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Good morning and welcome to Bruker's Second Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. Please also note that this event is being recorded today. I would now like to turn the conference over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead, sir.

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's Second 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 Bruker's 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 are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker's Safe Harbor Statement, which is shown on Slide 2 of the presentation. During this conference call, we will be making 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 supply chain logistics and inflation challenges. The company's actual results may differ materially from such statements. 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, 2022, and as updated by other SEC filings, which are available on our website and on the SEC website. Also, please note that the following information is based on current business conditions, and to our outlook as of today, August 3, 2023. We do not intend to update our forward-looking statements based on new information, future events or for other reasons, except as may be required by law, prior to the release of our third quarter 2023 financial results expected in early November 2023. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the second quarter and first half of 2023 in more detail and share our updated fiscal year 2023 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Justin. Good morning, everyone and thank you for joining us on today's second quarter 2023 earnings call. While we acknowledge that general market conditions are becoming softer in more cyclical applied semicon metrology and industrial markets, Bruker continues to see good demand for our truly differentiated scientific instruments and life science solutions. In the second quarter of 2023 we saw continued bookings growth from academia, government, and academic medical centers and contra retail industry trends. We are pleased with our continued growth in bookings in biopharma as well as in China, both in the second quarter and in the first half of 2023. We attribute this resiliency to our technologies and solutions often unique and differentiated capabilities and performance, which can partially shield us from customer budget reductions and market weakness. We expect solid mid-single digits to high single-digit organic revenue growth in the second half of 2023. But we also intend to be agile in managing our costs in this choppier macro environment. We will continue our strategic investments in our transformative Project Accelerate 2.0 particularly in proteomics and spatial biology, but also in recently acquired additional growth drivers in proteomics consumables, proteomics drug discovery services, neuroscience research tools, applied market solutions, and scientific software. Turning to Slide 4. In the second quarter of 2023, Bruker delivered another solid quarter with organic revenue growth of 13.5% and non-GAAP EPS growth of 11.1% year-over-year. Bruker's second quarter 2023 reported revenues increased 15.9% year-over-year to $681.9 million, which included a slight currency tailwind of 0.5%. On an organic basis, revenues increased 13.5%, which included 13% organic growth in scientific instruments and 18.4% in our BEST segment net of intercompany eliminations, while growth from acquisitions added 1.9%. This implies a constant exchange rate growth of 15.4% year-over-year. Our second quarter 2023 non-GAAP gross margin decreased 90 bps year-over-year to 50.9% with a decline attributable both to unfavorable product mix in the quarter as well as to currency and inflationary headwinds. Our non-GAAP operating margin was 15.3%, a decrease of 130 bps year-over-year due to the decline in gross margin as well as the already anticipated partially transitory currency and acquisition headwinds to our OPEX as we had explained when we gave initial 2023 guidance earlier in the year. In the second quarter of 2023, Bruker reported GAAP diluted EPS of $0.39 compared to $0.33 in Q2 of 2022, an increase of 18.2%. On a non-GAAP basis, second quarter 2023 diluted EPS was $0.50 and up 11.1% from $0.45 in the second quarter of 2022. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to Slide 5, you can see Bruker's strong performance and excellent execution in the first half of 2023, with organic revenue growth of 15.6% and non-GAAP EPS growth of 22.3%. More specifically, with our first half 2023 revenues increased by 15.5% to $1.367 billion. On an organic basis, first half revenues grew 15.6% year-over-year, consisting of 15.7% organic growth in scientific instruments and 14.1% organic growth at BEST, net of intercompany eliminations. First half 2023 order bookings for our BSI segment grew double-digits year-over-year organically, driven by Bruker BioSpin and CALID and our Bruker Scientific Instruments book-to-bill ratio for the first half remained above 1.0. Our first half 2023 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5, and you can see the strong non-EPS -- non-GAAP EPS growth of 22.3%, which we believe is excellent performance in the life science tools space. Our trailing 12-month return on invested capital, a