Q1 2025 Bruker Corp Earnings Call
Speaker Change: Good day and welcome to the Bruker Corporation 1st quarter 2025 earnings conference call.
Speaker Change: All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question you may press star, then one on your telephone keypad.
Speaker Change: To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Joe Kostka, Director of Investor Relations. Please go ahead.
Joe Kostka: Good morning. I would like to welcome everyone to Bruker Corporation's first quarter 2025 earnings conference call.
Joe Kostka: My name is Joe Kostka, and I am the Director of Bruker Investor Relations [inaudible]
Speaker Change: Joining me on today's call are Frank Laukien, our President and CEO and Gerald Herman, our EVP and CFO .
Speaker Change: In addition to the earnings release we issued earlier today, during today's conference call we will be referencing a slide presentation that can be downloaded from the events and presentations section of Bruker's Investor Relations website.
During today's call, we will be highlighting non-GAAP financial information. Reconciliation.
Speaker Change: Before we begin, I would like to reference Bruker's State Harbor Statement, which is shown on slide two of the presentation.
Speaker Change: 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 our recent acquisitions, geopolitical risks, tariffs, market demand or supply chains.
The company's actual results made different materially from such statements.
Speaker Change: Factors that might cause such differences include but are not limited to those discussed in today's earnings release in our form 10K for the period ending December 31, 2024, as updated by our other SEC filings, which are available on our website and on the SEC's website.
Speaker Change: Also, please note that the following information is based on current business conditions and two-hour outlook as of today, May 7, 2025.
Speaker Change: We do not intend to update our forward-looking statements based on new information, future events, or for other reasons, except this may be required by law prior to the release of our second quarter 2025 financial results, expected in early August 2025.
Speaker Change: You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today.
Speaker Change: We will begin today's call with Frank providing an overview of our business progress and of the expected impacts from U.S. policy changes and new tariffs.
Speaker Change: Gerald will then cover the financials for the first quarter of 2025 in more detail and share our updated full year 2025 financial outlook.
Speaker Change: We all said 5.1% organic revenue growth in our Rooker Scientific Instruments segment, and better operating
Speaker Change: In short, our teams executed very well under significant uncertainties in key markets.
Speaker Change: In the first quarter and in April at the important AGBT, ENC, Edskman, and AACR conferences.
Speaker Change: At the alphabet soup, we launched the number of very innovative performance leading new products in spatial biology, cellular analysis, NMR, microbiology and molecular diagnostics, all strengthening our high value offerings in key areas of our strategic focus.
Speaker Change: I'll cover several of these important new products in a few moments, but the key message here is that in times of funding uncertainties and in particularly, it is in particularly important to enable our customers with unique and highly relevant new research and clinical capabilities. Thank you very much.
Speaker Change: We also expect these meaningful post genomic innovations to drive continued higher revenue in the UK, your differentiation for Bruker beyond the present Akagov headwinds in the U.S. and China.
Let's begin on slide 4.
Speaker Change: With the performance of the business in Q125, then I'll walk you through the impact of recent US policy changes and the new tariff regime, how we anticipate it will impact Bruker and how we intend to mitigate the resulting headwinds to our margins.
Speaker Change: Slightly more than half in 2025 and then completely by 2026 Dr. Prasad, Dr. Prasad, Dr. Prasad, Dr. Prasad,
Speaker Change: On Q1 25 performance, we delivered a stronger than expected first quarter, Bruker's Q1 25 reported revenues increased 11% year over year to 801.4 million above our pre-announced range of $7.95 to $800 million and significantly above prior expectations.
Speaker Change: Our constant exchange rate, CR revenue growth was 12.5% year-over-year including organic growth of 2.9%
Speaker Change: with as I said earlier, a reasonably strong 5.1 organic growth delivered by our BSI segment.
Speaker Change: and a 9.6% contribution to revenue growth from acquisitions, if you recall, we did some of our larger acquisitions last year in the second quarter. [inaudible]
Speaker Change: Notably, performance in the Biopharma and markets strengthened in the quarter and grew in the mid-single digits percentage.
Speaker Change: Our first quarter 25 non-GAF operating margin was 12.7%, which was down year over year due to the expected MNA dilution from the strategic acquisitions. I just mentioned that we completed in Q224.
Speaker Change: However, underneath we again posted strong organic operating profit margin expansion of about 100 basis points year over year in the quarter.
Speaker Change: Our first quarter 25 diluted non-GAB EPS was 47 cents down from 53 cents in Q-124 due to expected
Currency Headwinds
Speaker Change: Please turn to slide five and six where we highlight the first quarter CER performance of our three scientific instruments, groups and of our best segment year over year.
Speaker Change: Biospin Growth was driven by Strong, Akagov Revenue, including an ultra high field NMR system in the UK, by industrial research and food safety markets, and a strengthening bioforma environment.
Speaker Change: as well as strong contributions from preclinical imaging and lab automation, the new ChemSpeed business.
Speaker Change: In Q1, our Caled Group had revenue of 280 million with mid-twenties percentage, CR growth. Caled growth was led, as you might expect, by microbiology and infection diagnostics, including the acquired LE Check Molecular Diagnostics Business.
Speaker Change: as well as double digit plus growth in life science mass spectrometry driven by strength and the Jim Stov, Jim Stov platform.
Speaker Change: Calid saw robust growth in Europe and the Americas in strength and clinical, industrial, and biopharma applications, while Akagav performance was moderate.
Speaker Change: Turning to slide six, in Q1, Brooker Nano Revenue was $257 million, with CER Revenue Growth
Speaker Change: Growth was supported by inorganic revenue growth from NanoString, which was not yet included in Q1 of 24, the year-over-year comparison.
Speaker Change: Strength in APEC X China, Biopharma, and Akagav Markets were partially upset by softness in Europe and China, as well as in X-ray and nano-analysis tools.
Speaker Change: Finally, first quarter best CER revenues declined in the iTunes percentage, net of intercompany eliminations as our research instruments business, our weaker performance in the quarter. They had a very strong prior year comparison.
Speaker Change: and that also was combined with continued softness in the superconductor market for clinical MRI.
