for improved revenue performance in 2026.

Finally best, which was a headwind to our overall revenue growth in 2025 should turn into a tailwind in 2026 having booked major multi-year agreements worth more than $0.5 billion over multiple years. Accordingly, we are establishing our fiscal year 2026 guidance for reported revenue growth of 45%, with 1% to 2% organic revenue growth for the full year and an approximate 1.5% revenue growth contribution from M&A.

This all implies constant exchange rate revenue growth of 2.5% to 3.5% year-over-year in fiscal year '26. As we explained in our press release, we still expect a mid-single-digit organic revenue decline in Q1 of '26, primarily due to the strong Q1 '25 year-over-year comparison. After our first quarter this year, we now expect to resume organic revenue growth in the second quarter and for the remainder of the year.

We remain very committed to rapid non-GAAP operating profit margin expansion, and we aim for 250 bps to 300 bps operating profit margin improvement in '26 despite and including a 50 bps currency headwind. This implies in principle 300 bps to 350 bps of expected organic operating margin expansion driven by our major cost saving initiatives, which we now expect to exceed the upper end of our previously stated range of $100 million to $120 million.

Finally, in fiscal year '26, we expect non-GAAP EPS growth of 15% to 17%, despite and including a strong 8% or approximately 15% expected currency headwind, which again implies 23% to 25% constant exchange rate non-GAAP EPS growth compared to '25.

Turning to current results now on Slide 4. In the fourth quarter of '25, Bruker delivered stronger revenues than expected and above the preliminary range we provided at JPM in early January. Bruker's fourth quarter '25 reported revenues of $977.2 million were approximately flat year- over-year, including a currency tailwind of 4.1%, a growth contribution from M&A of 0.8% and an organic decline of 5.1%.

Organic declines in BSI and at best, net of intercompany eliminations were also both at 5.1% in the quarter. In the fourth quarter, our non-GAAP operating margin was 15.7%, down 240 bps year-over-year as lower revenue volume, additional tariff costs and currency headwinds were only partially mitigated in Q4 by our earlier cost and pricing actions.

Fourth quarter '25 non-GAAP diluted EPS was $0.59, down from $0.76 in Q4 of '24. Gerald will discuss the drivers for margins and EPS later in more detail. As I said earlier, fourth quarter BSI book-to-bill was again meaningfully greater than [1.0], and our fourth quarter free cash flow was good at $207 million.

Moving on to our 2025 full year performance on Slide 5. Fiscal year '25 reported revenues increased by 2.1% to $3.44 billion. On an organic basis, revenues declined 3.7% year-over-year, consisting of a 3.5% organic decline in scientific instruments and a 5.4% organic decline at best, as always net of intercompany eliminations.

Acquisitions added 3.5% to revenue growth, and there was a 2.3% currency revenue tailwind for the year. Our 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. Margins and EPS were down year-over-year as a result of dilution from our strategic acquisitions that closed in the first half of '24.

Volume deleverage and strong currency and tariff headwinds. So please turn to Slide 6 and 7, where we highlight the 2025 constant exchange rate performance of our three scientific instruments groups and of our BEST segment year-over-year.

In 2025, BioSpin Group revenue was $879 million and declined in the mid-single-digit percentage. Solid revenue growth in Chemspeed lab automation was more than offset by declines in NMR instrumentation. Biopharma revenues were weak, resulting from soft bookings in the first half of '25. In the fourth quarter of '25, we had revenue from a 1.2 gigahertz NMR in the UK, our second gigahertz class NMR of 2025 compared to 4 gigahertz NMRs in 2024.

The two fewer gigahertz systems resulted in a roughly $25 million revenue headwind for to '25 revenues. We're expecting just 1 gigahertz NMR system in revenue in '26, as present gigahertz class NMR funding activity, which is healthy, but would likely not yet come in as revenue in '26, but may well refill our gigahertz NMR pipeline for '27 and beyond.

For 2025, the CALID Group had revenue of $1.2 billion and constant exchange rate growth in the high single-digit percentage with growth in microbiology and infection diagnostics driven by ELITech molecular diagnostics as well as by our Optics division, driven by our applied market security detection growth. This was partially offset by softness in mass spectrometry as strong orders for the recently launched timsOmni and timsMetabo as spectrometers we're expected to start to convert into revenue mostly in 2026.

On Slide 7, Bruker Nano '25 revenues was $1.1 billion and declined in the low single-digit percentage as solid growth in spatial biology driven by NanoString and robust biopharma growth was more than offset by declines in ACA/GOV industrial markets. Semi revenue -- semiconductor metrology revenues were flat for the year with a strong semi order book in Q4 of '25, which is expected to drive stronger semi performance in '26.