non-GAAP measure was 23.7%, a metric that highlights our strong Bruker management process and our focus on disciplined entrepreneurialism and organic growth supplemented by selected and smart acquisitions. Please turn to Slide 6 and 7 now, where we highlight the first half 2023 performance of our three scientific instruments groups and of our BEST segment, all on a constant currency and year-over-year basis. In the first half of 2023, the BioSpin Group revenue was $342 million and grew in the high single-digits. Please note that there were no gigahertz class NMR systems in revenue in the first half of 2023 compared to 1.2 gigahertz in the first half of 2022. We now expect 2 or 3 gigahertz class NMRs in revenue in the second half of 2023 with some gigahertz revenue shift into early 2024. In the first half of 2023, BioSpin saw strong growth across academic government, industrial research, and applied markets as well as in its new integrated data solutions division with its novel -- scientific and lab software platform, which we explained in a recent press release. For the first half of 2023, CALID Group had revenue of $464 million and increased in the low 20 percentage with strong growth in life science mass spectrometry driven by the timsTOF platform and aftermarket business as well as the optics IR, Near IR and Raman business. Our timsTOF platform saw robust demand for applications in 4D proteomics, anti-proteomics and metabolomics and more. In Q2 at ASMS, we launched the timsTOF Ultra, which provides market-leading sensitivity and throughput with expanded peptide coverage and more accurate quantitation in unbiased 4D single-cell cell line and tissue proteomics. Microbiology and Infectious Disease revenue was up slightly as solid demand for MALDI Biotyper consumables was offset by a final drop of our modest COVID-19 molecular diagnostics revenue now to near zero. Please turn to Slide 7 now, the first half 2023, Bruker NANO revenues, revenue was $435 million and grew in the low 20s percentage with strong revenue growth across its end markets including academic and government, industrial and semiconductor metrology. Revenues for our advanced x-ray and Nano surfaces tools all delivered strong revenue growth in the first half. Life science fluorescence microscopy revenue was up on product innovation and research demand and now also includes a strong contribution from our recent acquisition of the Inscopix neuroscience research tools. Finally, first half 2023 BEST revenues grew in the mid-teens percentage net of intercompany eliminations, driven by share gains and strong superconductor demand by MRI OEM customers as well as from growth in advanced technology revenues for Big Science, FUSION Research, and extreme UV semiconductor tools for key OEM customers. Moving to Slides 8 and 9. On Slide 8, we wanted to highlight something that you don't usually look at so closely, probably, namely our rather unique metrology tools and how they serve leading artificial intelligence, AI, chip R&D and production. I will let you read this slide. There's obviously many insertion points where our Bruker plays a key role in chip development and manufacturing, CPU chips, GPU chips, which tends to be then video or similar, high-bandwidth memory systems on FPGAs, something that some of you are familiar with, the take-home overall message is that approximately $75 million of our estimated 2023 revenue is driven by AI trends, and we think this will keep increasing. Of course, there's other trends from cloud to more pervasive computing that make the fundamentals in the semiconductor metrology space, very, very strong especially for us as we're not only -- as we're much less exposed to memory and much more exposed to the -- or have much more opportunity, I should say, from the -- in the novel techniques and the latest generation chips. This is highlighted here. Switching over to life science and proteomics, of course, on Slide 9. You may have already heard about the really transformative we believe, best-in-class sensitivity for 4D proteomics of our new timsTOF Ultra that we launched at ASMS 2023 and which raises the bar further for sensitivity in unbiased proteomics with new technologies, next-generation ion source, and next-generation TIMS technology. More importantly, this brings significant performance advantages for low sample amounts, including single-cell proteomics and single-cell lipidomics, immunopeptidomics, phosphoproteomics all types of post-translational modification analysis, which is so important in cancer and other diseases as well as in protein-protein interactions. All cutting-edge drug discovery and clinical research fields. In summary, Bruker continued to experience solid demand for our differentiated instruments and solutions across our portfolio. We continue to make investments in R&D and in our commercial infrastructure in compelling Project Accelerate 2.0 opportunity areas while also staying agile and disciplined with our cost. Our technology and biological applications leadership in many areas, combined with world-class execution and our unique Bruker management process culture of disciplined entrepreneurialism provide us well for continued outperformance. Let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 financial performance and fiscal year 2023 outlook in more detail.

