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Good morning, everyone, and welcome to the Bruker Corporation Fourth Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead.

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's fourth quarter 2023 earnings conference call. My name is Justin Ward, and I'm Bruker's Senior Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our Executive Vice President and CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of the Bruker Investor Relations website. During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. To begin, I would like to reference Bruker's safe harbor statement, which is shown on Slide 2 of the presentation. During this conference call, we will make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to geopolitical risks and wars as well as to supply chain logistics and inflation. The company's actual results may differ materially from 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, 2023, and as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and to our outlook as of today, February 13, 2024. We do not intend to update the forward-looking statements based on new information, future events or for other reasons, except as may be required by law, prior to the release of our first quarter 2024 financial results expected in early May 2024. 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 fourth quarter and full-year 2023 in more detail and share our newly established full-year 2024 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Justin. Good morning, everyone, and thank you for joining us on today's fourth quarter 2023 earnings call. Bruker finished 2023 with another quarter of excellent revenue growth including 15.9% organic revenue growth year-over-year. For the full-year 2023, we delivered industry-leading 14.5% organic revenue growth, which shows remarkable resiliency and consistency under difficult market conditions. Moreover, 2023 was our third consecutive year of double-digit organic revenue growth a testament to the strong execution of our Bruker colleagues across the globe and to our differentiated innovation strategy and culture of disciplined entrepreneurialism. Importantly, in fiscal 2023, we also delivered a solid 10.3% non-GAAP EPS growth year-over-year, all while investing significantly in R&D, capacity and productivity and in selected strategic bolt-on acquisitions. For those keeping track of our new Bruker cellular analysis business, which we refer to as BCA and formerly known as PhenomeX. As forecasted in fiscal '23, we had a fourth quarter bolus of $0.10 of non-GAAP EPS dilution. Excluding BCA, our fiscal year '23 pro forma non-GAAP EPS grew 14.5%. In Q4 of '23, we did major restructuring and cost cutting at BCA almost immediately after the acquisition closed on October 2, 2023. Accordingly, in fiscal year '24, we expect the quarterly BCA non-GAAP EPS dilution to be significantly reduced to just $0.02 to $0.03 per quarter with a significant further drop in dilution expected in fiscal year '25 and BCA profitability anticipated in fiscal year '26. As we look at the fiscal year 2024, we entered the year with solid bookings momentum, a strong backlog and a positive outlook for Bruker to emerge as a leader of the post-genomic era and financially to again achieve above-market organic revenue and non-GAAP EPS growth. Accordingly, we are today announcing our fiscal year '24 guidance for organic revenue growth of 5% to 7% and non-GAAP EPS growth of 5% to 7% both compared to fiscal year '23. Turning now to Slide 4. In the fourth quarter of '23, Bruker delivered excellent organic revenue growth of 15.9% and solid pro forma non-GAAP EPS growth. Bruker's Q4 '23 reported revenues increased 20.6% year-over-year to $854.5 million, which included a currency tailwind of 2%. On an organic basis, revenues increased 15.9%, which included 15.5% organic growth in BSI, our Scientific Instruments segment and 20.3% in our best segment. Net of intercompany eliminations, while growth from acquisitions added 2.7%. This implies constant exchange rate, or CER, revenue growth of 18.6% year-over-year. Our fourth quarter '23 non-GAAP operating margin was 18.1%, which was down 290 bps, primarily due to the dilutive PhenomeX acquisition in Q4 '23, as well as headwinds from other M&A and currency. Altogether, this combined effect more than offset our organic operating margin expansion of plus 270 bps. Our strong organic operating margin expansion is evidence of the success of our Project Accelerate and operational excellence initiatives. In Q4 of '23, Bruker reported GAAP diluted EPS of $1.41 compared to $0.66 in Q4 of '22. Our Q4 '23, included an acquisition gain of $0.99 from our PhenomeX acquisition. On a non-GAAP basis, Q4 '23 diluted EPS was $0.70, down 5.4% from $0.74 in the fourth quarter of '22, primarily due to the PhenomeX acquisition in Q4 '23. Excluding the initial minus $0.10 BCA dilution in Q4 '23, Bruker delivered pro forma non-GAAP EPS growth of plus 8.1% year-over-year in Q4 of '23. Moving to our full-year '23 performance. On Slide 5, you can see Bruker's strong performance and excellent execution in 2023 with industry-leading organic revenue growth of 14.5%, solid non-GAAP EPS growth of plus 10.3% and excluding BCA even pro forma non-GAAP EPS growth of plus 14.5%. More specifically, for fiscal year '23, revenues increased by 17.1% to $2.96 billion. On an organic basis, revenues grew 14.5% year-over-year, consisting of 14.5% organic growth in scientific instruments and 14.7% organic growth at best net of intercompany eliminations. Our 2023 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. And