Q2 2021 Bruker Corp Earnings Call
Good day, everyone and welcome to the brokers second quarter 2021 earnings conference call.
All participants will be in a listen only mode.
Should you need assistance. Please signal conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions Tom.
I'll ask a question you May press Star and then 1 to withdraw your question you May press Star and 2.
Also note todays event is being recorded.
At this time I'd like to turn the conference call over to Mary's father, and Nicola Senior director of Investor Relations and corporate development Ma'am. Please go ahead.
Thank you Jamie.
Good afternoon, I would like to welcome everyone to broker second quarter 2021 earnings Conference call My.
My name is nearest love them and Cobra Senior director of Investor Relations and corporate development and broker Corp.
Joining me on today's call are Frank low King, our president and CEO and Gerald Herman Our executive Vice President and Chief Financial Officer.
In addition to the earnings release, we issued earlier today during today's conference call, we'll be referencing a slide presentation. The PDF of this presentation can be downloaded from the latest results section and brokers and the Investor Relations website.
During today's call, we'll be highlighting non-GAAP financial information.
A reconciliation of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at IR, Doug broker Dot com.
Before we begin I would like to reference brokers Safe Harbor statement, which we show on slide 2.
During the course of this conference call, we will 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 the ongoing COVID-19 pandemic the spread of the Delta variant as well as ongoing worldwide semiconductor.
Doctor Chip and other supply shortages.
The company's actual results may differ materially from such statements fat.
Factors that might cause such differences include but are not limited to those discussed in today's earnings release and in our form 10-K as updated by our other SEC filings, which are available on our website and on the SEC's website.
Also note that the following information is related to current business conditions and to our outlook as of today August 2nd 'twenty 'twenty 1.
We do not intend to update our forward looking forward looking statements based on new information future events or for other reasons prior to the release of our third quarter 2021 financial results expected in early November 'twenty 'twenty 1.
Therefore, you should not rely on these forward looking statements as representing our views or outlook as of any date subsequent to today.
We will begin today's call with Frank providing a summary Daryl.
Gerald will then cover the financials for the second quarter and more detail.
Now I would like to turn the call over to broker CEO Frank Lockean. Thanks.
Thank you Morris lava and good afternoon, everyone. Thank you for joining us on today's earnings call.
Broker again demonstrated excellent progress and the second quarter following our strong start and the first quarter of 2021.
During the second quarter brokerage revenues margins and earnings grew significantly year over year with robust demand for our high performance scientific instruments life science and diagnostic solutions amidst a solid end market recovery.
Our teams executed well across our core business and project accelerate and broker is now very well positioned for excellent progress and 'twenty 'twenty 1.
Yeah.
Our second quarter 2021 revenues grew 34, 4% to approximately 571 million on and the organic basis <unk> revenues increased 27, 2% year over year, which includes 27, 8% organic growth.
And the brokers scientific instruments groups.
And 21, 8% growth.
Organic growth at best.
Our Q2, 'twenty, 1 non-GAAP gross margins expanded 490 basis points year over year to 50%, while our non-GAAP operating margin reached 17, 3% up from 11, 5% and the second quarter of 2020, which was negatively impacted.
And by the pandemic.
And the second quarter of 'twenty, 1 and brokers reported GAAP diluted earnings per share or EPS of <unk> 38 cents on a non-GAAP basis second quarter 2021 diluted EPS were <unk> 44 cents compared to 21 and the second quarter of 2000.
20.
Gerald will cover the drivers for margin and EPS later on the call, but in summary, the strong revenue and volume growth and the quarter drove substantial year over year gross and operating margin expansion, despite our increased R&D and marketing and sales and investments in project.
<unk> to debt.
On slide 5 we show <unk> performance for the first half of 2021 hour.
Our revenues increased by $277 million year over year or by 32, 6% to 112.6 billion on an organic basis revenues grew 25, 5% year over year again comprised of 26, 7% organic.
Growth and scientific instruments, and a 14, 3% organic increase at best net of intercompany eliminations.
First half 2021 order bookings for the broker for brokers and III scientific instruments groups grew more than 20% year over year organically and our BSI book to Bill ratio for the first half of the year remained above 1.0.
During the first half of the year many of our businesses saw revenue and bookings growth even beyond what the pandemic recovery would imply as we experienced strong demand across our core academic and industrial businesses as well as in our project accelerate high growth markets.
Geographically, our first half 2021 order bookings were particularly strong in North America, China, and other Asia Pacific markets outside of Japan.
Our first half 2020, 1 non-GAAP gross and operating margin and GAAP GAAP and non-GAAP EPS performance are all summarized on slide 5 all stepped up significantly year over year as our business recovered and actually accelerated in the first half of 'twenty.
And in 'twenty 1.
Okay.
Please turn to slide 6 and 7 now.
Where I provide highlights.
On where I'll provide highlights on the first half 2021 performance of our 3 scientific instruments groups and of our best segment, all on a constant currency and year over year basis.
For the first half of 2021, the bio spin group revenue grew approximately 20% to $307.9 million, reflecting a recovery and customer demand and installation activities compared to the.
First half of 2020.
And <unk> systems revenue was up strongly year over year, including revenue recognition on 2 gigahertz class and EMR systems and the first quarter of 2021.
As expected there were no gigahertz class <unk> systems and revenue in the second quarter of 2021.
In mid June and then the U S National Science Foundation announced a 40 million dollar award to establish a network of advanced MMR or Nan and Anne.
And 3 U S academic institutions University.
And the University of Connecticut School of Medicine, and the University of Georgia Complex Carbohydrate Research Center, and the University of Wisconsin, Madison National magnetic resonance facility.
We are pleased to announce that as a result of this grant a new recent order for a 1.1 gigahertz and EMR system has been received from the University of Wisconsin and Madison.