Thank you, Frank and thank you, everyone for joining us today. I'm pleased to provide more detail on Bruker's second quarter and first half 2023 financial performance, starting on Slide 11. In the second quarter of 2023, Bruker's reported revenue increased 15.9% to approximately $682 million, which reflects an organic revenue increase of 13.5% year-over-year. We reported GAAP EPS of $0.39 per share compared to $0.33 in the second quarter of 2022. On a non-GAAP basis, Q2 2023 EPS was $0.50 per share. An increase of 11.1% from the $0.45 we posted in the second quarter of 2022. Our Q2 2023 non-GAAP operating income increased 6.6%, and our non-GAAP operating margin decreased 130 basis points year-over-year to 15.3%, down as a result of lower gross margins and continued Project Accelerate 2.0 investments, as well as partially transitory headwinds from foreign currency and acquisitions, as we've communicated earlier in the year. Gross margin performance in the second quarter of 2023 was also unfavorably impacted by mix and inflation in several of our larger divisions. We finished the second quarter with cash, cash equivalents and short-term investments of approximately $575 million. During the quarter, we used cash to fund selected Project Accelerate 2.0 investments and capital expenditures. We generated $13 million of operating cash flow in the second quarter of 2023. Our capital expenditure investments were $23.5 million resulting in free cash outflow of $10.5 million in the second quarter of 2023. This compares with operating cash outflow of $44.4 million and a free cash outflow of $62.3 million in the second quarter of 2022. Bruker's second quarter cash flow seasonally tends to have the lowest cash flow of our four quarters. Slide 12 shows the revenue bridge for the second quarter of 2023, as Frank has reviewed earlier. Compared to the second quarter of 2022, BioSpin's second quarter 2023 organic revenue was essentially flat due in part to a 1.2 gigahertz system in our prior Q2 2022 revenue, while a gigahertz class system originally planned for the second quarter of 2023, has shifted into the second half of 2023. Nano organic revenue grew in the low 20% range, driven by strength in Nano's industrial research and academic businesses. CALID organic growth grew mid-teens percentage with strong performance from proteomics and molecular spectroscopy. We delivered solid growth in the second quarter of 2023 in the BSI segment systems and aftermarket revenue with mid-teens growth in systems and high single-digit growth in aftermarket. Geographically, and on an organic basis in the second quarter of 2023, our Americas revenue grew in the mid-single-digit percentage, Asia Pacific revenue grew in the high 20% range, while European revenue had high single-digit percentage growth, all year-over-year. For our EMEA region, which is small as we categorize it second quarter 2023 revenue was up over 30% year-over-year. Slide 13 shows our Q2 2023 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 50.9% decreased 9 basis points from the 51.8% we posted in the second quarter of 2022 due to unfavorable product mix and foreign currency and inflation headwinds. Second quarter 2023 non-GAAP operating margin of 15.3% was 130 basis points lower than the 16.6% margin we put up in the second quarter of 2022, as we were impacted by lower gross margin product mix in this quarter, continuing investments in select Project Accelerate 2.0 initiatives, and our recent acquisitions and a strong foreign exchange headwind. For the second quarter of 2023, our non-GAAP effective tax rate was 25.2% compared to 28.2% in the second quarter of 2022, driven mostly by favorable jurisdictional mix. Weighted average diluted shares outstanding in the second quarter of 2023 were 147.7 million, a reduction of approximately 2.1 million shares or 1.4% from the second quarter of 2022, resulting from our share repurchases over the past 12 months. And finally, for the second quarter 2023 non-GAAP EPS came in at $0.50, which was up 11.1% compared to the second quarter of 2022. Slide 14 shows the year-over-year revenue bridge for the first half of 2023. Revenue was up $184 million or 15.5%, including organic revenue growth of 15.6%. Acquisitions added 2% to our top line, while foreign exchange was a 2.1% headwind. Frank has already covered the drivers for the first half of 2023. Non-GAAP P&L results for the first half of 2023 are summarized on Slide 15, with the drivers largely similar to the second quarter of 2023, and as I've explained on slide. Turning to Slide 16. In the first half of 2023, we generated $100.5 million of operating cash flow, up $67 million over the first half of 2022 from higher profitability and favorable other items. We generated $52 million of free cash flow in the first half of 2023, up about $56 million over the first half of 2022. Including higher capital expenditures for capacity expansion and productivity optimization. Turning now to Slide 17, given the strength in revenue in the first half of 2023, we're again increasing our revenue guidance for the year. Our updated outlook for fiscal year 2023 includes a raise of our revenue guidance to a range of $2.85 billion to $2.9 billion. This includes organic revenue growth of 9.5% to 11.5% year-over-year, an increase of 0.5 percentage point from prior guidance. We continue to expect foreign currency tailwind of about 1% and an acquisition contribution of about 2% to our revenue growth. This leads to reported revenue growth in a range of 12.5% to 14.5%, an increase of 0.5% from our prior guidance. In 2023, we continue to expect about 50 basis points of organic operating margin expansion, excluding the effects of our recent acquisitions and foreign currency. For non-GAAP operating margins, we expect a decline from the prior year due to partially transitory operating margin headwinds from recent acquisitions and foreign currency, with this headwind now estimated at approximately 150 basis points for the full year of 2023, primarily due to a steeper-than-expected decline in the U.S. dollar against the Euro and the Swiss Franc in the last few quarters. As a reminder, last year, our third quarter of 2022 was exceptionally strong, and we expect a more typical quarterly cadence in fiscal year 2023. Accordingly, for the third quarter of 2023, we anticipate mid to high single-digit organic revenue growth and non-GAAP EPS down slightly year-over-year and then a reacceleration of EPS growth in the fourth quarter. While we do expect solid organic revenue growth in the second half of 2023, in the mid to high single-digit percentage range, we will also proactively manage our costs given the changing macro environment. On the bottom line, we're maintaining our non-GAAP EPS estimated range of $2.55 to $2.60 for fiscal year 2023, which would represent non-GAAP EPS growth of 9% to 11% compared to 2022. Note that this now includes an estimated 5% or approximately $0.10 year-over-year foreign exchange headwind to non-GAAP EPS. Other guidance assumptions are listed on the slide. Our fiscal year 2023 ranges have been updated for foreign currency rates as of June 30, 2023. To wrap up, Bruker delivered excellent organic revenue growth and strong EPS growth in the first half of 2023, and we remain confident in our full year 2023 outlook and beyond. With that, I'd like to turn the call over to Justin to start the Q&A session. Thank you very much.

