Q3 2021 Bruker Corp Earnings Call
[music].
Good afternoon, and welcome to the broker Corporation third quarter 2021 earnings Conference call. All participants will be in listen only mode should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.
After today's presentation there'll be an opportunity to ask questions to ask a question you May Press Star then one on your telephone keypad to withdraw your question. Please press Star then two.
Please note. This event is being recorded I would now like to turn the conference over to Miroslaw them in cobalt. Please go ahead.
Thank you Gary Good afternoon, I would like to welcome everyone to brokers third quarter 2021 earnings conference call. My name is Miroslaw Bromine Cola Senior director of Investor Relations and corporate development at broker Corporation. Joining me on today's call are Frank Louthan.
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 on brokers the Investor Relations website during today's call, we'll 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, Doug broker Dot com.
Before we begin I would like to reference brokers Safe Harbor statement, which I show on slide two.
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 supply chain challenges global logistics and inflationary risks the company's actual results may differ materially from such statements.
Factors that might cause such differences include but are not limited to the old 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 November 1st 2021 we do not intend to update our forward looking statements based on new information future events or other reasons prior to the release of our fourth quarter 2021 financial results expected in February 2022 therefore you.
Should not rely on these forward looking statements as representing our views or outlook as of any date subsequent to today.
Well I'll begin today's call with Frank providing a summary, Gerald will then cover the financials for the third quarter in more detail.
Now I'd like to turn the call over to broker CEO Frank Louthan.
Thank you Marius love them as you May know this will be mirrors love us last earnings call with us.
Gerald and I would like to thank her for her successful work in Investor Relations and corporate development over the last five years and we wish her the best going forward.
No. Good afternoon, everyone and thank you for joining us on today's earnings call.
As you can see on slide four.
Broker delivered another excellent quarter with sustained momentum in bookings revenue margin improvement and EPS growth.
Our teams continue to innovate and to execute very well managing through well publicized supply chain challenges.
I am confident that brokers now well on track for excellent financial and operational progress in 2020 one.
For the third quarter of 2021 brokerage revenues increased 19, 1% year over year to $609 million on an organic basis revenues increased 17, 8% year over year, which included 16, 8% organic growth in the broker.
Our scientific instruments groups and 29, 3% at best net of intercompany eliminations.
Our third quarter 'twenty, one non-GAAP gross margins expanded 210 basis points year over year to $51 seven.
While our non-GAAP operating margin reached 26% an improvement of 200 bps over 18, 6% in the third quarter of 2020.
In the third quarter of 'twenty, one broker reported GAAP diluted EPS of <unk> 57 cents compared to 35 <unk> reported in the prior year period.
On a non-GAAP basis, the third quarter of 21 diluted diluted EPS were <unk> 63 cents, an increase of 50% from 42 cents in the third quarter of 2020.
And Q3 F. 2021 included a tax benefit of approximately six cents on certain discreet items as Gerald will explain later.
In summary, it was an excellent third quarter with strong revenue growth operating leverage and favorable tax performance, which all drop through to the bottom line.
Even as we continue even as we continue to step up our project accelerate to Dot O and operational excellence investments.
On slide five we show brokerage performance for the first nine months of 2021.
Our revenues increased by $374 4 million year over year or by 27, five to $1 73 4 billion in the first nine months of 2021.
On an organic basis revenues grew 22, 6% year over year.
Comprised of $22, 9% organic growth in scientific instruments, and a 19, 2% organic increase at best net of intercompany eliminations.
During the third quarter of 2021, we again experienced strong demand and order bookings in both our core and project accelerate businesses geographically, we saw excellent order trends in North America, and the Asia Pacific region, including China with slower bookings performance.
In Europe, primarily due to strong comparisons from the third quarter of 2020.
Year to date third quarter 2021 order bookings for our scientific instruments groups was more than 20%.
Bookings growth for our scientific instruments groups with more than 20% on an organic basis, driven by customer demand in our academic and government life Sciences diagnostics biopharma applied in terrestrial and our semiconductor metrology businesses.
Year to date third quarter, 2021, non-GAAP gross and operating margin.
And GAAP and non-GAAP EPS performance, all stepped up significantly year over year as our business recovered strongly from the pandemic and accelerated beyond what a recovery would imply.
Please turn to slide six and seven now where we highlight the year to date third quarter 2021 performance of our three scientific instruments groups and of our best segment, all on a constant currency and year over year basis.
Year to date, the bio spin revenue Biasing group revenue grew in the low 20 percentage twenties percentage year over year to $494 4 million.
During the first nine months of 2021 bio spin saw strength in demand for its MMR preclinical imaging and aftermarket offerings, while system installation activities recovered.
<unk> systems revenue was up strongly year over year, including revenue recognition on three gigahertz class and EMR systems year to date.
During the third quarter bio spin achieved revenue recognition of its third gigahertz class system. This year, a one two gigahertz in EMR installed at Utrecht University in the Netherlands.
We continue to expect the fourth gigahertz class system to turn into revenue in the fourth quarter of 2021.
