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Good day, and welcome to the Bruker Corporation Fourth Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mr. Joe Kostka. Please go ahead, sir.

Good morning. I would like to welcome everyone to Bruker Corporation's Fourth Quarter 2024 Earnings Conference Call. My name is Joe Kostka, and I'm the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our EVP 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 & 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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent acquisitions, geopolitical risks, market demand or supply chains. 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 our Form 10-K for the period ending December 31, 2023, 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, 2025. 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 first quarter 2025 financial results expected in early May 2025. 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 of 2024 in more detail and share our full year 2025 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thanks, Joe. Good morning, everyone, and thank you for joining us on today's fourth quarter 2024 earnings call. Bruker finished 2024 with another quarter of excellent constant exchange rate, revenue growth and solid organic revenue growth, both higher than what we had expected for Q4 '24, given our very strong Q4 '23, which, if you recall, had organic revenue growth of nearly 16%. For the full year '24, we again delivered double-digit CER, constant exchange rate, revenue growth at 14% and 4% organic revenue growth well above the market, which we estimate was flat to down slightly in fiscal year '24. This is a testament to the strength of our portfolio of innovative solutions, culture of disciplined entrepreneurialism and our Bruker management process. In fiscal '24, we added strategic spatial biology, molecular diagnostics and lab automation platforms to our portfolio, continuing our multiyear transformation into a growth-oriented industry leader with scale, and positioned for leadership in the post-genomic era. This transformation is not just focused on growth, but also very much on higher margin potential and more rapid EPS increases going forward. We intentionally accepted initial margin and EPS dilution from our strategic M&A in order to unlock new very large market opportunities and strong secular growth tailwinds, but also in order to further raise the margin potential and EPS growth profile of Bruker. Looking to 2025, we entered the year with good bookings momentum. We started 2025 with solid BSI segment backlog of still over 6 months of revenue in part due to our Q4 '24 book-to-bill ratio of -- ended up at 0.99 or essentially 1. We also have begun to receive first orders related to the China stimulus program with over $15 million of China stimulus orders in the second half of '24, most of it in the fourth quarter and with more on the horizon. We acknowledge U.S. NIH and academic government market uncertainty and have built that into our guidance. But we fundamentally -- after some settling, we fundamentally do not expect the reduction in NIH and other life science medical and research investment in the U.S. Finally, we experienced strong market trends in diagnostics and in semicon metrology as I will show you later, and we also see signs of a biopharma recovery. Accordingly, we are establishing our fiscal '25 guidance for constant exchange rate revenue growth of 5% to 7%, with 3% to 4% organic growth and 2% to 3% contributions from M&A. We are very committed to rapid non-GAAP operating profit margin expansion and assume about 140 bps operating profit margin improvement in fiscal '25 compared to our '24 level of 15.4%, which by the way, was also a bit higher than what we had expected. Finally, we expect non-GAAP EPS growth of 11% to 13%, with 14% to 16% constant exchange rate, EPS growth, all compared to '24. Turning to Slide 4 now. In the fourth quarter of '24, Bruker delivered strong revenues and non-GAAP operating -- and stronger operating margins than expected. Bruker's Q4 '24 reported revenues increased 14.6% year-over-year to $979.6 million, which included an FX headwind of 1.2%. Constant exchange rate or CER revenue growth of 15.8% year-over-year included organic growth of 3.9% with 4.5% organic growth in our BSI segment and an organic decline of minus 2.8% at BEST, all net of company -- intercompany eliminations. Revenue from acquisitions added 11.9% in the fourth quarter of '24. In the fourth quarter '24, our non-GAAP operating margin was 18.1%, which actually matched our Q4 '23 margin as strong organic operating margin expansion of 300 bps fully offset margin dilution from M&A and FX. Our strong organic operating margin expansion is evidence of the progress our operational excellence processes and M&A integration activity initiatives are making. Finally, Q4 non-GAAP diluted EPS was $0.76, up 8.6% from $0.70 in Q4 of '23 and we are pleased that in the fourth quarter of '24, we were able to resume non-GAAP EPS growth year-over-year. All right. Moving to Slide 5. Now Bruker's strong growth performance amidst challenging marketing conditions in fiscal '24, once again delivered above-market organic revenue growth. Fiscal year '24 reported revenues increased by 13.6% to $3.37 billion with 14% CER revenue growth. On an organic basis, revenues grew 4% year-over-year, consisting of 4.2% organic growth in Scientific Instruments and 1.9% organic growth at BEST, net of eliminations. Acquisitions added 10% revenue growth, and there was a slight 0.4% FX revenue headwind for the year. Our 2024 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. Margins and EPS were down year-over-year as a result of the expected initial dilution from our strategic acquisitions that closed in the first half of '24. Please turn to Slides 5 and 6 now, where we highlight our fiscal year '24 constant exchange rate performance of our 3 Scientific Instruments groups and of our BEST segment year-over-year. In '24, BioSpin Group revenue was $905.7 million and grew with low teens percentage in constant exchange rate. BioSpin saw strong revenue growth in Europe and the Americas, as well as in industrial research, ACA/GOV markets and biopharma, with strong contributions also now from our automation, service and software business. We had revenue from 4 gigahertz class NMR systems each in '24 and '23. And in Q4 '24, we had revenue from 1, 1.2 gigahertz NMR at the University of