Speaker Change: Moving to slide 7, we highlight the recent innovations underscoring Bruker's leading commitment to advancing spatial biology announced first at AGBT and then expanded further at AACR in Chicago
Speaker Change: There's a lot of information on slide 7, don't worry, I won't read it all, but it gives you an idea about the breadth and depth.
Speaker Change: and best-in-class performance of each platform, each significantly enhanced in terms of content or sensitivity or throughput and of course the completely unique pain scape. [inaudible]
Speaker Change: Maybe one theme that comes here throughout is that spatial is going multiomics both our GOMX platform now allows high flex [inaudible]
Speaker Change: transcriptomics, of course, that's what Brennan for, but also Tissue proteomics.
Speaker Change: and that's also, by the way, true for our non-spatial encounter system that you may recall from the Nanostring days. Cosmix with the old transcriptome panel now that is ready for orders where we can really get 19,000 protein encoding.
Speaker Change: Jeans at the transcriptome level is an unmatched research tool, and importantly, we've increased our detection efficiency by a factor of 2x, one of the areas that the customers were waiting for.
Too much detail, let me move on to slide 8 [inaudible]
Speaker Change: Eight is an important acquisition, gets us into a different branch of diagnostics. This is not microbiology, infectious disease, and it very much fits with our...
Speaker Change: triple quadrupole mass spec strategy, which of course is very differentiated with our particular claim to fame and focus to chromatography free or chrome free.
Speaker Change: This gives us the crucial assays and kits and consumables business. Recipe is based in Munich, in business for over 40 years.
Speaker Change: Revenue's little greater than 15 million, very profitable, and for the European market, it gives us the therapeutic drug monitoring and other kids for IBD and other things that we don't need to go into detail. This combination kits assays content.
with a diagnostic focus. Thank you.
for therapeutic drug monitoring.
Speaker Change: is actually strategically quite exciting to us, and we think these two instruments, plus says and diagnostics coming together, is an important additional growth trajectory for the company.
Speaker Change: But we know you want to hear about the macro and I can go so let's go into it. Let me make sure I'm on the right slide. Yeah, I will now review.
Speaker Change: Our assessment and anticipated impact from U.S. policy changes regarding federal funding for academic research and the current tariff regime on Bruker for the remainder of 2025. Moreover, I will provide an overview of our additional cost initiatives.
Speaker Change: New Pricing Actions, and already ongoing and now accelerating supply network re-engineering to partially mitigate at least half of the new headwinds in this year, fiscal 25.
So...
Speaker Change: Here we go. Our initial estimates are that U.S. policy changes to federal research funding.
Lower China Stimulus Funding Release
Speaker Change: and some temporary revenue impact of new China tariffs. On revenue will amount to an approximately 100 million gross headwind to our organic fiscal year 25 revenues.
Speaker Change: Before some mitigation, you cannot mitigate that much on the revenue side but a little bit. Anyway, this 100 million fiscal year 25 revenue
Speaker Change: First and as a small and transient one, some fiscal year 25 China revenues that were to be shipped from the US may be delayed or delayed by customers or may be partially cancelled.
Speaker Change: Due to the current 125% Chinese import terrorist on U.S. goods, we're working with our customers to partially mitigate this impact with supply chain alternatives.
Speaker Change: Tarot Accentions, or Delivery Delays, with the largest transient impact now expected in the second quarter of 25.
Speaker Change: Ben Second, the strongest, but I thought the strongest revenue had been this year not surprisingly it's related to U.S. agagav market as a result of research funding policy changes.
Speaker Change: For Bruker, we now expect U.S. Akagav revenue to be down 20-25% for this year.
Speaker Change: U.S. Akagab in fiscal year 24 had grown to about 10% of overall Bruper revenues, and in the updated guidance we assume that the current academic funding uncertainty continues.
Speaker Change: Even though we acknowledge there's some potential upside in the second half of 25, if NIH and NSF and DOE are in Dgrants begin to flow again without further delays.
Third
Speaker Change: A headwind related to anticipated China, Akagav revenue, as funding of the stimulus programs in China has been slow to be released by the provinces.
Speaker Change: Many shovel-ready projects, a lot of them with our instrumentation, Hayant Akagov, but slow to release as they're probably watching tariffs and trade wars. This may improve throughout 25, but at the moment timing and amounts are uncertain. Thank you very much.
Speaker Change: So, there are a number of moving parts that could provide additional upside, such as release of China's stimulus funding.
German, and South Korean, stimulus funding, [inaudible]
Speaker Change: European Defense and Security Investments. We see some of that. And further semi-conductor metrology strength to due to the AI and machine learning trends, which are very profitable for us.
Speaker Change: So these factors could add up side, but we have not built them into our guide assumptions hoping to provide a floor for 25 with outside, in any case, more likely to benefit fiscal 26.
Speaker Change: We also note that uncertainty around potential US terrorists on former products could slow the encouraging recovery that we have seen in drug discovery and development markets in the last two quarters, and again, we have tried to take that into account in our guidance.
Speaker Change: So with respect to 25 operating profits, the growth headwinds before our mitigation actions are pretty meaningful [inaudible]
Speaker Change: So first of all, the roughly 100 million up-produced organic revenue previously noted is expected to lead to about a 50 million reduction in 25 operating profits.
Moreover, Bruker imports about 75% of our U.S. product revenue.
Speaker Change: Obviously not the service is revenue, there's another piece to develop our product revenue, 75% is imported largely from the European Union and Switzerland, but also from Israel and Malaysia [inaudible] thank you, thank you, thank you, thank you,
Speaker Change: The current US import tariff rate of 10% from those countries would result in an additional headwind of atmost of about 40 million to operating profit for the remainder of 25, again before our ongoing mitigation actions. [inaudible]
That's the growth headwind. [inaudible]
Speaker Change: So in total, we therefore estimate growth headwinds for our 25 operating profit, primarily from US Agagab disruption and new tariffs to be about 90 million altogether before our mitigation actions.
Speaker Change: Now, deploying our Bruker Management process and strong leadership team that as you've seen has been really excellent, executing very well not only this year but for many years. We have already taken and are taking numerous actions to have set more than half of these margin headwinds this year with a remainder expected to be fully effective. Thank you.