Finally, 2025 best revenues declined in the mid-single-digit percentage net of intercompany eliminations due to soft superconducting demand for clinical MRI systems. However, we received major multi-year orders at the end of the fourth quarter of '25 and at the very beginning of Q1 of '26 for superconducting wire from large MRI manufacturers totaling more than $500 million. This is over multiple years.

Also, our research instruments business, which is part of BEST received more than $40 million in orders for enabling technology for the extreme like infrastructure, something that we had a press release on previously and this will also -- is expected to go into revenue mostly in -- late in 2026.

Moving to Slide 8 now. We highlight our Project Accelerate 3.0 portfolio expansion strategy and we talked about that a little bit at the JPMorgan conference. We remain very focused on our leadership and expanding our leadership in post-genomic disease research and drug discovery tools, primarily proteomics and multiomics and of course, a core focus also on spatial biology.

We continue to expand and focus in novel diagnostics -- novel and differentiated diagnostics opportunities with novel microbiology and infectious disease molecular diagnostics opportunities. I'll highlight that our ELITech molecular diagnostics business had very strong placements in fiscal year '25, which bodes well for fiscal year '26 revenue growth.

In microbiology, we're entering the rapid AST market with the WAVE platform hoping to get FDA clearance for the first claim in this year in 2026. And in molecular diagnostics, we intend to expand into second-generation affordable syndromic panels on our Genius systems.

Finally, a very important trajectory for us is that our proteomic and spatial biology translational research tools increasingly are expected to enter laboratory developed tests or LDT markets here in the US and elsewhere in CLIA laboratories.

We're excited about our next-gen automated and digitized self-driving labs, something that we just announced on Monday at the SLAS conference here in Boston. And as I mentioned earlier, our security, defense and airport detection business something that was lingering for a number of years, but where we have differentiated capabilities is growing nicely at this point, particularly in Europe and overseas.

And finally, we continue to benefit from the AI boom indirectly and that our semiconductor metrology tools for new nodes and advanced packaging have seen solid order growth and particularly strong order growth in the fourth quarter.

With that, let me conclude soon on Slide 9, where you see where we give you our annual update on our revenue mix for the BSI segment, which, as you know, is 93% of our revenue. We are pleased that step-by-step, our aftermarket component of revenue is increasing a year ago in '24, it was 35%. Now it's at 38%. And in fact, that part was growing organically also in 2025.

Our end market growth is, as you would expect, now more than 60% of our revenue coming from the Project Accelerate 3.0 focused areas and with particularly good growth that we're expecting also in terms of orders and revenue from biopharma, from diagnostics and from semiconductor metrology.

Finally, by geography, -- as you all know, US biopharma and industrial growth looked stronger, certainly in orders in the second half of the year. US ACA/GOV is still weak and had been here -- weak throughout 2025, except for the first quarter. The rest of APAC has been very, very resilient and strong. And China, which used to be 16% to 17% of our revenue has continued to decline, although we saw some nice order growth in Q4 and it's now about -- just under 14% of our revenue.

Right, in summary, 2025 was indeed a challenging year for Bruker. We faced multiple unexpected significant headwinds, and we responded by continuing to innovate, launching novel and differentiated high-value solutions. We have also focused on cost efficiencies, taking very significant costs out in order to take a large step in '26 towards greater than 20% operating margins in the next few years.

In the medium-term, beyond 2026, we expect our organic growth profile to return to a CAGR that is 200 to 300 bps above the LSTDx market growth rate, and we will continue to focus on continued major margin expansion steps in '27 and '28 as well, while driving continued double-digit non-GAAP EPS growth. We believe that our transformed portfolio is now poised to achieve EBITDA margins greater than 25% over time.

With that, let me turn the call over to Gerald, our CFO.

Thank you, Frank, and thanks, everyone, for joining us today. Before I get into the details of our financial performance, I wanted to provide a high-level view of how the fourth quarter played out versus our expectations at the time of our last earnings call. We're pleased that revenue for the quarter came in about $20 million above our guide expectations.

However, despite the top line outperformance our non-GAAP operating margin of 15.7% came in below our expectations by about 100 basis points.

This was driven by headwinds of approximately 50 basis points from unfavorable mix, 30 basis points from delayed tariff offsets and about 20% bps -- sorry, 20 basis points from a stronger foreign exchange headwind relative to our prior guidance.

Our guide for fiscal year '26 reflects an improved mix profile as well as pricing and supply chain actions more fully mitigating the tariff impact going forward. Now some further details on Bruker's fourth quarter and full year 2025 financial performance starting on Slide 11.

