Q4 2023 Bruker Corp Earnings Call
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Operator: Good morning, everyone, and welcome to the Bruker Corporation fourth quarter 2023 earnings conference. All participants will be in a listen-only mode.
Good morning, everyone and welcome to the broker Corporation fourth quarter 2023 earnings Conference call.
All participants will be in a listen only mode.
Operator: If you need assistance, please say no to a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key and then one on your touch tone telephone.
Should you need assistance. Please see no conference specialist by pressing the Starkey followed by zero.
After todays presentation, there will be an opportunity to ask questions.
Ask a question you May press Star and then one on your Touchtone telephone.
Justin Joseph Ward: If you want to withdraw your questions, you may press the star. At this time, I'd like to turn the floor over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead. Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's fourth quarter 2023 earnings conference call. My name is Justin Ward, and I'm Bruker's Senior Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukien, our President and CEO, and Gerald Herman, our Executive Vice President and CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the events and presentations section of the Bruker Investor Relations website.
With all of your questions you May press Star two.
Also note todays event is being recorded.
At this time I'd like to turn the floor over to Justin Ward Senior director of Investor Relations and corporate development. Please go ahead.
Justin Ward: Thank you and good morning, I would like to welcome everyone to broker Corporation's fourth quarter 2023 earnings Conference call. My name is Justin Ward and nine Burkart Senior director of Investor Relations and corporate development. Joining me on today's call are Frank <unk>, our president and CEO and Gerald Herman our executive Vice President and CFO.
Justin Ward: In addition to the earnings release, we issued earlier today during today's conference call, we will be referencing a slide presentation that can be downloaded from the events and presentations section of the Burger Investor Relations website. During today's call, we will be highlighting non-GAAP financial information reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and our.
Justin Joseph Ward: During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. To begin, I would like to reference Bruker's Safe Harbor Statement, which is shown on slide two of the presentation. During 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 geopolitical risks and wars, as well as to supply chain logistics and inflation. The company's actual results may differ materially from these statements.
Justin Ward: Posted on our website at IR Dot group Dot com.
Justin Ward: To begin I would like to reference for Safe Harbor statement, which is shown on slide two of the presentation.
Justin Ward: During 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 geopolitical risks in wars as well as to supply chain logistics inflation. The company's actual results may differ materially from such statements.
Operator: Factors that might cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K for the period ending December 31st, 2023, and as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and our outlook as of today, February 13th, 2024. We do not intend to update these forward-looking statements based on new information, future events, or for other reasons, except as may be required by law, prior to the release of our first quarter 2024 financial results expected in early May 2024. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today.
Justin Ward: Factors that might cause such differences include but are not limited to those discussed in today's earnings release and in our Form 10-K for the period ending December 31 two.
Justin Ward: 2023, and as updated by our other SEC filings, which are available on our website and on the Sec's website.
Yeah.
Justin Ward: Also please note that the following information is based on current business conditions and to our outlook as of today February 13th 2024, we did not intend to update the forward looking statements based on new information future events or for other reasons, except as may be required by law prior to the release of our first quarter 2024 financial results expected in early May.
Justin Ward: 'twenty 'twenty four.
Justin Ward: You should not rely on these forward looking statements as necessarily representing our views or outlook as of any date after today.
Justin Joseph Ward: We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the fourth quarter and full year 2023 in more detail and share our newly established full year 2024 financial outlook. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukien. Thank you, Justin. Good morning, everyone.
Justin Ward: We will begin today's call with Frank providing an overview of our business progress Gerald will then cover the financials for the fourth quarter and full year 2023 in more detail and share our newly established full year 2024 financial outlook.
Justin Ward: Now I'd like to turn the call over to broker CEO, Frank while Keith. Thank you Justin and good morning, everyone and thank you for joining us on todays fourth quarter 2023 earnings call.
Frank H. Laukien: And thank you for joining us on today's fourth quarter 2023 earnings call. Bruker finished 2023 with another quarter of excellent revenue growth, including 15.9% organic revenue growth year over year. For the full year 2023, we delivered industry-leading 14.5% organic revenue growth, which shows remarkable resiliency and consistency under difficult market conditions. Moreover, 2023 was our third consecutive year of double-digit organic revenue growth, a testament to the strong execution of our Bruker colleagues across the globe and to our differentiated innovation strategy and culture of disciplined entrepreneurialism. Importantly, in fiscal 2023, we also delivered a solid 10.3% non-GAAP EPS growth year over year, all while investing significantly in R&D, capacity, and productivity, and in selected strategic bolt-on acquisitions. For those keeping track of our new Bruker Cellular Analysis business, which we refer to as BCA and was formerly known as Phenomex,
Frank: Broker finished 2023 with another quarter of excellent revenue growth, including $15, 9% organic revenue growth year over year.
Frank: For the full year 2023, we delivered industry, leading 14.5% organic revenue growth, which showed remarkable resiliency and consistency under difficult market conditions.
Frank: Moreover, 2023 was our third consecutive year of double digit organic revenue growth.
Frank: Estimate to the strong execution of our broker colleagues across the globe and to our differentiated innovation strategy and culture of disciplined entrepreneurial isn't.
Frank: Importantly in fiscal 'twenty to 'twenty three we also delivered a solid 10, 3% non-GAAP EPS growth year over year, all while investing significantly in R&D capacity and productivity and in selected strategic bolt on acquisitions.
Frank: Yes.
Frank: For those keeping track of our new broker cellular analysis business, which we refer to as B C. A N formerly known that's been a mix.
Frank H. Laukien: As forecasted in fiscal 23, we had a fourth quarter bolus of 10 cents of non-GAAP EPS dilution. However, excluding BCA, our fiscal year 23 pro forma non-GAAP EPS grew 14.5%. In Q4 of 2023, we did major restructuring and cost cutting at BCA almost immediately after the acquisition closed on October 2, 2023. Accordingly, in fiscal year 24, we expect the quarterly BCA non-gap EPS dilution to be significantly reduced to just 2 to 3 cents per quarter, with a significant further drop in dilution expected in fiscal year 25 and BCA profitability anticipated in fiscal year 26. As we look at fiscal year 2024, we enter the year with solid bookings momentum, a strong backlog, and a positive outlook for Bruker to emerge as a leader in the post-genomic era and, financially, to again achieve above-market organic revenue and non-GAAP EPS growth. Accordingly, we are today announcing our fiscal year 24 guidance for organic revenue growth of 5 to 7% and non-GAAP EPS Turning now to slide four.
Frank: As forecasted in fiscal 'twenty, three we had a fourth quarter bolus of 10 cents off non-GAAP EPS dilution.
Frank: Excluding D C. A R fiscal year 'twenty three pro forma non-GAAP EPS grew 14, 5%.
Frank: Yeah.
Frank: In Q4 of 'twenty, three we did major restructuring and cost cutting at BCA almost immediately after the acquisition closed on October 2nd funding 23.
Frank: Accordingly in fiscal year 'twenty four we expect the quarterly BCA non-GAAP EPS dilution be significant Lee reduced to just two to three cents per quarter with a significant further drop in dilution expected in fiscal year 'twenty five.
Frank: D C a profitability anticipated in fiscal year 'twenty six.
Frank: And as we look at the fiscal year 'twenty 'twenty four we entered the year with solid solid bookings momentum a strong backlog and a positive outlook for broker to emerge as a leader of the post genomic era.
Frank: And financially to again achieve above market organic revenue.
Frank: And non-GAAP EPS growth.
Frank: Accordingly, we are today announcing our fiscal year 'twenty for guidance for organic revenue growth of 5% to 7% and non-GAAP EPS growth of 527% both compared to fiscal year 'twenty three.
Frank: Turning now to slide four in the fourth quarter of 'twenty three brokerage delivered excellent organic revenue growth of 15, 9% and solid pro forma non-GAAP EPS growth.
Frank H. Laukien: In the fourth quarter of 23, Bruker delivered excellent organic revenue growth of 15.9% and solid pro forma non-GAAP EPS growth. Bruker's Q4'23 reported revenues increased 20.6% year-over-year to $854.5 million, which included a currency tailwind of 2%. [inaudible] Revenues increased 15.9%, which included 15.5% organic growth in BSI, our scientific instrument segment, and 20.3% in our best set segment, net of intercompany elimination, while growth from acquisitions added 2.7%.
Frank: Brokers Q4, 'twenty three reported revenues increased 26% year over year to $854 5 million, which included a currency tailwind up 2%.
Frank: On an organic basis.
Frank: <unk> increased 15, 9%, which included 15.5% organic growth at BSI.
Frank: Our scientific instruments segment and 23% in our best segment net of intercompany eliminations while.
Frank: While the growth from acquisitions added two points to 7%.
Frank H. Laukien: This implies constant exchange rate or CER revenue growth of 18.6% year over year. Our fourth quarter 23 non-GAAP operating margin was 18.1%, which was down 290 bps, primarily due to the dilutive Fenomex acquisition into 4.23, as well as headwinds from other M&A and currents. All together, this combined effect more than offsets our organic operating margin expansion of plus 270 bits. Our strong organic operating margin expansion is evidence of the success of our Project Accelerate and Operational Excellence Initiative. In Q4 of 23, Bruker reported diluted EPS of $1.41 compared to 66 cents in Q4 of 22. RQ423 also included an acquisition gain of 99 cents.
Frank: This implies constant exchange rate or see our revenue growth of 18, 6% year over year.
Frank: Our fourth quarter 23, non-GAAP operating margin was 18, 1%, which was down 290 bps, primarily due to the dilutive Panamax acquisition in Q4, 'twenty three as well as headwinds from other M&A and currency.
Frank: Altogether this combined effect more than offset our organic operating margin expansion of plus 270 bps.
Frank: Our strong organic operating margin expansion.
Frank: Is evidence of the success of our project accelerate and operational excellence initiatives.
Frank: In Q4 of 'twenty, three broker reported GAAP diluted EPS of $1 41, compared to 66 cents in Q4 of 'twenty two.
Our Q4 'twenty three included in the acquisition gain of 99 cents.
Frank H. Laukien: On a non-GAAP basis, Q4-23 diluted EPS was $0.70, down 5.4% from $0.74 in the fourth quarter of 2022, primarily due to the Finomex acquisition in Q4'23, excluding the initial minus 10 cents BCA dilution in Q4-23. Bruker delivered Proforma non-GAAP EPS growth of plus 8.1% year-over-year in Q4 of 2023 Moving to our full-year 23 performance on slide five, you can see Bruker's strong performance and excellent execution in 2023 with industry-leading organic revenue growth of 14.5%, solid non-GAAP EPS growth of plus 10.3%, and, excluding BCA, even pro forma non-GAAP EPS growth of plus 14.5%. More specifically, for fiscal year 23, revenues increased by 17.1% to $2.96 billion.
Frank: From our Panamax acquisition.
Frank: On a non-GAAP basis Q4, 'twenty three diluted EPS was <unk> 70 cents.
Frank: One 5.4% from 74 cents in the fourth quarter of 'twenty two.
Frank: Primarily due to the Panamax acquisition in Q4 23.
