Q2 2023 Bruker Corp Earnings Call
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I would now like to turn the conference over to Justin Senior Director of Investor Relations and corporate development. Please go ahead Sir.
Thank you and good morning.
I would like to welcome everyone to broker Corporation second quarter 2023 earnings Conference call. My name is Justin Warden Hamburgers senior director of Investor Relations and corporate development joining.
Joining me on today's call, our Franco out keen our president and CEO and Gerald Herman Our executive Vice President and C. F L.
In addition to the earnings release, we issued earlier today drink today's conference call, we will be referencing a slide presentation that can be downloaded from the events and presentations section brokers Investor Relations website.
Drank today's call, we will be highlighting non-GAAP financial information reconciliation of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at <unk> Dot com.
Four we begin I would like to reference brokerage Safe Harbor statement, which is shown on slide two of the presentation.
During this conference call, we will be making.
Looking statements regarding future events in the financial and operational performance of the company that involve risks and uncertainties.
Including those related to geopolitical risks and supply chain logistics of inflation's challenges.
Companies actual results may differ materially from such statements factors.
Factors that that might cause such differences include but are not limited to those discussed in today's earnings release and in our Form 10-K for the period ending December 31st 2022 is that the end is updated by other.
SEC filings, which are available on our web site and on the F. C C web site.
Also please note that the following information is based on current business conditions into our outlook as of today August 3rd 2023, we do not intend to update our forward looking statements based on new information future events or for other reasons, except as may be required by law prior to the release of our.
Third quarter of 2023 financial results expected in early November of 2023.
Should not rely on these forward looking statements as necessarily representing our views are I'll look as if any date after today.
We will begin today's call with Frank providing an overview of our business progress Gerbil, then covered the financial for the second quarter and first half of 2023 in more detail and shower updated fiscal year 2023 financial out of luck.
Now I'd like to turn the call over to Burger D O drank logging.
Thank you Justin good morning, everyone and thank you for joining us.
Once a day second quarter, 20th twenty-three earnings call.
While we have good knowledge that general market conditions are becoming softer and more cyclical applied.
[noise] micron metrology and industrial market.
Broker continued to see good demand for our truly differentiated scientific instruments in life science solution.
In the second quarter I'm twenty-three, we saw continued bookings growth from academia government and academic medical centers.
Contrary to industry trend, we are pleased with our continued growth and booking in biopharma as well as in China, both in the second quarter and in the first half of 2023.
We attribute this resiliency to our technologies and solutions, often unique and differentiated capabilities and performance, which can partially shield us from customer budget reduction.
And market weakness.
We expect solid mid single digits until high single digit organic revenue growth in the second half of 2023.
We also intend to be agile and managing our costs and this chap here macro environment.
We will continue our strategic investments in our transformative project accelerated through Dot O, particularly in proteomics and spatial biology.
But also in recently acquired additional growth drivers in proteomics consumable.
Proteomics drug discovery services.
Neuroscience research tool.
Applied market solutions and scientific software.
Turning to slide four in the second quarter of 2023 brokerage delivered another solid water with organic revenue growth of 13.5%.
And non-GAAP EPS growth of 11.1% year over year.
Brokers second quarter twenty-three reported revenues increased 15.9% year over year to 681.9 million, which included a flight currency tailwind off half a percent.
On an organic basis revenues increased 13.5%, which included 13% organic growth in scientific instruments, and 18.4% and in our best segment.
Your company elimination.
Wild growth from acquisitions added 1.9 per cent.
This implies a constant exchange rate wrote up 15.4% year over year.
Our second quarter twenty-three non-GAAP gross margin decreased 90, bips year over year to 50.9 per cent with a decline attributable both to unfavorable product mix in the quarter as well as as well as through currency and inflationary headwinds.
Or non-GAAP operating margin, but 15.3% a decrease of 130 bids year over year due to the decline in gross margin as well as the already anticipated partially transitory currency and the acquisition headwinds two hour Opex as we had explained when we gave me in.
This whole 20 twenty-three guidance earlier in the year.
In the second quarter of twenty-three broker reported reported gap diluted EPS of 39 cents compared to 33 cents and Q2 of 22, an increase of 18.2%.
On a non-GAAP basis second quarter twenty-three diluted EPS with 50 cents.
11.1% from 45 cents in the second quarter of twenty-two Gerald will discuss the drivers for margins then EPS later in more detail.
Moving to slide five.
You can see brokers strong performance and excellent execution in the first half of 2023 with organic revenue growth of 15.6% non-GAAP E. P. S growth of 22.3 per cent.
More specifically with our first half twenty-three revenues.
Excuse me, our first half twenty-three revenue increased by 15.5% to 1.367 billion on an organic basis first have revenues, 15.6% year over year, consisting of 15.7 per cent organic growth inside.
Instruments, and 14.1% organic growth at best and add up intercompany elimination.