Thank you, 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 from questions, we ask that you limit yourself to one question and one follow-up. Operator.

[Operator Instructions]. At this time, we will take our first question, which will come from Puneet Souda with Leerink Partners. Please go ahead.

Hey, thanks Frank. Thanks for taking questions here. First one, financial and a follow-up on AI. First one, maybe for Gerald. Obviously, great to see the strength and obviously congrats on the quarter, the top line guide raised as well. But gross margin obviously stepped down meaningfully in the quarter. You have 3 gigahertz magnets coming in the second half. Could you talk a little bit about sort of the cadence for that and how that impact the gross margin lift. I know you talked about 3Q EPS being lower versus 4Q. But maybe just talk to us about the cadence for gross and op margins in 3Q and 4Q, just given how you think these orders will land?

Yes, I'll take that. Hi, Puneet. Indeed, the gross margin when we said product mix in Q2 being a little weaker, that has to do with some of the ultra-high field gigahertz magnet shifting to the second half of the year. And we're now saying it's going to be 2 to 3 for the second half, possibly 1 in Q3 and 1 or 2 perhaps in Q4. But also there might be some of that may be shifting into 2024. I think overall, you see that these are important big field big-ticket items, but they just don't dominate a quarter. And so we don't really -- we manage other things around them. So it's -- while they're pretty visible and they're kind of fun like our Formula One car, but they don't -- we can execute in a quarter with or without them.

Got it. Super. And then I'm tempted to ask about two major themes that are important for you in the near term. Obviously, you talked about AI being one. And on that could you talk a little bit about that growth rate of that $75 million so far and sort of how do you expect that growth rate to trend, mean there are some wild estimates out there for GPU chips expansion, so I just want to get that? And then on the clinical MRI and PET imaging, Alzheimer's drugs are reaching the market, and there is a significant demand expected for PET. GE has talked about that. So could you take a minute and talk about how Bruker is positioned with respect to PET imaging as well? Thank you.

Right. So I'm taking down your questions. Right. Starting with AI, I actually don't have growth data that I can give to you. We all have this feeling that it's going to be big and big growth numbers. But I think you're better off looking at other industry data because we're obviously a small part of that. We also have not -- had not previously pulled together our generally AI-related revenues previously that had to do a little bit -- there was, of course, a big point for and similar computationally intensive needs that has cooled off obviously, and we've only now kind of established a baseline for our -- what we think is our AI-related revenue. So with apologies but we don't have Bruker internal data yet. We just realized that it's a meaningful amount of revenue and just take this as a baseline for us for future measurements of how this affects Bruker's growth rate. It is -- while I cannot give you a quantitative answer, obviously, one of our exciting growth drivers. And it also tends to carry good margins. To your second question on neurodegenerative and Alzheimer's disease, in particular, indeed, clinical, MRI PET will become more important. We -- as you know, we are the world leader in supplying superconducting materials to the world's various leading clinical MRI providers and MRI will be important as well as well as PET-MR. And of course, PET-MR as implied has an MR associated with it. Very rarely do people use PET only because you need the MRI for the high-resolution co-localization. The same is true for what we do with our products directly, which is the preclinical PET CT or PET MRI products, and we offer both of them, and I believe we're market leaders in both of them. So indeed, as they are -- to the extent they are animal models, whether they're rodent or nonhuman primates or HP we are very well positioned. And we -- while we cannot quite segregate it out, we believe that some of our healthy growth in our preclinical PET CT, PET MRI, PET-MR but also just MRI, preclinical MRI only without the PET element that growth has been good. And that is probably -- there's, of course, oncology and muscle and skeleton research and many, many other research areas but certainly neurodegenerative seems to be at an inflection point where perhaps after years of, quite honestly, drug discovery failures, it is now poised towards some modest successes and perhaps more in the pipeline. So that bodes well for our preclinical MRI business and for our BEST superconducting materials business. Sorry about the long answer, but you asked some longer questions that couldn't be answered with yes or no.

No, I appreciate the context. Thank you Frank.

And our next question will come from Derek De Bruin with Bank of America. Please go ahead.