In the fourth quarter '25, Bruker's reported revenue decreased 0.2% to $977.2 million, which reflects an organic revenue decline of 5.1% year-over-year. Acquisitions contributed 0.8% to our top line, while foreign exchange was a 4.1% tailwind.

Both our BSI and BEST segments had organic revenue decline of 5.1% and in the fourth quarter of 25%, with organic revenue declines across all groups. BSI, fourth quarter '25 instruments revenue declined in the mid- to high single digits while aftermarket revenue saw growth in the low single-digit range year-over-year. As Frank mentioned, for the full year of 2025 aftermarket revenue now represents 38% of BSI revenues, up from 35% in 2024.

Geographically and on an organic basis in the fourth quarter of '25, Americas revenue declined in the low teens percentage. European revenue declined in the high single-digit percentage and Asia Pacific revenue grew in the high single digits percentage, including double-digit growth in China all year-over-year. For our EMEA region, Q4 2025 revenue was up high single digits percentage year-over-year. Non-GAAP gross margin decreased 310 basis points in the fourth quarter of '25 to 49.4%.

Factors impacting our gross margin in the fourth quarter of '25 are essentially similar to those impacting the operating margin in the quarter. In the fourth quarter of '25, we posted a non-GAAP operating margin of 15.7% down 240 basis points compared to the fourth quarter of '24. This decline was driven by a combined 490 basis points decline from lower volume, unfavorable mix, tariffs and strong currency headwinds.

These headwinds, which are described in more detail on the slide, were partially offset by a 250 basis points benefit from our fiscal year '25 cost-saving initiatives as we realized approximately $25 million of cost savings in the quarter.

On a non-GAAP basis, fourth quarter '25 diluted EPS was $0.59, down 22.4% from $0.76 in the fourth quarter of '24. Our non-GAAP effective tax rate was 29.9% compared to 32.5% in the fourth quarter of '24, with the decrease driven primarily by discrete items in the fourth quarter of '25. On a GAAP basis, we reported diluted EPS of $0.10 versus $0.09 in the fourth quarter of '24. Weighted average diluted shares outstanding in the fourth quarter of '25 were 171.7 million, an increase of 19.7 million shares or 13% and compared to the fourth quarter of '24, reflecting the accounting for the mandatory convertible preferred stock offering we completed in September of 2025.

Turning now to Slide 12, we had an excellent cash generation quarter in the fourth quarter of '25 with approximately $230 million of operating cash flow generated in the quarter, actually the highest in our history. We delivered over $100 million in improved working capital performance in the fourth quarter of '25 and with CapEx investments at $22.6 million drove free cash flow of $207.3 million in the fourth quarter of '25 up about $54 million over the fourth quarter of '24. We finished the fourth quarter of 2025 with cash, cash equivalents and short-term investments of approximately $300 million.

During the fourth quarter, we used cash to fund selected Project Accelerate 3.0 investments, capital expenditures and continued our delevering actions with a debt repayment of approximately $145 million in the quarter. We ended fiscal year '25 with a leverage ratio of approximately 3.1%.

Slide 13 shows our non-GAAP P&L results for the full year of 2025. Revenue was up 2.1% to $3.44 billion, including an organic revenue decline of 3.7%. Acquisitions added 3.5% to our top line, resulting in constant exchange rate revenue to be roughly flat year-over-year. Foreign exchange was a 2.3% tailwind to revenue growth in fiscal year '25.

Fiscal year '25 non-GAAP operating margin was 12.6%, down 280 basis points year-over-year. This decrease reflects net headwinds from M&A of approximately 65 basis points, tariffs of approximately 65 basis points. Foreign exchange, 70 basis points as well as the impact from lower estimated volume impact of approximately 80 basis points, which includes the partial benefits from our pricing and cost reductions. The remainder of the non-GAAP P&L results for the full year of 2025 are summarized on Slide 13 with the drivers, as explained earlier and on the slide.

Turning now to Slide 15. We entered the year with a healthy backlog of approximately 7 months and solid order momentum after two consecutive quarters of BSI book-to-bill above 1.0. We are initiating guidance for fiscal year '26 as follows reported revenue of $3.57 billion to $3.60 billion, representing reported growth of 4% to 5% compared to fiscal year 2025. Organic revenue growth of 1% to 2% year-over-year plus acquisitions contributing 1.5% plus an estimated currency tailwind of 1.5%, all contributing to reported revenue growth.

For operating margins in fiscal year '26 we expect organic non-GAAP operating margin expansion of 300 basis points to 350 basis points in the year, offset by approximately 50 basis points of currency headwind resulting in a net non-GAAP operating margin expansion of 250 basis points to 300 basis points compared to the 12.6% posted in fiscal year '25.