<unk> aftermarket and software revenues also grew strongly grew year over year.
In the first half of 2021 hour.
Our colleague group revenues increased more than 30% to $385.7 million with continued strong growth and our mass spectrometry and microbiology businesses and a rebound in our FTIR and Nir right for Red and Roma and molecular spectroscopy product line.
Yeah.
We continue to see very robust demand and revenue growth for our Tim's tough unbiased 40 proteomics platform, while revenue for other life science mass spec products also grew year over year.
Microbiology and molecular diagnostics revenue grew year over year, driven by healthy demand for our mall the biotech for instruments and consumables, coupled with a partial recovery of broker Heinz tuberculosis diagnostic products.
During the second quarter, our revenue from Sars Cov, 2 or Covid PCR testing was approximately $6 million.
So first half 2020, 1 revenues of our infrared near infrared Raman molecular spectroscopy products were sharply higher year over year with solid execution, new product adoption and a strong global industrial applied and and.
Good day make market sweep out.
Please turn to slide 7 now.
First half 2021 broker nano revenues grew and the high 20% to $329.7 million.
Nanos industrial and academic business had a solid rebound with industrial even outperforming our recovery expectations.
Revenues for advanced X Ray nano surfaces, and nano analysis tools, all grew substantially year over year.
And then I know, it's microelectronics and semi con metrology tools continue to perform strongly with ongoing healthy demand.
Finally, fluorescence microscopy revenue was up strongly year over year on strengthened academic demand.
First half 2021 net revenue also included a contribution from our September 2020 canopy Biosciences acquisition with 4 with canopy single cell targeted proteomics tools and services.
Moving on to our best segment Best revenue and the first half of 2021 grew and the mid teens percentage net of intercompany eliminations driven by contributions from Big Science projects.
Best revenue from superconductors for healthcare and MRI was still below the prior year period. However, we see strength and MRI demand for superconductors in the second half of 'twenty 'twenty 1.
Moving to slide 8 we continue to make very good progress with our project accelerate initiatives.
And investments and our recent virtual Investor day in mid June we shared our strategies and goals for our potential breakout opportunities and unbiased 40 proteomics.
And in spatial biology, and single cell all mix.
And as well as and a rapidly growing microbiology and molecular diagnostics business and.
In early June we introduced 2 new Tim stopped platform systems and the team's tough pro 2.
And the team is tough.
And for single cell proteomics.
We anticipate these instruments will further drive our growth and the fast growing and exciting proteomics market.
And today, however for a change I would like to highlight additional important teamstaff pro 2 applications in the areas of 44 dimensional metabo low mix and 40 libido and makes research.
As you will see on slide 8 we had some important new workflows and products and libraries that we launched in the second half of June after our Investor Day, and there was a press release on that.
Very importantly, we have a new ultra high sensitivity source for high flow rates.
The IP hazy source that you see here on the soft pro which generally gives us about and order of magnitude sensitivity gain and further improves our enables new applications and small molecule made up of low mix and lipid Omics research.
We were delighted with our collaboration with scripts on the medicine for the large for the makeup of low makes library now with Ccs our collision Cross section data at scale with more than 10000 reference small molecule data entries and this library all now include.
<unk> is very new important parameter that we could measure at scale the Ccs our collision cross sections.
Because our collision cross sections of the Teamstaff platform are so accurately measured they can also be precisely.
Predicted and we have new Ccs predict.
Predict software developed together with partners that use artificial intelligence and deep learning to make collision cross sections from predictions available for even more small molecule workflows, including those in ex Brazil mix and and drug metabolites and.
And finally inmates have a low mix, we really have outstanding tools developed organically at broker Army tableau escape and test 2022 software tools and they are used and a variety of applications for instance for the reduction of Paul false positive identifications and <unk> switch.
Is a very very important aspect of how to do a lipid <unk> mix, so great new development, not only and proteomics, but also in 40, metabo low mix and lipid all mix. So.
So finally, let me.
<unk> things up here.
On slide 9 at our Investor Day. We also noted our continued investments and operational excellence, including investments and environmental sustainability here. We just briefly highlight the progress of our bio spin group and reducing its carbon dioxide emissions energy and liquid helium consumption.
And for its major new facilities or renovated expanded facilities in Germany, and Switzerland broker bio spin has invested in and solar energy and photovoltaic and other energy efficient systems, Bruce <unk>, New campus and Germany has been built to the latest standard with substantially reduced carbon dioxide emissions.
Really coalification capacity in various locations and I won't go into the details and numbers here, but if you look at this slide and some detail. If you are interested these are sizable investments and they make a major difference towards environmental sustainability, something we expect of ourselves and then something also our customers expect.
Broker.
So in summary, and to wrap things up during the second quarter and first half of 2021 broker has delivered strongly improved performance with significant year over year revenue growth margin expansion and EPS growth our core businesses have rebounded strongly and our higher growth project accelerate areas.
And you'd to deliver we're making further investments in our project accelerate to dot O and operational excellence initiatives, including stepped up investments in the second half of 2021.
With that brokerage is well on track for excellent financial and strategic progress and 2021, and we are raising our fiscal year 2021 outlook for revenue growth non-GAAP operating margin expansion and non-GAAP EPS further as Gerald will explain is it and as you.
Can see and our press release now with that let me turn the call over to our CFO Gerald Herman who will review, our financial performance and outlook in more detail share.
No.
Thank you Frank and thank you everyone for joining us and pleased to join you today and review broker second quarter and first half 2021 financial highlights starting on slide 11 brokers.
Brokerage revenue increased 34, 4% to approximately $571 million in the second quarter of 2021, which and includes an organic revenue increase of 27, 2% year over year.
We reported GAAP EPS of <unk> 38 per share excuse me compared to 16 in the second quarter of 2020.