you can see solid non-GAAP EPS growth of 10.3% despite a $0.10 headwind from BCA in the fourth quarter. I'll also note that our 2023 free cash flow increased by $98 million year-over-year. Our trailing 12 months return on invested capital, a non-GAAP measure was 20.6%, a metric that highlights our differentiated Bruker management process and focus on disciplined entrepreneurial innovation and organic growth supplemented by selected strategic bolt-on or early-stage technology acquisitions. Please turn to Slide 6 and 7, where we highlight the fiscal year '23 constant exchange rate, or CER performance of our three scientific instruments groups and of our BEST segment year-over-year. In '23, BioSpin Group revenue was $799 million and grew in the teens percentages in constant exchange rate. BioSpin saw growth across biopharma, academic government, industrial research and applied markets as well as in our new integrated data solutions or IDS division. We had revenue from 4 gigahertz class NMR systems each in fiscal '23 and fiscal '22. And in the fourth quarter of '23, we installed the first 1.2 gigahertz NMR in the United States at the Ohio State University and the 1.1 gigahertz NMR at the University of Wisconsin at Madison. For '23, our CALID group had revenue of $960 million and constant exchange rate growth in the high teens percentage with strong growth in life science mass spectrometry driven by the timsTOF platform and aftermarket business as well as strong growth in applied mass spectrometry and our optics infrared, near-infrared and Raman business. 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 to near zero. Please turn to Slide 7 now. Fiscal year '23, Bruker Nano revenue was $942 million, and in constant exchange rate, Nano grew in the high teens percentage with strong revenue growth across markets, including academic government, industrial, and semiconductor metrology. The artificial intelligence megatrend is a strong tailwind for our semiconductor metrology and advanced packaging tools. Revenues for our advanced X-ray solutions and Nano surfaces, core tools also showed strong growth. Fluorescence microscopy revenue was up on solid growth in academic government research as well as contributions from our Q4 '22 acquisition of the Inscopix neuroscience research tools. Finally, 2023 best revenues grew in the mid-teens percentage net of intercompany eliminations, driven by share gains and superconductor demand by our MRI OEM customers as well as by growth in big science, fusion research, and key new extreme ultraviolet EUV technologies for semiconductor lithography tools by large OEM customers, all in support of the strong AI or artificial intelligence demand. Let me now move to Slide 8, which is a slide that's familiar to those of you who saw our presentation at the JP Morgan Healthcare Conference, where we're outlining what we mean by leadership, emerging leadership in the post genomic era, which of course, includes many different fields of multiomics beyond genomics, but including genomics, as well as solutions for single cell, spatial, structural, quantitative, and interaction biology. I will not dwell on this, but I invite you to read this slide in more detail at your leisure. On Slide 9, you have a quick summaries of two technology acquisitions that we closed in early February and which both fill gaps that we had in our portfolio and therefore strengthen our portfolio. On the left, you will see that we acquired Nanophoton in Osaka, Japan, a company with about $5 million in fiscal year '23 revenue. They are a specialist in research Raman microscopy systems so far, primarily are only offered in Japan and Korea, but we think these products will do very well outside of Japan and Korea as well, since they're really performance-leading with exceptional speed, sensitivity, spatial resolution and user-friendly workflows in research Raman microscopy. Applications are going from inspecting semiconductors and nanomaterials battery research as well as academic and industrial research. Differently, here in United States in Tucson, Arizona, we acquired Spectral Instruments, Imaging LLC to go -- to complement our preclinical product lines with preclinical optical imaging for bioluminescent and fluorescent, in vivo imaging and optional X-ray imaging. This enhances our preclinical imaging, or PCI solutions for a vivo disease research and should be welcomed by our customers. So let me wrap things up. In summary, Bruker delivered excellent organic revenue growth and solid EPS growth in '23. Even as we have accelerated our strategic investments in the Project Accelerate 2.0 for transformation as well as in production capacity and productivity to meet our growing demand. Bruker strong growth is a result of its fundamental commitment to innovating in high-value solutions as well as of our ongoing portfolio transformation. Our technology and biological applications leadership in many areas combined with world-class execution and an excellent Bruker management process position us well for continued outperformance as a leader in the emerging post-genomic era. Now given our strong growth in '23, our healthy fiscal year '24 guidance as well as our recent selected strategic bolt-on acquisitions, we are now optimistic that we can achieve our previously communicated fiscal year '26 medium-term outlook for revenue and non-GAAP EPS already one-year earlier in fiscal year 2025. With that, let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q4 and full-year '23 financial performance in more detail and provide our fiscal year '24 outlook and assumptions. Gerald?