Great. Thanks for taking the question. This is Mike Ryskin on for Derik. I want to ask a little bit about 1Q, 2Q pacing on orders. I believe last time you said bookings were stronger than revenue in a couple of years in the first quarter. And I think today, you talked about book-to-bill for the first half being greater than 1.0. So could you just sort of put them on a little bit of an apples-to-apples basis for 1Q, 2Q, are bookings still come in stronger than revenue, did it normalize a little bit, and any color you could provide in terms of which end markets or customer classes, maybe do a little bit better on that on the order front in the third quarter?

Q1 indeed book-to-bill was still greater than 1 in Q2 for BSI which is the only thing that makes sense because BEST has these long-term 5-year order. So we look at our 90% of our business, the Scientific Instruments segment and their Q2 book-to-bill was roughly at 1. So still quite healthy. Not quite as strong as so many years where we -- many quarters, I apologize, where we had book-to-bill above 1 and sometimes above 1.1, but still quite healthy with growth in from China, certainly geographically it has been the strongest, also growth in academic, government, academic medical centers. There's a lot of funding in academic medical centers, not only in discovery research, but also in translational and clinical research and in many of our tools participate there. Still good, very good bookings growth in biopharma. I guess, our tools that are more in the use. We're not so much used in biologics manufacturing, at least not yet. But more on the drug discovery and development side. And I think many of our tools are just indispensable when you need them, you need them. It's not something that you can save on when you cut down budgets. So it partially shields us from some of the choppier environment. And I hope that answers your question, Mike. Then now, let me for completeness, semiconductor metrology orders and applied markets, orders and industrial orders were a little softer. So these are not unexpected. These are more of the slightly cyclical markets. Not bad, but certainly a little bit softer, which is why we're now getting into book-to-bill, that's closer to 1 as in Q2, which is healthy because we need to bring down our still very long backlog that has fairly much. We need to bring that down to more typical delivery times over the next couple of years.

That's great. I appreciate all that color, thanks. And then for a follow-up, I want to touch a little bit on CALID and mass spec. You touched on strong demand led by timsTOF and obviously, you guys showcased some new products at ASMS, talked about them at the Analyst Day. Just curious if you could dive into mass spec performance a little bit more. So any early feedback or learnings on the Ultra launch and just broadly, what are you seeing in mass spec land? Thanks.

Yes, we don't comment on other companies, mass specs or their claims. We read them. Our timsTOF product line and not only timsTOF is a platform. So the new Ultra is getting a lot of interest. It is particularly for the ultrahigh-sensitivity market. But remember, for the routine high-throughput markets, we have the timsTOF HT, we do a lot of mass spec imaging for multiomics, including targeted proteomics, but also metabolomics, lipidomics with timsTOF fleX. And there are some other specialty products that are derived of the timsTOF platform. So it's really that entire platform is doing really quite well. And I think, of course, with an exciting new product at ASMS introduced recently, we're just people are very, very impressed with its performance and what it can do. So that's the fact. That's the news from CALID and the timsTOF platform, is -- it has been growing very nicely throughout the first half of the year, and we expect that to continue.

Great, thanks.

Our next question will come from Josh Waldman with Cleveland Research. Please go ahead.

Hey, good morning. Thanks for taking my questions. Two for you. First, Frank or Gerald, I guess a follow-up on Mike's question. Curious how you're thinking about the contribution from the backlog work down in the coming quarters and maybe how that supports resiliency in the 2023 and medium-term guide. I mean is there a base case number for organic growth that backlog work down contributes or is that not the way to think about it?

I'll take that one quickly, Josh. So from my perspective, as you already know, we've got a record backlog, the numbers are high and continue to be held high. We have -- we estimated over eight months of backlog, and that's a significant level for us. So our expectation is just by virtue of scale that it will take us multiple years to reduce that backlog. That's not going to get pushed through in a particular quarter. But it does obviously give us, as Frank has mentioned, significant resiliency when it comes to forward quarters because we simply need to execute on that backlog as opposed to fundamentally rely on incoming orders to do that. I think the other point is that our backlog seems to be quite strong across most of our business divisions and we have some that have started to slowly into that backlog, but fundamentally, the largest divisions continue to have sizable backlog. So I think it bodes well, I think, for our forward view, particularly on the organic side.

Got it. Then Gerald, I wondered if you could talk to the assumptions underpinning the mid to high single-digit organic growth for the second half. I mean, obviously, implies a step down. The comp is only modestly more difficult, curious any additional color you could provide there and then maybe walk through the puts and takes on the impacts on the 1 gig systems, it sounds like it's a net headwind, is that right?