On a non-GAAP basis second quarter 2021, EPS was <unk> 44 per share compared to 21, and the second quarter of 2020.
Our second quarter 2021, non-GAAP operating income more than doubled from a weak comparison in the second quarter of 2020, which had been negatively impacted by the pandemic.
Our second quarter 2021, non-GAAP operating margin expanded 580 basis points year over year to 17, 3% driven by strong revenue and volume.
This was after absorbing additional investments and our project accelerate to doto and operational excellence programs and also included a negative impact from foreign exchange translation of approximately 70 basis points in the quarter.
We finished the second quarter with cash cash equivalents and short term investments of $706 million during.
During the quarter, we used cash to fund strategic investments stock purchases and dividends.
And the second quarter of 2021, we repurchased approximately 556000 shares of broker stock for a total of $38.3 million and.
And May our board approved a new 2 year share repurchase authorization of up to $500 million Valley.
Valid until May 2023.
Year to date share repurchases have totaled $1.1 million shares for approximately $71 million.
We generated $21.9 million of operating cash flow in the second quarter, which was more than offset by our higher capital expenditures in the quarter, resulting in a zero point $7 million and free cash outflow for the second quarter.
Our working capital to revenue ratio improved from the full year 2020, due to higher revenue and efficiency gains in the second quarter of 2021.
Slide 12 shows the revenue bridge for the second quarter of 2021.
As noted earlier organic revenue and the quarter increased 27, 2%.
We had a positive revenue contribution from acquisitions, and 0.4% and a foreign currency tailwind of 6.8%.
From a year over year organic revenue perspective in the second quarter of 2021 volume has been increased in the mid teens nano grew in the low 30% range and <unk> grew in the mid 30% range best revenue increased in the low 20% range net of intercompany eliminations.
Second quarter 2021, DSI systems revenue increased in the low 30% range organically.
After market revenue grew and the high teens organically compared to the second quarter of 2020.
Geographically and on an organic basis in the second quarter and 2021, our European revenue increased in the high 20% range North American revenue grew over 50% of a weak prior year comparison, and Asia Pacific grew and the high single digits year over year.
Softer revenue performance in China, and Japan was more than offset by strong revenue growth and other APAC regions.
<unk> of the World second quarter 2021 revenue was also higher year over year.
Slide 13 shows our second quarter 2021, P&L performance on a non-GAAP basis.
Second quarter 2021, non-GAAP gross margin of $50 zero percent increased 490 basis points from 45, 1% and the second quarter of 2020, driven by higher revenue and volume leverage.
Second quarter 2021, non-GAAP operating expenses increased 39% compared to the second quarter of 2020, reflecting more normalized expense levels. After the temporary cost controls and reductions we had in place during the second quarter of 2020.
Second quarter 2021 operating expenses also reflect a step up and our project accelerate and <unk> investments and a significant foreign exchange headwind.
And as previously communicated over the course of 2021, we are increasing our investments and our project accelerate and <unk> initiatives and the pace of these investments is expected to step up further in the second half of 2021.
Our Q2.2021 non-GAAP operating margin was 17, 3% was 580 basis points above 11, 5% in the second quarter of 2020.
This resulted from significantly higher revenue volume and operating leverage in the second quarter of 'twenty 1.
For the second quarter of 2021, our non-GAAP effective tax rate was 26, 7% compared to 22, 6% in the second quarter of 2020 with the increase driven principally by jurisdictional mix and the impact of favorable discrete tax items in the second quarter of 2020.
Weighted average diluted shares outstanding in the second quarter of 2021 were $152.9 million a reduction of approximately 1.8 million shares or 1.2% from the second quarter of 2020, resulting from our share repurchase activity.
Finally, second quarter 2021, non-GAAP EPS of <unk> 44.
More than doubled from the 21 in the second quarter of 2020, driven primarily by higher revenue gross and operating margins.
Slide 14 shows the year over year revenue bridge for the first half of 2021.
Revenue was up $277 million or 32, 6%, including organic growth of 25, 5%.
Acquisitions added 0.6% to our top line, while foreign exchange was a 6.5% tailwind and Frank has already covered the drivers for the first half of 2021 revenue.
P&L results for the first half of 2021 are summarized on slide 15 with.
With the drivers largely similar to the second quarter of 2021 and are explained on the slide.
Turning now to slide 16 in the first half of 2021, we generated $72.6 million and free cash flow compared to a cash outflow of $4 million.
And the 2020.
First half 2021 free cash flow benefited from a higher net income partially offset by other items, principally the timing of customer deposits.
Our cash conversion cycle at the end of the second quarter of 2021 was 239 days and reduction of 42 days compared to the second quarter of 2020, reflecting the normalization of our working capital cycle.
We continue to carry elevated inventory to better manage supply chain risks, including those related to semiconductor chips and other supply shortages as well as to meet accelerating demand across most of our businesses.
Turning now to slide 18.
Given our strong first half financial performance and improving outlook in our core business. We're again raising our outlook for 2021 revenue growth non-GAAP operating margin expansion and non-GAAP EPS.
For fiscal year 2021, we now expect organic revenue growth of 14% to 16% we.
We continue to project, a foreign currency tailwind to revenue growth of approximately 3%.
This is expected to lead to reported revenue growth for 2021 in the range of 17% to 19% compared to 2020.
Non-GAAP operating margin for 2021 is expected to expand 270 to 310 basis points compared to 16% reported in 2020.
Directionally, our guidance model assumes R&D investments and approximately 10% of revenue in 2021, but adjusted now for a lower foreign exchange headwind to our non-GAAP operating margin of approximately 30 basis points for the full year.
On the bottom line. This adds up to non-GAAP EPS for 2021, and a range of $1.88 to $1.93, representing non-GAAP EPS growth of 39% to 43% compared to 2020.