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide some more detail on Bruker's fourth quarter and full-year 2023 financial performance, starting on Slide 11. In the fourth quarter of 2023, Bruker's reported revenue increased 20.6% to $854.5 million, which reflects an organic revenue increase of 15.9% year-over-year. In the fourth quarter of '23, Bruker's reported GAAP diluted EPS of $1.41 compared to $0.66 in the fourth quarter of 2022. The fourth quarter 2023 GAAP EPS includes a $0.99 per share non-taxable line cash gain from the acquisition of PhenomeX now called Bruker Cellular Analysis division, or BCA. This gain for GAAP reporting represents a bargain purchase gain and reflects the excess of identifiable net assets acquired over the purchase consideration paid. Included in the acquired assets or deferred tax assets related to acquired net operating losses, or NOLs. While the present value of these NOLs is very significant for GAAP accounting, the tax benefits of these NOLs going forward are expected to be much more modest annually. On a non-GAAP basis, Q4 2023 diluted EPS was $0.70, down 5.4% from $0.74 in the fourth quarter of '22, primarily due to the $0.10 dilutive effect of our Phenomics acquisition in the fourth quarter as well as a challenging tax rate comparison year-over-year. Excluding BCA, Bruker delivered pro forma non-GAAP EPS growth of 8.1% year-over-year in the fourth quarter of '23. Non-GAAP gross margin performance was down 80 basis points year-over-year in the fourth quarter of '23 negatively impacted by foreign exchange and M&A headwinds, partially offset by organic gross margin expansion of about 40 basis points year-over-year. Our fourth quarter 2023 non-GAAP operating income increased 3.8%, while non-GAAP operating margin decreased 290 basis points year-over-year to 18.1%. And as foreign exchange and acquisition headwinds, primarily from BCA, more than offset very strong organic operating margin expansion of 270 basis points year-over-year in the fourth quarter of '23. Our fourth quarter 2023 pro forma non-GAAP operating margin, excluding PhenomeX acquisition was 20.6%. We finished the fourth quarter with cash, cash equivalents, and short term investments of approximately $488 million. During the fourth quarter, we used cash to fund selected Project Accelerate 2.0 investments, capital expenditures, and share repurchases of approximately $50 million. We generated $205.5 million of operating cash flow in the fourth quarter of 2023. Our capital expenditure investments were $31.5 million, resulting in free cash flow of $174 million in the fourth quarter of '23. This reflects an improvements in cash flow of about $37 million over the fourth quarter '22, driven by better working capital performance in the quarter. Slide 12 shows the revenue bridge for the fourth quarter of '23. We delivered solid revenue growth in the fourth quarter of '23 in BSI with 18.5% organic revenue growth in systems and 8.2% organic growth in aftermarket revenue, all year-over-year. Geographically and on an organic basis in the fourth quarter of '23, our Americas revenue grew in the teens percentage. Asia-Pacific revenue grew in the 20% range, while European revenue grew in the mid-teens percentage all year-over-year. For our EMEA region, fourth quarter 2023 revenue was up high single-digit percentage year-over-year. Slide 13 shows our fourth quarter 2023 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 51.8% decreased 80 basis points from 52.6% in the fourth quarter '22 impacted by foreign exchange and acquisition headwinds, partially offset by organic gross margin improvements of about 40 basis points year-over-year. Fourth quarter 2023 non-GAAP operating margin of 18.1% was 290 basis points lower than the 21% margin performance we posted in the fourth quarter of '22 as foreign exchange and acquisition headwinds primarily from BCA more than offset strong organic operating margin expansion of 270 basis points. For the fourth quarter of 2023, our non-GAAP effective tax rate was 31.3% compared to an unusually low 20.6% in the fourth quarter of '22 driven mostly by a one-time discrete favorable item in the prior year period. Weighted average diluted shares outstanding in the fourth quarter of 2023 were $146 million, a reduction of 1.9 million shares or 1.3% from the fourth quarter of '22, resulting from our share repurchases over the trailing 12 months. Finally, fourth quarter 2023 non-GAAP EPS of $0.70 was down 5.4% compared to the fourth quarter of '22, with a $0.10 headwind from BCA. Excluding BCA, our non-GAAP EPS was up 8.1% year-over-year. In fiscal year 2024, we expect BCA to be much less dilutive after our major cost actions in the fourth quarter of '23 and our full-year 2024 non-GAAP EPS guidance incorporates a $0.10 non-GAAP EPS headwind from BCA. Slide 14 shows the year-over-year revenue bridge for the full-year of 2023. Revenue was up $434 million to 17.1%, reflecting organic growth of 14.5%. Acquisitions added 2.2% to our top-line, while foreign exchange was at 0.4% tailwind resulting in constant exchange rate revenue growth of 16.7% year-over-year. Non-GAAP P&L results for the full-year of 2023 are summarized on Slide 15 with the drivers similar to the fourth quarter of 2023 as explained on the slide. Turning to Slide 16. In the full-year of 2023, we generated $350.1 million of operating cash flow up about $76 million from 2022 on improved working capital performance. We generated $243 million of free cash flow in 2023, up about $98 million from 2022 on higher operating cash flow and lower capital expenditures. Turning now to Slide 18. We entered the year with solid backlog and an even stronger portfolio to again achieve above-market growth. Our outlook for fiscal year 2024 includes, we are initiating a guidance range of reported revenue of $3.23 billion to $3.29 billion, representing growth of 9% to 11% compared to 2023. This guidance assumes organic revenue growth of 5% to 7% year-over-year, an estimated foreign exchange tailwind of 1% with acquisitions contributing 3% to revenue growth. That excludes any announced potential acquisitions that have not yet closed. This guidance implies constant exchange rate revenue growth of 8% to 10% in full-year of 2024. For operating margins in 2024, following strong organic operating improvement of about 130 basis points in 2023, we expect 2024 organic operating margin improvement of about 50 basis points. For non-GAAP operating margins, all in, we expect about an 80 basis point decline from the prior year due to a combined 130 basis point headwind from foreign exchange and acquisitions. On the bottom line, we're guiding to non-GAAP EPS for 2024 in the range of $2.71 to $2.76 or non-GAAP EPS growth of 5% to 7% compared to 2023. Other guidance assumptions are listed on the slide. Our full-year 2024 ranges have been updated for foreign currency rates as of January 31, 2024. One additional note on quarterly phasing for the year. We expect first quarter organic revenue to be sequentially below the fourth quarter of '23 and only modestly above the first quarter of 2023, which was an exceptionally strong first quarter. We also expect softer operating margin performance in the first quarter of 2024 driven by BCA dilution and other acquisition and foreign exchange headwinds. Our organic revenue and operating margin performance is expected to strengthen in the remainder of 2024. Finally, at our Investor Day in June 2023, I shared financial targets for the medium-term fiscal year 2026 outlook for Bruker. Our strong 2023 financial performance, healthy 2024 guidance and our portfolio strength gives you confidence that we will likely reach our full-year 2026 medium-term targets for revenue and non-GAAP EPS a year earlier in 2025. To wrap up, Bruker delivered differentiated organic growth and financial results in 2023, and we're well positioned to deliver above market revenue and non-GAAP EPS growth again in 2024. And 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 for question, will be asked that you limit yourself to one question and one follow-up. Operator we're ready for Q&A.

Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions]. Our first question today comes from Patrick Donnelly from Citi. Please go ahead with your question.

Hey, guys. Good morning. Thanks for taking the question. Frank, and maybe Gerald as well, just on that LRP pull-forward comment, obviously, very nice to see. Can you just talk about that on the earnings side, particularly, I think it implies almost 30% growth in '25 on the earnings side? Is that -- some of these deals slipping accretive? Obviously, the headwinds on the margins last year and this year from the deal has been notable. Can you just talk about some of the moving pieces there, confidence level to pull that forward against particularly on the earnings side, it's really nice to see? So I just wanted to get some more color on, again, approaching that $350 million, $355 million number a year early?

Yes. Thank you, Patrick. Indeed, we're optimistic that we can pull that forward by a year on the revenue and on the non-GAAP EPS side, which is wonderful. It's really combined result of stronger -- of strong '23 results and execution. And again, we are pleased to give pretty solid and healthy '24 guidance. Then indeed as some of these headwinds either go away or abate. And as we look at the -- as you've seen, we've delivered under the hood, so to speak, pretty healthy organic or moderate organic gross margin improvement and good over 100 bps operating -- organic operating margin improvement, and these are all the trends that are continuing while some of the temporary currency and accepted strategic M&A headwinds go away. So indeed, we expect without commenting on numbers, but we're expecting a very significant EPS step-up in '25 and also in '26.

Okay. That's helpful. And again, encouraging to see that. And Frank, maybe just on the overall backdrop. We've gotten a lot of questions on just the academic market, the health of it between continuing resolution in the U.S. and China noise. Can you just maybe talk about what you're seeing out there, expectations? Obviously, you have the order book that should help in the near term. But even on the order trends, how you're thinking about the near term and how you're thinking about that academic market, given at least what appears to be some high-level pressures out there? Thank you so much.

Yes, gladly. So academic government. Revenue growth was great and bookings growth was also pretty good. I mean in Q4, we had a bit of an air pocket in bookings, nothing dramatic in Q3 after a very strong Q1 and Q2 bookings in China, in particular. In Q4, it wasn't super strong, but it was solid. And from what I can see better than what other peers, larger peers may have reported in Q4. So our Q4 book-to-bill for BSI was not far from 1.0. So pretty solid and even China was okay, not so academic government not only backlog but bookings all the way to revenue growth over the various geographies looks solid. It's one of the very defensible areas at a time when for others at least, biopharma went down, COVID, of course, went down. So it's been one of the strong areas along with diagnostics and many other areas. Actually, just about all of our businesses are doing really quite well in most of our markets.