I guess I wouldn't characterize it as net headwind. I mean our perspective is, of course, on the -- first of all, back up, we posted 15.6% organic revenue growth in the first half. So that's strong growth. We -- our overall guide is at the midpoint, is 10.5% on organic which is also very significant, I think, not only for Bruker, but certainly, it appears even in the space. We do have -- as I just said, a significant amount of backlog, which we hope to execute on some of in the third and the fourth quarter. We do have stronger costs in both the third and the fourth quarter. We had an exceptionally strong third quarter in particular. And our expectation is that we'll improve on that as we move forward. So I think the color for us is that it's sunny here in Billerica relative to our organic revenue performance, and it's continued to expect to be that way going forward.

So strong orders in the first half, continued strong backlog, continued demand as far as we can see it. It's getting a little choppier. We acknowledge that. There are some markets that are not growing as fast as they were last year and others that continue to be quite resilient for us. In the mix, we're obviously very resilient here. You know our long-term guidance or medium-term guidance, I should say, that we just gave at our Investor Day for the next few years. So certainly, our second half expectations are consistent with that even if we don't grow at the torrid pace of 15% plus anymore of the first half.

Got it, good to hear. Thanks guys.

Thanks Josh.

Our next question will come from Dan Arias with Stifel. Please go ahead.

Hey, good morning guys. Thank you. Frank, BioSpin, how to lead times on NMR installations look today? And when you think about just exiting the COVID period over the last 12 months and then bringing up your own new Germany site, would you say that you've reached sort of a steady state there and that really shouldn't change or do you still think there are some things that you can do in terms of production capabilities, etcetera, or just customer acceptance that you think improves the lead times over the next 12 months.

Yes. No, Dan, we should still bring the NMR lead times. They're still exceptionally high, and they should be coming down over the next -- in future quarters. So this isn't the steady state. And right. We -- so we had some delays that were not -- that were by our gigahertz NMRs, our leading-edge products. So sometimes when they require a second round of tests or some modifications of the factory, it's easily a quarter's delay that can happen and that did happen. But also some of the other systems. I mean, demand has been excellent. Bookings at BioSpin have been very, very good in the first half and we think they'll continue to be strong. That means we need to ramp our capacity quite honestly, and everything from factory to test to field installations. So yes, these times are wonderful. It's a high-quality problem, but we need to bring them down with capacity growth. And actually, that's true in many areas and so you've seen our elevated CAPEX and this year and last year, actually, in the last few years, we're kind of building for productivity, but also sort of for the capacity that we think we need over the next decade or decades, and so more work to be done.

Okay. So if lead times have improved 12 months from now, chances are it's more to do with your own internal processes rather than anything customer related, just want to make sure I have that right.

I think that's a reasonable assumption, yes.

Okay. And then just maybe on the guide, Gerald, just to make sure I have it straight. If the NMR orders hadn't gotten pushed off to 2024 is it fair to say that maybe the outlook would have been up another 0.5 point to 1 point? And then on academic -- sorry, Accelerate 2.0 spend, I'm kind of just curious when you look in totality at what you plan on investing for that program, and I know it's sort of continuous thing to an extent. But how much of the investment for 2.0 do you kind of think of as a 2023 thing versus a 2024 thing?

So maybe on the first one, on the NMR, I mean all these ultra-high fields, there's a range. It depends on whether it's a 1.0, 1.1, 1.2, but very roughly system is around $10 million, right. So yes, it is different. So that's like a 25 bp size I suppose, if you like. So it's not unimportant. It's meaningful, but it's not that significant.

I'd say we have puts and takes in the guide. There will be some elements that we hope are upside and others that we are -- we have concern about downside. And so I think we factored those all into the -- take that into the guidance as we see that at the moment.

To your second part of the question, if I understood it correctly, about Project Accelerate 2.0 investments. Obviously, we're on a multiyear investment track there. So that's -- we're not giving 2024 guidance, of course. But as we gave medium-term guidance during the medium-term guidance at our Investor Day, we said that for that time period till 2026 we would expect to keep our R&D investments near 10% of revenue.

And as you see also, we have commercial investments that are going on in the sales and marketing area to support a number of the faster-growing elements of the business as well.

It's a significant transformation coming from Project Accelerate. It's going extremely well. It's -- and we're investing in that while delivering EPS growth, are we maximizing EPS growth. No, we're delivering enough EPS growth and focusing on doing the investments for the future in parallel. And this has worked out nicely and making us a faster growth company, and with excellent growth this year, relatively speaking, for sure, and really very good growth and also in an absolute way in the first half and the second half looking along our mid to high single digit or 6% to 8%, which was more specifically what Gerald gave as our medium-term organic growth guidance for the next few years. So we're right. We're -- the investments are paying off.

Okay, thank you.

And our next question will come from Patrick Donnelly with Citi. Please go ahead.

Questions. Frank, maybe on the China and biopharma piece, encouraging to hear you guys kind of shook off a little bit of the industry concerns there. Can you just talk about, I guess, if anything changed in terms of as the quarter went in linearity, even if you're willing to comment on July. Obviously, the peer set had some issues in those two markets. It would be great to just expand a little bit on what you guys saw and how you're feeling on the go forward there?