We expect to take a major step up in operating margin performance in fiscal year '26 with much of this margin improvement driven by our previously announced 120 million cost actions taken in fiscal year '25, which we now expect to exceed.

With markets signaling further recovery, and our new products and solutions gaining traction, we expect to take another meaningful step up in operating margins in fiscal year '27 and beyond. On the bottom line, we're guiding to non-GAAP EPS for fiscal year '26 in a range of $2.10 to $2.15 or non-GAAP EPS growth of 15% to 17% compared to fiscal year '25.

Using current foreign exchange rates, we're estimating a currency headwind of approximately 8% to fiscal year '26 EPS, implying non-GAAP CER EPS growth of 23% to 25% year-over-year. Other guidance assumptions are listed on the slide. Our fiscal year 2026 ranges have been updated for foreign currency rates as of December 31, 2025.

Finally, a bit of color on Q1 of '26. We have a strong year-over-year comparison as we delivered mid-single-digit BSI organic revenue growth in the first quarter of 2025 and margins in EPS in Q1 of '25 were not yet impacted by US import tariffs or ACA/GOV funding disruptions.

Therefore, we anticipate first quarter 2026 organic revenue to be down in the mid-single digits percentage and operating margin and EPS to be down meaningfully compared to the first quarter of 2025. We then expect operating margins and EPS stepping up each quarter thereafter throughout the rest of 2026.

To wrap up, we're encouraged by the order momentum we now see in many of our end markets. This, combined with some stability in the US academic funding environment gives us confidence that we're positioned to return to organic revenue growth in the second quarter of 2026 and we plan robust operating margin expansion and non-GAAP EPS growth in fiscal year '26 and beyond.

And with that, I'd like to turn the call over to Joe. Thank you very much.

Thank you, Gerald. We'll now begin the Q&A portion of the call. As a reminder, to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up.

Operator?

(Operator Instructions) Puneet Souda, Leerink Partners.

Yeah, hi guys, thanks for the questions here. Frank, the margin question has been a frequent one and obviously, a focus in the quarter. Could you talk about just given the 4Q margins, you came in below you were expecting a number of cost initiatives to push margins higher in '26. Maybe just tell us where are those cost initiatives focused? How much reduction? How should we think about that beyond that $120 million that you've talked about?

And also for Gerald, if you could talk about the off margin cadence just given the significant ramp you have throughout the year? And anything you can provide on your comment around the meaningful 1Q of margin impact.

Okay. Puneet, I'll start -- so as Gerald had explained of the 100 bps lower margin that what we had expected in Q4 of '25. The way we look at it is that the 50 bps from unfavorable mix is not likely to repeat itself. Those were idiosyncratic factors in Q4, 30 bps from the late tariffs offset, I think, will offset that successfully in 2026 and the 20 bps of stronger currency headwind is here to stay for now, right? And in fact, as you will see -- as you will have seen from our guidance by now, both on the operating margin expansion in '26 as well as on the EPS growth, we have acknowledged a significant headwinds from currency.

Accordingly, and that leads to the second part of your questions, we have gone even stronger or even further on the cost initiatives. We now expect these to yield on an annualized basis between closer to $140 million or even higher than that. That will not -- all these additional cost reductions will not all be active or effective, excuse me, in Q1 or Q2. But certainly by Q3, that should be all effective and then become annualized. So we've been pushing that, if you like, by an additional 10% to 15%.

And that's about the right amount. We don't want to underinvest in our opportunities. But we also, of course, are very committed to this 250 bps to 300 bps of operating margin expansion and the double digit in this case, reported a -- 15% to 17% reported EPS growth, which is all in including currency headwinds, which are strong and including obviously, also some of the dilution we have from the mandatory convert.

So that's -- hopefully, that addressed your questions. I think you had something for Gerald on Cadence.

Yeah, Puneet, it's Gerald. I'll just comment just generally, as I mentioned in my prepared remarks, we had a quite strong Q1 of '25. You may recall, while we sort of hit the mid-single digits range of total Bruker organic growth at the BSI level, it was actually mid-single digits and quite substantial.

We don't expect to hit that in the first quarter, especially on our organic performance, so we are expecting a softer Q1, and we expect to pick up the pace pretty dramatically starting in Q2, Q3 and stronger again finishing -- again in the fourth quarter. The step-up in operating margin growth is quite significant, largely due to what Frank was just describing.

Some of -- we do have in the fourth quarter of '25, about $25 million of cost savings that are reflected mostly in the OpEx category. You'll see that again in the other quarters as we move forward. But some of our European-based cost actions will take effect more in the first quarter and in the second. So you'll start to see a more significant ramp starting in Q2 and thereafter Q3 and Q4. We can talk more about the details, but fundamentally, that's the direction.