This also represents a 20 plus percent growth from our $1.57 pre pandemic non-GAAP EPS level in the full year of 2019.
Other guidance assumptions are unchanged and are listed on the slide.
And our updated full year 2021 ranges reflect foreign currency rates as of June 32021.
While we do not provide quarterly guidance given the unusual dynamics of 2020, and 2021 I'd like to add some additional color for our expectations on the third quarter.
Revenue margin and earnings comparisons to 2020 become more normalized in the second half of the year compared to the first half.
Given strong demand, we nonetheless anticipate Q3.2021 revenue to grow 10% to 12% on an organic basis compared to the third quarter of 2020.
This range includes the likely revenue recognition for 1 additional ultra high field and EMR system.
As I noted earlier, we also anticipate a further ramp up and our project accelerate and <unk> strategic investments during the second half of 2021.
To conclude we delivered excellent financial year over year improvements in the second quarter Roby.
And robust demand and recovery in our core business plus continuing strength in our project accelerate initiatives drove strong volume and pull through to our operating margin and EPS in the second quarter.
Our first half 2021 revenue performance exceeds the first half 2019 pre pandemic revenues by approximately 13% organically.
And we are currently well positioned for excellent progress in 2021.
And with that I'd like to turn the call over to Miroslav and to start the Q&A session. Thank you very much.
Thank you Gerald I would now like to turn the call back over to the operator to begin the Q&A portion as a reminder, in order to allow everyone to time for questions. We ask that you limit yourself to 1 question and 1 follow up.
Jamie Please go ahead.
Ladies and gentlemen at this time, we will begin that question and answer session to ask a question and once again you May press Star and then 1.
If you are using a speaker phone we do ask you. Please pick up the handset before pressing the keys to ensure the best sound quality.
To withdraw your question you May press Star and Q.
And again that it's Brian and then 1 to ask a question, we'll pause momentarily to assemble the roster.
And our first question today comes from Anthony.
<unk> from SVP Leerink. Please go ahead with your question.
Hi, Frank Thanks for taking the question. So first 1 is really on the day materially here Youre.
And we're seeing.
Hi, Frank you hear me now.
Yes.
We can yes, we can hear you but fairly.
Hopefully you can hear me now and I'll try to ask it.
I'll hop back into the queue.
And so we can hear you and now it's better yes.
Excellent. Thank you.
And just in terms of the overall demand that youre seeing and the market right now how much how would you classify that as a more of a pent up demand and really.
As you know as we go towards the fourth quarter.
Should we expect a normal sort of a fourth quarter cycle and in terms of the.
Budget flush and the total overall debt instrumentation demand that we normally see in the fourth quarter that would be great and would that be sort of somewhat what we have seen prior to COVID-19 is kind of what I'm trying to get to.
Yes.
So.
Puneet I think we are.
Seeing more than just a recovery.
This is a pretty this is pretty strong economy produced strong demand now also with the U S being very strong in terms of demand.
Previously Europe, and China had picked up earlier as you know.
We are seeing great strength, and industrial research and industrial QC businesses. So the the core businesses.
Along with academia those had been a little bit more sluggish until recently, but now they're very strong and both bookings and revenue and of course, our project accelerate to debt O initiatives are all doing quite well and some are doing exceptionally well so it's really.
It's really a very strong and picture right now.
In terms of normalized.
I would not I mean, we're obviously very pleased with our second quarter, but it's a weaker comparison and the second half the comparisons get more normalized or gets stronger.
I think.
I wouldn't want to point to any given quarter this year as a normalized quarter.
I think.
I think.
Would really average over the 4 quarters, and then and that's what we're managing to you know to set a new baseline rather than to do something and that compares to last year's rather distorted quarters in 2020, So I think we're.
And we're obviously, making excellent progress we're doing much more than just recover we're really do pretty fast growth mode right now and.
And.
Yes, I hope that gives you the type of color that you are looking for this is maybe 1 more point to 1 of your questions and by our elements of your question.
And this is much more than in our opinion and much more than just pent up demand or a catch up this is really quite healthy.
Got it that's very helpful. And then on <unk>, obviously, a strong installed base for years into the launch.
You're obviously launching new applications and to proteomics and and new products as well so as you look at that.
Trajectory.
Can you provide us in terms of the overall.
And given the current staff.
<unk> installed base the growth rate sort of you were expecting.
And sort of point and time and again.
A good question I would say is on the strategy for the LC side as you see more installed base growing out there.
Do you expect to see more attach rate for maybe broker lcs or other.
Broker accessories into into 10 and stuff.
Right. So the chips tough platform, which now has multiple types of systems right. The flex with them all the additional imaging capability. The CPE for single cell Proteomics brand New of course, the flex was launched previously and then the bread and butter system right for proteomics, but also.
With the new stores and the new capabilities also for $40 or below and mix as I explained.
Overall, it's just really a very good very healthy picks good picture of strength and in the first half as long as well as in the second quarter.
<unk> bookings and revenue growth and that platform had been very strong and stronger than the corporate average growth, which isn't bad so very pleased with that so we're in a growing were doing well in a growing market I think the proteomics markets are doing well and we're doing particularly well within proteome.
Mix.
And our LC attached is a bit of a specialized question, but our LC attachment rate is not bad a lot of customers are we're not pushing them or where our standard offering is a broker and nano eludes Elsie it's a very very good nano LLC.
We're not saying it is.
It is.
Much better than any other but it is good as any I would say out there and it's well recognized for excellent stability and separation and and all the usual attributes. So our LC attach rate is reasonably high and I think it's well above 50%, although I don't have an exact number for our gamestop theories.
For proteomics.
But we also work well with other either larger LC suppliers, you know who they are or specialist that particularly focus on proteomics. So I don't anticipate a significant change there because thats been pretty good for us all along more people are getting our.