First have plenty twenty-three order bookings for R. B S. I segmented grew double digits year over year organically driven by broker biased spin and call. It an hour broker scientific instruments book to Bill ratio for the first half remained above 1.0.
Our first half twenty-three non-GAAP growth and operating margin and Gab gap and non-GAAP E. P. S performance are all summarized on slide five and you can see the strong non U P. S. non-GAAP EPS broke of 22.3%, which we believe is excellent performance.
Life Science tool space.
Are trailing 12th month return on invested capital of non-GAAP measure was 23.7% a matrix that highlights are strong broker management process and are focused on disciplined entrepreneurial lives in organic growth supplemented by selected and smart acquisition.
Please turn to slide six and seven now where we highlight the first half twenty-three performance of our three scientific instrument groups and up our best segment, all on a constant currency and year over year basis and.
In the first half of twenty-three the Bios been group revenue was 342 million and grew in the high single digits.
Please note that there were no gigahertz class marked systems in revenue in the first half of twenty-three compared to one 1.2 gig of hurt in the first half of 22.
Now expect two or three gigahertz clouds on a march in revenue in the second half of twenty-three with some gigahertz revenue shifts into early 24.
In the first half of 2023 biased spin saw a strong growth across the condemning government industrial research and applied markets as well as in its new integrated data solutions division with its novel by why scientific and lap software platform, which we explained in a recent press release.
For the first half of 23 Calor group had revenue of 464 million an increase in the low twenties percentage with strong growth in life science mass spectrometry, driven by the Tipstaff platform and aftermarket business as well as the optics.
I R near I R N Robin business our team.
South platform, so robust demand for obligations and 40 proteomics anti proteomics, then metabolomics and more and.
And Q2 at a S. M. S. We launched himself ultra which provides market leading sensitivity and throughput where they expanded peptide coverage and more accurate quantitation and unbiased 40 single cell cell line of tissue proteomics.
[laughter] microbiology and infectious disease revenue was up slightly as all their demand from all the Biotyper consumables, what's all set by a final drop off our modest COVID-19, molecular diagnostics revenue now to near zero.
These turn to slide seven now the first half twenty-three broker nano revenues revenue, what 435 million and grew in the low twenties percentage with strong revenue growth across this end markets, including academic and government industrial in semiconductor metrology.
Revenues far advanced X Ray and on the surface as tools all delivered strong revenue growth in the first half.
Life Science fluorescence microscopy revenue was up on product innovation and research demand and now also includes a strong contribution from a recent acquisition all day in skull Peeks Neuroscience research tools.
Finally.
First half twenty-three best revenues screwed that made teams percentage net of intercompany eliminations driven by share gains and strong superconductor demand by M. R. I O N customers as well as from broke and advanced technology revenues for Big Science.
<unk> research and extreme UV semiconductor tools for key OEM customers.
Moving two flights.
Eight and nine on slide eight we want you to highlight something that you don't usually look at so closely probably named me or rather unique metrology tools and how they serve leading artificial intelligence intelligence AI chip R&D and production.
I will let you read this life. There's obviously many insertion points where are broker plays a key role in chip development and manufacturing C. P. U chips G. P U chips.
Tends to be the envy the hours similar high bandwidth memory systems on a chip F. G. F. P. G as something that some of you are familiar with the take home overall messages that approximately 75 million of our estimated 2023 revenue is driven by AI trends and we think this will keep increase.
Thing of course, there is the other trends from clouds two per more pervasive computing that make the fundamentals and this time I have conducted metrology space very very strong, especially for us as we are not only through Edward much less exposed to memory and much more exposed.
To the will have much more opportunity I should say from them in the novel techniques and the latest generation chips.
Chips that this is highlighted here switching over to life science and proteomics of course on slide nine.
You may have already heard about the really transformative.
We believe best in class sensitivity for 40 proteome mix of our new T himself ultra that'd be launched at ASM S twenty-three and which raises the bar further for sensitivity and unbiased proteomics with new technologies next generation ion source and next generation technology.
More importantly, this brings significant performance advantages for low sample of mountains, including single cell proteomics and single cell don't mix.
Pepsi, though mixed thoughts were pro jail mix all types of post translational modification analysis, which is so important and cancer and other diseases as well as in protein protein interactions all cutting edge drug discovery and clinical research fields.
In summary group of continued to experience solid demand for our differentiated instruments and solutions across our portfolio. We continue to make investments and R&D in on all commercial infrastructure and compelling project accelerates food out of a corporate opportunity areas while all.
Staying agile and disciplined with our cost.
Technology and biological applications leadership in many areas combined with world class execution, and our unique broker management process cultural disciplined entrepreneur realism provide as well for continued outperformance.
Let me now turn the call over to our C. F O Gerald Herman who will review brokerage Q2 financial performance and fiscal year twenty-three outlook in more detail.