Yes. We had -- if you recall, we had particularly strong order growth in China in Q1, and we highlighted that on our Q1 earnings call. And so we -- some of that we expected and continue to expect was real additional demand of things that would not have been purchased otherwise, except for that lo/stimulus program that China had and where we benefited disproportionately with our big ticket items, I think. And some of it also, we expect would be pull forward within the year. However, our second quarter growth for orders in China was still quite good. It wasn't exceptional as it was in Q1, but it was still quite good, so we didn't go from fees to salmon [ph], but continue to see good academic and government and academic medical center orders from China. So within the quarter, it doesn't -- most of our orders come in the last month of a quarter. That's just when you're more on the instruments business. So looking at trends within a quarter for us does not make sense. We don't have data that we would even look at that's particularly meaningful. That's more for other companies that have had more consumables revenue or so.

And Patrick, maybe just one other additional comment from my side. So there's there was really good revenue performance in the second quarter from China and the backlog levels in China continue to be significant from actually above the corporate average. So we have quite a backlog level there to work down, and we've been somewhat constrained by some export restriction issues, but hopefully, we work our way through those, and then some of that will fall into the revenue.

We export delay, not filling.

Delays on our export...

Understood. Alright. And then a quick one, Frank. Just to follow up on the orders and backlog. There's a lot of focus there. I appreciate the book-to-bill commentary. I mean, is it safe to assume if BSI book-to-bill was hovering around 1. I think BSI grew 13% organic in the quarter. So orders there up double digits, is that fair to say?

So I'm not sure I caught everything in Q2, as I mentioned earlier to Mike, our BSI book-to-bill was around 1. The second part, I...

Given that BSI grew 13%, is it safe to say orders were up double digits as well?

The first half was certainly double-digit growth. Now I right -- second quarter bookings were growing less than that because of the bookings a year ago, right, the Q2 bookings a year ago.

Yes. I might add also Patrick, that given some of the lumpiness in the orders, some of the pull forward we saw, as we articulated in China in the first quarter, we really think it makes sense to look at the first half of bookings. And again, the bookings in the first half were up double-digit organically year-over-year. So there's just so much lumpiness from quarter-to-quarter that we think it makes sense to look at the first half. But as Frank did state book-to-bill in that second quarter was hovering around 1, which we aim to keep it in that area going forward.

In some quarters, we'll have to come below that to build to work off the backlog. Still solid, not as strong as in Q1.

Understood, thank you.

Our next question will come from Dan Brennan with Cowen. Please go ahead.

Great, thank you. Thanks Frank and Gerald for taking the questions. Maybe just one sticking with the order dynamics from kind of what you guys are seeing today any sense on the trajectory of orders in the second half and what would be the early read on 24% organic growth, do you think, Frank. Obviously, the backlog is significant, but just trying to get a sense of that trajectory and kind of what you might be thinking about today?

Well, we have no specific 2024 comments, Dan, other than you saw our multiyear CAGR organic growth that we gave at our Investor Day of 6% to 8%, which would imply mid to high single digits. But that's not a 2024 comment. That's really a multiyear comment that we gave at our Investor Day and it's not even a little bit of 2024 guidance. It's just a multiyear comment. So order dynamics in the second half, I mean the pipeline, the opportunities look strong. And that's not something we'll have -- that's what we mean a lot. That's what we'll know after we report Q3 and Q4. So far, book-to-bill this year has been greater than 1, greater than 1 in Q1, about 1 in Q2 for always sort of the BSI segment, and that's really all we know.

Frank, thank you for that. And how about how about just academic spending broadly at Q2, it sounds like it was another solid quarter for you. And I think your peers while they struggled elsewhere, academics seem to be a bright spot this quarter, but there are some concerns over tighter budget. So I'm just wondering kind of how you see the global market for kind of academic as we look out to the back half of the year and beyond?

Yes, academic government. Again, academic medical center is becoming more and more important. There's a lot more money in cancer centers or neuroscience research centers than in good old departments of chemistry. So within academia, our shift towards more pathology -- disease biology, research and translational clinical research has been under the hood of what's in the academic bucket has been very strong in the last decade. And that shows that academic is good, but academic medical center in government is particularly good for us. Yes, there are some concerns about NIH budgets, of course. But then again, there's also things like the various the Science Act, which hasn't trickled down yet in the U.S., of course, nonacademic, the CHIPS Act in the U.S. and the equivalent in Europe and even in Germany specifically. Academic spending and investment in China has been strong in Japan. It's been strong. Europe, some budgets are a little bit delayed until the second half, but it's still been all right. So academic government is -- I know for a while, people were just in -- with biopharma, but it's a fantastic area and biopharma for us continues to be strong. So our products and solutions, just think of us as which way does the macro winds blow Bruker, I mean we're not immune to macro but we are somewhat resilient and partially shielded due to our rather unique products and technologies.