Speaker Change: Next year in 26. Our mitigation actions include new pricing actions, additional cost-cutting initiatives and supply network and manufacturing re-engineering. [inaudible]
Speaker Change: We estimate these mitigation measures will upset slightly more than half of the operating profit headwind for 25, we then expect to fully offset these headwinds through price, cost and supply network and manufacturing re-engineering.
By 2026.
Speaker Change: Fortunately, we're a very international company with a lot of flexibility, but it takes a little bit of time.
Speaker Change: Anyway, finally factoring in U.S. Akagov and Terrace Edmonds as well as the recent weakening of the U.S. dollar.
for EPS of $2.40 to $2.48.
Speaker Change: So, in summary, Bruker delivered strong CER growth and organic operating margin expansion in the first quarter of 25 were experiencing new headwinds as a result of Akagav policy changes and tariffs, as always we remain agile in responding to the evolving dynamics.
Speaker Change: Our management process is navigating us through these headwinds in 25 and setting us up for resuming margin expansion and strong EPS growth in 26 and beyond.
Speaker Change: So with that, let me turn the call over to Gerald, our CFO , who will review our financial performance in more detail and provide for the color on our updated outlook of 25 Gerald Goandis.
Gerald Herman: Thank you, Frank, and thank you everyone for joining us today. Please to provide more detail on Bruker's first quarter 2025 financial performance, starting on flight 10.
Gerald Herman: In the first quarter of 2025, we had another quarter of excellence execution, delivering a strong first quarter above our earlier expectations and the color provided to the investor community.
Gerald Herman: In the first quarter, 2025, Bruker's reported revenue increased 11% to 801.4 million dollars, which reflects an organic revenue increase of 2.9% year over year.
Gerald Herman: Acquisitions added 9.6% to our top line, while foreign exchange was 1.5% headwind, resulting in constant exchange rate revenue growth of 12.5% year over year.
Gerald Herman: Geographically and on a year-over-year organic basis in the first quarter of 2025, our America's revenue declined in the low single digits percentage.
Gerald Herman: European revenue grew in the mid-single digits percentage while Asia-Pacific revenue grew in the low single digits percentage despite a 10% decline in China. For our IMEA region, revenue was up mid-teens percentage.
Gerald Herman: We delivered strong BSI organic revenue growth in the first quarter of 25 at 5.1% driven by strength in our BBIO and Caled Groups.
Gerald Herman: Our order book performance in our BSI segment was down slightly compared to the prior year first quarter with softer academic government orders in the U.S. and in China.
And Q1 2025 non-GAAP operating margin was 12.7%.
Gerald Herman: which included 100 basis points of organic operating margin expansion on better mix and cost control. More than offset by planned M&A dilution as Q1 2024 did not include two of our largest strategic acquisitions that closed in the second quarter of 2004.
Gerald Herman: On an on-gap basis, Q1 of 25 diluted EPS was 47 cents. Down 11.3% from the 53 cents we posted in 1st quarter of 24, which did not yet include our key acquisitions last year.
Gerald Herman: On a gap basis, we reported diluted EPS of 11 cents compared to 35 cents in the first quarter
Gerald Herman: Weighted average diluted shares are standing in the first quarter of 2025, we're 151.9 million, an increase of 6 million shares or 4.1% from the first quarter of 2024, resulting from our follow on equity offering in May of 2024.
Gerald Herman: Turning now to slide 11. We generated $65 million of operating cash flow in the first quarter of 2025. Our Catholic expenditure investments were $26 million resulting in free cash flow of $39 million in the first quarter of 2025.
Gerald Herman: This reflects an improvement in free cashflow of about 39 million over the first quarter 24 driven by better working capital performance in the quarter.
Gerald Herman: We finished the first quarter with cash, cash equivalent and short-term investments on approximately $184 million. During the first quarter, we used cash to fund capital expenditures, select project accelerate 2.0 initiatives and debt repayments.
Gerald Herman: Turning now to slide 13, as Frank noted earlier, we're updating our fiscal year 2025 outlook to reflect a strong first quarter and the impact of recent policy changes and tariffs.
Gerald Herman: We now expect reported revenues of $3.48 to $3.55 billion, representing reported growth of $3.50 to $5.50
Gerald Herman: This implies constant exchange rates ER revenue growth of two and a half to four and a half percent all year over year.
Gerald Herman: The revenue guidance includes an organic revenue growth headwind of approximately $100 million from recent policy changes and tariffs partially offset by pricing and other mitigation actions of about $20 million for a net headwind of about $80 million.
Gerald Herman: We now expect our fiscal year 2025 operating margin to be roughly flat year over year, with organic improvement of greater than 70 basis points, including mitigation actions, to be roughly offset by headwinds from M&A and foreign exchange.
Gerald Herman: Recent policy changes, academic government market weakness in the U.S. and China, together with the current level of U.S. and China import tariffs, are assumed to be a $90 million gross headwind to operating profit in fiscal year 25.
Gerald Herman: We anticipate over half of this impact to be offset through our mitigation actions, including pricing about 10 million, cost management about 30 million, and supply chain reengineering about 10 million already in fiscal year 25.
Gerald Herman: On the bottom line, we're now guiding to non-GAAP EPS for 2025 in a range of $2.40 to $2.48. This translates to roughly non-GAAP EPS growth of 0-3% compared to 2024.
Gerald Herman: Given the recent weakening of the US dollar against major currencies, foreign exchange is now a 5% headwind to our non-GAPPPS.
Gerald Herman: Implying constant exchange rate non-GAPPPS growth of 5-8% for fiscal year 25.
Gerald Herman: Other guidance assumptions are listed on the slide. Please note our fiscal year 2025 ranges of an updated for foreign currency rates and tariff rates as of April 30th, 2025.
Gerald Herman: While there are other policy and macroeconomic risks that could further impact our fiscal year 25 financial performance, with this updated guidance we hope to have established a floor based on current headwinds and our robust mitigation actions.
Gerald Herman: Given the lower base years of 24 and 25, it's now become clear that our previously communicated medium-term outlook targets are not likely to be realized under our originally planned cadence.