Thank you Frank and thank everyone for joining us today I'm pleased to provide more detail <unk> per second quarter and first half of 2023 financial performance, starting and slide 11th.
In the second quarter of 2023 brokers reported revenue increased 15.9% to approximately $682 million, which reflection organic revenue increase a 13.5% year over year.
We reported Gal P. P. S 39 cents per share compared to 33 cents in the second quarter of 2022.
On a non-GAAP basis, Q2, 2023, EPS was 50 cents per share an increase of 11.1% from the 45 cents, we posted in the second quarter of 2022.
R Q2, 2023, non-GAAP operating income increased 6.6% in our non-GAAP operating margin decreased 130 basis points year over year, 215.3%.
Down as a result of lower gross margins and continued project can salary to the auto investments as well as partially transitory headwinds from foreign currency and acquisitions as we can.
Communicated earlier in the year.
Gross margin performance in the second quarter of 2023 was also unfavourably impacted by mix and inflation and several of our larger divisions.
We finished the second quarter with cash cash equivalents in short term investments of approximately $575 million.
During the quarter, we used cash to fund selected project accelerated to the auto investments and capital expenditures.
We generated $13 million of operating cash flow in the second quarter of 2023.
Capital expenditure investments for $23.5 million, resulting in free cash outflow of $10.5 million in the second quarter of 2003.
This compares with operating cash outflow of $44.4 million and a free cash outflow of $62.3 million in the second quarter of 2022.
Brokers second quarter cash flow seasonally tends to have the lowest cash flow.
Four quarters.
It's like 12 shows the revenue bridge for the second quarter of 2023 is Frank is reviewed earlier.
Compared to the second quarter of 2022 bio spins second quarter twenty-three organic revenue was essentially flat due in part to a 1.2 gigahertz system. Prior Q2, 22 revenue well a gigahertz closed system. Originally planned for the second quarter of 2003 has shifted into the second half of <unk>.
23.
Nano organic revenue grew and the lowest 1% range driven by strength and nanos industrial research and academic businesses.
Organic growth groove, new teams percentage was strong performance from proteomics and molecular spectroscopy.
Re delivered solid growth in the second quarter of 2023, and the ER, sorry segment systems and aftermarket revenue with mid teens growth in systems and high single digit growth and aftermarket.
Geographically and on an organic basis in the second quarter of 2023 are Americans revenue grew in the mid single digit percentage.
Pacific revenue grew in the high 20 per cent range.
While European revenue had high single digit percentage growth all year over year.
R I V a region, which as small as we categorize it second quarter of 2023 revenue was up over 30% year over year.
Slide 13 shows are Q2, 2023, P&L performance on a non-GAAP basis.
My God gross margin of 59% decreased 90 basis points from the 51.8% we posted in the second quarter of 2002, due to unfavorable product mix and foreign currency and inflation headwinds.
Second quarter 2000, twenty-three non-GAAP operating margin of 15.3% was 130 basis points lower than the 16.6 per cent margin, we put up in the second quarter of 2022, as we were impacted by lower gross margin product mix in this quarter continuing investments and select.
Project accelerated to the other initiatives and our recent acquisitions and a strong foreign exchange headwind.
For the second quarter of 2023 are non-GAAP effective tax rate was 25.2% compared to 28.2% in the second quarter of 2022, driven mostly by favorable jurisdictional mix.
Weighted average diluted shares outstanding in the second quarter of 2023 $147.7 million a reduction of approximately 2.1 million shares or 1.4% from the second quarter of 2022, resulting from our share repurchases over the past 12 months.
And finally for the second quarter of 2023 19 P. P S.
Came in at 50 cents.
Which was up 11, 21% compared to the second quarter of 2022.
Slide 14 shows a year over year revenue bridge for the first half of 2023.
Revenue was up $184 million or 15.5%, including organic revenue growth to 15.6%.
Acquisitions added two per cent towards topline well foreign exchange was a 2.1% headwind.
Frank is already covered the drivers for the first half of 2023.
non-GAAP P&L results for the first half of 2023 are summarized applied 15 with the drivers largely similar to the second quarter of 23 and this was explained.
Right.
Turning to slide 16 in the first half of 2023, we generated $100.5 million, if operating cash flow up $67 million over the first half of 2002 on higher profitability and favorable other items.
We generated.
$52 million of free cash flow in the first half of 23.
$56 million over the first half of 2002.
Including higher capital expenditures for capacity expansion in productivity optimization.
Turning now to slide 17, given the strength in revenue in the first half of 2023 were again, increasing our revenue guidance for the year.
Updated outlook for fiscal year 2023 includes a raise of our revenue guidance to a range of 2.85 $2.9 billion.
This includes organic revenue growth of 9.5% to 11.5% year over year, an increase of half a percentage point from prior guidance.