In the third quarter bio spin revenue benefited from the earlier timing of revenue recognition of certain systems in China previously expected to be delayed to the fourth quarter due to timing of receipt of required paperwork in China.
Year to date, the Calvert group revenues increased in the mid twenties percentage to $579 $9 million with continued growth in our mass spectrometry and microbiology businesses and very strong performance in our FTIR and Nir, our Raman molecular spectroscopy product lines, we have.
Again saw strong revenue growth for our Tim's tough unbiased 40 proteomics platform, while revenue for other life science mass spec products like our research multi tav product line rebounded as well.
Please note that tomorrow broker will host in <unk> 2021 scientific press conference at eliminate at 11, a M. Eastern time and that next week, we will have the international youthful conference bode both with significant broker proteomics solutions innovations.
Including in unbiased single cell proteomics.
Microbiology and molecular diagnostics revenue grew year over year, driven by healthy demand for multi biotype are.
Instruments, and consumables, including accelerated growth in the U S.
This was coupled with continued recovery of broker Heinz tuberculosis diagnostics products.
While during the third quarter of 2021 our revenue from Sars Cov, two PCR testing has declined further to about $5 million.
Year to date revenues for our STR FTIR near IR, and Raman molecular spectroscopy products were substantially higher year over year with strong execution and a rebound from 2020 on strong global industrial applied and academic demand.
Turning to slide seven now year to date broker nano revenues grew in the midst twenties percentage to $504 6 million.
Nanos industrial and academic business has rebounded strongly with industrial research outperforming our recovery expectations revs.
Revenues for advanced X Ray nano surfaces, and nano analysis tools, all stepped up substantially versus the year ago period.
Dinos micro electronics and semi con much metrology tools continue to perform very well on a year to date basis with ongoing strong bookings and backlog.
Life Science fluorescence microscopy revenue was up sharply year over year on product innovation and strong academic demand.
Year to date nano revenue included a contribution from our September 2020 acquisition of canopy Biosciences single cell targeted proteomics tools and CRO services.
Late in the third quarter of 2020.
The broker nano group closed two small acquisitions, adding X ray inspection and film thickness measurement tools towards microelectronics advanced packaging and semiconductor metrology portfolio with relatively small revenue contribution expected in the fourth quarter.
Turning to best year to date best revenue grew in the high teens percentage net net of intercompany eliminations driven by contributions from Big science projects and a recovery in MRI superconductor demand by our Med Tech OEM customers.
Best Superconductor demand appears healthy.
But we have seen.
Supply chain challenges due to material shortages and slow logistics.
Moving to slides eight and nine now we continue to make good progress with many of our project accelerate to Dot O initiatives.
On slide eight I highlight progress with our multi biotech franchise in the U S. As many of you are aware our penetration with the multi biotype are at in the U S flag the European markets and as you can tell here as of June 2021, we had more than twice as many multi bio.
<unk> installed in Europe than in the U S. So we have a lot more potential in the U S.
Since our subsea tie for FDA clearance late in December 2021, we're delighted that more than 100 U S. Customers are nearly 100 U S customers have already obtained the workflow adoption training at the end of the third quarter with many more scheduled for the fourth quarter.
If you recall, our multi <unk> for clinical microbiology.
Provides rapid and affordable identification of more than 400 micro organisms from positive blood culture very relevant for sepsis, when every hour counts and time matters for outcomes and survival.
Year to date as of the end of the third quarter of 'twenty. One. This has resulted or this has helped with greater than 50% year over year multi bio type of order growth in the U S, including recovery from Covid, including recovery of course from the Covid impact that 2020, but again.
It seems like it's more than just a recovery.
As shown on slide nine and discussed on our second quarter 2021 conference call in June of this year. The U S National Science Foundation announced a $40 million award to establish a network for advanced N M R or Nan among three U S academic institutions.
The University of Connecticut School of Medicine, The University of Georgia Complex Carbohydrate Research Center, and the University of Wisconsin, and Madison's National magnetic resonance facility.
Recently, we announced receipt of a second one one gigahertz MMR order funded by this NSF Nan grants. The second system was ordered by the University of Georgia and will be used for solution stayed in EMR. This follows. The initial Nan funded order for a one one gigahertz <unk> University of Wisconsin.
Addison for solid state in EMR, we're very encouraged by the growing interest in gigahertz class <unk> in the U S, which will benefit research into a diverse set of scientific problems in functional structural biology disease biology and materials science.
So in summary, during the third quarter and the first nine months of 2021 broker delivered excellent progress against our strategic and financial objectives.
Our core businesses have rebounded very strongly and our project accelerate high growth high margin initiatives continued to do well.
Operationally our teams continue to successfully navigate a challenging supply chain and logistics environment, where we have invested in increased buffer inventories and vendor commitments to protect our revenue growth and our P&L.
For the remainder of the year and as we move into fiscal year 2022, our high backlog flexibility positions us well to manage supply chain and logistics challenges.
Though risks remain.
We also made further investments in our dual strategy of project accelerate to Lotto and operational excellence I'm very pleased with our performance year to date and we are now well on track for an excellent year and we are further raising our guidance for the full year 2021.