Thank you very much, Frank, and thanks, everyone, for joining us today. Pleased to provide more detail on Bruker's fourth quarter and full year 2024 financial performance. Starting on Slide 11. In the fourth quarter of 2024, Bruker's reported revenue increased 14.6% to $979.6 million. It reflects an organic revenue increase of 3.9% year-over-year. Geographically and on an organic basis in the fourth quarter of '24, our Americas revenue grew in the low single-digit percentage, European revenue grew in the mid-teens range, while Asia Pacific revenue declined in the high single-digit percentage all year-over-year. For our EMEA region, the fourth quarter '24 revenue was up mid-single-digit percentage year-over-year. BSI organic revenue growth in the fourth quarter of '24 was 4.5%, a solid revenue performance on top of an exceptional fourth quarter of '23 at 15.5% organic growth. BSI fourth quarter '24 organic systems growth was in the low single-digit range, with aftermarket revenue growth in the low double-digit range percent year-over-year. For the full year 2024, aftermarket revenue represented over 30% of BSI revenues for the first time. Non-GAAP gross margin increased 70 basis points in the fourth quarter '24 to 52.5% as pricing and operational excellence initiatives continued -- contributed to gross margin expansion year-over-year. Our fourth quarter '24 non-GAAP operating income increased 14.9% year-over-year and we posted a non-GAAP operating margin of 18.1%, equal to that reported in the fourth quarter, which has not yet have margin dilution associated with some of our first half '24 acquisitions. On a year-over-year basis, we delivered excellent organic operating margin expansion of 300 basis points in the fourth quarter of '24, driven by volume, mix, operational excellence and integration synergies. This significant organic operating margin expansion fully offset the margin dilutive impact of our earlier strategic M&A and FX in the quarter. On a non-GAAP basis, fourth quarter '24 diluted EPS was $0.76, up 8.6% from $0.70 in the fourth quarter of '23. Our non-GAAP effective tax rate was 32.5% compared to 31.3% in the fourth quarter of '23, with the increase driven mostly by jurisdictional mix and discrete items. On a GAAP basis, we reported diluted EPS of $0.09 per share, including significant acquisition-related costs compared to $1.41 per share in the fourth quarter of '23, which included a onetime $0.99 per share noncash bargain purchase gain arising from the PhenomeX acquisition. Weighted average diluted shares outstanding in the fourth quarter of 2024 were 152 million, an increase of 6 million shares or 4.1% from the fourth quarter of 2023, resulting from our follow-on equity offering in May of 2024. Turning now to Slide 12. We generated $189.9 million of operating cash flow in the fourth quarter of '24. Our capital expenditure investments were $38.8 million, resulting in free cash flow of $151.1 million in the fourth quarter of '24. This reflects a cash flow decrease of $23 million compared to the fourth quarter of '23, as significant acquisition-related expenses and restructurings more than offset better working capital performance in the fourth quarter of '24. We finished the fourth quarter of '24 with cash, cash equivalents and short-term investments of approximately $183 million. During the fourth quarter, we used cash to fund selected Project Accelerate 2.0 investments, capital expenditures and completed debt repayment of about $50 million. We continue to move forward with our delevering actions following the strategic acquisitions we completed in the first half of 2024. In addition, with improved cash flow entering 2025, returning capital to our shareholders through our existing share buyback program is an attractive opportunity at this time. Slide 13 shows our non-GAAP P&L results for the full year of 2024. Revenue was up 13.6% to $3.37 billion, reflecting organic growth of 4%. Acquisitions added 10% to our top line while foreign exchange was a 0.4% headwind, resulting in constant exchange rate revenue growth up 14% year-over-year. The remainder of the non-GAAP P&L results for the full year of 2024 are summarized on Slide 13 with the drivers as explained and on the slide. Turning now to Slide 14, in the full year of 2024, we generated $251.2 million of operating cash flow, down about $99 million from 2023 as a result of lower net income and significant acquisition-related expenses and initial working capital needs for our acquired businesses. We generated $134 million of free cash flow in 2024, down about $109 million from 2023 on lower operating cash flow and higher capital expenditures. Turning now to Slide 16. We entered the year with a stronger transformed portfolio, healthy backlog and emerging order momentum. We're initiating guidance for full year 2025 as follows: reported revenue of $3.47 billion to $3.54 billion, representing reported growth of 3% to 5% and constant exchange rate revenue growth of 5% to 7% all compared to 2024. This guidance assumes organic revenue growth of 3% to 4% year-over-year and estimated foreign exchange headwind of 2%, with acquisitions contributing 2% to 3% to revenue growth. For operating margins in 2025, we expect non-GAAP operating margin expansion of approximately 140 basis points compared to the 15.4% we posted in 2024. On the bottom line, we're guiding to non-GAAP EPS for 2025 in a range of $2.67 to $2.72 or non-GAAP EPS growth of 11% to 13% compared to 2024. This includes an approximate 3% foreign exchange headwind and our non-GAAP CER EPS growth guidance for 2025 is therefore 14% to 16% year-over-year. Other guidance assumptions are listed on the slide. Our fiscal year '25 ranges have been updated for foreign currency rates as of December 31, 2024. We anticipate first quarter 2025 organic revenue to be roughly flat year-over-year with CER revenue growth in the mid-single digits. In the first quarter of 2025, we expect softer operating margin performance year-over-year as we experienced some dilution from our NanoString acquisition completed in early May of 2024. As we saw in fiscal year 2024, we expect our organic revenue and operating margin performance to strengthen in the subsequent quarters of 2025. To wrap up, Bruker delivered meaningfully above market organic growth in 2024, and we're well positioned to deliver strong CER revenue and non-GAAP EPS growth in 2025. With that, I'd like to turn the call back over to Joe. Thank you very much.