Frank: Yeah.
Excluding the initial 10 set minus 10 cents BCA dilution in Q4 23.
Frank: Ruger delivered pro forma non-GAAP EPS growth of plus eight 1% year over year in Q4 of 'twenty three.
Frank: Moving to our 2040 year 'twenty three performance on slide five you can see brokers strong performance and excellent execution in 'twenty two 'twenty three with industry, leading organic revenue growth of 14, 5% solid non-GAAP EPS growth of plus 10, 3% and <unk>.
Frank: <unk> BCA, even pro forma non-GAAP EPS growth of plus 14, 5%.
Frank: More specifically for fiscal year 'twenty three revenues increased by 17, 1% to $2 96 billion on an organic basis revenues grew 14, 5% year over year, consisting of 14, 5% organic growth in scientific instruments at 14.
Frank H. Laukien: On an organic basis, revenues grew 14.5% year-over-year, consisting of 14.5% organic growth in scientific instruments and 14.7% organic growth at best, net of intercompany elimination. Our 2023 non-GAAP growth, operating margin, and GAAP and non-GAAP EPS performance are all summarized on slide 5, and you can see solid non-GAAP EPS growth of 10.3% despite a 10 cent headwind from BCA in the fourth quarter I'll also note that our 2023 free cash flow increased by 98 million year over year. Our trailing 12 months return on invested capital, a non-GAAP measure, was 20.6%, a metric that highlights our differentiated Bruker management process and focus on disciplined entrepreneurialism, innovation, and organic growth, supplemented by selected strategic bolt-ons for early stage technology acquisition. Please turn to slides six and seven, where we highlight the fiscal year 23 constant exchange rate, or CER, performance of our three scientific instruments groups and of our best segment year over year.
Frank: 7% organic growth at best net of intercompany eliminations.
Frank: R 2023, non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on slide five and you can see solid non-GAAP EPS growth of 10, 3%. Despite a 10 cents headwind from BCA in the fourth quarter.
Frank: I'll also note that note that our 2023 free cash flow increased by 98 million year over year.
Frank: Our trailing 12 months return on invested capital a non-GAAP measure was 26% a metric that highlights our differentiated broker management process and focus on disciplined entrepreneurial is innovation and organic growth supplemented by.
Frank: Selected strategic bolt on or early stage technology acquisitions.
Frank: Please turn to slide six and seven where we highlight the fiscal year 'twenty three constant exchange rate or see our performance of our three scientific instruments groups and of our best segment year over year and 23 Bio Spin group revenue was 799 million and grew and it grew in the teens percentages.
Frank H. Laukien: In 23, Biospin group revenue was $799 million and grew by the team's percentages in constant exchange rate. Biospin saw growth across biopharma, academic government, industrial research, and applied markets, as well as in our new integrated data solutions or IDS division. We had revenue from four gigahertz class NMR systems each in fiscal 23 and fiscal 22, and in the fourth quarter of 23, we installed the first 1.2 gigahertz NMR in the United States at Ohio State University and the 1.1 gigahertz NMR at the University of Wisconsin at Massachusetts.
Frank: In constant exchange rate.
Frank: <unk> been saw growth across Biopharma academic government industrial research and applied markets as well as in our new integrated data solutions or ideas Division.
Frank: We had revenue from four gigahertz class at the bar systems, each in fiscal 'twenty, three and fiscal 'twenty two.
Frank: And in the fourth quarter of 'twenty three we installed the first one two gigahertz anymore in the United States at the Ohio State University and the one one gigahertz and tomorrow at the University of Wisconsin at Madison.
Frank H. Laukien: For 23, our Cali group had revenue of $960 million and constant exchange rate growth in the high teens percent, with strong growth in life science mass spectrometry driven by the Timsoft platform and aftermarket business, as well as strong growth in applied mass spectrometry and our optics business, including infrared, near-infrared, and rock. Microbiology and infectious disease revenue was up slightly as solid demand for multibiotyper consumables was offset by a final drop in our modest COVID-19 molecular diagnostics revenue to near zero. Please turn to slide seven now. Fiscal Year 23, Bruker Nano revenue was $942 million, and at constant exchange rates, Nano grew in the high teens percentage, with strong revenue growth across markets, including academic, government, industrial, and semiconductor metrology. The artificial intelligence megatrend is a strong tailwind for our semiconductor metrology and advanced packaging tools.
Frank: For 'twenty three our colleague group had revenue of 960 million at constant exchange rate growth in the high teens percentage with strong growth in life science mass spectrometry, driven by the change yourself platform and aftermarket business as well as strong growth in our flight mass spectrometry and <unk>.
Frank: Our optics infrared near infrared business.
Frank: Microbiology and infectious disease revenue was up slightly as solid demand from all of the bio type of consumables was offset by a final drop off our modest COVID-19, molecular diagnostics revenue to near zero.
Frank: Please turn to slide seven now.
Frank: Fiscal year.
Frank: Fiscal year 'twenty, three Brooklyn, Nano revenue was 942 $942 million and in constant exchange rate nano grew in the high teens percentage with strong revenue growth across markets, including academic government industrial and semiconductor metrology.
Frank: The artificial intelligence Mega trends is a strong tailwind for our semiconductor metrology and advanced packaging tools.
Frank H. Laukien: Revenues for our advanced x-ray solutions and nanosurfaces, core tools, also showed strong growth. Fluorescence microscopy revenue was up on solid growth in academic and government research, as well as contributions from RQ422's acquisition of the Inscopix neuroscience research tool. Finally, 2023 Best Revenues grew in the mid-teens percentage net of inter-company eliminations, driven by share gains and superconductor demand by our MRI OEM customers, as well as by growth in big science, Fusion Research, and Key New Extreme Ultraviolet EUV Technologies for Semiconductor Lithography Tools by Large OEM Customers, all in support of the strong AI or Artificial Intelligence demand. Let me now move to slide eight, which is a slide that's familiar to those of you who saw our presentation at the J.P. Morgan Healthcare Conference, where we're outlining what we mean by leadership, emerging leadership in the post-genomic era, which, of course, includes many different fields of multiomics beyond genomics but including genomics, as well as solutions for single cell, spatial, structural, quantitative, and interaction biology. I will not dwell on this, but I invite you to read this slide in more detail at your leisure. On slide nine.
Frank: Revenues for our advanced X Ray solutions and that is surfaces core tools also showed strong growth.
Frank: Fluorescence microscopy revenue was up on Salt Lake broke in academic government research as well as contributions from our Q4 'twenty two acquisition upbeat and scope eggs Euroscience research tools. Finally, finally twenty-three best revenues screen grew in the mid teens percentage, that's all intercompany.
Frank: [noise] elimination, driven by share gains and superconductor and superconductor demand by our MRI OEM customers as well as by growth in Big Science, usually research and key new.
Frank: Extreme ultraviolet UV technologies for semiconductor lithography tools by large OEM customers all in support of the strong AI or artificial intelligence demands.
Frank: Let me now move to slide eight which is a slide that is familiar to those of you who saw our presentation at the JP Morgan Healthcare conference, where we're outlining a what.
Frank: What we mean by leadership emerging leadership in the post genomic era, which of course includes many different fields of multi omics beyond genomics, but including genomics as well as solutions for single cell spatial structural quantitative and interaction biology, I will not dwell on this.
Frank: I invite you to read this slide in more detail at your leisure.
Frank: On slide nine.
Frank H. Laukien: You have quick summaries of two technology acquisitions that we closed in early February and which both fill gaps that we had in our portfolio and therefore strengthen our portfolio. On the left, you will see that we acquired NanoPhoton in Osaka, Japan, a company with about $5 million in fiscal year 2023 revenue. They are a specialist in research Raman microscopy systems. So far, they're mainly only offered in Japan and Korea, but we think these products will do very well outside of Japan and Korea as well since they're really performance-leading with exceptional speed, sensitivity, spatial resolution, and user-friendly workflows in research Raman microscopy.
Frank: You have a quick summary of two technology acquisitions that'd be close in early February and which both fill gaps are that'd be had in our portfolio and therefore strengthen our portfolio.
Frank: On the left you will see that'd be acquired nine a photon in Osaka, Japan, a company with about 5 million in fiscal year 'twenty three revenue. They are a specialist in research Rahman microscopy systems, so far primarily or only offered in Japan and Korea, but we think these products will do very well outside of <unk>.
Frank: Japan, and Korea as well since they are really performance, leading with exceptional speed sensitivity spatial resolution and user friendly workflows in Robin about research Rama microscopy.
Frank H. Laukien: Applications are going from inspecting semiconductors and nanomaterials, battery research, as well as academic and industrial research. In the United States, in Tucson, Arizona, we acquired Spectral Instruments Imaging LLC to fill complement our preclinical product lines with preclinical optical imaging for bioluminescence and fluorescent in vivo imaging and optional x-ray imaging. This enhances our preclinical imaging or PCI solutions for in vivo disease research and should be welcomed by our customers. In summary, Bruker delivered excellent organic revenue growth and solid EPS growth in 2023, even as we have accelerated our strategic investments in the project Accelerate 2.0 for transformation, as well as in production capacity and productivity to meet our growing demand. Bruker's strong growth is the result of its fundamental commitment to innovating in high-value solutions, as well as of our ongoing portfolio transformation.
Frank: Applications are from its going from inspecting semiconductors, and nano materials battery research as well as academic and industrial research.
Frank: Friendly here.
Frank: The United States in Tucson, Arizona, we acquired spectral instruments imaging LLC to fill to Coco to complement our preclinical product lines with preclinical optical imaging for bioluminescence in fluorescence in vivo imaging and optional X Ray imaging this enhances.
Frank: Our preclinical imaging or PCI solutions for in vivo disease research and should be well come by our customers.
Speaker Change: So let me wrap things up in summary, broker delivered excellent organic revenue growth and solid EPS growth and 23.
Speaker Change: Even as we have accelerated our strategic investments in the project accelerate to that O four transformation as well as in production capacity and productivity to meet our growing demand.
Speaker Change: Brokers strong growth as a result of a fundamental commitment to innovating and high value solutions as well as of our ongoing portfolio transformation.
Frank H. Laukien: Our technology and biological applications leadership in many areas, combined with world-class execution and an excellent Bruker management process, position us well for continued outperformance as a leader in the emerging post-genomic era. Now, given our strong growth in 23, our healthy fiscal year 24 guidance, as well as our recent selected strategic bull run acquisitions, we are now optimistic that we can achieve our previously communicated fiscal year 26 medium-term outlook for revenue and non-GAAP EPS already one year earlier in fiscal year 2025. With that, let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q4 and full year 23 financial performance in more detail and provide our fiscal year 24 outlook and assumptions. Gerald
Speaker Change: Our technology and biological applications leadership in many areas combined with world class execution and an excellent.
Speaker Change: Broker management process position us well for continued outperformance as a leader in the emerging post genomic era.
Speaker Change: Now given our strong growth in 'twenty three are healthy fiscal year 'twenty four guidance as well as our recent selected strategic bolt on acquisitions. We are now optimistic that we can achieve our previously communicated fiscal year 'twenty six medium term outlook.