Software of course, they are using everybody uses multiple.
Bioinformatics packages for proteomics, but theyre increasingly are also very very interested and our very fast GPU driven run and done proteomics Pacer software, even if they then use complementary other packages by other vendors, who we collaborate with so I think.
We're picking up some proteomics revenue beyond just the mass spec.
And that's what you're referring to obviously.
And thats going as expected, it's going well.
Great and just last 1 if I could squeeze and in terms of the ultra high frequency and Yogurts and tomorrow.
Could you just clarify the expectations again for this year and.
Given the multiple sort of larger brands.
And your outlook here in terms of.
Expansion of the number of installed base I think you had guided to 3 to 5 and installs for the year is that changing and how should we look at 2022 I. Appreciate it. Thank you for this year, we're most likely going to look at 4 and now it's my best estimate with some.
Both both some factory and but also some customer, citing some day.
Delay so for this year is that we.
We had 2 and Q1 non and Q2 as expected.
Gerald just said, we're expecting 1 in Q3 and.
And yes, you do the math, therefore, probably 1 more in Q4, although right now we gave color on Q3. So that's the plan for this year, we're delighted with the additional NSF funding on orders right those wont go into revenue.
Not next year more like 'twenty 3 'twenty 4 we will need to see exactly how that plays itself out we've ramped up our capacity to to build and test more in Switzerland.
We're not giving 2022 guidance, but I mean, our order book certainly are full and so.
So that.
That all bodes very well may be very importantly, other than just instruments and more orders and more funding. That's good the U S needs a lot more funding I'm glad with us.
And at that funded.
Ice breakers, so to speak with you with the 2 systems that debt. The 2 additional systems, 1 of which we received an order to the other ones so far as MBS funding.
And we'll probably want to do a lot more to be on par with Europe and then of course also I think there'll be a lot of interest over time, developing and Asia Pacific.
We're so far there is only 1 system on order for Korea.
So other applications are coming along very nicely.
And and even some of the structure prediction by by Google Alpha fold and so on could actually be a boost to MMR demand because we don't do.
And we don't do fundamentally not due to the structure as we love to start and MMR, our customers like to start with.
And with a structure, whether that comes from X ray or cry OEM or from prediction if its reasonably good and then to do the dynamics and look at the binding and look at the changes and and functional interaction. So.
Actually there's a lot of good drivers that I think will make MMR functional structural biology, even more important both technical as law as well as what's happening around us outside of broker, we think theres a lot of good <unk>.
Scientists Pic drivers.
And that's great. Thanks for the details Frank Yes.
Yes.
Our next question comes from Derik de Bruin from Bank of America. Please go ahead with your question.
Hi, good afternoon, and congratulations on a strong quarter.
Thank you just 2 quick questions. Frank did could you clarify Dodd Frank heard you correctly and greater than 20% order growth and the first half what was it and what was and exiting <unk> you don't mind.
I may need some help here with greater than 20% organic growth rate and BSI and the first half right.
And.
Yes.
And I know that our BSI book to Bill was about 1.1.
Second quarter.
So that is the number that I have at my fingertips.
So pretty healthy.
Great. Thank you and thanks for clarifying piece on that and can you talk a little bit about the semiconductor market and supply chain issues I think somebody some of the other companies have talked about transportation costs going up and shipping costs going up can you talk a little bit and what youre seeing and in the supply chain and also just what youre sort of looking at in terms of the semiconductor markets and.
And obviously, how that impacts the and.
What youre seeing your scores and global supply chain there as well. Thank you yeah. Yeah for US. This has 2 sides right. The 1 we're like everyone else we are.
We're working really really hard and it's a struggle to deal with supply chain issues and cost drive from from transportation issues to even mundane things wood pallets and things like that to of course.
Electronic components and semiconductor chips there is.
We're working it so far and.
But it is it is far from trivial so.
I mean, I think there are real risks.
<unk>.
I think that.
That's why our guidance I think is very reasonable.
We also still thing that some of these things and some cases I don't think they'll derail us, particularly slow us down here or there on the other hand of course, we have a large semiconductor metrology business, that's doing extremely well and and investments in.
In semiconductor metrology in packaging are all really very very good for our broker nano business.
And.
And so by the way I was just passed a note that our BSI orders in in the second and the second quarter.
Sure.
Our organic growth for that was around 30%. So so again very very strong and.
And.
And yet book to Bill was book to Bill for BSI orders.
Was 1.1 so all they are all very good metrics.
Great.
By the way.
I mean, if some if some of this year, we have we have outstanding growth and recovery at least we think so and if there is some things get delayed a little bit from Q4 into next year, where we're really that's fine with US we think that sets sets up and maybe a more normalized set of.
Comparisons for next year, whereas this year.
The growth rates in any given quarter always so much depend on the prior year's quarter and the prior year as we know was was unusual.
So this is actually we're not losing having excellent orders excellent backlog and if some things were to get delayed a little bit we're fine with that.
That's up a more even trajectory.
Okay. Thank you very much.
Our next question comes from Tycho Peterson from Jpmorgan. Please go ahead with your question.
Frank I was just wondering looking across the 4 divisions. If you could just give us a little bit of color about how youre thinking has evolved.
The segment's baby and selecting I know you just touched on the semiconductor piece Fernando but can you maybe just give us a walk through between Boston and then ill call it and best and how you're thinking about the back half of the year.
Yes.
Sure Tycho So socal, it's just Cal is just doing really well and and even in the second half it will have a little bit of a headwind because second half of last year had more PCR testing for Covid and that's obviously come down sequentially and so you'll have a little bit of a headwind but between <unk>.
And multi biotype are and meta below mix and also the strength and the applied market that we see and our molecular spectroscopy business and <unk> spin.