Okay, great. Thanks Frank.

You're welcome, Patrick.

Our next question comes from Josh Waldman from Cleveland Research. Please go ahead with your question.

Hey, good morning guys. Thanks for taking my question. Two for you. Maybe Gerald, starting on the margin side, wondering if you could unpack the margin guide a bit more curious the puts and takes on the organic margin of 50 bps. Is that about what you would normally expect on 5% to 7% organic growth. Just wondering how mix, price, maybe other moving pieces within the cost structure are impacting that number?

Yes, I'd say generally, it's -- Josh, it's the impact of the PhenomeX acquisition specifically. We of course, continue to take pricing actions, and we have a number of other initiatives underway that play into that, puts and takes are not that significant, but that's probably the most material item.

Just about the organic expense of 50 bps.

Yes. So just to clarify, there's a lot of distortion on the margin related to the timing of PhenomeX. So recall that we acquired it basically the beginning of Q4 of '23 and there was quite a drag on margins. That will become a margin or an organic op margin tailwind next year because you're anniversarying that acquisition beginning of Q4. So in the early part of the year, where most of the PhenomeX op loss will still be taking place that will be characterized as an acquisition margin drag. So it really just has to do with the categorization of PhenomeX and the timing of that acquisition, Josh. Does that make sense?

Yes. Yes, I think that makes sense. And I guess one more, Gerald, on the margins. I mean it sounds like you're pulling forward the revenue and EPS '26 target by a year. Is the margin target kind of off the table at this point?

No, it's not off the table, but I'll take that, Josh. It's just that we don't think we can pull forward. That looks more likely to be a '26 non-GAAP operating margin target. But it's not at all of the table. We think we can reach that in '26 without pull forward with plenty of room to advance the operating profit margin and further into the mid-20s in subsequent years.

Got it. Okay. And then my follow-up, Frank, was on BioSpin. Just wondering how many 1 gig systems are included in the guide for '24? And then curious any thoughts or context you can provide on how the non-1 gig class or the sub-1 gig class is performing?

Yes. I think in -- for '24, we're again looking at 3 to 4 gigahertz class systems. And so again, three to four basically same as in '23 and in '22. And I'm sorry, what was the second part of your question?

Yes. I was just wondering how the non 1-gig class, so kind of maybe like 300 up to maybe [indiscernible]?

Yes. No, that's doing great. I mean, most of the growth -- in Q4, the ultra-high field was very strong because if you recall in '23, a number of them got delayed or had needed some rework. So of the four systems in '23, three of them came in, in the last quarter, and we expect to spread that more evenly in '24. And so the bookings and revenue growth in BioSpin has really been excellent, and most of that was driven not by the ultra-high field, but by the health of applied markets, clinical research applications in biopharma as well as the core academic structural -- functional structural biology and other applications and preclinical imaging. So BioSpin is doing great. It's not just an ultra-high field story. ultra-high field story is sort of like the Formula 1, and it's one that can enumerate the system. So it's very interesting, but most of the businesses, it's not the ultra-high field business.

Got it, okay.

Thank you, Josh.

Our next question comes from Puneet Souda from Leerink Partners. Please go ahead with your question.

Yes, Frank. Thanks for taking the questions. So I just wanted to clarify on the pull forward of the fiscal '26 targets. How much of that is sort of just the acquisitions that have been sort of announced so far, they should become organic in FY '25. And I wanted to ask about the ELITech acquisition as well. Is that included in those assumptions? It's not materialized yet and pending regulatory approval. So could you update us on that, that's a sizable acquisition for you?

Yes. So very clearly, ELITech, or Chemspeed to announce potential acquisitions that have not closed are neither included in our '24 guidance nor in our '25 pull forward of our revenue. And our medium-term revenue and non-GAAP EPS targets that we previously had established for '26. So ELITech and Chemspeed are not in those numbers. And the pull forward, therefore is primarily driven by very good organic growth and margin developments and expected very good EPS growth also in -- then in '25, '26 which is primarily an organic development. On the revenue side, of course, aided somewhat by the BCA or PhenomeX acquisition. I believe our goal for that is about $60 million in revenue for 2024 so that helps, but it's not the driver. The other acquisitions, while there have been a number of selected acquisitions that simply were feasible with companies where we've often been in touch with them for many years. And now this was the right time to find valuations that seem fair for both sides. Those as you know were to some extent, they have some market tractions, but they were relatively moderate in size. And in some ways, you could regard them as technology acquisitions to complement our portfolio.

Got it. Helpful. Then on timsTOF, if I may ask. What is the expectation for growth this year? Maybe, Frank, could you maybe highlight at a high level, just given there is a higher resolution high-end competitor launch that was announced last year? And sort of the question is how that competes with timsTOF. What's your growth expectation for timsTOF's overall portfolio this year? Thank you.