Let me now turn the call over to our CFO Gerald Herman who will review, our financial performance and outlook in more detail Gerald.
Thank you Frank and thank you everyone for joining us today I'm pleased to review brokers third quarter and year to date 2021 financial highlights starting on slide 11.
Brokerage revenue increased 19, 1% to approximately $609 million in the third quarter of 2021, which includes an organic revenue increase of 17, 8% year over year.
We reported GAAP EPS of <unk> 57 per share compared to 35 cents in the third quarter of 2020.
On a non-GAAP basis third quarter 2021, EPS was <unk> 63 per share an increase of 50% compared to 42 cents in the third quarter of 2020.
Our third quarter 2021, non-GAAP operating income grew 32, 1% from a still somewhat softer comparison in the third quarter of 2020, when our recovery from the pandemic began.
Third quarter 2021, non-GAAP operating margin expanded 200 basis points year over year to 26% driven by our strong revenue and volume growth.
These results also include continued investments in our project accelerate initiatives and operational excellence programs.
Our teams executed very well in the third quarter handling significantly higher volume to split despite supply chain shortages and logistics delays that may ultimately result in some shipments slipping into 2022, but.
Thus far these issues have been well managed as we operate with increased buffer inventories and make longer term vendor commitments with down payments to protect our revenue growth and P&L.
We finished the third quarter with cash cash equivalents and short term investments of approximately $670 million during.
During the quarter, we used cash to fund strategic investments in our business two small acquisitions in the nano group and our dividend program.
May of 2021, our board approved a new two year share repurchase authorization of up to $500 million valid until May 2023.
No share repurchases under the program in the third quarter of 2021.
Year to date, our share repurchases have totaled $1 1 million shares for approximately $71 million.
We generated $23 $9 million of operating cash flow in the third quarter, which was substantially offset by our capex investments, resulting in $7 6 million and free cash flow for the third quarter.
This was impacted by a buildup of buffer inventories the timing and scale of income tax payments customer and vendor deposits.
Our working capital to revenue ratio Nonetheless improved substantially from the third quarter of 2020 due to higher revenue and efficiency gains.
Slide 12 shows the revenue bridge for the third quarter of 2021.
As noted earlier organic revenue in the quarter increased 17, 8%.
We had a positive revenue contribution from acquisitions of 0.3% and a foreign currency tailwind of 1.0%.
From an organic revenue growth perspective, and compared to the third quarter of 2020 bio spins Q3, 2021 revenue increased in the low 20% range.
<unk> performance reflects revenue recognition of a gig it hurts the animal World class system in this quarter and also benefited from the revenue recognition of certain systems in China, which had been delayed due to paperwork challenges and were previously forecast to be in the fourth quarter revenue.
Nano organic revenue grew in the high teens percent range on strength in Nanos industrial research and academic businesses.
Tallied grew low double digits with continued strong performance in life science mass spectrometry, and the multi biotech or franchise, partially offset by a year over year decline in service called two testing revenue.
Best revenue increased in the high 20% range net of intercompany eliminations.
Overall, we estimate that approximately $15 million of brokers third quarter 2021 revenue, which was previously expected in the fourth quarter of 2021 was recognized in the third quarter. This was related primarily to the bio spin China import paperwork acceleration noted above.
Third quarter 2021, VLSI systems revenue increased in the low 20% range organically, while BSI aftermarket revenue grew in the mid single digits organically compared to the third quarter of 2020.
Geographically and on an organic basis in the third quarter of 2021, our European revenue increased high single digits North America grew in the low 30% range.
<unk> are still weak prior year comparison in Asia Pacific grew in the high teens percent year over year, driven by strong performance in China, and other APAC markets, excluding Japan.
Rest of the World third quarter 2021 revenue was slightly higher year over year.
Yeah.
Slide 13 shows our third quarter 2021, P&L performance on a non-GAAP basis.
Q3, 2021, non-GAAP gross margin of 51, 7% increased 210 basis points from 49, 6% in the third quarter of 2020, driven by higher revenue and volume leverage.
Third quarter 2021, non-GAAP operating expenses were up 19, 5% compared to the third quarter of 2020, reflecting more normalized expense run rates. Following the curtailment of temporary cost reductions that we introduced in 2020 to address pandemic economic conditions.
Third quarter 2021 operating expenses also included the expected step up in certain project accelerate <unk> investments.
Our third quarter 2021, non-GAAP operating margin of 26% was 200 basis points above the 18, 6% in the third quarter of 2020.
This was driven principally by our revenue growth volume and strong operating leverage in the quarter.
For the third quarter of 2021, our non-GAAP effective tax rate was favorable at 19, 2% compared to 26, 5% in the third quarter of 2020.
The lower third quarter 2021 tax rate reflects significant rate favorability from stock compensation activity in the quarter as well as other favorable discrete tax items.
We estimate that stock compensation activity resulted in an approximate 0.6, sorry, <unk> <unk> discrete tax benefit to our third quarter 2021 non-GAAP EPS.