We continue to expect foreign currency tailwind of about 1% and an acquisition contribution of about 2% to our revenue growth.
This leads to reported revenue growth in a range of 12.5% to 14.5% an increase of half a percent from our prior guidance.
In 2023, we continue to expect about 50 basis points of organic operating margin expansion, excluding the effects of a recent acquisitions in foreign currency.
For non-GAAP operating margins, we expected declined from the prior year due to partially transitory operating margin headwinds from recent acquisitions in foreign currency with this headwind now estimated at approximately 150 basis points for the full year of 2023, primarily due to a steeper than.
[noise] expected decline in the U S dollar against the Euro and the Swiss franc in the last few quarters.
As a reminder, last year, our third quarter of 2022 was exceptionally strong and we expect a more typical quarterly cadence in fiscal year 2003.
Accordingly for the third quarter of 2023, we anticipate mid to high single digit organic revenue growth and non-GAAP EPS down slightly year over year, and then a reacceleration in EPS growth in the fourth quarter.
While we do expect solid organic revenue growth in the second half of 2023 in the mid to high single digit percentage range. We will also proactively manage our costs given the changing macro environment.
On the bottom line, we're maintaining our 90 I P. P. S estimated range of 255 to 264 fiscal year, 2003, which would represent non-GAAP EPS growth of 9% to 11% compared to 2022.
No to fish now includes an estimated 5% or approximately 10 cents year over year foreign exchange headwind to non-GAAP EPS.
Other guidance assumptions are listed on the slide.
Fiscal year 2023 Rangers had been updated for foreign currency rates as of June 30th 2023.
To wrap up broker delivered excellent organic revenue growth and strong EPS growth in the first half of 2023, and we were renting coin confident in or a full year 2000 twenty-three outlook and beyond.
With that I'd like to turn the call over to Justin starts Q&A session. Thank you very much.
Gerald.
I would now like to turn the call over to the operator to begin the Q&A portion of the call as a reminder to allow everyone time for questions. We ask that you limit yourself to one question and one followed.
Operator.
We will now begin the question and answer session.
Again to ask a question you may crushed starved and one on your Touchtone phone.
If you're using a speaker phone please pick up your handset before pressing the keys into withdrawal question. Please Crestar then too.
Again, we also ask that you please limit yourself to one question and one follow up.
At this time, we will take our first question, which will come from <unk> Tsuda with lyric partners. Please go ahead.
Eight thanks, Frank Thanks for taking the questions here first one financial and and a follow up on the eye first one maybe for Gerald you know obviously, great to see this trend and I'll just congrats on the on the corner the top line guide ways as well, but you know gross <unk>.
<unk>, obviously step-down meaningfully in the quarter you have three gigahertz magnets coming in the second half could you talk a little bit about sort of the cadence for that and how would that impact. The gross margin left I <unk> I know you talked about three Q E. P S being lower versus four Q, but maybe just talk and talk to us.
The kittens for Christian up margins you know in three Q in Fork you just given you know how you think these order shall land.
Yeah, I'll take that <unk>.
Indeed, the gross margin when we said product mixing Q T b two being a little weaker that that has to do with some of the I'll try to be able to get get arts magnet shifting to the second half of the year and we're.
We're now saying, it's gonna be two to three for the second half, possibly one in Q3 in one or two perhaps in queue for but also there might be some of that may be shifting into 24, I think overall you see that you know these things are these.
These are important big field big Big Big ticket items, but they just don't dominate a quarter and so we don't really.
We we we manage other things around them. So it's while they're pretty visible in that kind of fun I like a formula one car, but they they don't we can execute and a quarter with or without them.
Got it Super and then I'm tempted to ask about two major themes that are important for you in the near term, obviously, you talked about AI being one and.
Could you talk a little bit about that growth rate up that 75 million, so far and sort of how do you expect that growth rate to trend I mean, there's some wild estimates out therefore G. P. U chips expansion. So I just wanted to get that and then on the clinical M. R. I and pet imaging Alzheimer's drugs are reaching the market <unk>.
And there is a significant demand expected for a pet.
G as talked about that so could you take a minute and talk about how brokers physician.
With respect to pet imaging as well thank you.
Right.
So I'm just taking down your questions right and she's starting with a I I'm actually don't have God gross data that I can give to you. We all have this feeling that it's gonna be big in big growth numbers.
But I think you're better off looking at other industry data cause. We're obviously a small part of that we also have not had not previously pulled together or I are generally a I related revenues previously that had to do a little bit you know there was of course, the bitcoin farm.
Similar computationally intensive needs that has cooled off obviously and we've only not all kind of established a baseline for our what we think is our AI related revenue so with apologies, but we don't have brokerage tonal data yet we just realized that it's a meaningful amount of revenue and just.