Yes. Since the Astra launch by a competitor, that's a competitive product. We've continued to grow our timsTOF business, but there is a competitive product on the market. And our product, our new Ultra and of course, the various other price and performance and capabilities point of the timsTOF platform including the flex version with MALDI Imaging, in glycomics and other imaging applications. And they really are all performing well, but we acknowledge there is new competition, and that's getting some traction as well. Of course, the traditional Orbitrap franchise is probably see most of that internal competition, but that's not our issue. So we expect continued steady growth in a growing proteomics market. Unfortunately, this is not a zero-sum game, but a growing market as far as we can tell with very healthy fundamental dynamics, and we expect to continue to do well and that in 2024.

Okay, fair. Thanks.

Our next question comes from Dan Arias from Stifel. Please go ahead with your question.

Hi, good morning guys. Thanks for your question. Gerald or Frank, on the deals that you've done here, it looks like you're guiding to a three-point contribution from M&A. How conservative or nonconservative would you say that is? I mean you've got a half a dozen or so assets. So when you kind of look at the growth expectations that you have for them, I'm just curious what you've modeled relative to 2023. Did you pump the brakes because of the macro? Have you assumed some acceleration because now you're able to support them? Just trying to put some context to the growth expectation there.

No, we're at the middle of the fairway, neither super conservative nor bullish. That's just a mathematical number of what comes out of these acquisitions. Again, other than the PhenomeX acquisitions, now BCA, the other acquisitions that have closed mostly don't have very significant revenue in the aggregate, it adds up a little bit, which is why we get to the 3% but that's a figure -- that's a middle of the fairway figuring out. So I think nothing overly conservative, nor bullish on that one.

Hey, Dan. Keep in mind, most of these transactions -- so PhenomeX closed in Q4 of last year. Most of the other ones closed sort of very end of year or very beginning of this year. So it's a comp situation. The underlying revenue growth of those acquired businesses, as Frank said, we don't have aggressive assumptions within that.

And most of these are healthy businesses, of course, the one that we're working through, of course, is the PhenomeX issue.

Correct. Okay. Helpful. And then, Frank, maybe just sort of in the spirit of Patrick's question on academic, can you do a similar thing on Europe just in the way that you're thinking about things and what's under the outlook? I mean tough macro conditions, academic funding may be down a bit to your prior point. But you guys are doing well there. I think on a reported basis, you're up 20% in 4Q. So what should we expect if we compare 2024 in Europe to '23?

Yes. I mean, it's something we have internet visibility into that, right? But I mean, academic government funding is always relatively stable. And in Europe, particularly so you might have more ups and downs in Japan and in China, in the U.S., depending on political situation or gridlock or continuing resolutions. In Europe, usually, this is not a political item, both at the country level, the major economies and smaller healthy countries in Europe. They don't constantly debate about their governmental or academic R&D budgets. Those are just steadily increasing. And the things to at the European level. There's some European overall European budgets much, much more importantly is what does it get allocated to. And the drivers are clearly favoring the post-genomic era, and I think it will be for the next decade or two. And there, we are just very well -- or increasingly very well positioned and really strongly positioned in proteomics, lipidomics, metabolomics, glycomics, you name it. So too much jargon, but the post-genomic era at a high level is very much the fundamental secular trend that supports our growth in academic government funded budgets that is much higher than the overall growth that you may read at a national level. It's the reallocation of the post-genomic era that I think is the -- that in artificial intelligence. So probably the two very big megatrends for Bruker for the next decade.

Okay. Okay. So Frank, just to close the loop on the thought. Germany macro conditions, recessionary conversation, not something that you see as a red flag right now.

No, but a yellow flag. I mean, Germany is bumbling along and strong growth has not been all that strong. And yes, it's not one of the growth engines of Europe in '24, probably either pretty clear.

Okay, super, thank you.

Our next question comes from John Sourbeer from UBS. Please go ahead with your question.

Thanks. Good morning and congrats on the quarter. I just want to follow-up on the BSI book-to-bill. I know you don't break it out by region, but was China the real region there that drove that below one on the book-to-bill? And I guess, if you were to ex out China was book-to-bill greater than one and any additional color just around expectations for that?

Maybe to clarify, so overall BSI book-to-bill was actually above 1. That includes China. Now China obviously is below 1 because of the bolus in orders we got from the stimulus. And again, that bolus was really focused in Q1, but we did have some in Q4 of last year as well. But overall BSI book-to-bill was above 1, including China.

And I would just say China had, I would say a bit of a recovery in the fourth quarter where we saw some challenges in the third quarter relative to that particular market. So from a bookings perspective, there was some improvement there.

And I guess as a follow-up, just on China there. Any expectations on the outlook for that market for the year, what sentiment are you hearing from customers there and just visibility into the backlog here starting the year?