Just a quick follow-up on Frank, the new and competitive renewal awards are coming in lower. Maybe it's due to the -- at NIH mainly and maybe it's due to the political challenges that we have and getting those grants out and whatnot, but NIH is supposed to be 1% better this year versus last year. So just any feedback on the ACA/GOV customers in your interactions in the -- and so far in the first quarter, I would appreciate any context there.

Yeah. I mean the -- nobody is talking about a strong tailwind yet, but the absence of the strong headwind from last year feels a little bit better for US ACA/GOV. US ACA/GOV orders in Q4 were still quite weak. But I think that -- so that's bottoming out later than the trough in biopharma and industrial research demand where we probably saw a trough mid-year of last year.

So there's still -- that's why everybody, including us, in particular, are still cautious on growth rates this year, right, 1% to 2% organic growth rate isn't a snap back to our typical growth rates. So we're still cautious on that.

But I am obviously -- compared to a really tough year '25, I'm encouraged that things are likely going to get better. But I think until academia gets more confidence and that I think it will maybe a couple of quarters, even if an NIH budget that's flat or up plus 1% and with prohibitions against overhead cuts and multiyear grants or at least limitations on those.

If this will pass, and I think there's a reasonable chance of that. Similarly also encouraging on NSF and other science budgets by the way, NASA, DOE, you name it. So I'm encouraged with that, but I think it may not help us with orders all that much until the second half.

Michael Reiskin, Bank of America.

Hey, thanks for the question, guys. I want to dig into the margin a little bit. In terms of the 2026 versus 4Q, I think you talked about 4Q coming in a little bit lighter and you shift to some of those. I guess asking it qualitatively, just you pointed to the higher end of the range.

What gives you confidence in your ability to take that given that you weren't able to execute on all the margin crossed out in the fourth quarter? Just sort of -- just confidence on ability to execute that. And then I've got a follow-up. Thanks.

Well, we've taken out the high end of the $100 million to $120 million in cost already, and we are in the process of taking out additional costs, which will, let's say, that becomes fully effective by midyear. So that's why we have a lot of confidence in that.

And then some of the other margin idiosyncrasy, some of that has to do with pricing, supply chain, these things. When we increase pricing and until we then get an order and until that order turns into revenue can -- in many cases, be 3- or 4-quarters.

So the effect of all these things, the good steps that we did take and have taken or continue to take on the supply chain have a longer lead time, and we noticed that in Q4, but they really are happening and they have happened. So that gives us a lot of confidence in next year. And as I said, we had some -- we really did have some unfavorable mix in Q4. So we don't think that will repeat itself.

Okay, I appreciate that. And then for the follow-up, I want to talk about your comments you made about revenue pacing through the year. I think you pointed to down mid-single in the first quarter, but you expect revenues to be positive starting in 2Q. Just clarify how much of that is the comps from prior year?

I know there were 1Q '25 was surprisingly good. I think we didn't see the hit from the end market slowdown from the NIH concern until later in the year. So how much of that is the prior year comps versus underlying assumptions on any end market improvement this year or just sort of how your order book visibility factors into that? Just the confidence between that 1Q jumping.

Yeah, it's both. Yeah, you're right. It's both. I mean the -- there's -- I cannot really disentangle that quantitatively, but qualitatively, both -- your question already implies they both play a role. So yes, the comps get easier and in some cases, a lot easier by Q2, right? Q2 was -- Q2 '25 was not good for us.

So the comps do get easier and even through the remainder of the year. So with easier comps and with picking up -- with improving -- gradually improving order momentum in many of the segments, even if not all of them, even China bookings were better in Q4.

Applied, semi was very strong. Biopharma was very solid in bookings in Q3 and Q4 of last year. Industrial Research, which came to a -- was very, very slow. The orders in Q2 as everybody was trying to figure out what's the new geopolitical and tariff landscape.

As that has now become solidified or stabilized, for the time being, I think these markets have all picked up. Really, the -- a little bit the outlier is still US ACA/GOV, but at least even there from what I see, reading more than tea leaves, reading NIH budgets, I think it may begin to benefit us in the second half in bookings.

That, however, may then mean that it could be a Q4 or mostly '27 effect in revenue, which is why we think longer term, we return to our 200 bps to 300 bps above market revenue organic CAGR, but not yet this year. But even this year, you do the math pretty easily with a mid-single-digit decline in Q1.

Obviously, the organic growth rates for the remainder of the year, the remaining three quarters are better than the full year growth rate, obviously, that's the easy math for you and for us. And -- but even at that level, they're not fully back at our long-term growth rates. We hope to achieve those in '27 and beyond.