This is a bait baseline perhaps for for a future measurement of how this affects brokers growth rate. It is while I cannot give you a quantitative answer obviously one of our exciting growth drivers and it also tends to carry with margins to your second question on your a digit energy and Alzheimer's disease in particular, India.
<unk> Nicole M. R. I'd pets will become more important we as you know we're the world's leader in supplying superconducting materials to the world's variates needing clinical MRI providers, and MRI will be important as well as well.
At M R and of course M. R. As implied has an M. R associated with it very rarely do people use pets only because you need the MRI for the high resolution Colocalization. The same is true for what we do with our products directly which is the preclinical pet C T.
Or pet MRI products, and we offer both of them and I believe we're market leaders in both of them.
So indeed as they are to the extent they are animal models, whether they're road and or nonhuman primates are on H B, we are very well positioned and we while we cannot quite segregated out we believe that some of our healthy growth in our preclinical.
C T pet MRI.
M R. But also just MRI three preclinical MRI only without the pet element that growth has been good and that is probably there there is of course oncology and and and muscle and skeleton to research and many many other research areas, but certainly neurodegenerative seems to.
Be at an inflection point, where it perhaps after years of but honestly drug discovery failures. It is now poised towards some modest successes and perhaps more in the pipeline so that bodes well for our preclinical MRI business and for our best superconducting materials business, sorry about the long answer that you asked them longer foot.
Questions that couldn't be answered with a yes or no.
No I appreciate the context, thank you Frank.
And our next question will come from that Derek Deborah with Bank of America. Please go ahead.
Right. Thanks for taking the question. This is my question on for Derek one ask a little bit about one.
122 Q.
Tasting on orders I believe last time, you said bookings were stronger than revenue in a couple of your pets.
In the first quarter and I think today you you talk about a book the bill for the first half being greater than 1.0. So could you just sort of put them on a little bit of an apples to apples basis for once you took your you know our booking still come in stronger than revenue to normalize it a little bit in any color you could provide in terms of which.
And markets, our customer classes, maybe do a little bit better on that on the on the order front.
And the third quarter Pier.
Pier one indeed book to Bill was still greater than one in Q2, four BSI, which is the only thing that makes sense cause best test. These long term five your order. So we look at our 90 per cent of our business the scientific instruments segment and their queue to book to Bill was roughly at one so it's still quite healthy not quite as strong as many years where.
Many quarters, I apologize, where we had booked a bill above one and sometimes about 1.1, but still quite healthy with Ah Ah growth in in from China, certain knee geographically the being the strongest mall, so growth and academic government academic medical centers as.
A lot of funding and academic medical centers not only in discovery research, but also in translational in clinical research and in many of our tools participate there still good very good bookings growth in in in in Biopharma I guess, our tools that are more on the used.
We're not so much used in in in in biologics manufacturing at least not yet, but more on the drug discovery and development side and I think many of our tools are just indispensable when you need them you need them, it's not something that you can save on when you cut down budgets. So impartially shields us from some of the chop your environment.
And I hope that answers your question, Mike No no. Let me, let me for completeness semiconductor metrology orders and applied markets orders and industrial orders were a little softer.
So these are not unexpected these are more likely cyclical markets.
Two more typical delivery times over over the next couple of years.
That's great I appreciate all that color. Thanks, and then for the follow up I want to touch a little bit on on Callen and mass spec you've touched on strong demand by 10 soft and obviously you guys showcase some new products at SMS.
Talk about them day in all states. Just curious you took a dive into mass spec performance a little bit more so any early feedback or warnings on the ultra launch and just broadly what are you seeing a mass spec land. Thanks.
Yeah, we don't <unk>.
Comment on on other companies some aspects or their claims we we read them.
Our our team stuff product line. Another on the same stuff as a platform. So then you all choice it's getting a lot of interest. It is it is particularly for the I'll try sensitivity market, but remember for the more routine and routine high throughput.
Markets, we have big Tim stuff H T. We do a lot of.
Mass spec imaging for multi all makes including targeted proteomics, but ultimate of of what makes <unk>. It makes with it didn't stop flex.
And there are some other specialty products.
And and I think of course with an exciting new product at a S. M S.
Shaduf recently were just.
People are very very impressed with its performance and what it can do so.
That's the <unk>, that's the news from <unk> and the same stuff platform. It has it has been growing very nicely throughout the first half of the year.
Expect that to continue.
Great. Thanks.
And our next question will come from Josh Waldmann with Cleveland Research. Please go ahead.
A morning, Thanks for taking my questions two for Ya.
First Franker Gerald I guess, a follow up on Mike's question curious, how you're thinking about the contribution from the backlog work down in the coming quarters, and maybe how 'bout supports resiliency and the twenty-three a medium term guys.
Is there is there a base case number organic growth that backlog work down contributes or is that not the way to think about it.
I'll take that one quickly Josh so.
From my perspective, as you already know we've got a record backlog.
The numbers are high and continue to be held high we have <unk>, we estimate over eight months.