<unk> continues to have great momentum.
B nano, particularly strong compared to last year of course with its industrial recovery and its continued strength and semi and it's emerging and beginning to move the needle and very nice growth and fluorescence microscopy from from light sheet light sheet imaging to multi photon does.
Super resolution imaging, so that part is now growing.
So b nano and sort of a little bit the star this year B bio had us and okay second quarter, but we think it will have a very strong third quarters there'll be bio will do well as well, although a little bit more and.
Better and Q3 than in Q2 and best is another surprise this year because early in the year, we didn't really expect the the MRI OEM demand from our OEM customers large MRI companies to be as strong and Thats just been strengthening and strengthening so so best is actually as you've already seen Q2 was.
Pretty good growth for best and then and the second half of the year best will actually be.
And right up there and in terms of good growth so.
Not a lot of weak spots and maybe just the occasional.
Orderly.
1 weaker quarter, followed by again, a strong quarter and b bio, but over the year that <unk> is doing great and <unk> is doing.
<unk> and nano are doing the best this year.
Okay. That's helpful. And then 2 for Gerald quickly Im wondering if you can kind of quant.
Quantify any contribution from the Covid.
Covid.
PCR assay and the quarter and then cash flow I'm wondering if you could maybe provide some updated thoughts on cash flow and the back half of the year as revenues pick up we've had questions extra volume and the asphalt.
Yes, so in terms of the Covid and PCR.
Revenue levels pretty I guess, I'd say fairly modest $6 million and the second quarter, so not a.
Hey, guys.
Net net outstanding on many levels, but not really quite a drop off and some.
Had predicted and in other cases, so that's that's pretty stable I guess I would say at this point.
Relative to your question regarding cash flow we.
And we did generate some fairly solid operating cash flow in the quarter and the second quarter specifically.
Tom.
We're starting to see some change in volume of customer deposits.
The level and how the timing of it.
Obviously really impacts our cash flow on an ongoing basis and that's been the case was clearly the case and the second quarter. The way. This typically works is as we finalize orders, we begin to get fairly significant customer deposits and place and we're hopeful and thats going to continue as we start to season.
Demand.
Continues to move in the second quarter, we had a little bit of movement between tax payments between quarters, so that negatively impacted our cash flow for the second quarter, but overall, we're very optimistic about with these levels of net income.
We're very optimistic and the long term and cash flow just varies highly from quarter to quarter cash flow is really best looked at over averaged over several quarters and you saw.
First half cash flow is about $73 million roughly.
So much much much much higher than last year.
Okay. Thank you and welcome.
Our next question comes from Dan Leonard from Wells Fargo. Please go ahead with your question.
Alright, thanks for the time.
So a question on the guidance raise and I was hoping perhaps you could frame the new growth outlook compared to 2019, I understand the growth deceleration youre looking for and 2 week versus 2020 and give it given the comps, but im not sure I understand what's driving the deceleration and the 2 year stack compared to 2019 versus what you just reported and the first.
Yes.
Yeah. So.
We think we are.
We're just really looking for the for the full year growth.
And the full year growth also compared to 2019 is actually quite strong as well of course, our guidance is relative to last year with the at the midpoint, 15% organic growth rate guidance that you've now heard and.
And the rest is pretty much just math quite honestly I mean.
This year the growth rates the growth rates will be much higher and the first half of the year.
Due to comparisons and then and then there'll be there'll be mathematically lower and the second half.
I think for the for the year, we will still have.
Excellent growth year over year and also very.
Very solid growth compared to 2019, but 2020, you didn't just not happened right. There was actually a year 2020 with a pandemic. So it's not that we can simply do a spreadsheet exercises as if it did.
I'd like to pretend that didn't happen.
And we all like that yes.
And.
Shrank as a follow up is there any way to frame the metabolomics and lipid <unk> applications you highlighted for Tim staff are these maybe secondary and tertiary applications compared to proteomics or could they be equivalent and import.
To proteomics and Tim sauce, and a very good question. So lipid <unk> meta below mix. They are slightly they are different but they are usually bunched together when people look at these markets.
And how we look at them and.
It is smaller than the proteomics opportunity for sure.
But.
Initially or maybe a couple of years ago, we perhaps also expected that proteomics wood.
And which dominate and and it will be the larger of the <unk> field for us for sure by by quite a bit but it turns out that this 4 day metal below it makes sense and 40 lipid Amit let's take these 2 together with some of the new 4 day capabilities that are unique to our gamestop platform and.
And then Tom.
And time is 10 times more sensitive source and.
And these libraries and predict capabilities actually start to make a bigger difference in those markets in terms of unique capabilities and unique working flows and we're now getting.
Without even having tried as much we're now getting quite a bit of a pull from those markets. In addition.
I don't have a really good number for you, but maybe it's like a 2 to 1 or 3 to 1 proteomics compared to Metabo low mix lipid oil mix. So it's not negligible, but it is certainly smaller and proteomics is the bigger opportunity, but that gives you a very rough sizing.
Okay I appreciate that perspective, thank you.
Our next question comes from Jack Meehan from Nephron Research. Please go ahead with your question.
Yes.
Thank you and good afternoon.
Wanted to try and Dan first question and maybe a second way as I look at the back half of the year.
Your guidance seems to imply somewhere around 2% to 3% compounded growth versus 2019 and that compares to on an organic basis and that compares to around 6% and the first half of the year. So I was curious.
What are some things that might be weighing on it.
And for Gerald.
<unk> revenue guidance you talked about.
Is there any comment you can give around phasing on EPS, how that goes through the income statement.
Yes, I'll take the first part and then turn things over to so Jack I haven't checked all your percentages, but direction and I am sure. They are correct yes.
You know.
Debt.