Speaker Change: For revenue and non-GAAP EPS already one year earlier in fiscal year 2025.
Speaker Change: With that let me now turn the call over to our CFO Gerald Herman who will review brokers Q4, and full year 'twenty three financial performance in more detail and provide our fiscal year 'twenty for outlook and assumptions Gerald.
Gerald N. Herman: Gerald Thank you Frank and thank you everyone for joining us today I'm pleased to provide some more detail on brokers fourth quarter and full year 2023 financial performance starting on slide 11.
Gerald N. Herman: Thank you, Frank, and thank you everyone for joining us today. I'm pleased to provide some more detail on Bruker's fourth quarter and full year 2023 financial performance, starting on slide 11. In the fourth quarter of 2023, Bruker's reported revenue increased 20.6% to $854.5 million, which reflects an organic revenue increase of 15.9% year over year. In the fourth quarter of 2023, Bruker reported GAP diluted EPS of $1.41 compared to $0.66 in the fourth quarter of 2022. The fourth quarter 2023 GAAP EPS includes a $0.99 per share non-taxable, non-cash gain from the acquisition of Phenomics, now called Bruker Cellular Analysis Division or BCA. This gain for GAAP reporting represents a bargain purchase gain and reflects the excess of identifiable net assets acquired over the purchase consideration paid. Included in the acquired assets are deferred tax assets related to acquired net operating losses, or NOLs.
Gerald N. Herman: In the fourth quarter of 2023 brokers reported revenue increased 26% to $854 $5 million, which reflects an organic revenue increase of 15, 9% year over year.
Gerald N. Herman: In the fourth quarter of 'twenty, three brokers reported GAAP diluted EPS of <unk>.
Gerald N. Herman: Dollar 41, compared to 66 cents in the fourth quarter of 2022.
Gerald N. Herman: <unk> fourth quarter 2023, GAAP EPS includes a 99 cent per share nontaxable non cash gain from the acquisition of Pheno mix now called <unk> brokers cellular analysis division of BCA.
Gerald N. Herman: This gain for GAAP reporting represents a bargain purchase gain and reflects the excess of identifiable net assets acquired over the purchase consideration paid.
Gerald N. Herman: Included in the acquired now sits or deferred tax assets related to acquired net operating losses or Nols while.
Gerald N. Herman: While the present value of these NOLs is very significant for GAAP accounting, the tax benefits of these NOLs going forward are expected to be much more modest annually. On an on-gap basis, Q4 2023 diluted EPS was $0.70, down 5.4% from $0.74 in the fourth quarter of 2022, primarily due to the $0.10 dilutive effect of our Phenomics acquisition in the fourth quarter, as well as the challenging tax rate Excluding BCA, Bruker delivered pro forma non-GAAP EPS growth of 8.1% year-over-year in the fourth quarter of 2023. Non-GAAP gross margin performance was down 80 basis points year-over-year in the fourth quarter of 23, negatively impacted by foreign exchange and M&A headwinds, partially offset by organic gross margin expansion of about 40 basis points year-over-year.
Gerald N. Herman: While the present value of these Nols is very significant for GAAP accounting the tax benefits of these Nols going forward are expected to be much more modest annually.
Gerald N. Herman: On a non-GAAP basis, Q4, 2023 diluted EPS was <unk> 70 cents down five 4% from 74 cents in the fourth quarter of 'twenty, two primarily due to the Tencent dilutive effect of our <unk> acquisition in the fourth quarter as well as a challenging tax rate comparison year over year.
Gerald N. Herman: Excluding BCA Brinker delivered pro forma non-GAAP EPS growth of eight 1% year over year in the fourth quarter of 'twenty three.
Gerald N. Herman: non-GAAP gross margin performance was down 80 basis points year over year in the fourth quarter 'twenty three.
Gerald N. Herman: Negatively impacted by foreign exchange and M&A headwinds, partially offset by organic gross margin expansion of about 40 basis points year over year.
Gerald N. Herman: Our fourth quarter 2023 non-GAAP operating income increased 3.8%, while non-GAAP operating margin decreased 290 basis points year-over-year to 18.1%. Foreign exchange and acquisition headwinds, primarily from BCA, more than offset a very strong organic operating margin expansion of 270 basis points year-over-year in the fourth quarter of 2023. Our fourth quarter 2023 pro forma non-GAAP operating margin, excluding the phenomenal acquisition, was 20.6%. We finished the fourth quarter with cash equivalents and short-term investments of approximately $488 million.
Gerald N. Herman: Our fourth quarter 2023, non-GAAP operating income increased three 8%, while non-GAAP operating margin decreased 290 basis points year over year to 18, 1% as foreign exchange and acquisition headwinds primarily from D. C. A more than offset very strong organic operating.
Gerald N. Herman: An expansion of 270 basis points year over year in the fourth quarter of 23.
Gerald N. Herman: Our fourth quarter 2023 pro forma non-GAAP operating margin, excluding genomics acquisition was 26%.
Gerald N. Herman: We finished the fourth quarter with cash cash equivalents and short term investments of approximately $488 million during the fourth quarter. We used cash to fund selected project accelerate to doto investments capital expenditures and share repurchases of approximately $15 million.
Gerald N. Herman: During the fourth quarter, we used cash to fund selected Project Accelerate 2.0 investments, capital expenditures, and share repurchases of approximately $15 million. We generated $205.5 million of operating cash flow in the fourth quarter of 2023. Our capital expenditure investments were $31.5 million, resulting in free cash flow of $174 million in the fourth quarter of 2023.
Gerald N. Herman: We generated $205 $5 million of operating cash flow in the fourth quarter of 2023.
Gerald N. Herman: Our capital expenditure investments were $31 $5 million, resulting in free cash flow of $174 million in the fourth quarter of 'twenty three.
Gerald N. Herman: This reflects an improvement in cash flow of about $37 million in the fourth quarter 22, driven by better working capital performance in the quarter. Slide 12 shows the revenue bridge for the fourth quarter of 2023. We delivered solid revenue growth in the fourth quarter of 2023 in BSI with 18.5% organic revenue growth in systems and 8.2% organic growth in aftermarket revenue all year over year. Geographically, and on an organic basis, in the fourth quarter of 23, our America's revenue grew in the teens percent. Asia-Pacific revenue grew in the 20% range.
Gerald N. Herman: This reflects an improvement in cash flow of about $37 million over the fourth quarter 22, driven by better working capital performance in the quarter.
Gerald N. Herman: Slide 12 shows the revenue bridge for the fourth quarter of 'twenty three we delivered solid revenue growth in the fourth quarter of 'twenty three in BSI with 18.5% organic revenue growth.
Gerald N. Herman: Systems, and eight 2% organic growth in aftermarket revenue.
Gerald N. Herman: Year over year.
Gerald N. Herman: Geographically and on an organic basis in the fourth quarter of 'twenty three our Americas revenue grew in the teens percentage.
Gerald N. Herman: Asia Pacific revenue grew in the 20% range.
Gerald N. Herman: While European revenue grew in the mid-teens percentage all year over year, for our EMEA region, fourth quarter 2023 revenue was up a high single digit percentage year over year. Slide 13 shows our fourth quarter 2023 P&L performance on an on-gap basis. Non-GAAP gross margin of 51.8% decreased 80 basis points from 52.6% in the fourth quarter 22 impacted by foreign exchange and acquisition headwinds partially offset by organic gross margin improvements of about 40 basis points year over year. Fourth quarter 2023 non-GAAP operating margin of 18.1%, 290 basis points lower than the 21% margin performance we posted in the fourth quarter of 22, as foreign exchange and acquisition headwinds, primarily from BCA, more than offset strong or organic operating margin expansion of 270 basis points.
Gerald N. Herman: While European revenue grew in the mid teens percentage all year over year.
Gerald N. Herman: For our EMEA region fourth quarter 2023 revenue was up high single digit percentage year over year.
Gerald N. Herman: Slide 13 shows our fourth quarter 2023, P&L performance on a non-GAAP basis non.
Gerald N. Herman: non-GAAP gross margin of 51, 8% decreased 80 basis points to 52, 6% in the fourth quarter 'twenty two impacted by foreign exchange and acquisition headwinds, partially offset by organic gross margin improvements of about 40 basis points year over year.
Gerald N. Herman: Fourth quarter 2023, non-GAAP operating margin of 18, 1% was 290 basis points lower than the 21% margin.
Gerald N. Herman: Performance, we posted in the fourth quarter of 'twenty, two that was foreign exchange and acquisition headwinds primarily from BCA more than offset strong organic operating margin expansion of 270 basis points.
Gerald N. Herman: For the fourth quarter of 2023, our non-GAAP effective tax rate was 31.3%, compared to an unusually low 20.6% in the fourth quarter of 22, driven mostly by a one-time discrete favorable item in the prior year period. Weighted average diluted shares outstanding in the fourth quarter of 2023 were 146 million, a reduction of 1.9 million shares, or 1.3% from the fourth quarter of 22, resulting from our share repurchases over the trailing 12 months.
Gerald N. Herman: For the fourth quarter of 2023, our non-GAAP effective tax rate was 31, 3% compared to an unusually low 26% in the fourth quarter of 'twenty, two driven mostly by a one time discrete favorable item in the prior year period.
Gerald N. Herman: Weighted average diluted shares outstanding in the fourth quarter of 2023 were 146 million a reduction of one 9 million shares or one 3% from the fourth quarter of 22, resulting from our share repurchases over the trailing 12 months.
Gerald N. Herman: Finally, fourth quarter 2023 non-GAAP EPS of 70 cents was down 5.4% compared to the fourth quarter of 22, with a 10 cent headwind from BCA. Excluding BCA, our non-GAAP EPS was up 8.1% year over year. In fiscal year 2024, we expect BCA to be much less dilutive after our major cost actions in the fourth quarter of 23. And our full year 2024 non-GAAP EPS guidance incorporates a 10 cent non-GAAP EPS headwind from BCA. Slide 14 shows the year-over-year revenue bridge for the full year of 2023. Revenue was up $434 million, or 17.1%, reflecting organic growth of 14.5%.
Gerald N. Herman: Finally fourth quarter 2023, non-GAAP EPS of <unk> 70 cents was down five 4% compared to the fourth quarter of 'twenty two.
Gerald N. Herman: With a 10 cent headwind from BCA excluding.
Gerald N. Herman: Excluding D C. Our non-GAAP EPS was up eight 1% year over year.
Gerald N. Herman: In fiscal year 2024, we expect PCA to be much less dilutive after our major cost actions in the fourth quarter of 'twenty, three and our full year 2024, non-GAAP EPS guidance incorporates a 10 cent non-GAAP EPS headwind from BCA.
Gerald N. Herman: Slide 14 shows the year over year revenue bridge for the full year of 2023.
Gerald N. Herman: Revenue was up $434 million or 17, 1%, reflecting organic.
Gerald N. Herman: Organic growth of 14, and a half per cent.