Oh backlog and that's a significant level for us. So our expectation is just by virtue of scale that it will take us multiple years to reduce the backlog that's not gonna get pushed through in a particular quarter, but it does obviously give us.
Frank is mentioned significant Brazilian see when it when it comes to four quarters because.
We simply need to execute on that backlog as opposed to fundamentally rely on incoming orders to do that.
I think the other point is that our backlog seems to be quite strong across most of our business.
Divisions, and we have some that have started to.
Lowly into that backlog fundamentally the largest divisions continue to that sizeable backlog Sir.
You can.
Well I think for our forward view, particularly on the organic sound.
Got it then Gerald wondered if you could talk to the assumptions underpinning the mid to high single digit organic grows for the second half I mean, obviously applies to step down comps only modestly more difficult.
Curious any additional cover color you can provide their and then maybe walk through the puts and takes on.
The impact on the one gig system it sounds like.
It sounds like it's a net headwind.
Is that right.
I guess I I wouldn't characterize it as a note handling our perspective is of course on your first of all back up we we posted 15.
6% organic revenue growth in the first half so that's.
Strong growth we.
We are overall guide is the midpoint is tend to have an organic.
Which is also very significant I think not only for broker, but certainly computers even in this space.
We do have.
They said a significant amount of backlog, which we would hope to execute on some of in in the third and the fourth quarter and we do have stronger comps and both the third and the fourth quarter, we had an exceptionally strong third quarter in particular.
Our expectation is that will will improve on that as we move forward.
It's a color for us is that you know.
Sunny.
Here in <unk> relative to our organic revenue performance and it's it's continued to expect to be that way going forward.
With a strong orders in the first half continued strong backlog convenient demand as far as we can see it <unk>.
Getting a little Choppier, we acknowledged that.
There are some markets that are not growing as fast as we were last year.
And all of us that continued to be quite resilient.
And that makes for obviously very resilient here.
Are you you you know our long term guidance or medium term guidance I shouldn't say that'd be just gave out our investor day for the next few years. So certainly our second half expectations are consistent with that even if we don't grow at the torrid pace of 15% plus any more of the first time.
Got it great to hear thanks.
Mmk temperature.
Our next question will come from Dan <unk> with Steve. Please go ahead.
Good morning, Thank you Frank on file spin how to lead times on and Omar installations look today and when you figure it out just exiting the COVID-19 period over the last 12 months and then bringing up your own new Germany site.
You know what did you say that you've reached sort of a steady state there and that really shouldn't change or do you still think there are some things that.
That you can do in terms of production capabilities et cetera, or just customer acceptance that you'd think improved the lead times you know over the next 12 months.
Future orders. So this isn't the steady state.
And.
Right we.
So we had a we had some delays that were not David February by our gigahertz seminars are leading edge products or sometimes when they reached by or a second round of tests or or some modifications at the factory nance easily of quarters delay that can happen and that did happen, but also some of the other systems I mean demand has been excellent bookings.
<unk> has been has been very very good and.
In the first half and we think they'll continue to be strong.
That means we need to ramp our capacity quite honestly and everything from the from factories, a test to to field installations. So yeah. This the times are are wonderful, it's a high quality problem that'd be need to bring them down but capacity grows and and actually that's true in many areas so that you've seen.
Elevated capex and this year and last year actually in the last few years, we're kind of building for productivity, but also for the capacity that we think we need over the next decade or a decade and.
And so more work to be done.
Okay. So if if lead times have improved 12 months from now chances are it's more to do with your own internal processes, rather than anything customer related just want to make sure I have that right.
I think that's a reasonable assumption yes.
Mmm, Okay, and then just maybe on the Guy Gerald just to make sure I have it straight if the enema orders.
And gotten pushed off the 2024 is it fair to say that maybe the outlook would've been up another half a point to point.
And then an academic sorry to accelerate 2.0 spend.
I'm kind of just curious you know when you look into <unk> at what you plan on investing for that program and I know, it's sort of a continuous thing to an extent, but how much of the of the investment for 2.0.
Do you kind of think of as of 2023 thing versus of 2024 thing.
Yeah, well, maybe on the first one <unk> I mean, all these ultra high fields, there's a range depends whether it's at 1.011112, but very roughly a system is around 10 million right. So yeah.
Two.
So does that sound like it.
Twenty-five besides suppose if you like.
So it's not.
It did not unimportant.
It's meaningful but it's not that significant.
So.
I mean, I I'd say and we we have puts.
Puts and takes in the guide uhm there'll be some elements that we hope our website and other severe concern about downside and so I think we factored those all into the into the Guy who did receive it at the moment.
Mm Hmm.
Junior a second thought to a second part of the question if I understood correctly about projects accelerate two dot O investments, obviously, we're on a multi year investment to track there yeah. So that that's.