But we're very comfortable the way, we're managing the year in terms of growth and.
And financial progress and and organic growth and.
And we're not managing to the third quarter or to the fourth quarter. We are managing to the year and we think we will establish a very healthy pattern with excellent growth for the year and that's our story and we're sticking to that and you can absolutely do calculations on 2 year growth on any given quarter those are probably correct.
And that's.
We're totally fine with that I think we're making excellent progress.
And and expect to establish a <unk>.
2021 pattern that is rational and a good basis for comparison and the future. So hopefully next year I'll be.
Less defensive or our facetious or whatever I am when it comes to discussing prior year comparisons because there'll be bill bill that will make sense to us.
You want to take the second part so Gerald.
Relative to your comments on.
Where we see the third quarter, what I can tell you is that.
We put up very solid operating cash.
Margin performance in the second quarter and $17.3 our expectation with a higher level of organic revenue growth has and will continue to see some improvement there we are however.
Investing more heavily and I mentioned in my prepared remarks and the.
<unk>.
In our project accelerate and <unk> investments in the second half so despite some improvements from a revenue perspective, we are intending to continue to strengthen our investments in.
And the strategic investments, so I'm not going to I don't really want to give you EPS guidance or any other color on specifically on a particular quarter will talk about that at the full year level, but fundamentally.
Directionally, where we're spending a little more and important strategic areas in the third and the fourth quarter look I mean, we're growing around 40% in terms of non-GAAP EPS were very satisfied with that that gives us the opportunity we have.
<unk> always said, we will we're committed to margin expansion into EPS growth and if we can do more we will invested and the business and that's exactly what we're doing we're not trying to maximize this year, we're trying to invest and our future and deliver excellent improvements this year.
Yes, great.
1 other thing I was curious to get more color on was the results and the U S. This quarter, obviously the year over year benefited from the prior year comp, but it was a strong quarter.
And the step up sequentially, it was even bigger and going back to 2019 or 2018.
And just any color on what youre seeing here and the U S that might have been driving the strength would be helpful. Yes U S. Biopharma strong actually also sepsis hyper and multi biotype for our strong semiconductor.
It's also pretty broad based but biopharma and multi biotype are come to mind, which.
Biopharma was strong last year, getting even stronger, whereas multi biotype, a was really weak last year and in the U S. We didn't have any.
PCR Covid testing revenue so.
So those things contribute to that but overall there and their income.
They're not insignificant, but that the U S economy academic and industrial semiconductor Biopharma applied diagnostics small Deepak microbiology diagnostics, we don't do PCR and the U S.
And just all remarkably strong.
Thank you Frank.
Our next question comes from Doug Schenkel from Cowen. Please go ahead with your question.
Hey, good afternoon.
Good afternoon and Dubai.
And my questions I have.
And 1 guidance question, and then kind of I guess, 1 higher level outlook question for the longer term. So the first on guidance.
And this has been touched on a little bit already but I guess, maybe taking a different angle on this.
Recognizing the comparisons get tougher and the second half I think it's clear you sound great when it comes to bookings and higher level trends.
With that and mind, though when you when you look at the quarterly pacing guidance assumes that growth moderates. The midpoint I think you guys said, 11% I think it's 10 to 12 and Q3 and if I'm if I'm doing the quick math right that implies around 4% growth and Q4 again I get the comps but is there another component.
And of this just a function of.
Doug.
You have a lot of visibility on Q3, and then when you look ahead to Q4, recognizing the business is going well, but the world is still uncertain and there is just kind of a prudent way to guide the street. So that's the first question and essentially just kind of what's behind that thinking on pacing.
And then the second question just kind of goes back to your recent capital market's analyst event.
And where you highlighted a lot of exciting existing and pending efforts and emerging proteomics I'm. Just wondering if you could talk about how and how those especially the pending efforts are impacting revenues and I'm guessing it's too early to impact revenue and bookings, but I'm, assuming that is something that's factoring into how youre thinking about and the year into 2022.
If you could talk about that a little bit and I think that would be of interest as well. Thank you.
So on the.
I'm going to be combative today, but I just have to be you know were reported in Q2 today and not Q4 and Q2, we over perform consensus vary significantly by about $30 million or something like that so.
Sure criticize us that well, but that makes Q4 looked less important than all of that but first of all we're greatly outperforming and over delivering and we are setting up for a good Q3. So yes. That's those are those are the facts. The rest is just guidance and <unk> and and future.
Quarter. So we're very pleased with our performance that were that were delivering and that our certainly the buy side really appreciates.
The.
There is.
The rest would be repetitive, we're managing to the year, we're having great performance improvements this year and we're very happy with our over performance first and Q1 and then in Q2.
And I think it's better to have upfront over performance to derisk the year than 2 as opposed to if I'd missed the first 2 quarters, maybe you'd be happy with my Q4, because they are not but it gets a lot more risky. So I don't quite honestly, I know, where you're coming from but I get it and I don't get it so anyway.
Maybe Frank we're driving the year with over performance upfront and Derisking the year and.
And I think thats the way to do it.
Yes, Frank I think you're I think maybe you are taking this the wrong way.
I guess equally direct I think it's really more.
Good you did you did a good job and the first half, which I think I agreed with and I think most on the call have secondly, I think we look at Q3 and that's a good guide Q4 is a little bit lower.
I think we're just I'm not saying that's not good I'm, saying payers that just kind of let's be conservative because we're doing real well and the bias is to the upside there. So I actually would kind of redirect you to thinking about it a little differently.
Okay. Thank you.
Your second higher level question was on the outlook on proteomics and sorry can you remind me of.
And what the what.
A question on volume.
Yes, Im just wondering that obviously generated a lot of excitement.
I think starting to get Farooq are a little more attention in terms of what you are capable of with the pipeline and you guys have been doing great with your.