Gerald Herman: We intend to provide updated medium-term outlet targets when we have a clear line of sight on U.S. federal research policy and funding and stabilize tariffs.
Gerald Herman: Fundamentally, we remain optimistic that we've transformed Bruker's portfolio for above-market revenue growth, rapid margin expansion towards the mid-20%
Gerald Herman: Operating margins, and mid-high teens, EPS growth, once new headwinds abate.
Finally, to add color on the second quarter of 2025.
Gerald Herman: Given softer U.S. and China academic government market conditions, and some U.S. produced China revenue likely delayed from the second quarter. We expect our second quarter 2025 organic revenue to decline in the low single digits.
Gerald Herman: In the second quarter of 2025, we also expect to see a transient year-over-year decrease in non-GAAP operating margin and non-GAAP EPS performance with significant improvements in both metrics expected in the second half of this year.
Gerald Herman: To wrap up, Bruker delivered a solid BSI organic revenue growth and organic operating margin expansion in the first quarter of 2025 under uncertain conditions. Moving forward, we remain confident in our ability to continue to execute well under a challenging environment.
Gerald Herman: And with that, I'd like to turn the call over to Joe. Thank you very much. Thanks, Gerald. I'd now like to turn the call over to the operator to become a portion of the call
Gerald Herman: As a reminder, to allow everyone time for questions, we have to you limit yourself to one question and one follow-up.
Speaker Change: We will now begin the question and answer session. To ask a question you may press star, then one on your telephone keypad. If you are using a speaker phone, please pick up your hand and set before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then two. At this time we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Puneet Souda of Lee Rank Partners. Go ahead, please.
Puneet Sudha: Hi, Frank. Thanks for the questions here and thanks for all the details on the tariffs for quantifying that. Could you elaborate if there was any pull forward in the quarter because of the tariffs worries or any other worries in the market that the customers might have had? And are you baking any impact from that as a result of that pull forward? And in China, I appreciate you
Puneet Sudha: You mentioned cancellations, but are you seeing any cancellations in the US or European markets, specifically maybe around USF, Gigahertz magnets, I didn't hear guidance on that for the year. [inaudible]
Speaker Change: Okay, Puneet, thank you. So there really wasn't any pull-forward that's being talked about due to tariffs or backup we didn't see that. However, we acknowledged that the UK 1.2 gigahertz system that we had expected for Q2.
Speaker Change: He just technically just went in easily and got in in Q1. That wasn't a pull forward, that was just a really smooth installation. So that helped Q1 a little bit, and of course...
for which state? [inaudible]
Speaker Change: according to the terms would be mostly if we think would be on them.
Speaker Change: They presently right now are a little bit in this holding pattern. Hey, don't ship yet. We can't accept it because we can't pay the import duties. It's not a big effect, but of course in Q2 it's going to be noticeable as Gerald explains. Thank you very much.
Speaker Change: We do not see any cancellations. We see lots of uncertainties and delays in the US and I could go up. We haven't seen any cancellations because of that. So, no cancellations yet.
Speaker Change: in China, but delays and in some cases we are also simply rerouting and you know maybe building some of these systems in Europe or Malaysia.
Speaker Change: So hopefully we can mitigate but you know sort of typically with a quarters delay .
Okay, that's also completely there. And then questions, Justin.
Speaker Change: Yeah, thank you. And then when we think about the offsets, you know, obviously a lot of challenges in the market today, but when we think about the offsets, the AI chips on, on choring of that.
Speaker Change: The funding initiatives in Germany, maybe lower interest rates. Can you walk us through how are you, you know, thinking about some of those offsets potentially, you know, sort of mitigating the impact maybe, maybe into the second half? [inaudible]
Speaker Change: Yeah, in terms of orders they may, I mean AI remains very strong in our tools, I mean, you know...
Speaker Change: Of course, there's more important partners, but without that CDI revolution also wouldn't work, right? TMSC absolutely needs our tools
Speaker Change: I think there are single largest customers in the world at this point, of course, they're doing a lot of work both in Japan and in the US. They're also upgrading and investing in Taiwan.
Speaker Change: So, that remains strong and has remained strong, in fact, for AI-driven...
Hookings in Q1 were quite strong, so that that's strong and…
Speaker Change: A lot of the delivery times for these things are longer when their fab is ready middle of next year, you can't really ship it earlier German and Korean and similar stimulus funding or European defense fund spending the timeline, these are all good trends [inaudible]
Speaker Change: Some of them are beginning to turn into orders, some of them just, you know, are very encouraging in Germany I would say, that's nearly 10% of our revenue.
Tailwinds for 26 and even into 27, 28.
Hi everyone. Thank you very much for coming.
AI will help us with this year.
Speaker Change: Although, if I take an order today, it's probably for next year, but I have orders that I can ship this year and that continues to be a strong demand and-
Speaker Change: and yes, the onshoreing in Japan, in the US, also in Europe , plays a role but also very significant continued investments by the leading technologically leading companies in Taiwan and in Korea.
So that's actually quite good [inaudible]
Okay, I'll hop back into the queue. Thank you.
Thank you, Puneet [inaudible]
Speaker Change: The next question comes from Michael Ryskin of BOA. Go ahead, please.
Michael Ryskin: Great, thanks for taking the question. Frank, I want to talk about a comment you made towards the end of the prepared remarks in terms of the...
Speaker Change: How does Bruker offset that next year? Could you talk about, you know, how you would respond, what different levers you are, how we should think about possible ways to get around that, whether it's on a biotech, whether it's, you know, Puneet just asked on AI and some of that.
Some of the more.
Industrial Attack, parts of the business. [inaudible]
Yes, to sort of what steps would you take to? [inaudible]
to offset that. [inaudible]
Yeah, I know you listed most of them, so I'll...
As you see in our 24...
Mid-24, Medium.
Term Outlook
24, 25, the two bass ears, that's obviously changed. [inaudible]
Speaker Change: So we're talking about, so therefore, we are very committed to resuming, very significant margin expansion this year, all that we had a lot more than the 140 bits lined up and we're hoping to do much better than that. Turns out this year we're moving sideways because we're using all of these improvements plus new cost and pricing and supply chain actions.