Thanks, Gerald. We'll now begin the Q&A portion of the call. [Operator Instructions] Operator?

[Operator Instructions] And the first question will come from Puneet Souda with Leerink Partners.

Frank, my first question is on the guide. I mean the full year guide is 3% to 4% organic growth, which is higher -- at the higher end versus what you had before the NIH indirect announcements and direct cuts. So I'm just trying to understand what sort of gives you the confidence on the instrumentation sales? I mean, obviously, Bruker's instrumentation has more exposure to instrumentation. I mean, so just trying to understand, is it ELITech? Is it AI? Is it aftermarket service or European offsets that are counteracting through the year that sort of give you the confidence and because you're -- and you're also stepping up your margin guide. I mean, 140 bps expansion here that you have for the year, so just getting a number of inbounds on that and if you could help us understand.

Thank you, Puneet. Yes, no, there's puts and takes. There's plenty of them. It's a dynamic environment. We already, for somewhat other reasons, had indicated that we -- even at JPMorgan that we thought that there would be uncertainty in government-supported research and, of course, that uncertainty is there. We all know why. And we just looked at that. I mean, NIH is less than 5% of our exposure, if you like. I did some of them, we did some of the modeling. Look, if that was -- came down 8% to 10%, which I think it's not going to happen, but it could happen, that would be maybe $15 million a little bit more of less revenue and for that, I think we have enough other growth drivers outside of the United States with biopharma coming back a bit, maybe not roaring back, but coming back, some China stimulus funding that may be offsetting or more than offsetting that. Microbiology, semiconductor, AI, applied markets all the way to defense spending in Europe, quite honestly, there are enough drivers that if we put it all together, a 3% to 4% organic growth, it's not an astounding number, but for this year, I think it's solid. And I think we've built a -- I'm not saying this is conservative, I think it's very balanced, quite honestly. And yes, and we really manage at the end of the day for the constant exchange rate revenue growth, right? Even as you go through the quarter, some of them will have more CER, some of them will have more organic growth. So I'm very confident that we can reach the 5% to 7% CER revenue growth this year. And yes, I think it will include the 3% to 4% organic revenue growth. Could we do better? Yes, but there are headwinds, and that's why I think this is appropriately balanced. And yes, we're very committed to the operating profit margin. It's going very quickly back towards 20% over 3 years, obviously, and want to take a sizable step in '25. Management teams completely plugged into that. And that -- and there, we have also enough opportunities to make that happen even with some NIH, which we're now assuming some NIH funding being less certain in the first half of this year or maybe throughout the year. So we feel good about this and are very committed to that, and it then all adds up to 14% to 16% constant exchange rate EPS growth. Unfortunately, there's a bit of a headwind, but I -- for EPS, and I've indicated that at JPMorgan already as well. So with that, the reported EPS growth of 11% to 13% is not -- it's a good number and it's even better if you disregard FX, but of course, this is a reality. So we think all in, I think this is very greater commitment to solve for margins and EPS, if in doubt, that's what will change in the company in terms of OpEx and other things to deliver that, but also reasonable confidence in the revenue growth.