Gerald N. Herman: Acquisitions added 2.2% to our top line, while foreign exchange was a 0.4% tailwind, resulting in constant exchange rate revenue growth of 16.7% year over year. Non-GAAP P&L results for the full year of 2023 are summarized on slide 15, with the drivers similar to the fourth quarter of 2023 as explained on the slide. Turning to slide 16, in the full year of 2023, we generated $350.1 million of operating cash flow, up about $76 million from 2022 on improved working capital performance. We generated $243 million of free cash flow in 2023, up about $98 million from 2022 on higher operating cash flow and lower capital expenditures.
Gerald N. Herman: Acquisitions added two 2% to our top line, while foreign exchange was a 0.4% tailwind, resulting in constant exchange rate revenue growth of 16.7.
Gerald N. Herman: 7% year over year.
Gerald N. Herman: non-GAAP P&L results for the full year of 2023 are summarized on slide 15, with the drivers similar to the fourth quarter of 2023 as explained on the slide.
Gerald N. Herman: Turning to slide 16, and the full year of 2023, we generated $350 $1 million of operating cash flow up about $76 million from 2022 on improved working capital performance.
Gerald N. Herman: We generated $243 million of free cash flow in 2023 up about $98 million from 2022 on higher operating cash flow and lower capital expenditures.
Gerald N. Herman: Turning now to slide 18.
Gerald N. Herman: We entered the year with solid backlog in an even stronger portfolio to again achieve above market growth.
Gerald N. Herman: Our outlook for fiscal year 2024 includes.
Gerald N. Herman: Turning now to slide 18, we enter the year with solid backlog and an even stronger portfolio to again achieve above market growth. Our outlook for fiscal year 2024 includes, We are initiating a guidance range of reported revenue of $3.23-$3.29 billion, representing growth of 9-11% compared to 2023. This guidance assumes organic revenue growth of 5% to 7% year-over-year, an estimated foreign exchange tailwind of 1%, with acquisitions contributing 3% to revenue growth. That excludes any announced potential acquisitions that have not yet closed. This guidance implies constant exchange rate revenue growth of 8-10% for the full year of 2024. For operating margins in 2024, following strong organic operating improvement of about 130 basis points in 2023, we expect an organic operating margin improvement of about 50 basis points in 2024. For non-GAAP operating margins all in, we expect about an 80 basis point decline from the prior year due to a combined 130 basis point headwind from foreign exchange and acquisitions.
We are initiating our guidance range of reported revenue of $3 two three to $3 two $9 billion, representing growth of 9% to 11% compared to 2023.
Gerald N. Herman: This guidance assumes organic revenue growth of 5% to 7% year over year.
Gerald N. Herman: An estimated foreign exchange tailwind of 1% with acquisitions contributing 3% to revenue growth.
Gerald N. Herman: That excludes any announced potential acquisitions that have not yet closed.
Gerald N. Herman: This guidance implies constant exchange rate revenue growth of 8% to 10% in full year of 2024.
Gerald N. Herman: For operating margins in 2024, following strong organic operating improvement of about 130 basis points. In 2023, we expect 2020 for organic operating margin improvement of about 50 basis points.
Gerald N. Herman: For non-GAAP operating margins all in we expect about an 80 basis point decline from the prior year due to a combined 130 basis point headwind from foreign exchange and acquisitions.
Gerald N. Herman: On the bottom line, we're guiding to non-GAAP EPS for 2024 in a range of $2.71.
Gerald N. Herman: The $2 76 for non-GAAP EPS growth of 5% to 7% compared to 2023.
Gerald N. Herman: Other guidance assumptions are listed on the slide are.
Gerald N. Herman: On the bottom line, we're guiding to non-GAP EPS for 2024 in a range of $2.71 to $2.76, or non-GAP EPS growth of 5% to 7% compared to 2023. Other guidance assumptions are listed on the slide. Our full year 2024 ranges have been updated for foreign currency rates as of January 31st, 2024.
Gerald N. Herman: Our full year 2024 range has been updated for foreign currency rates as of January 31st 2024.
Gerald N. Herman: One additional note on quarterly phasing for the year, we expect first quarter organic revenue to be sequentially below the fourth quarter of 'twenty, three and only modestly above the first quarter of 2023.
Gerald N. Herman: Which was an exceptionally strong first quarter.
Gerald N. Herman: One additional note on quarterly phasing for the year; we expect first quarter organic revenue to be sequentially below the fourth quarter of twenty-three and only modestly above the first quarter of twenty-two, which was an exceptionally strong first quarter. We also expect softer operating margin performance in the first quarter of 2024, driven by BCA dilution and other acquisition and foreign exchange headwinds. Finally, at our Investor Day in June 2023, I shared financial targets for the medium-term fiscal year 2026 outlook for Bruker.
Gerald N. Herman: We also expect softer operating margin performance in the first quarter of 2024, driven by BCA dilution and other acquisitions and foreign exchange headwinds.
Gerald N. Herman: Our organic revenue and operating margin performance is expected to strengthen in the remainder of 2024.
Gerald N. Herman: Finally at our Investor Day in June 2023, I shared financial targets for the medium term fiscal year 2026 outlook for broker <unk>.
Gerald N. Herman: Our strong 2023 financial performance, hopefully 'twenty 'twenty four guidance and our portfolio strength gives me confidence that we will likely reach our full year 2026 medium term targets for revenue and non-GAAP EPS a year earlier in 2025.
Gerald N. Herman: Our strong 2023 financial performance, healthy 2024 guidance, and our portfolio strength gives me confidence that we will likely reach our full year 2026 median term targets for revenue and non-GAAP EPS a year earlier in 2025. To wrap up, Bruker delivered differentiated organic growth and financial results in 2023, and we're well positioned to deliver above-market revenue and non-GAAP EPS growth again in 2024. With that, I'd like to turn the call over to Justin to start the Q&A session. Thank you very much.
Gerald N. Herman: To wrap up brokerage delivered differentiated organic growth and financial results in 2023, and we're well positioned to deliver above market revenue and non-GAAP EPS growth again in 2024.
Gerald N. Herman: That I'd like to turn the call over to Justin to start the Q&A session. Thank you very much. Thanks.
Justin Ward: Thanks Gerald.
Justin Ward: I'd 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 question and ask that you limit yourself to one question and one follow up.
Speaker Change: Operator, we're ready for Q&A.
Operator: Ladies and gentlemen, we will now begin our question and answer session to ask a question you May press star and one on your Touchtone telephone.
Operator: If you are using a speakerphone please pick up the handset prior to pressing the keys.
Justin Joseph Ward: Thanks, Gerald. I'd 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 follow-up. Operator, we're ready for Q&A. Ladies and gentlemen, we'll now begin that question and answer session. To ask a question, you may press star and one on your touchtone telephone. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound.
Speaker Change: Who are the best sound quality.
Speaker Change: We'd like to withdraw your question you May Press Star then two.
Speaker Change: But again that is star and then wanted to join the question queue.
Speaker Change: Our first question today comes from Patrick Donnelly from Citi. Please go ahead with your question.
Patrick Donnelly: Hey, guys. Good morning, Thanks for taking the question.
Patrick Donnelly: Frank and maybe Gerald as well just on that L. RP pull forward comment obviously very nice to see can you just talk about that on the earnings side, particularly I think it implies.
Patrick Donnelly: Almost 30% growth in 25 on the earnings side is that you know some of these deals slipping accretive obviously the headwinds on the margins last year and this year from the deals has been notable.
Operator: If you'd like to withdraw your question, you may press star. Again, that is star and then one to join the conversation. Our first question today comes from Patrick Donnelly from Citi. Please go ahead with your question. Hey guys, for taking the question. Frank and maybe Gerald as well, just on that LRP pull forward comment, obviously very nice to see. Can you just talk about that, the earning side, particularly? I think it implies,,,,,,,,,,,,,,,,,,,,,,,,,,, Thank you, Patrick.
Patrick Donnelly: Can you just talk about some of the moving pieces there confidence level to pull that forward against particularly on the on the earnings side, It's really nice to see so just wanted to get some more color on again approaching that $3 $53 55 number of euro.
Patrick Donnelly: Yeah.
Patrick Donnelly: Thank you Patrick Indeed, we are were optimistic that we can pull that forward by a year on the on the revenue on the non-GAAP EPS side, which is wonderful it's really a combined resolved up you know stronger up strong twenty-three results and execution and again you know we are.
Frank H. Laukien: Indeed, we were optimistic that we could pull that forward by a year on the revenue side of the non-GAAP EPS side, which is wonderful. It's really a combined result of, you know, [inaudible] or moderate organic gross margin improvement and good over 100 BIMS operating margin organic operating margin improvement. And these are all the trends that are continuing while some of the, you know, temporary currency and accepted strategic M&A headwinds go away. So indeed, we expect, without commenting on numbers, but we're expecting a very significant, Okay, that's helpful. And again, it's encouraging to see that. And Frank, maybe just on the overall backdrop, you know, we've gotten a lot of questions. The academic market, the health of it. Transcripts provided by Transcription Outsourcing, LLC, should help in the near term, but even on the order.
Patrick Donnelly: Please to give pretty solid and healthy 24 guidance then indeed at some of these headwinds either go away or abate.
Patrick Donnelly: And as we look at the.
Patrick Donnelly: As you've seen we've delivered under the hood, so to speak pretty healthy organic.
Patrick Donnelly: Or or moderate organic gross margin improvement and good over 100 bps operating March organic operating margin improvement and these are all the trends that are continuing while some of the temporary currency and and and accepted strategic M&A.
Patrick Donnelly: Headwinds go away. So indeed, we expect without commenting on numbers.
Patrick Donnelly: But we're expecting a very significant EPS step up in 'twenty five and also in 'twenty six.
Patrick Donnelly: Okay. That's helpful and then again encouraging to see that and Frank maybe just on the overall backdrop, we've gotten a lot of questions on just the academic market the health of it between continuing resolution in the U S and China noise can you just maybe talk about what youre seeing out there expectations.
Frank: So you have the order book.
Frank H. Laukien: How you're thinking about the near term and how you're thinking about that academic market, at least what appears to be some high-level. Thank you. Yeah, gladly.
Frank: That should help in the near term, but even on the order trends, how youre thinking about the near term and how youre thinking about that academic market given at least what appears to be some some high level pressures out there. Thank you so much.
Speaker Change: Yes, slightly so academic government.
Frank H. Laukien: So academic government, revenue growth was great, and bookings growth was also pretty good. I mean, in Q4, we had a bit of an air pocket in bookings, nothing dramatic in Q3. After very strong Q1 and Q2 bookings, in China in particular, in Q4, it wasn't super strong, but it was solid. And, you know, from what I can see, better than what other peers, larger peers, may have reported in Q4. So our Q4 book to bill for BSI was not far from 1.0, so pretty solid. And even China was okay.
Speaker Change: Revenue growth was great and bookings growth was also pretty good I mean in Q4, I know, we had a bit of an air pocket in bookings nothing dramatic in Q3. After a very strong Q1, and Q2 bookings in China in particular in Q4.