Speaker Change: to just deal with the headwinds this year, but assuming no new new headwinds.
Speaker Change: by 26 and beyond. I think this operating model, operational excellence, integration that all still works, but it kind of takes up, you know, with a one year shift because this year we're playing defense, but honestly. Thank you very much.
Speaker Change: Right. I think all these trends that you did mention, BioFarma has been picking up nicely our tools for BioFarma, including those from spatial biology and beacon, cellular analysis. You've seen, we've not just done cost cuts, we've done incredible, fantastic, fast product development to resume growth in these businesses. Thank you very much.
Speaker Change: When the headwinds abate, right, we're doing very well with AI, then we just discussed that with Puneet, and you asked about it, that's doing well at European security and defense spending, European investment, quite honestly, infusion research, other clean energy projects are all helping us.
Speaker Change: So there's a lot of good growth drivers that are a little bit overshadowed this year but that I think will play a bigger role next year.
Speaker Change: I'm pretty sure it's not the opening bit, but I think it will be down. I agree with you, it will be down. Maybe just not as deeply as it's proposed by the White House initially.
Speaker Change: But there are many other, I mean, Germany is not only looking at defense, they're really looking at significant R&D and innovation infrastructure [inaudible]
and tools, investments and...
and other...
Speaker Change: The weakness of the America Academic System, there will be other countries that try to, well quite honestly, exploit that a little bit and say, oh great, we can get some research, just let's give them a startup budget so you see some of that dynamics. There's a lot of growth drivers.
Speaker Change: They're just most, we're not baking them in this year, even if they help us a little bit in the second half, mostly I think it'll be on the orders.
Speaker Change: And we're just trying to set ourselves up for giving a baseline for 25 moving sideways a little bit with some organic growth and a little bit of...
Speaker Change: EPS growth, actually EPS growth, excluding currencies, reasonable for us this year and what we're projecting, and then really fully resuming fast margin expansion, EPS growth, etc. next year.
Speaker Change: Okay, that's all really helpful. And then Gerald, if I could squeeze in a follow-up for you, you mentioned a comment in your prepare marks about order book and BSI down your year on ANG and US and China. Obviously makes sense to do what's going on there. Anyway, you could quantify that, either via book to bill, or just an order growth number. And then could you touch on your backlog?
You're existing back walkability to offset maybe an OO or order book and one Q2Q this year, just sort of what that buffer gives you. Thanks.
Transcription by ESO. Translation by —
Speaker Change: Yeah, and with respect to the order of performance in the first quarter was actually just slightly under the first quarter of 2024.
The general...
Speaker Change: The composition of that was what we did see is slightly weaker performance in academic and government research sectors in both China and the US. We saw strength actually in Biopharma and in some of the industrial markets.
Speaker Change: including Sammy, of course. So I think generally speaking right now we are reasonably well positioned on the order book in order for us to continue to, these orders of course benefit.
Speaker Change: as you march into the second half of 2025 and further into 2026.
Speaker Change: So I think generally speaking, our general position is we're feeling pretty good about that. I would say on the backlog, we are on still at seven months on the backlog level, so we do have
Some remain backlogged to be able to pull on in some of these quarters . . . .
Speaker Change: I think that's the high level view. And BSI booked a bill just down just below 0.95, not great, a little weaker in March, as you would have expected, which is, you know,
Speaker Change: If it's the overall pictures as expected, not great, not that [inaudible]
Thanks a lot, guys. I'll leave it there. We should
Speaker Change: The next question comes from Patrick Donnelly of City. Go ahead, please.
Patrick Donnelly: Hey, good morning guys. Maybe one more on the tariff side, you know, encouraging to hear you guys off setting that for 26. 6.
Patrick Donnelly: Can you just talk through? It sounds like pricing, cost initiative, moving to manufacturing around.
Patrick Donnelly: Supply Chain Management. Can you just talk through, I guess, the new pricing assumptions, what you're doing on the manufacturing side? Just want to talk through that confidence level of offsetting it into 26 and preserving that number. Thank you very much for your time.
to begin.
Patrick Donnelly: and I'm moving into 26th of the clean slate on the paraphrased offset. So if you're going to talk through pricing, manufacturing costs, cost emissions, let me use it in our set of...
Yeah.
Patrick, thank you, good questions. So pricing, yeah, we're taking...
Patrick Donnelly: some US, but also some worldwide additional pricing action. I think for competitive reasons, we'd like to not go into that. It's not across the board, right? You kind of do it in a way that's smart and like all other companies in terms of supply chain.
Patrick Donnelly: Yes, certain, you know, the usual things that you do as an international company. I mean, there are some products that you can, you know, through the final assembly and system steps, we can do it.
Patrick Donnelly: in the U.S., so we can do it in Europe , or we can do it in our Malaysia, Penang Malaysia major, manufacturing centers, and we're exploring all of that and looking at all of that. Vice versa, we used to do X-ray, MADSPEG, NNMR, final assembly and system sets.
in the US, we're talking to third party. Thank you.
Patrick Donnelly: You know, trusted contract manufacturers that are international that we're already using either in Malaysia.
Patrick Donnelly: or in Europe , quite honestly. And they have, you know, one of them has a facility here in New Hampshire and others have other US facilities about ensuring parts of our production even. And for that, of course we also need a little bit more visibility about where...
Patrick Donnelly: Transatlantic tariffs, or respect to Israel and Malaysia, end up right now, we assume existing tariffs, which may not be a bad assumption for things to end up but then again nobody is entirely sure.
Gerald Herman: And yeah, cost actions, I think Gerald mentioned those the additional cost actions.
Gerald Herman: We expect this year to amount to about 30 million so pretty aggressive and by the way we didn't wait for that and you know that we that has started actually that started some of it that started right at the beginning of the year because we wanted to overperform our initial guidance. Thank you very much.
Gerald Herman: and then more of that has been significantly accelerated as more clouds moved in. And so, yeah, and so here we, that's, that's...
Gerald Herman: The cost actions are significant. The supply chain, you don't see such a big number, 10 million this year but that has a little bit more of a delayed effect. That will be a much bigger effect next year.