Weighted average diluted shares outstanding in the third quarter of 2021 for $152 8 million a reduction of approximately one 5 million shares or 1% from the third quarter of 2020, resulting from our share repurchase activity over the past year.
Finally, third quarter 2021, non-GAAP EPS of <unk> 63.
Rose, 50% compared to 42 in.
In the third quarter of 2020, driven primarily by higher revenue improved improved gross and operating margins and the favorable tax rate in the third quarter of 2021.
Slide 14 shows the year over year revenue bridge for the first nine months of 2021.
Revenue was up $374 million or 27, 5%, including organic growth of 22, 6%.
Acquisitions added <unk>, 5% to our top line, while foreign exchange was a four 4% tailwind.
And Frank has already covered the drivers for the first nine months of 2021.
P&L results for the first nine months of 2021 are summarized on slide 15 with drivers similar to the third quarter.
Turning to slide 16 in the first nine months of 2021, we generated $82 million of free cash flow approximately $19 $4 million higher than in the first nine months of 2020.
Year to date third quarter 2021 free cash flow benefited from higher net income, partially offset by higher inventory levels to support further growth and to address supply chain risks the timing of shipments and the timing and scale of customer deposits and higher vendor advances.
Our capex spending in the quarter reflects our continued investments in growth capacity and productivity as part of our operational Excellence initiative.
Our cash conversion cycle at the end of the third quarter 2021 was 236 days a reduction of 27 days compared to the third quarter of 2020, reflecting gradual improvement in our working capital cycle.
Turning now to slide 18, given our strong financial performance and demand for our products and solutions. During the third quarter were once 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 16, five to 17, 5% year over year.
We now estimate a combined tailwind from foreign currency and acquisitions to revenue growth of approximately 3%.
This is expected to lead to reported revenue growth for 2021 in a range of 19, 5% to 25% compared to 2020.
Non-GAAP operating margin for 2021 is now expected to expand to 350 to 400 basis points to 19, 5% to 20%.
Compared to 16% reported in 2020.
On the bottom line. This all adds up to non-GAAP EPS for 2021, and an estimated range of 205 to 209, which would represent non-GAAP EPS growth of 52% to 55% compared to 2020.
This also represents 31% to 33% growth from our dollar 57 pre pandemic non-GAAP EPS level in fiscal year 2019.
After the favorability we experienced in the third quarter, we now project a non-GAAP tax rate of approximately 29% for full year 2021.
Other guidance assumptions are listed on the slide.
Our full year 2021 ranges have been updated for foreign currency rates as of September 32021.
For the fourth quarter of 2021, this outlook implies organic revenue growth in the mid single digits. We.
We expect the quarter to be impacted by a number of factors, including first the shift of some bio spin China revenue from the fourth quarter into the third quarter as explained earlier.
Second supply chain and logistics delays, which may result in the push out of certain shipments into 2022.
Third a headwind of approximately $8 million from higher Sars Cov, two testing revenue in the fourth quarter of 2020 and.
And finally, all compared to our fourth quarter of 2020, when our revenues were more normalized than in the second and third quarters of 2020.
These factors together with our continuing investments in key project accelerate to dano initiatives, including proteomics and spatial biology are expected to result in fourth quarter 2021, non-GAAP operating profit margin and EPS slightly down or approximately flat year over year.
To conclude Bruegger delivered another excellent quarter with meaningful improvements in our revenue margins and EPS.
We are raising fiscal year 2021 guidance significantly, reflecting our strong financial performance through the first nine months and the robust market demand, we see for our products and solutions.
Our nine month year to date 2021 revenue now exceeds the comparable pre pandemic 2019 period by approximately 13% organically.
We are well positioned to enter 2022 with good momentum and strong backlog.
Finally, I'd like to add my appreciation to miroslaw over for her insights and dedication in shaping and advancing brokers Investor Relations program over the past five years, we wish her all the best in the future.
I'd like to turn the call back over to Miroslaw about to start the Q&A session. Thank you very much.
Daryl and thank you both so recognizing me.
Now I'd like to turn the call over to the operator to begin the Q&A portion as a reminder, in order to allow everyone time for questions. We ask that you limit yourself to one question and one follow up.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
If you were using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question comes from Puneet pseudo was S. S. VB Leerink. Please go ahead.
Yeah, Hi, Frank Thanks for taking the question and congrats on the quarter and slower really great working with you really best wishes for the next call.
So Frank My first question is really on the guide.
The beat in the quarter here, obviously, great to see that but you know when we put that in obviously midpoint.
Reaching to the midpoint of the organic guidance range versus what we were modeling. So I'm just trying to understand on one hand, there's a backdrop of the strong quarter. You had the demand is strong you highlighted more than 20% bookings growth.
Year to date Youre getting another gigahertz placement multi biotech or is it strong here. So the question is really the conservatism is it coming from supply chain, mostly or is it a software budget flush if you could walk us through the components here and on the supply chain side. If you could just maybe help us under.
<unk>.
Is it worse than what you had highlighted in the.