Good backlog visibility. And I mean, China is perhaps the market for the entire industry where we have the least visibility for 2024. And I would say we're not that different than that. We do note that their academic government and investment tends to be strong. And I think there's a commitment that continues for that. So we think we're well positioned. But while Q4 was a bit of a recovery in China BSI orders compared to Q3, after the very strong first half, we don't have other -- we don't have more visibility to China than other peers.

But we do have quite a different mix in China as a reminder. So our end market mix in China is about 50% academic and government, which as Frank just mentioned, is one of the bright spots. Our biopharma revenue mix in China is only about 10%. That's really where the weakness is concentrated on.

And we did not exceed that, Biopharma go away in China in Q4.

Thanks for taking the questions.

Sure.

Our next question comes from Doug Schenkel from Wolfe Research. Please go ahead with your question.

Good morning. Thank you for taking my questions. The first topic I wanted to touch on is backlog. I believe at some point over the course of Q4, you talked about having eight to nine months of backlog. I think the norm is closer to 6%. So I'm just curious if you people can comment on where that is now? And is there an assumption embedded into guidance that this comes down a bit?

Yes. For your [indiscernible] which we enjoy reading has come down a little bit to closer to 7.5 months now. And that's still elevated. So we expect that, that will come down over the next two to three years. So some of that is built into our guidance for fiscal year '24. Mostly, it's driven by reasonable and above here, it seems. Order momentum, given the various secular trends that we have mentioned, in particular, but we also expect that without quantifying it, Doug, we also expect that our backlog will come down a bit further. But as I said, it was 7.5x, 7.5 months at the end of '23. So it's come down a little bit.

Okay. No, that's helpful just to make sure that's not -- it helps, but it's not a major driver to growth. So that's helpful. Can I just touch on M&A real quick? Lots of questions there, lots of focus on all the activity there. I would love to just take a step back and think about this bigger picture. How are you going about identifying these opportunities? Why so many so quickly? And as we kind of think about these, are they filling gaps in the portfolio? Or are they kind of moving you into new markets. So there's a lot there, but I would love to just hear the philosophy and just kind of the logic behind getting so active so quickly? Thank you.

Very good questions, and the answer is a little of both. First of all, it is just the end of '23 when most of these deals were negotiated, right, some of that closed in January or February, but we've been obviously working on them in the second half of '23. And on some of them, we've literally been in the second or third round some of these companies. We've just known without any process for literally for years. And finally, the stars aligned in an unusual way, right? We're not on a buying spree, it's just in an unusual way, we will finally be able to in various areas, pull together the right valuations and deals with sellers and buyers both thinking it was fair, and it was fine. So it's very unusual. I don't expect that pace to continue. This is not a different type of Bruker. We do selected strategic acquisitions. Some of them clearly fill gaps or holes in our fees, gaps in our portfolio like Tornado or SII or even Nanophoton. Now I don't mean to degrade those companies in any way. They have beautiful product lines. They have technology. They have market traction, demonstrated and margin traction demonstrated in some markets. But usually, they're not acting globally or at least not fully globally. We can help them with that, and they fill real gaps in our product lines. The pending acquisitions of Chemspeed will take us further into new areas of biopharma, in chemicals and even cosmetics and consumer products, R&D and QC automation. So those are new areas but adjacent. In a way, we've been in infectious disease biology, but primarily with the MALDI Biotyper with a very small hold in molecular diagnostics. ELITech is a much bigger sample-to-answer molecular diagnostics play. It will not make us a Tier 1 competitor, right? Those are [indiscernible] and others, but it would get a solid Tier 2 competitors. So it expands our infectious disease franchise, again, not new to us but very nicely complementary to the MALDI Biotyper that's of course, focused on bacteria and not on viral detection versus molecular diagnostics, there's a lot of infectious disease viral detection. So adjacencies or gaps in our product line don't expect this pace and frequency to continue. That's really very, very unusual. But it has to do, of course, with markets in late '23, market valuations in late '23 permitting to come to compromises on valuation that seems reasonable and that support again, long-term high ROIC, while providing fair valuations for these companies that are where the founders or others might be exiting.

That's great. Thank you very much.

You're welcome, Doug.

Our next question comes from Derik De Bruin from Bank of America. Please go ahead with your question.

Hi, good morning. Thanks for taking my question. Hey, Gerald, just to clarify, just I got a couple of questions from clients. You said the book-to-bill in Q4 was not far from one and then your comment about being greater than one was for the full-year?

Actually, both the fourth quarter was above -- a book-to-bill of above one and the full-year as well above one.

Got it. Thank you. Just wanted to clarify that. And going back to the Chemspeed and the ELITech deals, I mean we have a general idea on the revenues because you disclosed those. Are those -- how profitable are those businesses? Basically, when those come in, we're not going to see like another step down in the margin, right? I mean your guide right now is basically assuming that those there, right? Can you just talk a little bit about profitability of those businesses?