Okay. All right.
Speaker Change: And there may be a bit of a follow-up amongst question there. When you think about the academic market, Frank, I know you're talking about academic government, I think down 20, 25% this year.
Gerald Herman: I guess when you look forward, you know, Gerald mentioned that mid-to-high teens
Gerald Herman: Earnings, Once These Headlands Are Absorbed. Are you thinking that the academic market and one of the big questions together? Is this structural for the next few years, right? We've just declined for years, for the next few years?
Gerald Herman: Or is it, you know, you rebase this year and then have opportunity for that piece to grow? How do you think about the academic government exposure here? And is this, again, with the new administration office? Is this structural until things change on that front over the next few years? [inaudible]
Yeah, we still assume that U.S. Akagov will be weak.
Gerald Herman: on the weaker side. Next year, of course, we don't have a straight visibility about some of the budget negotiations. I know they'll be negotiated, but you know, I don't think that Congress will in and say, hey...
Gerald Herman: Nevermind, Mr. President, we're going to have an NIH budget increase, but you know, probably hopefully, I'm not.
Gerald Herman: a lesser decrease. Other things of course, you know, I mean,
actor gov.
Gerald Herman: 75% of the aggregate market for us worldwide is outside the US. That's doing well. There's even some stimulus funding. There is some, you know, that that's actually one of the better pieces of our demand in the US. We also expected to be.
Certain universities being...
Gerald Herman: in political fights with, and you know some of them are big, right? Some of them that's not insignificant so I think some of that. [inaudible]
We, we, we believe we'll...
Gerald Herman: Be somewhat temporary, although temporary, not one or two quarters, but enough for this year, and we still expect some weakness next year, although probably growth here over year compared to this year in the U.S. like I got.
Right, understood, thanks [inaudible]
Thank you, Patrick.
Speaker Change: The next question comes from Tycho Peterson of Jeffries. Go ahead, please.
Tycho Peterson: Frank, I wanted to dig into your pharma comments. You mentioned strengths in bio-pharma a few times, so did it get better as a quarter progress? Anything you can say in April , is that mostly Tim's Toff? And then in your guidance, you alluded to maybe baking in some pharma slowdown, so maybe just talk about the gizziness takes. And then in your guidance, you alluded to maybe just talk about the gizziness takes. And then in your guidance, you alluded to maybe just talk about the gizziness takes.
Tycho Peterson: Yeah, bio-farm eyes, you know, we're partly in the late-regulated, mostly in the drug discovery and development.
Tycho Peterson: Biopharma has been increasing from a week base last year or before that even. Biopharma has had trended very nicely for us in Q4 already and in Q1. I don't really for us because we're not primarily consumables, April , I can't comment.
Tycho Peterson: Taking that in and knowing that there's a threat of biopharmate tariffs, we have...
Tycho Peterson: You know, put in a moderated recovery, a dampened recovery in bioforma.
Tycho Peterson: but not, you know, a falling back into a hole as it was maybe a year ago or so.
Tycho Peterson: Tim Stoff, NMR, but also a little bit of spatial, of course our cellular analysis, beacon tools, now that we have the new bench top discovery system.
Tycho Peterson: We're having more and more, we're not a one-trick pony or a two-trick pony in Biopharma anymore, so there's a lot of tools including some process analytical tools and things like that, process Rama and some of the automation things from ours.
Ken Speed Acquisition, some of the software that all supports.
Tycho Peterson: Efficiency and Productivity, Investments in Pharma towards the Digital Lab, and maybe eventually the Lights out Lab and things like that. So we have a bunch of things that are driving that. It's not only a one or two products story anymore, and that's all been...
Tycho Peterson: Interest of the Healthy, actually has been quite healthy in the last two quarters [inaudible]
Okay, and then follow up.
Tycho Peterson: The follow-up on M&A, you know, you're adding these, the Rathrapie deal, just over 15 million or so on revenues, but you're not really changing your contributions here. It was two to three before and now it's two and a half. So maybe just talk a little bit about, you know, what what the offsets are on M&A. And are you kind of more optimistic on revenue synergies from some of the deals, maybe just a scorecard. Now that we're kind of a year going to these deals. We're going to have a couple of minutes. We're going to have a couple of minutes.
Tycho Peterson: Jack M. Speed is doing great, better than expected, with its automation, demand, informa, and elsewhere, so very happy with that. Elisak, my god, the most predictable business ever, and they're doing well, and in fact they did well again in Q1.
Tycho Peterson: So that's a good space, and they're doing a little better than our acquisition model. They also did better last year and getting more platforms out that then...
Tycho Peterson: Spatial Biology and Cellular Analysis, they both suffered from weak pharma this year, and they're both suffering a little bit from weak academic this year, and of course it gets harder to export things to China when there's 125% increase.
Tycho Peterson: So there, we're making great progress on taking cost out, on efficiency, on putting in the new management process, amazing progress in new competitive products, from sell your analysis and spatial biology, but they're
Tycho Peterson: Both somewhat weaker than what we had expected because of course the U.S. Akagov this year, they both noticed that.
That was a quick rundown Tycho. Yeah.
The next question comes from Rachel.
Bedstall of JP Morgan, Gus
Go ahead, please.
Transcription by CastingWords
Perfect. Good morning. Thanks so much for taking the questions.
Speaker Change: So I wanted to follow up on my earlier question around Order of Trends. I appreciate all the color you gave us on orders in the quarter and book to bill as well. But can you talk to us about your expectations for bookings going forward? Do you think we've kind of hit the bottom on orders? Are you expecting us to get worse?
Tycho Peterson: as we get into the second, third quarter, given some of the headlines on NIH budget proposals, and then where are you expecting to exit this year on Backlog, giving you said you still have this seven months of backlog that you're working with? [inaudible]
Tycho Peterson: I think the academic order weakness, I think it's just beginning, Q1 or maybe March, we saw it, it's a little bit of that, but so U.S. academic orders and a lot of that headwind this year, I think you'll see that in week U.S. academic government orders in the U.S. in Q2.