Speaker Change: Isn't super strong, but it was solid and you know from what I can see better than what others years larger peers may have reported in Q4. So our Q4 book to Bill for BSI was not far from one point, though so pretty solid and ER and even China was okay.
Speaker Change: Hey.
Frank H. Laukien: So academic government, not only backlog, but bookings all the way to revenue growth over the various geographies looks solid. It's one of the very defensible areas at a time when, for others at least, biopharma went down. COVID, of course, went down.
Speaker Change: So academic government not not only backlog, but bookings all the way to revenue growth over the various geographies.
Speaker Change: And it looks look solid it's one of the very defensible.
Areas and Ah and at a time when for others at least Biopharma went down Covid of course went down so it's been one of the strong areas along with you know diagnostics and many other areas actually just about all of our businesses are doing really quite well and in most of our markets.
Frank H. Laukien: So it's been one of the strong areas along with diagnostics and many other areas. Actually, just about all of our businesses are doing really quite well in most of our markets. Okay, great, thanks Frank. You're welcome, Pat. Our next question comes from Josh Waldman from, Please go ahead with your question. Yeah, two for you. Maybe Gerald, starting on the margin side.
Speaker Change: <unk>.
Speaker Change: Okay, great. Thanks Bryan.
Bryan: You're welcome Patrick.
Bryan: Our next question comes from Josh Waldman from Cleveland Research. Please go ahead with your question.
Joshua Waldman: Hey, good morning, guys. Thanks for taking my question.
Bryan: Okay.
Joshua Waldman: Yes, Q4, you maybe Gerald.
Josh Waldman: <unk>.
Joshua Waldman: On the margin side wondering if you could unpack the margin guide a bit more curious the puts and takes on.
Gerald N. Herman: I wonder if you could unpack the margin guide a bit more on the organic. Is that about what you would normally expect on five? Yeah, I'd say generally, it's Josh, it's the impact of the phonomics acquisition. Specifically, we, of course, continue to take pricing actions. And we have a number of other initiatives underway that play into that puts and takes are not that significant, but that's probably the most material item. Yeah, so just to clarify, there's a lot of distortion on the margin related to the timing of phenomics.
Joshua Waldman: On the organic margin up 50 bps.
Joshua Waldman: Is that about what you would normally expect on 5% to 7% organic growth just wondering how mix price maybe other moving pieces within the cost structure are impacting that number.
Speaker Change: Yes, I'd say generally it's Josh it's the it's the impact of genomics acquisition, specifically, we of course continue to take pricing actions and we have a number of other initiatives underway that play into that puts and takes are not that significant but that's probably the most material item.
Speaker Change: The organic.
Speaker Change: Yes, so just to clarify there's a lot of distortion on the margin related to the timing of Pheno makes the recall that we acquired it basically the beginning of Q4 of 'twenty three.
Gerald N. Herman: So recall that we acquired it basically at the beginning of Q4 of 23, and there was quite a drag on margins, that will become a margin for an organic op margin tailwind next year because your anniversary met acquisition began in Q4. So in the early part of the year, when most of the phenomics op loss will still be taking place, that will be characterized as an acquisition margin drag. So it really just has to do with the categorization of Phenomex and the timing of that acquisition job. Does that make sense?
Speaker Change: And there was quite a drag on margins that will become a margin or an organic op margin tailwind next year, because you're anniversarying that acquisition beginning in Q4. So in the early part of the year, where most of the Pheno mix op loss will still be taking place that will be characterized as an acquisition.
Speaker Change: <unk> margin drag.
Speaker Change: So it really just has to do the categorization of Pheno mix and the timing of that acquisition, Josh is that makes sense.
Joshua Waldman: Yes, I think that makes sense.
Speaker Change: And I guess, one more gerald on the on the margin I mean, it sounds like you're pulling forward the revenue and EPS.
Gerald N. Herman: Yeah. And I guess one more, Gerald, on the margins. I mean, it sounds like you're, forward. Is the margin target kind of off the table? No, it's not off the table. I'll take that, Josh.
Joshua Waldman: 96 target by a year.
Joshua Waldman: <unk>.
Joshua Waldman: Is the margin target kind of off the table at this point.
No it's not off the table so I'll take that Josh. It's just that we don't think we can pull forward that looks more likely to be at 26.
Frank H. Laukien: It's just that we don't think we can pull forward. That looks more likely to be a 26 non-GAAP operating Margin Target. But it's not at all off the table.
Joshua Waldman: non-GAAP operating margin target.
Speaker Change: It's not at all the table, we think we can reach that in 'twenty six without pulled forward with plenty of room to advance the operating profit margin that further into the mid twenty's in subsequent years.
Frank H. Laukien: We think we can reach that in 26, without pulling forward with plenty of room to advance the operating profit margin then further into the mid-twenties and subsequent. Okay, and then my follow-up, Frank, was on Biospin. I was wondering how many people one gig would have.
Speaker Change: Got it Okay and then my follow up Frank was on.
Speaker Change: Bio spin wondering how many one gig systems are included in the guide for.
Frank H. Laukien: Unknown, and then curious; any thoughts or context you can provide. Yeah, I think in for 24 we're again looking at three to four gigahertz. Lab, system.
Speaker Change: 24, and then curious any thoughts or context, you can provide on how.
Speaker Change: The non one gig class or the someone get class is performing.
Speaker Change: Yeah, I think and for 'twenty four we're again looking at three to four gigahertz class systems.
Frank H. Laukien: And so again, three to four, basically the same as in 23 and in 22. And I'm sorry, what was the second part of your question? Yeah, yeah, I was just wondering how the non-core, Oh, yeah, no, that's doing great. I mean, you know, most of the growth in Q4, the ultra-high field, was very strong because, if you recall, in 23, a number of them got delayed or had needed some rework. So the four systems in 23, three of them came in during the last quarter, and we expect to spread that more evenly in 24.
And so again three to four four same basically the same as in 'twenty three and in 'twenty, two and I'm sorry, what was the second part of your question.
Speaker Change: Yes, Yes, I was just wondering how the non one gig class so kind of maybe like 300 up to maybe Oh, yeah. No. That's doing great. I mean, most of most of the growth in Q4, the ultra high field was a was very strong because if you recall in 'twenty three and number of them.
Speaker Change: Delayed for I needed some rework so of the four systems in.
Speaker Change: 23, three of them came in in the last quarter.
Speaker Change: We.
Speaker Change: We expect to spread more evenly in 'twenty four and so the bookings and revenue growth in <unk> has really been excellent and most of that was driven not by all the ultra high field, but by the alpha.
Frank H. Laukien: And so the bookings and revenue growth in Biospin has really been excellent. And most of that was driven, you know, not by all the ultra-high field, but by the help of applied markets, clinical research, applications in biopharma, as well as the core academic functional structural biology and other applications, and Preclinical Imaging. So Biospin's doing great. It's not just an ultra-high-field story. The ultra-high-field story is sort of like Formula One, and you can enumerate the system, so it's very interesting, but most of the business isn't the ultra-high-field business. Thank you, Josh.
Speaker Change: Slide markets clinical research.
Speaker Change: Applications in Biopharma as well as the core academic structural biology functional structural biology and other applications.
Speaker Change: And preclinical imaging so a bio spin is doing great. It's not just an ultra high field story.
Speaker Change: Dry field storage sort of like the Formula one and it's one can enumerate the system. So it's very interesting, but most of the businesses, it's not the ultra high field business.
Speaker Change: Got it okay, great. Thank you.
Speaker Change: Thank you Josh.
Frank H. Laukien: Our next question comes from Puneet Souda from Lee Ring Partners. Please go ahead with your question. Yeah, Frank, thanks for taking the questions.
Speaker Change: Our next question comes from Nishu Sood from Leerink Partners. Please go ahead with your question.
Puneet Souda: Yeah, Frank Thanks for taking the questions. So.
Frank H. Laukien: I just wanted to clarify on the pull forward of the fiscal year 26 targets, how much of that is, you know, sort of just the acquisitions that have been sort of announced so far; they should become organic and FY 25. And I wanted to ask about the ELITEC acquisition as well. Is that included in those assumptions?
Puneet Souda: Just wanted to clarify on the pull forward of the fiscal year 'twenty six targets.
Puneet Souda: How much of that is.
Puneet Souda: Sort of just the acquisitions that have been announced.
Puneet Souda: Announced so far they would should become organic in FY 'twenty five but.
Puneet Souda: And I wanted to ask about the La Tech acquisition as well is that included in those assumptions.
Frank H. Laukien: You know, it's not materialized yet and is pending regulatory approval. So could you update us on that? That's a sizable acquisition for you. Yeah, so, very clearly, Elitech or Chemspeed to announce potential acquisitions that have not closed are neither included in our 24 guidance nor in our, you know, 25 pull forward of our revenue and, our medium-term revenue and on-gap EPS targets that we previously had established for 26, so ELITEG and CHEMSPEED are not in those targets. The pull forward, therefore, is primarily driven by very good organic growth and margin developments and expected very good EPS growth also in 20 or then in 25-26, which is primarily an organic development on the revenue side, of course, aided somewhat by the BCA or Phenomex acquisition.
Puneet Souda: It's not materialized, yet and pending regulatory approval. So could you update us on that that's a sizable acquisition for you.
Speaker Change: Yeah. So.
Speaker Change: Very clearly ill, let check or cam speed to announce potential acquisitions that have not closed or neither include it in our 24 guidance nor in our you know 25 pull forward.
Speaker Change: Our.
Speaker Change: Our revenue and our.
Speaker Change: Our medium term revenue and non-GAAP EPS targets that we previously had established for 26, so let's take it can speed or not in those numbers.
Speaker Change: And.
Speaker Change: All forward. Therefore is primarily driven by very good organic growth and margin developments and expected very good EPS growth also.
Speaker Change: Also in 'twenty or then in 'twenty five 'twenty six.
Which is primarily organic developments on the revenue side of course, aided somewhat by the BCA or Phantom X acquisition.
Frank H. Laukien: I believe our goal for that is about $60 million in revenue for 2024, so that helps, but it's not the driver. The other acquisitions, while there have been a number of selected acquisitions that simply were feasible with companies where we've often been in touch with them for many years, and now this was the right time to find valuations that seemed fair for both sides, those, as you know, were, to some extent, they had some market traction, but they were relatively moderate in size, and in some ways, you could regard them as technology acquisitions to complement our portfolio. Got it. It's super helpful.
Speaker Change: I believe our goal for that is about $60 million in revenue for 2024, so that helps but it's not the it's not the driver the other acquisitions, while there have been a number of selected acquisitions that simply where feasible.
Speaker Change: With companies, where we've often been in touch with them for many years.
Speaker Change: Now this was the right time to find valuations that seemed fair for both sides. Those as you know we're.
Speaker Change: To some extent they have some market traction, but they were relatively moderate in size and in some ways you could regard domestic technology acquisitions to complement our portfolio.
Got it that's.
Frank H. Laukien: Then on Timstoff, if I may ask, what is the expectation for growth this year? Maybe, Frank, could you maybe highlight at a high level, just given, you know, there is a high resolution, high end competitor launch that was announced last year, and sort of the question is how that competes with Timstoff and what is your growth expectation for the overall Timstoff portfolio this year? Thank you.