You know what happened, but I'm getting 24 guidance of course, but as we gave medium term guidance drove the medium term guidance at an Investor day, we said that for that time period until 2026, we would expect.
<unk> to keep our R&D investments near 10% of revenue.
We're investing in that while delivering EPS growth, we maximizing ETS growth no, we're making we're delivering and off EPS growth and focusing on doing.
Doing the investments for the future.
In parallel on this has worked out nicely and keep on making us a faster growth company and have excellent growth. This year relatively speaking for sure really very good growth.
Super that gift.
<unk>.
And our next question will come from Patrick Donnelly with city. Please go ahead.
Taking the questions Frank maybe on the China Biopharma peace encouraging to hear you guys kind of shook off a little bit of the industry concerns. There could you just talk about I guess, if anything changed in terms of as the quarter went you know in Minneapolis.
If you're willing to comment on July you know obviously, the peer said add some issues in those two markets would be great to just expand a little bit on what you guys saw on how you feel I'm Gonna go forward there.
Yep, we had particularly if you recall, we had particularly strong order growth in China in Q1, and we highlighted that on our queue one earnings call and so we put some of that <unk> <unk>.
Expected and continue to expect was real additional demand of things that would not have been purchased otherwise except for that loan slash stimulus program that China had and where we benefited disproportionately without big ticket items I think.
And tell me that also we expect would be pulled forward within the ear. However, our second.
Quarter growth of four orders in China was still quite good I think it wasn't exceptional as he wasn't Q1, but he was still quite good. So we didn't and I'll go from feast or famine, but continued to see good academic in government and academic medical center orders from China.
So.
Within the quarter it doesn't most of our orders come into last month of a corner. That's just when you're more on the instruments business. So looking at trends within a quarter for us doesn't make it does not make sense to me. We don't have data that'd be would even look at that as particularly meaningful.
More for all the companies that have me and him on both revenue myself.
And Patrick maybe just one other additional comment from my side so theirs.
There was really good revenue performance in the second quarter from China, and the backlog levels in China continue to be significant.
I'm actually above the corporate average so we have quite a backlog level here to to work down and you've been somewhat constrained by some experts restriction issues, but hopefully we work our way through those and then submit that will.
Phone to the robot Unfortunately is not really yeah.
Delays on our next word that we need to get here.
Alright, and then and then click one <unk> just to follow up on the orders and backlog you know there's a lot of focus there you know appreciate the book the Bill commentary I mean is it safe to assume it's B S. I book, the Bill was hovering around one yeah, I think I agree 13, organic and a quarter. So orders there up double digits is that fair to say.
So I'm not sure I caught everything in Q2 as I mentioned earlier to to Michael R. R. B S. I spoke to bill was around one.
The second part.
Your question.
Okay, given that B S. I grew 13 is it safe to say orders were up double digits as well.
The first half was certainly double digit growth.
I.
Right second quarter.
Kings.
We're growing less than that because of the bookings a year ago right.
Q2 bookings a year ago.
Yeah, I'm I might add also Patrick that given some of the lumpiness in the order of some of the port forward. We saw as we articulated in China in the first quarter, we really think it makes sense to look at the first half.
Four and a quarter.
Book to Bill on that second quarter was hovering around one which we we aim to keep it in that area going forward.
Oh, and some photos you'll have to come to load that to be able to work up the backlog yep.
Yep. So it's still no. Thank you that'll solve it still solid not as strong as in Q1.
Understood. Thank you.
Uh-huh sure.
Our next question will come from a Dan Brennan with Cowan. Please go ahead.
Great. Thank you thank Frank a general taking the questions maybe just one.
Sticking with the order dynamics kind of some kind of what you guys have seen today any sense on like a directory of orders in the second half and what would be the early read on.
24 organic growth do you think Frank obviously, the backlog significant but just trying to get a sense of that trajectory.
Kind of what you might be thinking about today.
Well the.
I have no specific 24 common than other than you saw hour, a multiyear keg or organic growth that'd be gave it our investor day of of.
6% to 8%, which would imply me to high single digit, but that's another 24 comment that's really a multiyear comment that'd be gave it our investor day, and it's not even a little bit of 24 guidance is just a multiyear comment.
So.
Ordered dynamics in the second half I mean, the pipeline the opportunities look strong and you know.
That that's not something boom.
That that would be may know opposites would've blown the loft are cute, we report Q3 and Q4.
So far book to Bill this year has been.
Been greater than one greater than one in Q1 about one in queue to all sorts of besides segment and that's really all we know.
And how 'bout, Frank <unk>, how 'bout, just academic spending broadly at two two sounded like it was another solid quarter for you and your peers.
While they struggled elsewhere academics seems to be a bright spot this quarter, but there are some concerns over tight budget. So I'm just wondering.
How you see the global market or kind of academic as we look out to the back half of the year and beyond.