I hope that helps.

Tycho Peterson, Jefferies.

Hey, thanks. Frank, maybe just -- can we do a quick walk on the assumptions for some of the other end markets? I appreciate you've hit on academic already. But what are you assuming for biopharma this year? What are you assuming for semi, anything in microbiology that could be a headwind, we've heard about that from some of your peers. So maybe just give us a walk on some of the end markets.

Tycho, it's Gerald. I'll just talk -- just generally about the end markets assumed in the guide. For biopharma, we're not assuming a significant snapback. We're assuming low single digits organic growth. Our semi business, which was relatively flat on a revenue level for 2025. We're expecting to be in the low single digits in growth. Clinical, a little bit stronger for us from our microbiology based business.

And academic and government research largely driven by continued softness for the first quarter or so. We are expecting to be sort of flat or low single digits down, industrial flat and applied about the same. So generally speaking, we are not expecting a significant snapback in any of our end markets, we think strength coming from biopharma and certainly semi in 2026.

Okay, and then I would add maybe one fine point. Molecular diagnostics, which is, of course, part of infectious disease diagnostics, we're expecting very good growth there this year because we had nearly 30% -- now about 30% more placements of these Genius platforms last year in '25 than what we had anticipated or what we had planned. So that was excellent.

So that tends to then bring in the pull-through in the following year. So I think diagnostics and biopharma and semi will be the highlights for the year '26 and others are recovering and stabilizing and US ACA/GOV perhaps turning in our revenues and P&L, not really much of a corner until Q4 or perhaps even into next year, but with improving trends and less headwinds. Sorry. Yeah.

And then Gerald, I know you had a number of questions on margins. Can you just comment on gross margins for this year? Are you expecting gross margin expansion?

Yeah, we are. I mean, as you already heard specifically on the fourth quarter, we were somewhat below our expectations on the gross margin level, and that was partly being driven by the mix issues and the tariff and of course, the foreign exchange pieces I highlighted earlier.

So yeah, we're not going to be able to do too much further on the foreign exchange piece. But on the mix, our view is that this is going to improve for us and certainly from the tariff side, as you heard from Frank, we're expecting to recover that and mitigate any tariffs going forward.

I think it's fair to say that of our operating profit margin expansion about half of it comes from gross margin expansion.

Yeah. And of course, our OpEx, right?

Right. But it's about half-half this year '26 and probably -- and beyond that as well.

Okay. And then, Frank, on the M&A contribution, you flagged proteomics and spatial entering LDT and CLIA. Can you maybe just elaborate a little bit more on how you think about that opportunity?

Sorry, those were not M&A contributions. Those were --

I don't know -- it was related to Nano String, okay. Can you just comment on what --

No, no, no. Those were -- this is just our higher growth and higher margin opportunities, which we bundle under the now further evolved projects accelerate. Much of that -- or some of that was M&A, but it was prior M&A that we've now owned for 1- or 2-years in these areas.

Subbu Nambi, Guggenheim.

Hey guys, thank you for taking my questions. So what are your expectations this year for book-to-bill and backlog to hover at? Will it be noisy with some end market rebound? Just how should we be thinking about the trend of customer spending interest in 2026?

Yes, we expect continued gradual improvement. So while we don't specifically forecast backlog or book-to-bill, we hope that we believe actually that the book-to-bill trends over the last two quarters, which in BSI were above 1.0 will continue into this year also aided, of course, by easier comps, at least again in Q2 through Q4.

And we may need -- we may use a little bit of our still high backlog this year, but we're not modeling anything that becomes all normalized to perhaps the 5.5x or 5x level -- 5 months level that we think it would be a normalized level for the way BSI is configured now.

Thank you for that. And then you mentioned some new products in microbiology and diagnostics, Exiting 2026, what do these businesses look like, like from a product road map perspective and a revenue growth perspective?

Thank you.

Okay, exiting '26, okay. Yeah, so in microbiology, I assume that we'll have the first rapid AST gram-negative, positive blood culture claim approved by the FDA this year, 2026, hopefully before midyear and that we will be in clinical trials for additional claims on that rapid AST platform, so that will be a nice buildup over the next couple of years as more and more content is becoming available on that WAVE platform.

Of course, there's a lot of content coming out on our existing Genius platforms, both in Europe and then we're also doing a first assay going into clinical trials. For entering the US market with these Genius platforms, again that won't move the needle in '26. So it includes still some investment, obviously, in OpEx investments in '26, but that will begin to mostly help us then for further growth in '27, '28 and beyond.

And what was the second part of your question? Or what did that address your question?