The second quarter. So just wanted to get a sense of where things stand today.
Yeah, Hi, Puneet.
So the I think the guide's appropriate I mean, obviously, we took up our our guidance for the full year very significantly.
And are seeing terrific improvements just about in every category throughout the for the full year.
So that's really what we're driving and managing AD right.
Gerald explained some of it already we had this sort of $15 million that we thought we'd end up in Q4 already coming into Q3.
And we.
We have an $8 million headwind from Covid testing in Q4 from compared to a year over year and now and.
And then.
We're just really very very happy with how it's shaping up obviously.
Looking at the main points I realize that we always give a range at 17% organic growth and.
19, and a big step up in margins.
More than 50% EPS growth.
You know I think I think that's just going to be a perfect ending to the year.
And indeed I think.
Supply chain to your question.
It's not no dramatic shifts, but they are pervasive there everywhere. Our teams are working very very hard very successfully so far.
<unk>.
Our some of our delivery times have become longer and that's how we're quoting systems to customers in and that gets accepted because everything I think theyre seeing it everywhere. So most most things that come in now as the orders I mean, they announced that almost all of that would go into Q1 or Q2 or even later of next year. So it's not.
No no dramatic changes.
But on the other hand, we're just.
Our Q3 was if you like.
Somewhat better than we had even expected and the full year growth rate is and all the other metrics I think are are terrific.
We're looking forward to entering 2022, then also with rather strong and flexible backlog.
And hopefully continued momentum obviously, we'll comment on that when we report Q4 sometime in February of next year.
Okay.
Thats helpful and in terms of inflation in terms of cost increases from suppliers could.
Could you just update us on your ability to potentially push that to the customers and maybe just give us a sense of what youre seeing out there in terms of inflationary sort of expectations that are obviously happening with a number of companies, but just wanted to get your view since.
Broker has significant capital equipments.
Right.
<unk> pressure is clearly out there and it's also rather pervasive.
Many areas, we have long term contracts many areas, we have very very good vent.
Vendor relationships and significant influence we're doing redesigned by cost in many areas, where we are and hence we're making significant enhancements in productivity.
The inflationary pressures are still there and of course greater than certainly at any time in the last decade.
So.
We are looking at that proactively of course also in our pricing this pricing and price increases are.
Or something that we are that will be higher than in other years that's clear.
But I'll also say that our number one priority at brokerage customer satisfaction long term customer satisfaction. So we're not going to try to pass on every price our logistics spike onto our customers.
But we will also cushion some of that for them.
And I think Thats, a good long term customer strategy that gets honored by demanded by long term customer loyalty. So I'm not trying to suggest that all short term inflationary pressures or spikes will be simply passed on but we have enough other things in the pipeline so that I'm.
Quite quite confident that we have.
We will manage differently, but we'll manage well in this new in this new environment with more to be seen and obviously when we when we give guidance for 2022, so far it has obviously with terrific three.
350 bps, so more non operating margin expansion in gross margin expansion.
So far we're doing extremely well in that environment.
Got it Okay and last one for me I think really have three questions. So I think we need to also leave some time for all the questions because we usually have one or two.
I am sorry puneet.
The next question is from Derik de Bruin with Bank of America. Please go ahead.
Hi, Thanks for taking the question. This is my question on for Derek.
I wanted to talk briefly about the NSF orders, you've called out we've talked about in the past, but I wanted to sort of get an update of your thoughts on.
When this could start contributing revenues could this be 'twenty, 'twenty, two or closer to 23 or beyond and just sort of at a high level. If you could provide us an update on the ultra high field order book and how we should think about the cadence of some of those deliveries in 2022.
Yes.
Understood. So no. These NSF orders these NAND orders will certainly not.
Not be delivered in 2022 that goes into two.
2023, and beyond I don't have the exact target quarter, but.
The order book for Ultra high field Gigahertz class MMR.
Is is at least two years out I don't have the exact numbers right now.
Yeah.
So these these orders it used to be a delivery times of four to five years. They have certainly come down to three years more typically are three years or less.
And we've made good progress this year in 2022, and 2021, and we expect to place one more well we've placed already but we hope to have in revenue one more system in the fourth quarter.
So I'm not going to comment on 2022 expectations, but the order book is pretty much full for the next two years and more demand hopefully we will come up during that time period.
Okay, Great I appreciate that and then if I could get a follow up on on.
The margin profile and sort of the flow through really.
Really strong both on gross margin and operating in.
In the third quarter I'm, just wondering if you could parse that apart.
What was the contribution or the benefit from the 15 million pull forward I imagine that probably can't do at a pretty nice margin.
And then the supply chain issues, you've talked about potentially affecting some delays into 2022.
Quantify that thanks.
Well I'll take that one it's gerald so relative to the.
The performance on the margin side at the operating margin and gross margin performance.
I said on other calls when we get this level of revenue growth and the volume we tend to see very good operating margin performance.
Rob stone to our bottom line more quickly.
That's driven in this particular case not only by good strong performance in our bio spin group, which.
This event to a $15 million.
He helped that situation, but furthermore.