They're not in our guide nor in the '26 to '25. Pull forward, as I said earlier, Derik, we have not -- we have just said that they're both profitable. And when or if -- when we close them, then we'll give more details with a more detailed press release on each of those. We just don't want to jump the gun.

Got it. I just wanted to clarify the profitability comment. And then just one final one. You've called out geopolitical risks a couple of times. I'm starting to get some questions from investors about, obviously, what's going on with China and your sales into the semiconductor market and people are starting to worry about competition and just pushbacks. I guess, how do you sort of like think about the geopolitical risk in China right now? And just what's going on there, just sort of your broad thoughts.

Well, geopolitical risks for us is code for a Ukrainian-Russian war and Israel-Hamas war and the potential of some more like action around Taiwan happening at some point or these war spreading. So it's not -- it's sort of related to wars and conflicts as opposed to how fast is China growing or not. So they are with two war spending and they increased risk of a conflict over Taiwan and possible at some point in the next decade. That's why we're highlighting that. It's an unprecedented level of geopolitical risk and everybody is facing that the industry is facing. But we mean that narrowly by conflicts rather than an economy growing or slowing, maybe that helps.

Yes. Well, I was thinking more about trade, just in terms of restricting R&D, restricting instrumentation sales. So I'm getting some questions from investors on your metrology tools into China and things like that, just the sense that there might be some trade pushback. That's where I was going.

Yes. Remember, you may remember that about two years ago, there were some additional restrictions on selling certain semiconductor, most advanced semiconductor metrology tools in China. And so of course, that was implemented a couple of years ago, if I recall. And that's long baked into our model. But of course, if there was a conflict there on Taiwan, if there were new restrictions, those are some of the geopolitical risk that the industry is facing. And so that's what we mean by that, Derik.

Got it, thank you for clarifying.

Operator, I think we'll take one final question, operator.

Our final question comes from Brandon Couillard from Jefferies. Please go ahead with your question.

Hi, thanks. Good morning. Frank, you mentioned the IDS business within BioSpin. Just curious what else you think you need to I guess, accelerate the vision you have around software? And how do you differentiate in lab software in what seems like a pretty crowded space?

Yes, it's crowded, but some of these assets previously acquired haven't done all that well or some of them have older concepts. So we think we can bring some fresh breath of air into some of that scientific and lab software. And the assets that we have acquired and now -- to some extent, are integrating, right? We provide nice portfolio, vendor agnostic, scientific and lab digitization software solutions that we think has good growth potential with excellent margin potential. Some of the automation acquisitions like the one we did already Optimal in the U.K. about a year ago, 1.5 years ago and the pending potential Chemspeed acquisitions also have software components and we'll benefit from some of the software assets that we have already in this IDS. So don't know that we need a lot of other things. I think we're getting together or we did get managed to quietly build and pull together the assets that we needed for a serious lab and QC software business. So we're pleased with that. Still early days, but a nice aftermarket growth, if you like, first of all, something we're always trying to strengthen then, of course with good, very good gross margin and operating margin potential and just good revenue growth potential.

And then one more for Gerald. For the year, what are you embedding for interest expense in the guide? And we've done a couple of debt rounds in the last few weeks? And how do you think about free cash flow conversion for the year? Thank you.

From a -- just let me answer your last question first. Our cash flow position actually for 2023 improved sharply from '22. You saw we added almost $100 million to that number. So I'm pretty encouraged about where we are. Some of that is coming from working capital management improvement. We've had a number of initiatives there. We're pleased with how that's performing. So our expectation is also that we're going to continue to improve that, especially during the '24 period. I guess I'd also say in terms of our overall interest, the cost from an interest perspective for 2024, we're guiding somewhere in that $17 million -- to up a little bit above that $17 million for the full-year.

Yes. So interest expense will come up a little bit, obviously, right? So last year, it's closer to $10 million, it will come up a little bit into that.

Yes. Just for those that haven't seen it, we have announced some additional financing activities, particularly with some institutional investors and the overall rate -- interest rate coupon rate picture there is quite favorable. Well, these are bigger numbers. The overall impact is not as giant as some might think it is.

And maybe a final comment, Brandon, some of these things only get funded when we -- or we only need to pull from them for funding. If and when we close, for instance, the ELITech acquisition, which is the larger one. So we can time that to some extent that the interest expense only, additional interest expense kicks in if and when we get the additional profitability from these businesses.

We draw them as required.

Some of them we draw as required, and some of them have delayed drawdown dates anyway.

Okay, thanks for that clarification. It's helpful. Thank you.

Good question.

All right. With that, we want to thank everyone for joining us today. Bruker's leadership team looks forward to meeting with you at an event. We're speaking with you directly during the first quarter. Please feel free to reach out to me, if you have any follow-ups. Have a great day.