The Diagnostics business.

Yeah, well, the Genius is the Diagnostics business, right? Syndromic panels will begin to roll out and get through regulatory approvals in Europe in late '26, '27, so they'll begin to affect our larger installed base in Europe first, Europe and Latin America and a few other countries actually and then there will be a series of syndromic -- affordable syndromic panels coming out through and making it through the regulatory processes, IVDR in this case, in '27, '28.

So these are -- that's just a flywheel. You add something every year. It doesn't make a big difference in 1 year, but the cumulative effect over time is just very, very nice. As we've seen with molecular diagnostics even in '25, that was a very nice growth market, mid- to high single-digit growth market for us.

Doug Schenkel, Wolfe Research

Good morning guys. Thank you for taking my question. So regarding first quarter organic revenue growth guidance, your description of the difficult comparison is accurate. However, there's two or three discrete items that seem like those should render the number a bit better.

What I'm thinking about are, first, the recovery of at least part of the $40 million in semiconductor-related revenue that you previously told us it slipped out of Q4, and you expected to recapture largely in Q1, but over the course of the first half.

The second is the impact of pricing, which you started to get more aggressive with last May, and it takes time for that to come through quarter-by-quarter, but it seems like at this point that should be more meaningful.

And then I guess the third I would point to is you did talk about an NMR placement slipping out of Q4 and maybe that gets recaptured in Q1. So when I think about those things, that doesn't seem consistent with mid-single-digit organic declines in Q1 even with the comp. Can you help us out?

Yeah. Doug, it's Gerald. With respect to the Q1 story, I think it's important to understand that some of our organic performance in Q1 of '25 was pretty significant in terms of both mix and actual operating profit performance. So we had strong order performance in semi, in particular, in the first quarter of 2025 and very strong bookings performance in that quarter. So we think that the timing of our existing orders that are principally driven by what happened in H1 really of 2025 will not significantly improve our ability to execute on orders in the first quarter.

So that becomes headwind in its own right, but it's just the timing of our orders and the lead time required in order for those to execute into revenue. I would say, secondly, with respect to the semi orders that got pushed out, I mean, I think our commentary has been pretty consistent about hitting the first half of 2026. And not all of that is going to impact in the -- in Q1. So I think we are expecting to see some improvement in Q2 from those, but not all of it hits in Q1 of '26.

And then on the NMR side, I mean, we don't have any specific NMR pushouts. I mean we had some challenges in BioStim for sure, from a mix perspective. We saw some of that in the fourth quarter, but we don't really --

The 1.2 gigahertz did not get delayed. It was in Q4, the UK 1.2 gigahertz. Maybe, Doug, I mean, you're -- you know us really well. You know a lot of the moving pieces. Obviously, as we've said, a mid-single digits, that's obviously quite a range, right? -- of outcomes for Q1.

But we just wanted to highlight that it will still be our revenue, almost certainly will still be down. And I think mid-single digits, which is a bit of a range, we realize that is not just prudent and conservative. I think that's the right number. It puts a little bit into perspective, obviously greater optimism that we have in resuming organic growth and not only at the 1% to 2% level, but more meaningfully in the subsequent three quarters of this year.

Luke Sergott, Barclays.

Hey, this is Jake on for Luke. Thanks for the question. I wanted to dig more in on China and that double-digit growth. Your mix there is historically leaned towards industrials. But with your build-out on the pharma portfolio and this part of the market picking up there, what does your end market mix in China look like now? And how should we think about it going forward?

Yeah. After a bit of a lull there when the CRO business went away, and then that was indeed -- we had very little on that. Now China has recovered on the CRO side and China is becoming -- it's a drug discovery and development biopharma powerhouse in its own, right? So that's beginning to become noticeable.

And academic spending, there was -- I mean, we don't talk about it much anymore, but there was decent academic spending and bookings in Q4, better than the year before. Whether some of that was stimulus or not is now not so clear. People can't really just -- this is stimulus, this is other academic funding. It's become more nebulous and diffused. But anyway, it was healthier.

So we didn't know what expectations to have for China in Q4, but it ended up being one of the better performers in terms of bookings. And also at the end of the year, we had some decent revenues there. Hard to read any trends into that. Clearly, the biopharma piece in China is growing. No questions about that. Of course, there's also some of that is growing also in India.

And also the rest of APAC from Korea to Taiwan to Japan, they all have improving biopharma trends for our particular tools. So -- and of course, there's a lot of semiconductor metrology in APAC outside of China, obviously, Taiwan, Korea, but also Japan. So we're benefiting from that mostly on the order side, which should bode well for -- bodes well for gradual step-ups in '26.