Speaker Change: Helpful.
Speaker Change: Then on Tim staff, if I may ask.
Speaker Change: What is the expectation for growth this year maybe.
Speaker Change: Maybe Frank could you maybe highlight at a high level just given you.
Speaker Change: There is a high resolution.
Speaker Change: Competent competitor launch that was announced last.
Speaker Change: Last year and sort of the question is how that competes.
Speaker Change: And it's tough and what's your growth expectation for Gen software overall portfolio. This year. Thank you.
Frank H. Laukien: Yeah, since the Astra launch by a competitor that's a competitive product, we've, you know, we've continued to grow our Timstop business, but there is a competitive product on the market. And, you know, our product, our new Ultra, and, of course, the various other price and performance and capability points of the Timstop platform, including the flex version with moldy imaging and glycomics and other imaging applications. And, you know, they really are all performing well, but we acknowledge there's new competition and, and that's getting some traction as well. Of course, the traditional Orbitrap franchise probably faces the most internal competition, but that's, you know, that's, that's, that's, that's not our issue. So we expect continued steady growth and a growing proteomics market. Unfortunately, this is not a zero-sum game, but a growing market, as far as we can tell, with very healthy fundamental dynamics, and we expect to continue to do well in that in 2024. Okay, fair, fair. Thanks.
Frank: Yeah since the Australia launched by a competitor that's a competitive product.
Speaker Change: We will.
Speaker Change: Continued to grow at a tough business, but there is a competitive product on the market and you know our product our new ultra and of course, the various other price and performance and capabilities points of the of the same soft platform, including the flex version with mall the imaging like whole makes sense.
Speaker Change: The other imaging applications.
Speaker Change: You know are they they really are all performing well, but you know we acknowledge there is new competition and and that's getting some traction as well of.
Speaker Change: Of course, the traditional or be trapped franchise is probably.
Speaker Change: The most of that internal competition, but that's you know that's.
Speaker Change: That's all that's that's not our issue. So we expect continued steady growth in our growing proteomics market. Unfortunately, this is not a zero sum game, but a growing market as far as we can tell with very healthy fundamental dynamics and we expect to continue to do well in that in 2024.
Okay.
Speaker Change: Thanks.
Gerald N. Herman: Our next question comes from Dan Arias from Stiefel. Please go ahead with your question. Good morning, guys. Thanks for the questions. Gerald or Frank on the deals that you've done here.
Speaker Change: Our next question comes from Dan Arias from Stifel. Please go ahead with your question.
Dan Arias: Hey, good morning, guys. Thanks for the questions Gerald or Frank on the deals that you've done here it looks like Youre guiding to a three point contribution from M&A, how conservative or non conservative would you say that is I mean, you've got a half a dozen or so assets.
Gerald N. Herman: Looks like you're guiding to a three point. How conservative or non-conservative would you say that is? I mean, you've got a half a dozen or so assets when you kind of look at the growth expectations that you have for them. I'm just curious what you've modeled. 23. Did you pump the brakes because of the macro?
Dan Arias: So when you when you kind of look at the growth expectations that you have for them.
Dan Arias: Just curious what you've modeled relative to 2023 did you pump the brakes because of the macro have you assume some acceleration because now you are able to support them just trying to put some context to the growth expectation there.
Frank H. Laukien: Acceleration, because now you're able to support them, trying to put them in some context to the, No, we're right in the middle of the fairway. Neither super conservative nor bullish. That's just a mathematical number of what comes out of these acquisitions. Again, other than the Finomex acquisitions, now BCA, the other acquisitions that have closed mostly don't have very significant revenue in the aggregate. It adds up a little bit, which is why we get to the 3%. But that's a figure that that's a little of a fairway figure.
Speaker Change: Oh right in middle of the fairway, neither neither up Jim neither Super Conservative nor bullish that's just a mathematical number of what comes out of these acquisitions again other than the Phantom X acquisitions now V. C. A the other acquisitions that have closed mostly don't have.
Speaker Change: Very significant revenue.
In the aggregate that adds up a little bit which is why we get to the 3%, but that's a.
Speaker Change: That's a figure that that that's a little of a fairway figuring out so.
Gerald N. Herman: Yeah. So I think conserve nothing, nothing overly conservative nor bullish on that one. Again, keep in mind most of these transactions, so Phenomics closed in Q4 of last year, most of the other ones closed sort of very end of the year, very beginning of this year. So it's a comp situation.
Speaker Change: Thing conserve nothing nothing overly conservative or bullish on that one.
Speaker Change: Yes keep in mind most of these transactions so for nomex closed in Q4 of last year most of the other ones close sort of very end of your very beginning of this year.
Speaker Change: Comp situation the underlying revenue growth of those acquired businesses as Frank said, we don't have aggressive assumptions within that.
Frank H. Laukien: The underlying revenue growth of those acquired businesses, as Frank said, we don't have aggressive assumptions. And most of these are healthy businesses, of course; the one that we're working through, of course, is phenomenal. Okay, helpful.
Speaker Change: And mostly most of these are most of these are healthy businesses of course.
Speaker Change: The one that we're working through of course is the mix.
Speaker Change: Yes sure.
Speaker Change: Alright, okay.
Frank H. Laukien: And then Frank, maybe just sort of in the spirit of Patrick's question about academics, can you do a similar thing on Europe, just in the way that you're thinking about things and what's under the outlook. I mean, tough macro conditions, academic funding may be down a bit to your prior. You guys are doing well there, I think, on a reported basis. You're up 22, and Dan Forkiew.
Speaker Change: And then Frank maybe just sort of in the spirit of Patrick's question on academic can you do a similar thing on Europe, just in the way that you're thinking.
Speaker Change: Thinking about things and what's under the outlook I mean tough macro conditions academic funding may be down a bit to your prior point you guys are doing well there I think on a reported basis, you are up 20% and <unk>. So.
Frank H. Laukien: So, you know, what should we expect if we compare 2024 and Yeah, I mean, it's not that we have internet visibility and that right. But I mean, academic government funding is always relatively stable. And in Europe, particularly, so you might have more ups and downs in Japan and China and the U.S. depending on the political situation or gridlock or continuing resolution. In Europe, usually, this is not a political item, both at the country level, the major economies and smaller, you know, smaller, healthy countries in Europe; they don't constantly debate about their governmental or academic R&D budgets; those are just steadily increasing.
Speaker Change: What should we expect if we compare 2024 in Europe 23.
Speaker Change: Yeah, I mean, it's something we have entered that visibility into that right but.
Speaker Change: But I mean academic government funding is always relatively stable and in Europe, particularly so you might have more ups and downs in Japan, and China. The U S. Depending on political situation, our grid lock or continuing resolutions in Europe, usually this is not a political ida both at the con.
Speaker Change: Entry level, the major economies in smaller.
Speaker Change: Smaller healthy countries in Europe, they don't constantly debate about their governmental Oh academic R&D budgets. Those are just steadily increasing and the same store at the European level, There's some European overall European budgets.
Frank H. Laukien: And the same is true at the European level; there are some overall European budgets. Much, much more importantly, is what does it get allocated to? And the drivers are clearly favoring the post-genomic era. And I think they will be for the next decade or two. And there we're just very well, or increasingly very well positioned and really strongly positioned in proteomics, lipidomics, metabolomics, glycomics, you name it. I don't want to throw out too much jargon, but the post-genomic era at a high level is very much the fundamental secular trend that supports our growth in government-funded academic budgets that is much higher than the overall growth that you may read at a national level.
Speaker Change: Much much more importantly is what does it get allocated to and the drivers are clearly favoring the post genomic era and I think they will be for the next deck.
Speaker Change: Decade or two.
Speaker Change: And there we are just very well or increase the need very well positioned.
Speaker Change: Strongly positioned in proteomics flip it all makes Smith at below <unk> you name. It went up for all of two much jargon, but the post genomic ear I at a high level, it's very much the fundamental secular trend that supports our growth in academic government funded budgets that as much.
Speaker Change: Higher than the overall growth that you may read at a national level. It's the reallocation of the post genomic era that I think gets the.
Frank H. Laukien: It's the reallocation of the post-genomic era that I think is the, that and artificial intelligence are probably the two very big mega trends for Bruker for the next decade. Okay, so Frank, just to close the loop on the thought Germany macro conditions, recessionary conversation, not something that you see as, No, but a yellow flag. I mean, Germany is fumbling along, and strong growth has not been all that strong. And yeah, it's probably not one of the growth engines of Europe in 24 either.
That and the artificial intelligence are probably the two.
Speaker Change: Very big Mega trends for the next decade.
Speaker Change: Okay. Okay. So Frank just to close the loop on the THAAD, Germany macro conditions recessionary conversation not something that you see as a red flag right now.
Frank: No, but a yellow flag I mean, Germany is bumbling along.
<unk> growth has not been all that strong and yeah. It's it's not one of the growth engines of Europe.
Frank: 24, probably either pretty clear.
Frank H. Laukien: Pretty clear. Okay. Yeah. Our next question comes from John Sourbeer from UBS. Thanks, good morning, and congrats on the quarter.
Speaker Change: Okay Super Thank you.
Speaker Change: Yes.
Speaker Change: Our next question comes from Jon <unk> from UBS. Please go ahead with your question.
Jon: Thanks, Good morning, and congrats on the quarter.
Unknown Speaker: I just wanted to follow up. I know you don't break it out by region, but was China the real region there that drove that below one on the book to bill? And I guess, you know, if you were to X out China, it would have booked a bill greater than one, and any additional colleges around. Unknown Speaker Yeah, so maybe to clarify there, so overall BSI book to bill was actually above one that includes China. Now, China obviously is below one because of the bullets and orders we got from the stimulus. And again, that stimulus was really focused on in Q1, but we did have some in Q4 of last year as well.
Jon: Wanted to follow up on the ESI book to Bill I know you don't break it out by region, but was trying to the rural region, there that drove that.
Jon: That below one on the book to Bill and I guess, if you were to ex out China was book to Bill greater than one.
Jon: Any additional color just around expectations for yes, maybe to clarify Eric So overall BSI book to Bill was was actually above one that includes China.
Our China, obviously is below one because of the bolus in orders, we got from the stimulus and again that bolus was really focused in in Q1, but we did have some in Q4 of last year as well.
Unknown Speaker: But overall, BSI spoke to Bill, and John, and I would say China China had, I would say, a bit of a recovery in the fourth quarter where we saw some challenges in the third quarter relative to that particular market. So from a bookings perspective, there was some improvement there. And I guess as a follow-up just on China there, you know, Unknown Attendee, Michael Ryskin, Douglas Schenkel, Gerald Herman, Patrick Donnelly, Good backlog visibility, and I mean, China is perhaps the market for the entire industry where we have the least visibility for 2024. And I would say we're not that different from that. We do note that, you know, their academic government and investments tend to be [inaudible]. While Q4 was a bit of a recovery in China, PSI orders compared to Q3 after the very strong first half, we don't have, We don't have more visibility into China than other peers. But we do have quite a different mix in China, as a reminder.