Tycho Peterson: Probably in Q3 and there we'll see whether there is some budget flush and grants moving through
Tycho Peterson: So the branch of that is now coming in Q2 and Q3 and the...
Tycho Peterson: Revenue headwind that we've taken into account in this new guidance and that we've explained.
Tycho Peterson: We have enough other strengths in our forecast. We still think we'll come out of the end of the year with a six and a half to seven months backlog. So I know we're all focused on U.S. Akagov and every day there's a...
Tycho Peterson: Usually not very nice headline, but there is not the stuff that we do and we are so diversified and so international that we actually still we think our long-term normalized backlog should be around 5x now that we have much more consumable than aftermarket that's a little lower than historically. Thank you very much.
Tycho Peterson: when we would have set five and a half backs and I think at this end of this year we're almost certain to be at six and a half, possibly still at seven. So that's...
I think it's some additional insights on the timing [inaudible]
Speaker Change: Yeah, I know that was great color. Thank you, Frank. And just in my follow-up, I wanted to dig into some of the China stimulus comments. You called out that being a little bit slower in light of the terror situation and provinces just being slower to release those funds.
Speaker Change: So, can you unpack that for us a little bit more? How much stimulus revenues did you guys recognize in China in the first quarter? And then are you assuming any China stimulus revenues for the rest of the year? Thanks.
Speaker Change: I know it more by orders. It was low. It was very little less than 10 million, certainly, in Q1, as I would think most of the provinces are hanging on to the money if they have it.
Speaker Change: You know, what's going on with tariffs and trade war, I assume? So it's yeah, it's been delayed essentially.
Speaker Change: And as I said earlier, we have not baked in by now, you know, now it's May. We have not until that gets even if it got released and then turned into order as well. Let's go home.
So we don't expect you
China Stimulus to be significant in our PNL in 25 .
Thanks, Frank [inaudible]
Speaker Change: The next question comes from Luke Sergott of Barclays. Go ahead, please.
Speaker Change: Thanks, guys. I just wanted to dig in a little bit on the 2Q, get some cleanup modeling. You know, can you just help us with the guide assumptions by the segment for BSI and best, you know, what's embedded there for that low single digit currency growth, kind of FXMA.
Speaker Change: and then on the operating profit, you know, I understand that the cost out, excuse me, for that 90 million, or the mitigation efforts for that 90 million turned into 45, like how much of that 45 net, are you guys looking to hit in that, in that 2Q. . . .
Thank you too.
Gerald, that's a long time. We get the question.
Speaker Change: Yeah, yeah, I appreciate it. Probably more of that in Q3 and Q4, right? So, some of the mitigation actions that we've already put in place, particularly around pricing and
a more significant reset on the second quarter expectations. But once those elements kick in, specifically are clear around the ...
Speaker Change: at the EVS line will improve sharply in the second, I'm using the third and the fourth quarter in the second half of the year.
and others. Thank you. Thank you.
Speaker Change: In certain businesses, we can pretty quickly turned down our production capacity by almost about 20% with this short term work mechanisms, where basically people end up working 20% less and they're still paid like 90, 598% because of the government kicks in for up to two years, that's a great way of keeping your.
Speaker Change: Our highly trained workforce and then ramping them back up you know six months or 12 months late or whatever it will be and we are already doing that and so we've announced that in Switzerland. For instance, so it's a very smooth and fast mechanism and it doesn't require it doesn't cost us much on the GAAP side in terms of restructuring and cash and <unk>.
Speaker Change: Can also implemented very quickly, but very quickly means still it's mostly going to have a Q3 and Q4 effect that maybe if I.
Speaker Change: Any bit of an effect that will be effective as of Q2, but it won't move the needle financially yet in Q2.
Speaker Change: Okay. Thanks.
Speaker Change: And then.
Speaker Change: Of course things I'm, sorry, there are things like discretionary spending and hiring and we're doing all of these things also things that you do on pricing until you put them in the price list and get a new order until you have that then works out and pricing also has all of the time delay. That's why these things do have effect more into the second half and then.
Speaker Change: Much more significant annualized effect next year.
Speaker Change: Okay understood and then I guess when you talk about the other regions that are doing stimulus like South Korea, and Germany and Japan.
Speaker Change: Okay.
Speaker Change: I understand that this is more of an out year dynamic and potential tailwind, but with a little context for what those countries have done in the past from a stainless perspective have you have you done any work or have any insight there of what this could look like with this look like something like China's stimulus in the past or are you just get a huge bolus or is this more infrastructure.
Speaker Change: Sure and more secular.
Speaker Change: Yeah, and I think in Korea, a number is now and then there was also I forget it's over three years or something like that and it was.
Speaker Change: Jody <unk> 'twenty 'twenty $1 billion of what currency U S. Dollar, yes, okay. So over three years or so so meaningful.
Speaker Change: Germany is huge but it will pay for a lot of other stuff Thats got a 50 billion per year over the next 10 years. Some of that goes into defense right. We do have some detection equipment that on the margin goes goes there. So that's a good trend for us and one of our little niches.
Speaker Change: A lot of it is supposed to go into innovation and technology.
Speaker Change: Regaining or expanding where they have a technology leadership. So there is some we're pretty optimistic that a fair that but I can't quantify it because it's also as you know the new government was elected yesterday finally, and so they have some really big numbers some of that will build bridges some of that will built angst.
Speaker Change: That won't really help us although it may be good for the economy in general, but a lot of that probably will also go into innovation, including into life science tools, and and so Ken Ken quantity quantify it yet and it will almost certainly be 26 and beyond but could be not just a bolus, but a little bit of a longer term.
Speaker Change: Friends.
Speaker Change: Great. So, we'll probably get <unk> for another five minutes or so going over a little bit for those who want to stay we will try to get through a few more a couple more people on questions.
Speaker Change: Alright, we move on to to the extent Theres still on.
Speaker Change: Okay. The next question comes from Subaru.
Speaker Change: Go ahead please.
Speaker Change: Hey, guys. Good morning, Thank you for taking my question.
Speaker Change: The best is only 10% of the revenue.
Speaker Change: We expect the clinical data.
Speaker Change: <unk> improved from broker.