And could you talk a bit about the assumptions in Q1, what you're hearing from the customers in terms of instrumentation placements, their ability to take the instrument and install and get them signed off in Q1 and sort of the main question being that some of the facilities are very much supported by the indirect cuts. I mean I recall when I purchased your solariX 15 Tesla magnet many years ago, I mean we had to take down a while and that was facilities. So if you could maybe just elaborate what you're hearing from the customers and your ability to continue to install here, and any backlog cancellations that you contemplate just given the NIH backdrop?

We have not heard anything about any backlog cancellations. That's why we're a little bit cautious on Q1, as you've heard from Gerald, right? We think we've baked that into that. Fortunately, in Q1, we still also have quite a bit of M&A growth. So I think our mid-single-digit CER revenue growth looks good. But indeed, as you've seen, we've said organically, we might be near flat in Q1, which is baking in a cushion and some belts and suspenders hopefully, for some of that uncertainty. No specific anecdotal. Hey, I don't get my lab ready or I don't have, I don't know, power cryogens, we haven't heard any of that. But right now, obviously, there is uncertainty and then, yes, there was a stay of that order. And we think this has to be -- there will be a new paradigm. I think there is no going back. But I think there also will be, either they'll have a new funding category where they put the $4 billion saved back into infrastructure or other scientific or clinical research projects. We don't think there will be simply a cut, quite honestly, I think that's almost bipartisan in Congress. And I don't know that the new HHS and NIH administration has said we want to cut budgets. I think they want to reprioritize and we'll see how -- what that does. But I think net-net, there will still be a lot of research and validation funding for the type of instruments and aftermarket solutions that we and others in the industry make. So I'm not doom and gloom on the NIH and overall spending philanthropic and other and state spending. Many of these things are very strong. There are many other funding sources. But yes, we've built in hopefully something that accepts that there is uncertainty certainly in Q1 and probably into Q2 into the cadence of our quarters. By the way, it's also not all back-end loaded. I think, already by Q2, we're much more -- even just the way our revenue flow is going Q2 through Q4, I think you'll see pretty strong improvements year-over-year.

The next question will come from Patrick Donnelly with Citi.

You have Lizzy on for Patrick. I guess, first, can you talk a little bit about academic government budget in Europe and China, I think you touched a little bit on stimulus there, but it would be great to hear more on that?

Yes. They've been -- of course, in China, there is now stimulus funding. It's not going to be this 1- or 2-quarter bolus, which in a way is nice for us. It's going to be much more spread out. Some of that has begun to come in already, a little tiny bit in Q3, a little bit more in Q4. We expect more in the first half of this year, but it may even come out throughout the year. It may be more for us in terms of revenue at '24 -- sorry, I misspoke, '25 and '26 effect which is great. I'd rather have these things be a little bit smooth over multiple quarters. Europe has been -- I should also mention the rest of Asia. There is a lot of Asia Pacific, Taiwan, Korea, even Japan, other parts of India, which is not specific, but nonetheless, those have been strongish, and some of that is making up for a little bit of weakness in China. You may -- you'll hear that from others as well. Europe has been reasonably good recently, and so all in, I think ACA/GOV is not going to be great this year, but I think it's not going to be that bad. It's not all -- I think it's -- and then there's just a lot of other strengths and growth drivers that we see this year that I mentioned earlier that don't depend on ACA/GOV. So yes, with all in, I think, again, we try to bake all of that into our guidance range of this 5% to 7% CER revenue growth, and I think it's reasonable.

Great. And I've just one more. For the deal dilution this year, is $0.08 to $0.10 kind of the right way to think about it entirely? Or am I thinking about that right?

Yes. This is Gerald. Yes, you are thinking about it correctly. We're moving from roughly $0.15 to $0.20 plus dilution coming out of '24 into $0.08 to $0.10 in '25 on the EPS line. That's correct.