And I would just add that our guide for 2026 related to China is not strong. I mean we are assuming that the basic revenue performance is largely flat, which is not a good -- and it's certainly not a snapback from where it was several years ago. So we're not assuming strong growth in China in our current guide position.

Dan Brennan, TD Cowen.

Great, thank you. Thanks for the questions. So maybe the first one would just be on US academic and government, Frank. And Gerald, I know you made some comments already. Just did you guys say what the instrument growth or trend was for you from that customer base in '25 and what's assumed in '26. And I think, Frank, you mentioned multiyear funding was capped. I'm just wondering, like, is that multiyear funding no longer a headwind? Or just how do we think about that for '26?

Yeah, good question. On the multiyear funding, quite honestly, I'm not so sure I'm a little confused by that as well. I know that all plays itself out. Even if it's multiyear funding, it is more funding into the system and some of that funding is a little bit fungible in some of these big economic research or disease research centers.

If they get more funding in one area, it alleviates pressures elsewhere to transfer budget. So it makes more money available. So even the multi-year grants aren't bad for us, even if they don't always immediately and directly fund another NMR or mass spec or microscope.

Before the -- to your first part of your question, bookings in ACA/GOV in the US for the year were down in the high teens. So not the worst outcome, but not a great outcome, right? So that's clearly a significant headwind. We also felt it in revenues, but bookings were down significantly in high teens for the year. It means in some quarters, it was down more than 20%.

And I think you said earlier, Frank, it was flat -- the outlook is expected flat in '26. Is that right?

This is for all of our ACA/GOV. Yes, yes. So this is not -- this was not a US specific comment. But as you know, China and Japan and Europe, the ACA/GOV and almost everywhere else was much more -- much better than in the US, right?

Some were strong, some were just solid and good. So that was a comment for all of ACA/GOV, not a US specific comment. I don't know that we broke that out. Therefore, you'd still expect US ACA/GOV to be down organically in revenue for the year '26.

Got it. And if I can just sneak one more just on semis. Just -- so the guide is flat for semis. I know that business has been growing double digits, you were very positive on kind of the AI connection. Can you just elaborate a little bit on --

Just to be sure, yeah, just to be clear. So with respect to full year '25 revenue performance, semi was flat. For full year '26 in our guide, we are expecting actually to be up in the low single-digits range. And that's what we're currently thinking. By the way, just to -- just to clarify even on the ACA/GOV side, we're not expecting a significant growth level in ACA/GOV either in the US or globally in our guide.

Brandon Couillard, Wells Fargo.

Hey, thanks. Good morning. Frank, just directionally, which of the three BSI segments do you expect to lead in terms of revenue growth this year? And just one clarification on the ultra-high field NMR systems. I think you said one install expected in '26. You used to carry a pretty large backlog there -- do you expect to go back to, say, three or four installations in '27? Is there just a timing thing or something dynamic?

Right. So thank you, Brandon. You were asking about the groups, right?

Yes.

Yeah. So we think the weakest growth in the groups this year and '26 will be in BioSpin whereas B Nano and CALID and BEST are expected to grow organically, comparable. They'll all three grow, but BioSpin because of the longer-term bookings and also because of, for instance, no ultrahigh field or maybe only one -- in revenue in '26, BioSpin is going to be the laggard this year in revenue growth and not normalize until '27.

Indeed, to your second part of your question, Brandon, there is some good activity, but trying to find funding, building consortia, et cetera. So I don't know that we'll go back to 4% a year, but I think we'll be -- hopefully be able to go back to 2% or 3% a year in revenue by '26 -- sorry, '27 and beyond. That's sort of our expectations. So '26 will be a bit of a lull, which goes hand-in-hand, but it's not the only reason that BioSpin will be the growth laggard in '26 for us.

And then Gerald, what do you have penciled in for net interest and other expense for '26? And -- the cash flow was a bright spot in the fourth quarter. How do we think about free cash flow conversion this year?

Thanks. Yeah. I mean just on the last point, we're quite pleased with how the fourth quarter came in as far as working capital conversion and our actual cash flow for the quarter came in about $207 million on the free cash flow -- $207 million on the free cash flow number. So quite pleased about that. As you already know, we've had a lot of effort related to inventory actions and happy to see that it has resulted in something positive.

I mean we could talk further more about that. When you look at just the interest expense line, we're thinking somewhere around this $35 million to $40 million range for interest expense. And then we have some offsets on that other income line. We can talk about more of this offline, but there's some nets that get you to, I think, a better performance on the other income line, net interest other income line for us in '26.

And with that, ladies and gentlemen, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Joe Kostka for closing comments.

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

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining. You may now disconnect your lines.