Yeah, I could I make government again academic medical centers, becoming more and more important there is a lot more money in and and you know and cancer centers are neuroscience research centers than in good old Department of chemistry.
So within nicodemus hour shifts towards more.
Mmm Mmm a solid.
Pathology.
That shows that academic is good but academic academic medical center in government is particularly good for us.
Yeah, there's some concerns about NIH budget. So of course, but then again, there's also things like the various.
The Science Act, which hasn't trickled down yet in the U S of course non-academic the chips Act and the U S and the equivalent in Europe , and even in Germany, specifically.
[noise] dimmick spending and investment in China has been strong in Japan, it's been strong.
So could emmick government is.
I know for a while people were just enamored with biopharma, but it's a it's a fantastic area I'm in Biopharma for us continues to be strong.
So our.
Our products and solutions.
And our next question will come from Rachel <unk> with J P. Morgan. Please go ahead.
Hi, Rachel it's Gerald good morning to you just just generally on China robust ordered demand and I would say robust revenue performance in China for the first half.
I.
I think what we've seen so far is that there is quite a bit of interest in in China around.
An additional stimulus program, it's not a surprise that with.
With the Chinese GDP.
Falling off so much that there is there something you're interested in doing that at the at the.
Come with level, what we've heard on the street is just very positive about that when you're you're not clear, but certainly reviewing some of the same.
Mmm information.
Yeah, I mean, there's a lot of speculation about things that may happen in the second half, but I think from even just reading across the industry. A lot of that is at this point is speculative for all that based on our data. So I think what we you know what our our second half.
Full year guidance, and then what and the collar. We've given you for the second half is not based on.
Yeah, I mentioned earlier Rachel.
Significant backlog in China, we just like to execute on it and that would be that's what <unk>.
So yeah I'll be looking at all of this with great interest, but we don't have anything to hang I'll add on yet.
When we do we'll we'll reported.
Okay, and then just one more from me I'm basking previously talked about growing throughout the year supply chain, that's really the limiting factor that rolling off. So can you talk about 18 per cent credit that corner was obviously pretty impressive how is that supply chain factor kind of driving through that number and <unk>.
About that segments sequentially throughout the back half of the year. Thank you supply chain and logistics is gradually getting better.
It is not completely normal lives in some areas like superconducting materials. It is still even multiyear constrained and you know that's why we're gaining market share I think because we've made the longterm multiyear investments ahead of the curve, whereas others now cannot react fast enough.
But supply chain.
And logistics are gradually improving but it is still you know it. It's still requires very strong execution. Then I think we have that I think we've shown that over and over again.
It is.
Bill Hartley.
Still partly a drag on on on on growth.
You know when you which is the same.
Saying it in a different way, but that also why our higher backlog in in isn't coming down and a quarter or two but but over over a couple of years. So it's.
It's getting better but it's still the topic is just not a headline topic anymore.
An operator, maybe we have time for one more question from one more participant please.
Alright last question here will come from Jack <unk> Research. Please go ahead.
Thank you good morning.
I wanted to ask about Tim's toft instrument pricing curious how that is trending you can just early dialogue with customers around ultra do you think there's potential to pull up the blended instrument pricing for the <unk> family with some of these new launches.
Yeah, I mean, it's been trending up for some time right, obviously that seems tough S. D. P. I came out a couple of years ago for single cell protein mix and also the <unk> with the additional mass spec imaging capability for targeted multi L makes carry higher at selling <unk>.
Prices, you know sort of in the million and above range and the I'll try is also in that in that million plus range. So.
Given some.
Competitive trends that are that are also launching.
Great and <unk>, that's simply the mob the mix of models, it's not per instrument, but it's the make the model within the platform.
Great.
Gerald you talked about proactively managing costs can you just talk about where you're so pissed with that and uhm possible to quantify how much you're targeting thanks.
Oh look I mean.
Will say that brokers philosophy is disciplined entrepreneur listen so we're pretty disciplined on costs. All the time, our focus now will just be to look at discretionary spending in areas, where we think we can tighten slightly dishes in deep surgery by any stretch.
Organizations very focused on this from the very beginning to continue to do so I'm not gonna providing color on the numbers, but.
You think we're going to continue to be disciplined in our cost management. That's what that's what we do it's tweaking it's not restructuring.
That's what we're aiming for meaningful savings because you know obviously, it's choppier macro we cannot ignore what's going on around us.
And you know you can always sometimes you do you defer hiring some.
Sometimes you have discretionary spending that you can reduce those all the levers that we're working on right now and then that'd be implemented alrighty.
Alright, and this concludes our question and answer session I'd like to turn the conference back over to Justin Board for any closing remarks.
Well, we want to thank everybody for joining us today Records leadership team look forward to meeting you with you at an event or speaking with you directly during the third quarter. Please feel free to reach out to meet a range any follow up have a great day.
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