Seeing very good strong demand.
From a revenue perspective in the third quarter in a number of different market segments.
It's true for our industrial industrial research academic markets or Biopharma markets applied markets.
Metrology as well so all of those are carrying pretty solid margin performance at the gross margin line. So generally speaking that helps significantly and that's what that's what you see here.
I might also mentioned.
Asked about items that might fall into 2022.
We won't comment specifically on that but with the.
Now with the fact that we have logistics delays, we have supply chain challenges.
With broker the way. This works is particularly for large high value pieces of equipment, we really only need one or two units to fall naturally into be delayed for some reason either customer.
Customer acceptance issues or just facilities not being ready and in those cases, we all ultimately it just falls into the next quarter. So I think we'll see some of that particularly with some logistics delays.
And that's that's probably the high level view from my perspective on it.
As we've all taken into account in the guidance for the full year and the implied guidance or color for the fourth quarter of course.
Great. Thanks, so much congrats on that as well.
Thank you the.
Your next question is from Tycho Peterson with Jpmorgan. Please go ahead.
Hi, This is Rachel on for tank got it thanks for taking the question so.
So first up on China can you just walk us through your expectations on resale procurement initiatives.
Emphasized local players in the market and also do you see any risks.
Actual range.
Right.
Yeah.
Yeah, I mean in most of the product areas.
Where we are active we are really very very differentiated and unique in.
Very often globally.
And including even in China. So it's.
It's not that our products are easily displaced by something Thats made locally I mean, we're aware of that we see we see those preferences for sure and.
We have really excellent applications and sales and service support in China Chinese customers generally are very satisfied with the product and the support.
That they're getting from broker and very often our products are almost always our products are just very differentiated.
I think I'll leave it at that but we're well aware of some of these political tendencies, they do not affect us.
Primarily they do not affect us all that strongly.
Understood and then last one from me so last quarter, you guys flagged some broad weakness in Japan, you called it out a little bit on this call as well.
So can you just give us an update about the demand trends youre seeing in the region for <unk> as well.
Did you say, Japan was that the question.
Yes.
Yeah.
Well.
I believe Japan had been weak and I think Japan had seen somewhat better bookings than there had been I'm aware of on the EMR side that they had been or some sort of a special supplementary budget and.
Sure.
Have seen and I think are also expecting some decent bookings in Japan, because some extra money to become available after the Olympics.
But I have to say I'd, rather get another quarter of visibility into Japan orders before I comment right now I don't really have any of that.
After a slow start for most of the year. There are now some signs of hope, but I wouldn't call. The data you had let us let us comment more after the fourth quarter.
Great. Thanks for taking my questions.
Sure.
The next question is from Dan areas with Stifel. Please go ahead.
Good afternoon, guys. Thanks for the questions Frank anything to add to the comment in industrial research is a bit beyond where you were thinking for the quarter was that focused on a particular geography or application or was it just sort of across the board.
It's really quite broad and even in our more industrial and applied businesses like the molecular spectroscopy or X ray tools or other surface tools surface analysis tools.
Its particularly strong of course in advanced packaging and semiconductor that serves broadly the microelectronics industry. So chip scare cities in a way are also good for broker because they drive demand and investment of course, there's a lot of political factors geopolitical factors of why investment in that.
Space is likely to be driven by demand trends, but also by trends towards more geopolitical independence.
In that area in particular, but in general in industrial and applied markets have really been just very strong and almost without exception. So for very many of our product lines. Our core products, we really have continued innovation.
We work on not only on productivity, but also on performance on.
On next generation product line refresh so very often we have been and we found ourselves to be in a very good competitive position. So also our core businesses have done really quite well in bookings and I'll also in revenue.
So it's pretty broad based.
Okay.
Maybe just a follow up on bio spin I was wondering whether you could just sort of update us on the color that you might have on lead times and bio spin and just where things.
When it comes to installation timing for some of the big ticket items I mean, how should we think about the timeline there relative to some of the.
Earlier days in the pandemic and maybe how are you finding those today.
That's a good question and those delays were maybe we couldnt access a lab or couldn't go to a certain country.
Still are some countries, but in the bigger.
It's obviously gotten better and on the other hand, some countries in Asia Pacific or.
Australia, and New Zealand are still difficult to access its getting better, but it's and we're working in this new you know obviously a lot more is done by virtual.
So and so so we're dealing it is an improving situation and we have new tools and methods that work reasonably well.
Have allowed us to show the strong growth obviously.
Despite some remaining restrictions.
In Western Europe, and North America. These things are now.
Obviously in much better shape, but there are still parts of the world, where we can ship, we can deliver and we can get revenue, but we're doing it differently.
It is improving and we have better processes, we really do some very complicated installations these days and customer trainings.
Augmented virtual reality and things like that it's actually quite remarkable how much progress we have been making.
So it's.
Not holding us back as you can see from the results from the guidance.
Okay. Thanks, very much sure.
The next question is from Patrick Donnelly with Citi. Please go ahead.
Hi, Thanks for taking my question. This is lindsey spire on for Patrick Donnelly.