New products I think thats brought a little more attention to it on Wall Street I missed 1.
Wondering as you think about it with customers.
Was that already resonating or are there similar efforts, where youre starting to get more credit as we think about the outlook for 2022 and 2023 with some of these pipeline initiatives.
I think the customers. We've had we've got we've received and for some time now for the last.
3.3 and a half years ever since we really launched other proteomics team and stopped pro platform and then the successor and additional and more differentiated product I think the customer and scientific recognition is excellent and they are obviously looking at and products that are on that art.
And technologies that are available today.
There isn't much confusion among customers and I think the story is more complex about investors because there are so many new proteomics companies and <unk> stories, and sometimes were included and proteomics exciting stories because.
That's factual and sometimes.
I don't know sometimes people kind of look at the 2 leading proteomics companies out there and don't even mention them among proteomics companies, which the customers don't have that issue.
So I think I think it.
I think it has helped on the on the Wall Street side as you pointed out and <unk>.
And I think among the customers. We did we just don't have that issue you go to proteomics conferences and you go to mass spec conferences with proteomics interest and they are the recognition for the Tim's top 40 proteomics platform is really excellent and it's just getting stronger because theres. So many so many satisfied customer.
Errors and many of them are now getting.
Second and third and so I'm getting fifth and seventh instruments and whatnot. So it is almost that there's quite a difference between the investment community and the scientific community and customers and the latter and among the scientific community customers academics as well as biopharma companies and the Tim stuff at extreme.
And the well recognized as something Thats really and.
And some ways game, changing and certainly had some extra very advanced and complementary capabilities that you can't get any other way.
Got it okay. Thanks.
Our next question comes from Brandon <unk> from Jefferies. Please go ahead with your question.
Hey, Thanks, good afternoon.
Frank you alluded to some softness in China, and Japan, and second quarter, you just elaborate a little bit more on what youre, seeing and China, and maybe what your outlook and beds for that market for the year.
Yes.
Brandon.
Japan has been weak this year and continues to be weak.
So that's a pretty short answer, but I think it's pretty much the answer.
And in China actually it's much more differentiated I think for the whole year, China will be strong, but yes. It was a low weaker and revenue in Q2 as.
Although order bookings and Q2 and China were very very good for BSI and it's almost all BSI there so.
We think thats going to even out over the quarters. So China, we expect to be strong. This year remember that the China comparison is a little tougher already in Q2 also maybe an additional point because China began to recover already in Q2 of 2020 much much earlier than others.
And.
And yes, we will have a look we had a little bit of a discrepancy between China revenue and some paperwork that's associated with with.
It's the tax exempt tax exemption certificates for certain academic customers. So China will be okay for the year and will be a strong growth contributor, but not as much and Q2, So youre right, Japan, It's just weaker this year and maybe up to the Olympics, Phil have up additional priorities, but right now the spending and Japan just hasn't been as strong.
And it's probably a few single out any 1 single economy and the world that's not at least for us isn't booming yet that would be Japan.
Got you and thank you.
Our next question comes from Josh Waldman from Cleveland Research. Please go ahead with your question.
Hey, guys. Thanks for fitting me in just to follow up on China, I believe at the virtual and its day analyst day I think on the Q&A you alluded to some changes that are underway in China and just any further unpack there or is that the debt the taxes and changed you just mentioned or is it something else, Yes, hi, Josh It's Gerald so what's actually.
<unk> is we've got very strong order bookings performance in China across our BSI groups.
And just a bit of a delay and actually getting those tax exemption certificates is coming through the Chinese authorities. They recalibrated a renewed their exemption and activities in Q2, and that's just created some delays so it's more pushout activity than anything else at this stage.
Got it so no orders dropping out and the book more Gino.
As I said before we have a very robust and the order bookings performance across all the groups and China.
Got it and then Judy earlier comment on potential benefits from any unforeseen shipments and shipment delays later in the year I guess, what is your ability or appetite Frank to manage growth by I guess purposefully delaying shipments out of 2021, I mean, it seems like based on order trends.
And concerned maybe is less and your ability to hit the guide and maybe more on your ability to kind of even out revenue growth and 2021% to 2020.2 and so.
Let me comment on your ability or willingness.
Good question, we're certainly capturing all the revenue we can and.
I mean, theres, a little bit of conservativism, built and as well right I mean, there is.
They are contradictory statements of how severe delta is and and is there and objective.
Is there the scientific conclusion or are there different different arguments that 1 here you see it it's pretty diverse and then.
And how will different countries and react to it.
Countries that don't have high vaccination rates, obviously are extremely vulnerable, including hospitalizations and death rates, you'll see that and you saw that and India.
And southeast Asia right.
Countries with high vaccination rates are high and whatever perhaps something along herd immunity, which U K and others come to mind, it's just not clear what will happen in Q4, they will probably will be another wave, but will it be will it be a wave of just infections or hospitalizations and that of course makes a big difference we don't we.
And settled that debate so so.
So we're being somewhat cautious they are also all of the supply disruptions that could slow us down so far we've managed really well.
But it is much much more work for our supply and logistics and production teams than ever before and.
And.
And.
And with that we want to make.
And we built and a little bit of conservativism, but not excessive either.
And we'll see how that plays itself out but.
But there are some risks still for the remainder of the year that hopefully we've adequately reflected in our guidance.
Thanks, guys.
And ladies and gentlemen, with that we'll be ending today's question and answer session I would like to turn the floor back over to to Miroslaw them and Cobra for closing remarks.
Thank you for joining us today.
During the third quarter Luca will participate in the 2021 Wells Fargo and virtual healthcare conference and.
We look forward to meeting you and events during the quarter.
Correct Lee with you during the quarter. Thank.
Thank you and have a nice evening.
Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending you may now disconnect your lines.