Jon: But overall BSI book to Bill was above one including China.
Speaker Change: And I would say.
Speaker Change: China, China had.
Speaker Change: I would say a bit of a recovery in the fourth quarter we saw.
Speaker Change: Some challenges in the third quarter relative to that particular market. So from a bookings perspective, there was some improvement there.
Speaker Change: And I guess as a follow up just on China there.
Speaker Change: Any expectations on the outlook for that market for the year sentiment are you hearing from customers, there and just visibility into the backlog youre starting the year.
Speaker Change: Oh, good backlog visibility and.
I mean, China is perhaps the market for the entire industry, where we are.
Speaker Change: The least visibility for 2020 four.
Speaker Change: I would say were not that different than that but we do note that.
Speaker Change: Are their academic government.
Speaker Change: The investments have to be.
Speaker Change: Strong and I think there is a.
Continuous for that so I think we're well positioned.
Speaker Change: While Q4 was a bit of recovery in China, BSI order compared to Q3 after the very strong first half.
Speaker Change: We don't have.
Speaker Change: We don't have more visibility into China than others other peers.
Speaker Change: But we do have quite a different mix in China. As a reminder, so our end market mix in China is about 50% academic and government, which as Frank just mentioned is one.
Unknown Speaker: So our end market mix in China is about 50% academic and government, which, as Frank just mentioned, is one of the bright spots. Our biopharma revenue mix in China is only about 10%. That's really where the weakness is, and we did not see that week biopharma go away in China in Q4. Thanks for taking the question. Sure. Our next question comes from Douglas Schenkel from Wolf Research. Please go ahead with your question. Good morning, and thank you for taking my questions.
Speaker Change: One of the bright spots, our biopharma revenue mix in China is only about 10%. So that's really where the weakness is concentrated.
Speaker Change: And we did not exceed that Biopharma go away in China in Q4 right.
Speaker Change: Thanks for taking the question.
Speaker Change: Sure sure.
Speaker Change: Our next question comes from Doug Schenkel from Wolfe Research. Please go ahead with your question.
Doug Schenkel: Good morning, and thank you for taking my questions. The first topic I wanted to touch on is our backlog I believe at some point over the course of Q4, you talked about having.
Douglas Anthony Schenkel: The first topic I wanted to touch on is backlog. I believe at some point over the course of Q4, you talked about having eight to nine months of backlog. I think the norm is closer to six.
Eight to nine months of backlog I think the norms closer to six so I'm just curious if you'd be willing to comment on where that is now and is there an assumption embedded into guidance that this comes down a bit.
Gerald N. Herman: So I'm just curious if you'd be willing to comment on where that is now, and is there an assumption embedded in guidance that this comes down a bit? Yeah, for your wolf bite, which we enjoy reading, it has come down a little bit to closer to seven and a half months now, and that's still elevated, so we expect that that will come down over the next two to three years.
Yeah for your Wolf bites, which we enjoy reading.
Speaker Change: [laughter] come down a little bit.
To to closer to seven and a half months now and that's still elevated so we expect that that will come down over the next two to three years. So so some of that.
Gerald N. Herman: So some of that is built into our guidance for fiscal year 24. Mostly it's driven by, you know, reasonable and above here, it seems, order momentum, given the various secular trends that we have mentioned in particular. But we also expect, without quantifying it, that we also expect that our backlog will come down a bit further. But as I said, it was seven and a half months at the end of 23.
It's built into our guidance for fiscal year 'twenty four mostly it's driven by you know reasonable and above peer it seems.
Speaker Change: Order momentum.
Speaker Change: Given the various secular trends that we have mentioned in particular, but we also expect that without quantifying. It Doug. We also expect that our backlog will come down a bit further.
Speaker Change: As I said, it was seven and a half X seven and a half months at.
Frank H. Laukien: So it's come down a little bit. Okay, no, that's helpful just to make sure that it's not a major driver of growth in the year. So that that's helpful. Can I just touch on M&A real quick?
Speaker Change: At the end of 'twenty, three so it's come down a little bit.
Speaker Change: Okay. No. That's helpful just to make sure that's not it.
Speaker Change: It helps but it's not a major driver to growth in the year. So that's helpful.
Speaker Change: On can I can I just touch on M&A real quick lots of questions. There are lots of focus on all the activity there.
Frank H. Laukien: Lots of questions there, lots of focus on all the activity there. But I would love to just take a step back and, you know, think about this bigger picture. How are you going about identifying these opportunities? Why so many so quickly? You know, as we kind of think about these, are they filling gaps in the portfolio, or are they kind of moving you into new markets? So there's a lot there, but I would love to just hear the philosophy and just kind of the logic behind getting so active so quickly. Thank you. Very good questions, and the answer is a little of both.
Speaker Change: I would love to just take a step back and think about this bigger picture. How are you going about identifying these opportunities why so many so quickly.
Speaker Change: As we kind of think about these are they are they filling gaps in the portfolio or are they kind of moving you went to do markets.
Speaker Change: So theres a lot there, but I would love to just hear the philosophy and just kind of the logic behind getting so active so quickly. Thank you.
Speaker Change: Very good questions and yes, there's a little of both.
Frank H. Laukien: First of all, this is just the end of 23, when most of these deals were negotiated, right? Some of them then close in January or February, but we've been obviously working on them in the second half of 23. And on some of them, we've literally been in the second or third round with some of these companies we've just known without any process for literally four years. And, and this is finally the stars aligning in an unusual way, right? We're not on a buying spree, just in an unusual way, we were finally able to, in various areas, pull together the right valuations and deals with sellers and buyers both thinking it was fair and it was time. So it's very unusual.
Speaker Change: First of all is this just.
Speaker Change: At the end of 'twenty three went in most of these deals were negotiated right. Some of that that close in January or February, but we've been obviously working on them.
Speaker Change: And the second half of 'twenty, three and on some of them we've literally been in the second or third round. Some of these companies. We've just knowing without any process or literally for years and the sign of Lee the stars aligned in the non usual way right, we're not buying.
<unk> just in an unusual way we were finally be able to in various areas pull together, the right valuations and deals with sellers.
Speaker Change: Sellers and buyers both thinking it was fair and it was five so it's very unusual.
Frank H. Laukien: I don't expect that pace to continue. This is not a different type of broker. We do selected strategic acquisitions. Some of them clearly fill gaps or holes in our Swiss cheese, gaps in our portfolio like Tornado or SII or even Nanophoton. Now, you know, I don't mean to degrade those companies in any way. They have beautiful product lines.
Speaker Change: Don't expect that pace to continue this is not a different type of broker we do selective strategic acquisition some of them clearly fill gaps or holes in our Swiss cheese gaps in our portfolio like tornado or S II or even that a photon now.
Speaker Change: Great those companies in any ways that beautiful product lines they have technology.
Frank H. Laukien: They have the technology. They have market traction demonstrated and margin traction demonstrated in some markets, but usually, they're not acting globally, or at least not fully globally. We can help them with that, and they have filled real gaps in our product. The pending acquisitions of ChemSpeed will take us further into new areas of biopharma and chemicals and even... Cosmetics and Consumer Products, R&D, and QC Automation. So those are new areas, but adjacent. Ditto, in a way.
Speaker Change: They have market traction demonstrated and margin traction demonstrated in some markets, but usually they're not acting globally or at least not fully globally. We can help them with that and they felt real gaps in our product lines.
Speaker Change: The pending acquisitions off campus speed will take us further into new areas of Biopharma chemicals uneven.
Speaker Change: Cosmetics and consumer products, R&D and QC automation. So those are new areas by the adjacent.
Speaker Change:
Frank H. Laukien: We've been in infectious disease biology, but primarily with a multi-biotyper with a very small foothold in molecular diagnostics. ELITEX is a much bigger sample to answer.
Speaker Change: And the way we've been in infectious disease biology, but primarily with them all the biocide or with a very small Paul.
Speaker Change: Hold in molecular diagnostics analytics is a much bigger sample to answer <unk>.
Speaker Change: Molecular diagnostics play it will not make us a tier one competitor right those are Roche and Abbott and <unk> and others, but it was just a solid tier two competitors. So it expands our infectious disease franchise again, not new to us, but very nicely complex complementary to the.
Frank H. Laukien: It will not make us a Tier 1 competitor, right? Those are Roche's and Abedinologics and others, but it will make us a solid Tier 2 competitor. So, it expands our infectious disease franchise. Again, not new to us, but very nicely complementary to the multi-biotyper that's, of course, focused on bacteria and not on virus viral detection, whereas molecular diagnostics is a lot about infectious disease viral
Speaker Change: All of the biotech, but that's of course focused on.
Speaker Change: On bacteria virus viral detection, whereas molecular diagnostics is a lot of infectious disease viral detection, so adjacencies or gaps in our product line don't expect this pace and frequency of continue that's really very very unusual but it has to do of course with markets in late 'twenty three bucket.
Frank H. Laukien: So, adjacencies or gaps in our product line, don't expect this pace and frequency to continue. That's really very, very unusual, but it has to do, of course, with... [inaudible] That's great. Thank you very much. You're welcome, Doug.
Valuations in late 'twenty three for meeting to come to compromises on valuation that seems reasonable and that support again long term IRR ROIC.
Speaker Change: While providing fair valuations for these companies that are where the founders or others might be exiting.
Gerald N. Herman: Our next question comes from Derek DeBruin from Bank of America; please go ahead with your question. Hey, Gerald, just to clarify, I got a couple of questions from clients. You said the book to bill in Q4 was not far from one, and then your comment about being greater than one was for the full year. Actually, both.
Speaker Change: That's great. Thank you very much.
Speaker Change: Youre welcome Doug.
Speaker Change: Our next question comes from Derik de Bruin from Bank of America. Please go ahead with your question.
Speaker Change: Hi, good morning, Thanks for taking my question.
Speaker Change: Gerald just to clarify.
I've got a couple of questions from clients you said the book to Bill in Q4 was not far from one and then your comment about being greater than one was for the full year.
Speaker Change: Actually both the fourth quarter was about how the book to Bill was above one.
Gerald N. Herman: The fourth quarter had a book deal of above one, and the full year as well, above one. Got it. Thank you. And going back to the ChemSpeed and the Elitech deals, I mean, we have a general idea of the revenues because you disclosed those. But how profitable are those businesses?
Speaker Change: Yes.
And the full year is well above one got it. Thank you just wanted to clarify that and going back to the Chem speed in the OE Tech deals I mean, we have a general idea on the revenues because you disclose those are those how profitable are those businesses basically windows come in we're not going to see like another step down.
Gerald N. Herman: Basically, when those come in, we're not going to see another step down in the margin, right? I mean, your guide right now is basically assuming that they're right. Can you just talk a little bit about the profitability of those businesses? They're not in our guide.
Speaker Change: The margin right I mean, the guide right now is basically assuming that those theyre right can you just talk a little bit of profitability of those businesses.
Speaker Change: They're they're not in our guide.