Was wondering if you guys could talk a little bit about the European recovery that youre seeing and I always talk about China, but I'm curious all Europe and those end markets as well. Thank you.
Sure.
Suddenly different timing, China recovered first already began to recover already in late Q2 of last year.
Europe began to recover earlier than the U S and Europe was already getting.
Stronger in Q3, and Q4 of last year in terms of bookings.
And and then it took a while for the U S, especially academic and government spending to really get going but right now thats the strongest growth driver in terms of bookings for sure.
So.
Europe.
Yes, I don't know that theres much more to say European revenue growth was good European bookings growth in the third quarter year over year, a little bit weaker, but really because Q3 of last year was so bad.
There were some sizable proteomics initiatives in Germany, and some other countries last year. So.
Yes, China first Europe second Americas.
Americas, I should say North America, USA third with Japan in some parts of the rest of the world on the really now hopefully beginning to recover.
I hope that helps you.
Great. Thank you that does.
The next question is from sung <unk> Nam with BTG. Please go ahead.
Hi, Thanks for taking my questions and I would like to add thanks to lot and there's a lot. That's all for all your help.
Two quick ones, one is I'm, sorry, if I missed it but Frank what percentage of your installed the moldy.
By type of installed base in Europe currently has adopted.
The subsea type our workflow.
Right No I, we didn't I don't think I have that number at my fingertips.
It is not.
So first of all it's only preclinical right. It's not sepsis inherently is a clinical about two thirds of our multi <unk> worldwide. Our clinical one third our non clinical so they would never have it in Europe, there has been adaptation, but lower reimbursements.
The reimbursement environment for the subsidy type of type capability in the U S is much much stronger in the U S. So we think it's a much bigger driver in the in the U S and we are indeed seeing that.
I do not I cannot answer your specific question because I do not have that number.
Oh no worries. Thank you and then just I'm curious about your molecular diagnostics such as <unk>.
Hi, where you might be seeing growth kind of beyond the COVID-19 testing opportunity.
Well I would say, it's mostly recovery of their TB theyre tuberculosis, PCR testing, including the liquid array.
PCR multiplex thing that looks at many many different resistance patterns for a while that was that clearly.
<unk> play and probably still continues to play second fiddle to Covid testing, but it is now coming back like so many other diagnostic procedure that is recovering and we have some strong products there.
That obviously were overshadowed by Covid testing.
Albeit mostly in tuberculosis testing and as you know.
We're focusing on Europe Africa.
And India and those markets. This is not something we sell in the Americas or in <unk>.
Japan or China. So it's it has regional specializations.
Great. Thank you so much.
The next question is from Josh Waldman with Cleveland Research. Please go ahead.
Hey, Thanks for taking my questions. Frank I think I heard you comment orders were up 20% year to date, but wondered if you could comment on order growth here in the third quarter overall.
Then.
I believe the longer term growth outlook, you laid out back at the analyst meeting incorporate something like 8% to 10% annual organic growth through 2024.
Franco Gerald.
If you could provide any context on how we should be thinking about 2022, I guess given the comp.
It's obviously more difficult should we be assuming something below that for next year.
So.
Josh a lot of questions embedded here.
Gerald will start real quick with the with the BSI year to date or Q3, I think your question order bookings right. They were very similar right and wrong.
Actually it's over 20% order bookings growth for BSI.
Groups for the third quarter and actually for the full year to date nine months and those were organic organic organic.
Bookings performance was very strong.
Was the third quarter stronger than year to date trends.
Very similar similar I'd say yeah.
In the third quarter keep in mind that we got the 211 gigahertz orders in the third quarter from this NAND. They both came in in the third quarter.
If I can recall correctly. So yes, so that was a bit of a step up but if you. If you disregard well I mean, they're very nice orders, obviously, but the trends have been very similar and very strong for the first three quarters I wouldnt read anything into that so year to date, 20% and that's very close to the quarterly.
It averaged over three quarters is also close to the quarter and EFI growth I was just going to add one other thing Josh it's across all the groups.
So each of those groups is performing very well on the order bookings side right. So that's important it's not simply one group we're firing on those cylinders I'm talking about the groups. The BSI groups outside groups and I am sorry, some of your other questions. I mean, we're not going to go into 2022 trying to forecast 2022.
But what were some of the other elements of your question, Josh If you could repeat remind us please.
Yes, more just kind of context on 2022 in light of the.
Longer term guide, obviously, the comps step up significantly you should shoot.
Should we automatically be assuming something below that.
<unk>.
Just at a very high level, we obviously in June as you recall, we said our 2020 for multiyear targets right.
And.
I mean, we're clearly de risking that with the strong of 2021 if it comes near out near our guidance right and so this year is sort of.
Not only a recovery, but this year is really a big step up in many aspects, which is which is wonderful.
No.
As you know we will give 2022.
Guidance and outlook in February when we report the fourth quarter and half.
<unk>.
A better overall picture so that at all.
2021, strong, but really also a very good step up in deep derisking. The targets that we had that we had given we have great momentum.