Speaker Change: Given that it's taking some time for the AI trends to impact your revenue.
Speaker Change: One of the things in Bucharest strength is the diagnosis.
Speaker Change: That portfolio.
Speaker Change: Therefore knock things trending one of these segment when ACA mandates down.
Speaker Change: Or was it remains a question. Thank you or good diversified portfolio as opposed to offset all of these weaknesses. That's all.
Speaker Change: Im asking about it.
Speaker Change: So you're talking about the best portfolio did I understand that correctly.
Speaker Change: That's right.
Speaker Change: Yes, yes.
Speaker Change: I think I think that's going to be a slower recovery in the MRI market. Obviously these are other big health care companies that youre, all familiar with and.
Speaker Change: The trends there don't fluctuate all that much so we expect that to be a weak year for best.
Speaker Change: And.
Speaker Change: Okay.
Speaker Change: A <unk>.
Speaker Change: Reasonably better year for the you know nearly a $100 million ROI research instruments component. They just had a tough comparison in Q1 year over year that an incredible Q1 of last year. So the <unk> business I think will be not growing fast but be BBB be steady.
Speaker Change: And the superconducting materials business.
Speaker Change: This year will be weaker probably for the full year, but not as pronounced in the percentage as you with year over year as you've seen in Q1 it'll be much more it.
Speaker Change: It will stick out less.
Speaker Change: Alright.
Speaker Change: More questions.
Speaker Change: Thank you.
Speaker Change: Thank you Sue.
Speaker Change: One more question if.
Speaker Change: Next person is longer okay. Okay. The next question comes from Doug Schenkel of Wolfe Research go ahead. Please.
Doug Schenkel: Hey, good morning.
Doug Schenkel: One question I guess, what I would call portfolio evolution, and then just a follow up on China. So portfolio evolution. Some of your bigger acquisitions over the past couple of years ostensibly search to move your revenue mix away from China.
Doug Schenkel: And into areas outside of academic research I'm, not saying those were the primary motivations, but.
Doug Schenkel: Theyre certainly features of a lot of those deals.
Speaker Change: So China seems like a complete black box right Alan it seems like it possibly could be structural academic government funding as we've talked about extensively is that risk globally.
Speaker Change: So I guess, what I'm wondering is when would you expect the deals you did in 'twenty three 'twenty four to grow year over year on a same store sales basis.
Speaker Change: Is that going to happen in 'twenty, five and 26 are we kind of in the background starting to see the benefits of portfolio evolution.
Speaker Change: Oh absolutely.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: Yes go ahead.
Speaker Change: 100, <unk> why don't we answer that and we'll come back to China in a second.
Speaker Change: Okay, and then we'll wrap it up.
Speaker Change: So yeah, absolutely the portfolio evolution is already visible I mean diagnostics is steady in <unk>.
Speaker Change: As can be and right now those things are weaker steady high single digit growth in diagnostics molecular microbiology is awesome.
Speaker Change: There's also a lot of consumables, so that works the automation and multiple smaller software scientific software acquisitions, I kind of take them a little bit together because they feed each other towards the digitized lab more automated lab.
Speaker Change: Thats, all working really nicely and even as people are little people, but <unk>.
Speaker Change: Biopharma and other industries, Cleantech and fine chemicals love to invest in that because you know they they can either can't find the staffing or they're prepared to do it with more productivity and less less less hands on time. So those are all good trends the investments of up.
Speaker Change: Yes.
Speaker Change: Berkeley lights, which is cellular analysis that beacon platform as many of you know it and.
Speaker Change: And about that third of spatial biology that does go into Biopharma, yeah. They are helping us in the Biopharma recovery.
Speaker Change: So that a lot of these things are already active in and are offsetting some of the ACA Cup weakness without the portfolio evolution, including the pretty rapid evolution with our acquisitions in the last five six quarters or so this would be.
Speaker Change: Software call and maybe we wouldn't.
Speaker Change: Maybe it would go down organically. This year, we think we will still grow a little bit despite all the headwinds.
Speaker Change: Okay.
Speaker Change: China is partner, China is hard to read I agree.
Mike: Yes, Mike My question, there was just going to be.
Speaker Change: And I know I'll keep it tight.
Speaker Change:
Speaker Change: If we think about even what you guys were saying.
Speaker Change: Once a month and a half ago about orders to China stimulus.
Speaker Change: It obviously sounds different today and what has changed in that period.
Speaker Change: My question is really do you think in general your visibility on what's going on in China, and what's going to happen in China. As it is just a lot lower than it has been for the last decade and do you think you have that adequately captured in guidance at this point.
Speaker Change: It is lower.
Speaker Change: Got it.
Speaker Change: Captured because we're not build.
Speaker Change: There is stimulus plans the amazing when some of our executives throw over there the projects that are already approved by the University, maybe even approved locally just no funding yet.
Speaker Change: Be quite favorable for us and MMR mass spec and other fields, but the funding doesn't get released and I don't know whether it gets released ever or in Q2, or Q3, Q4 and May and I don't think they know however.
Speaker Change: Unlike past China's stimulus programs, which were sort of <unk>.
Speaker Change: One or two quarter wanders. This one seems to be much more sustained and so some of the professors RPI is with large.
Speaker Change: Large.
Consortia for academic medical research. They say yeah. This will get funded we just don't know whether this year or next year I mean worst case in three years, but this will get funded this is a priority.
Speaker Change: So.
Speaker Change: It's more of that but the timing is really there is no visibility into timing and David will have it either it could be next quarter. It could be next year Theyre, all pretty confident there because they will get it.
Speaker Change: So that's the answer.
Speaker Change: I wish I wish I knew.
Speaker Change: Do the clients.
Speaker Change: That's how it works right now.
Alright, 940, so we're 10 minutes over.
Speaker Change: Yes.
Speaker Change: Okay. This concludes our question and answer session.
Joe Kostka: I would like to turn the conference back over to Joe <unk> for any closing remarks.
Joe Kostka: Thank you for joining us today brokers leadership team looks forward to meeting with you at an event or speaking with you directly during the second quarter feel free to reach out to me to arrange any follow ups and have a good day. Thank you.
Joe Kostka: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.