Great, thanks Frank, thanks Gerald.

Our next question will come from Rachel Vatnsdal with J.P. Morgan. Please go ahead.

Hey, thank you for taking my questions. And good morning. I wanted to follow up on Patrick's question earlier about China. So you mentioned that APAC growth was in the high 20s. Can you give us what was the specific China growth in the quarter and then what did orders grow in China? And as a follow-up, what are you hearing on additional stimulus tranches being released in the region. We've heard from some of your peers that there could be some stimulus coming in 4Q, so what are your expectations there and how is that contemplated in this year's guidance?

Hi Rachel, it's Gerald. Good morning to you. Just generally on China, robust order demand and I would say, robust revenue performance in China for the first half. I think what we've seen so far is that there is quite a bit of interest in China around these additional stimulus program. It's not a surprise that with the Chinese GDP following off somewhat that there's suddenly interest in doing that at the government level. What we've heard on the Street is just very positive about that. When we are not clear. But certainly, we're hearing some of the same information.

Yes. I mean there's a lot of speculation about things that may happen in the second half. But I think from even just reading across the industry, a lot of that at this point is speculative rather than based on hard data. So I think what we -- but our second half full year guidance and what -- and the color we've given you for the second half is not based on hope.

Yes. I mentioned earlier, Rachel that we have significant backlog in China. We just have to execute on it, and that would be -- that's what we've baked in.

So yes, we're looking at all of this with great interest, but we don't have anything to hang our hat on yet. And when we do, we'll report it.

Great. And then just one more for me. On BEST, you previously talked about growing throughout the year and the supply chain was really the limiting factor there rolling off. So can you talk about 18% growth this quarter was obviously pretty impressive. How is that supply chain factor kind of driving through those numbers? And then how should we think about that segment sequentially throughout the back half of the year? Thank you.

Supply Chain and Logistics is gradually getting better. It is not completely normalized in some areas like superconducting materials. It is still even multiyear constrained. And that's why we're gaining market share, I think, because we've made the long-term multiyear investments ahead of the curve, whereas others now cannot react fast enough. But supply chain and logistics are gradually improving, but it still requires a very strong execution. And I think we have that. I think we have shown that over and over again. It is still partly a drag on growth which is the same saying it in a different way but that also while a higher backlog and then it isn’t coming down in a quarter or two but over a couple of years. So, it is getting better but it is still a topic, it is just not a headline topic anymore.

Operator, maybe we have time for one more question from one more participant, please.

Our last question here will come from Jack Meehan with Nephron Research. Please go ahead.

Thank you, good morning. I wanted to ask about timsTOF's instrument pricing. Curious how that is trending and just early dialogue with customers around Ultra, do you think there's potential to pull up the blended instrument pricing for the timsTOF family with some of these new launches?

Yes, I mean it's been trending up for some time, right. Obviously, the timsTOF SCP that came out a couple of years ago for single-cell proteomics and also the timsTOF fleX with the additional mass spec imaging capability for targeted multiomics, carry higher selling prices sort of in the million and above range. And the Ultra is also in that $1 million-plus range. So indeed, average pricing for the timsTOF platform has been going up for some time, and that given some competitive trends that are also launching high-end instrumentation that tends to be above the $1 million that seems to be a market trend for right now. It's not -- so on the ASP on the timsTOF family has come up and may continue to go up.

Great. And Gerald, you talked about...

That’s simply the mix of models, it's not for instrument. But it's the mix of models within the platform.

Great. Gerald, you talked about proactively managing costs. Can you just talk about where you're focused with that and is it possible to quantify how much you're targeting? Thanks.

Look, I mean, I will say that Bruker's philosophy is disciplined entrepreneurialism, so we're pretty disciplined on costs all the time. Our focus now will just be to look at discretionary spending in areas where we think we can tighten slightly. This is a deep surgery by any stretch and our organization is very focused on this from the very beginning and continue to be so. So I'm not going to provide any color on numbers. But we think we're going to continue to be disciplined in our cost management. That's what we do.

It's tweaking. It's not restructuring. We're aiming for meaningful savings because, obviously, it's a choppier macro. We cannot ignore what's going on around us. And you can always sometimes you defer hiring, sometimes you have discretionary spending that you can reduce, those are the levers that we're working on right now and that we've implemented already.

Alright. And this concludes our question-and-answer session. I'd like to turn the conference back over to Justin Ward for any closing remarks.

Well, we want to thank everybody for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Please feel free to reach out to me to arrange any follow-up. Have a great day.