Got it thanks guys.
Thank you.
Your next question is from Jack Meehan with Nephron Research. Please go ahead.
Thanks, Good afternoon.
I was wondering if you could give us some more color on Tim's top performance in the quarter. How uptake is in terms of shipments and where maybe just even more broadly just how that performance in that.
Tim's top pro did in the quarter relative that Calvin overall would be helpful.
Yeah. So.
Jack.
So associated ship.
Shipments slash revenue for Tim staff have been strong all year in the third quarter was no exception.
Also beginning to already see some.
Some bookings for the new gym stuff SCP. In addition, which is really an additional growth driver of the single cell proteomics system that we launched on June 1st even though it's essentially a $1 million system. They were some budgets that.
Were that people simply found because they thought they needed to have that unique capability for unbiased proteomics is an additional quantitative spatial biology technology, so quite encouraged by.
Early orders of these more expensive systems and while the <unk> pro and I'll, let him start pro two that we're shipping now is really been growing very nicely all three quarters, including the third quarter of nice revenue nice shipments.
And.
I'll just put out the teaser that tomorrow morning, we will have a per hour hour ASML press release, a lot of that will relate to new we just introduced the two systems. So we're not launching systems tomorrow, we introduced them at the original ASM is timing of June early June.
And but a lot of very significant further workflow and software and other capability enhancements developed by ourselves and very often.
By by our key customers, but being beneficial also for other customers. So I think we'll have some exciting proteomics and other mass spec news Tomorrow morning, and then we have an 11 o'clock press release four that's more scientifically oriented we're not going to talk about EPS, but happy to talk about protein identifications and gold belt.
Proteomics Tomorrow.
But it's doing very well Andy Andy.
The interest by more and more key opinion leaders, but also not only key opinion leaders also what I would say the early majority is is.
Is really very positive and it's just a new category. This 40 <unk> it makes that Ccs our collision cross section enabled.
Is a new take on the field and it has so many advantages when you can do that at scale and we will just have so many examples of that tomorrow again.
Great looking forward to it.
I also just had one clarification the $15 million related to paper work.
Can you just elaborate on that so the sales were expected in the fourth quarter pulled forward.
You were able to generate in the third quarter is that.
The paperwork stuff was about 10 of the $15 million of about $15 million that we thought would go into Q4 ended up already coming through in Q3 wonderful about $10 million of that was China paperwork related and it wasn't the tax or import certificates with something very MMR specific.
Some samples that we need for <unk>.
S qualifier and calibration samples and that had held up things that we thought would get delayed into Q4 and then they ended up not getting delayed.
I wouldn't it was very broker and very MMR specific I wouldn't read anything into that onto other parts of the business or other companies, but so $15 million came in was not delayed I should say, which is great and of that $10 million was paperwork, China MMR related but very broker specific very MMR specific.
Got it.
Sorry, just a follow up does your fourth quarter guidance have any additional pressure related to.
Any one off things that we should know about.
Well, we have one one gigahertz I think of 1.1 gigahertz system in Europe in our fourth forecast.
But we have.
We've guided in a way that.
That has a high chance.
What's happening, but even if it doesn't.
Don't you worry about that.
We think we've got that covered.
We look at some contingency plans if not a then b or C. Alright, so I wouldn't there's nothing that nothing worth pointing out.
Unless something some major shutdown in December occurs because of some new variant or so, but but I think we've been good at it.
Taking taking.
Taking things into account and I think we're in good shape to meet our implied guidance for Q4, and our full year guidance.
Thank you.
The next question is from Mac Sykes with Goldman Sachs. Please go ahead.
Hello, Hi, Thanks for taking my questions squeezing me in I'll just leave it to one question.
I just wanted to go back to the multi biotype are installed base that chart that you had on slide eight where you showed the Americas versus Europe is there any obstacles within the U S market that would prevent you from getting to what the European installed base looks like and what impact do you think that would have on just your consumables revenue stream and overall recurring revenue if you were to grow it too.
Sort of a European size of installed base.
Okay. So we've been a good very good question I think we have the opportunity for substantial growth in the Americas I wouldn't say that Americas well first of all this is America, so maybe 75% to 80% of the thousand 20 systems you see here would be U S. The rest is Latin America, and Canada and then.
Mexico.
So there's a lot there's even more growth potential in the U S.
That's been slower to adopt than than Europe. That's for sure. So we think of the U S could be a pretty sustainable part of the of the further <unk> growth.
Two what's implied in your question, which is actually quite insightful.
The U S consumables pull through and reimbursement for assays is quite a bit better than in Europe.
So I.
On average systems in the U S pull through more long term revenue.
And then in Europe, so that would be even quite beneficial and maybe thats. What you are aiming for with that question as well as the U S probably will grow faster than Europe, and multi biotype a systems installations.
We expect an even better consumables pull through.
In the U S than in Europe or in APAC.
Great. Thank you very much guys I appreciate it.
This concludes our question and answer session I would like to turn the conference back over to mirror swab, a minute mento for any closing remarks.
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The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
Okay.
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