Frank H. Laukien: More on the 26 to 25 pull forward, as I said earlier, Derik, we have not, we have just said that they're both profitable. And when, when, or if when we close them, then we'll give more details with a more detailed press release on each of those. We just don't want to jump the gun. Okay. I just wanted to clarify the profitability comment. And then just one final one.
Speaker Change: Nor in the 20.
$6 25 pull forward as I said earlier dairy.
Speaker Change: We have not that we have just said that they are both profitable.
Speaker Change: And wait wait.
Speaker Change: Wayne.
Speaker Change: If when we close them then we will give more details with a more detailed press release on each of those we just don't want to jump the gun.
Speaker Change: Got it I just wanted to clarify the profitability comment and then just one final one.
Frank H. Laukien: You know, you've called out geopolitical risks a couple of times. I'm starting to get some questions from investors about, you know, obviously what's going on with China, you know, and your sales into the semiconductor market, and people are sort of starting to worry about competition and just pushback. I guess, how do you think about geopolitical risk? in China right now and in just what's going on there, just your sort of your broad, Well, geopolitical risks for us are Code 4, a Ukrainian-Russian war and Israel-Hamas war and the potential for some more like action around Taiwan happening at some point, or these wars spreading, so it's not... It's sort of related to wars and conflicts as opposed to, You know, how fast is China growing or not. So there they are with two wars pending, and they have increased the risk of a conflict over Taiwan at South China possible at some point in the next decade.
Speaker Change: You've called out geopolitical risks a couple of times I'm starting to get some questions from investors about.
Speaker Change: Obviously, what's going on with China.
Speaker Change: And your sales into the semiconductor market and people are starting to worry about competition and just push backs I guess, how do you sort of like think about the geopolitical risk.
Speaker Change: In China, right, now and and and just what's going on in your just your sort of your broad thoughts.
Speaker Change: While geopolitical risks for US is code for.
Speaker Change: Our Ukrainian and Russian War in Israel, Hamas Ward and Anne.
Speaker Change: And.
Speaker Change: The potential of.
Speaker Change: Some more like action around Taiwan happening at some point.
Speaker Change: Or these war spreading so it's not.
Speaker Change: It's sort of related towards and conflict as opposed to.
Speaker Change: Yes.
Speaker Change: How fast is China growing or not.
Speaker Change: So there they are with two wars spending and they increased.
Speaker Change: Risk of a conflict over Taiwan that song.
Speaker Change: It's possible at some point in the next decade, that's why we're highlighting that it's an unprecedented level of geopolitical risks.
Frank H. Laukien: That's why we're highlighting that it's an unprecedented level of geopolitical risk that everybody is facing that the industry is facing. But we mean that narrowly by conflicts rather than, you know, an economy growing or slowing. Maybe that helps.
Speaker Change: Everybody is facing that the industry is facing but we mean that narrowly by conflict swap of then.
Speaker Change: An economy growing or slowing.
Frank H. Laukien: Yeah, well, I was thinking more about trade just in terms of restricting R&D and reducing analytical instrumentation sales. So I'm getting some questions from investors about your metrology tools into China and things like that, just the sense that there might be some trade. That's where I was going. Yeah, remember, you may remember that. About two years ago, there were some additional restrictions on selling certain semiconductor most advanced semiconductor metrology tools to China. And so, of course, that was implemented a couple of years ago, if I recall, and that's long since integrated into our model. But of course, if there was a conflict around Taiwan, if there were new restrictions, those are some of the, you know, geopolitical risks that the industry is facing, and so that's what we mean by that risk.
Speaker Change: Maybe that helps yes, well I was thinking more about Trey just in terms of restricting R&D <unk> instrumentation sales, so I'm getting some questions from investors on.
Speaker Change: Your metrology tools into China, and things like that just the sense that there might be some trade pushback, that's what I was going forward yes.
Speaker Change: Remember you may remember that.
Speaker Change: About two years ago, there were some additional restrictions on selling certain semiconductor most advanced semiconductor metrology tools to join up and so of course that was implemented a couple of years ago, if I recall and that that's long baked into our model.
Speaker Change: But of course, if there was a conflict there on Taiwan, if they were new restrictions.
Speaker Change: Those are some of the you know.
Geopolitical risks that the industry is facing.
Speaker Change: So that's what we mean by that right.
Frank H. Laukien: Got it. Thank you for clarifying. Operator, I think we'll take one final question, Operator. Our final question comes from Brandon Couillard from Jeffries. Hey, thanks. Good morning.
Speaker Change: Got it thank you for clarifying.
Okay.
All right operator, I think we'll take one final question operator.
Speaker Change: Our final question comes from Brandon <unk> from Jefferies. Please go ahead with your question.
Brandon: Hey, Thanks, Good morning, Frank you mentioned, the IVF business within <unk>, just curious what else do you think you need.
Frank H. Laukien: Frank, you mentioned the IDS business within BioSpend. Just curious what else you think you need to, like, accelerate the vision you have around software and how do you differentiate in lab software in what seems like a pretty crowded market? Yeah, it's crowded, but some of these assets previously acquired haven't done all that well, or some of them have older concepts. So we think we can bring some fresh breath of air into some of that scientific and lab software, and the assets that we have acquired, and to some extent are integrating, provide a nice portfolio of vendor-agnostic scientific and lab digitization software solutions that we think have good growth potential with excellent margin potential. Some of the automation acquisitions, like the one we did already, Optimal in the UK, about a year ago, a year and a So, I don't know that we need a lot of other things.
Two.
Brandon: I guess accelerate division you have around software and how do you differentiate and laptop and what seems like a pretty crowded space.
Brandon: Yeah, it's it's crowded but you know some of these some of these assets previously acquired Havent done all that well or some of them have older concept. So we think we can bring some fresh breath of air into some of that scientific and lab software and the.
Brandon: The assets that we have acquired and I'll. It to some extent are integrating rights will provide some nice portfolio vendor agnostic scientific and lab.
Brandon:
Brandon: Digitization software solutions that we think has good growth potential with excellent margin potential.
Brandon: Some of the automation acquisitions like the one we did already optimal in the UK about a year ago Youre in Africa and the pending.
Brandon: Potential speed acquisitions also have software components and will benefit from some of the software assets that we have already in this ideas.
Brandon: Don't know that we need a lot of other things I think we're getting together or we did get managed to quietly built and pulled together the assets that we needed for a serious.
Frank H. Laukien: I think we're getting together, or we did manage to quietly build and pull together the assets that we needed for a serious lab and QC software business. So, we're pleased with that. Still early days, but, you know, nice aftermarket growth, if you like, first of all, something we're always trying to strengthen, then, of course, with good, very good gross margin and operating margin potential and just good revenue growth potential. And then one more for Gerald, for the year, what are you embedding for interest expense in the guide that we did? rounds in the last few weeks, and how you think about pre-cast, from a Just let me answer your last question first.
Brandon: Lab and QC Saul.
Brandon: Software business. So we're pleased with that still early days, but.
Brandon: Nice aftermarket growth if you like first of all something we're always trying to strengthen then of course with good very good gross margin and operating margin potential and just good revenue growth potential.
Brandon: Helpful and then one more.
Brandon: Gerald for the year, what are you embedding for interest expense in the guide and they've done.
Speaker Change: That rounds.
Speaker Change: A few weeks and how do you think about free cash flow conversion for the year. Thank you.
Speaker Change: From a.
Gerald N. Herman: Just let me answer your last question first.
Gerald N. Herman: Our cash flow position actually for 2023 improved sharply from 22. So we added almost 100 million to that number. So I'm pretty encouraged about where we are. Some of that is coming from working capital management improvement. We've had a number of initiatives there, and we're pleased with how that's performing. So, our expectation is also that we're going to continue to improve that, especially during the 24-month period. I guess I'd also say, You know, in terms of our overall interest. The costs from an interest perspective for 2024, we're guiding somewhere in that, you know, Unknown Speaker 17 to a little bit above that $17 million for the full year. Unknown Speaker So interest expense will come up a little bit, obviously. So last year it was closer to 10.
Gerald N. Herman: <unk>.
Gerald N. Herman: Our cash flow position actually for 2023 improved sharply from 22, so almost $100 million.
Gerald N. Herman: Does that number so I'm pretty encouraged about where we are and some of that is coming from working capital management improvement. We've had a number of initiatives. We're pleased with how that's performing.
Gerald N. Herman: Okay.
Gerald N. Herman: Our expectation is also that we are.
Gerald N. Herman: I'm going to continue to improve that especially during the 24 period I guess I'd also say.
Gerald N. Herman: In terms of our overall interest.
Gerald N. Herman: The costs from an interest perspective for 2000.
Gerald N. Herman: 24, we're guiding somewhere in that.
Gerald N. Herman: 17.
A little bit above that $17 million for the full year.
Gerald N. Herman: So interest expense will come up a little bit obviously right. So last year was closer to 10, it will come up a little bit into it yes.
Gerald N. Herman: We'll come up with a little bit on that. Unknown Speaker Yeah, just for those that hadn't seen it, we have announced that there are some additional financing activities, particularly with some institutional investors, and the overall rate, interest rate, and coupon rate picture there is quite favorable. So, while these are bigger numbers, the overall impact is not as giant as some might think it is.
Gerald N. Herman: For those that haven't seen it we have announced.
Gerald N. Herman: There are some additional financing activities, particularly with certain institutional investors in the overall interest rate coupon rate picture there is quite favorable so.
Gerald N. Herman: So these are bigger numbers.
Gerald N. Herman: The impact is not as giant is somebody I think it is and maybe a final comment brand in some of these things only get funded when we or we only need to pull from them for funding.
Gerald N. Herman: And maybe a final comment, Brandon. Some of these things only get funded when we, or we only need to pull from them for funding if and when we close, for instance, the Alitech acquisition, which is a larger one. So, we can time that to some extent so that the interest expense, only additional interest expense kicks in if and when we get the additional profitability from these. We draw them as required. Some of them we draw as required, and some of them have delayed drawdown dates anyway.
Gerald N. Herman: If and when we close for instance, the <unk> acquisition, which is the larger one.
Gerald N. Herman: So we can tie that to some extent that the interest expense on the additional interest expense kicks in.
Gerald N. Herman: And when we get the additional profitability from these days.
Gerald N. Herman: We draw them as required some of them, we draw as required and some of them up delayed draw down days anyway.
Gerald N. Herman: Thank you. All right, with that, we want to thank everyone for joining us today. Bruker's leadership team looks forward to meeting with you at an event. We're speaking with you directly during the first quarter. Please feel free to reach out to me to arrange any follow-ups. Have a great day. Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. You may now disconnect.
Okay. Thanks for that clarification is helpful. Thank you.
Speaker Change: Good question, though.
Speaker Change: Alright with that we want to thank everyone for joining us today brokers leadership team looks forward to meeting with you at an event or speaking with you directly during the first quarter. Please feel free to reach out to meet a range any follow ups have a great day.
Speaker Change: Ladies and gentlemen, with that we'll conclude today's conference call and presentation. We thank you for joining you may now disconnect your lines.