And then hopefully, near -- very much hope to be near breakeven in '26. So it's -- and again, it shows you some of our ability to flex with some of the biopharma business and cellular analysis and spatial biology being relatively weak in '24. We've flexed to make that happen. And again, we're on track for exactly those numbers that you asked about for '25 and still very much looking to have breakeven from that in '26 already.

Next question will come from Michael Ryskin with Bank of America.

This is Julia on for Mike. Do you have an update on biopharma recovery timing? Are you expecting that to be in the second half of this year?

Good question, Julia. We think it's going to -- we don't think it's a step function. We think it's going to be gradual. So we're expecting that already in the first half of this year, but maybe getting stronger in the second half of the year. I think that's maybe a better way to think about it.

The next question will come from Luke Sergott with Barclays.

This is Salem on for Luke. Is the expectation still to play somewhere in the realm of 3 to 4 UHF NMRs this year kind of in line with before you've placed in the past couple of years? And then could you talk about the geographic concentration of the backlog in BSI? Is that relatively in line with your exposure? Or do you see it kind of higher in regions where you're seeing the most strength?

Good questions. Yes, this might be a year with 3 ultra-high field systems in '25. Indeed, last 2 years, we had 4 of them. Could be 4 this year, but we're presently expecting 3, all baked into the guidance and geographic breakdown of backlog for BSI, I'm -- I assume it's consistent with our -- Jason, do you have a thought on that?

It will be consistent with our geographic mix.

Yes. So nothing unusual there is the answer, right?

Correct. The only thing I would add is the backlog level at this point, close to 7 -- a little over 7 months at this stage. So it hasn't really changed dramatically from the third quarter coming out of the fourth. So we still have a fairly significant backlog level. The composition is, as Frank just described, similar to our overall geographic mix, but the number is a little bit not terribly changed from where we were in the third quarter.

And if I may, since the consumables heavy businesses like ELITech molecular diagnostics or even the cellular analysis and spatial biology businesses, by their nature, have less backlog. We probably will have a normalized backlog level that's not 5.5, but 5. So we have -- we can continue to cushion this year and any NIH uncertainties, et cetera, and we do some of that with our still elevated backlog that has remained stubbornly high, and that's a good thing. Of course, we had modeled it previously to where it would come to below 6 and 5.5 by right about now, but book-to-bill has been reasonable throughout the year and pretty quite good for a strong Q4 being at 0.99 is excellent. So yes, so we continue to benefit from that, and it also allows us to do some good quarterly planning and cushioning, because we -- it's a bit of a luxury position, but it's good to have.

That's helpful. Appreciate that. And then on operating margins, you're targeting around 140 basis points of expansion, right? And I'm just wondering if you could give some puts and takes on that kind of bucket out the assumptions on the operational improvements on the existing business versus what's continuing to come from the integration of M&A, maybe a little bit on FX as well. And kind of in that vein, I know you guys do a good amount of manufacturing in Europe. Are you guys contemplating anything on potential tariffs there? If not, how are you thinking about the potential risk?

Okay. Lots of good questions. Yes, 140 bps, of course, there's always a bit of a range around that, but that looks like a reasonable number. So yes, that would bring us to about 16.8, but it could be a little bit higher, it could be a tad lower than that, but I think that's 140 bps is a good number. It's all in. So we haven't tried to -- there is some -- there is continued organic headwind here probably around 50 bps, but there's also a little bit of FX tailwind. So it's net-net. There is a nonorganic -- let me get this right, nonorganic headwind. So without all these headwinds in an ideal world, it would be even better than 140 bps, but this is an all-in number, including FX and including yes, about 50 bps of organic headwinds. Tariffs, right, I mean we do manufacture in the U.S. We manufacture in Europe. We manufacture in Malaysia. Those are our major sites. We do not manufacture in China. So we have a lot of flexibility, and we can turn on a dime. But if they're -- so far, we don't seem to be affected, but you never know what happens, things are happening quickly. So if we needed to respond, we can respond within a few quarters. And yes, I don't think we'll be singled out for punitive tariffs or anything like that. I mean, this is -- our instruments also including those coming from Europe, and many of them are coming from the U.S., but many of them are coming from Europe are needed for our life science research enterprise here in the U.S. So we can -- we have flexibility. We have a number of operations in the U.S. that do manufacturing and final test. And if we needed to modify some of -- move some of the production over here for the U.S. market, we could certainly do that.

The next question will come from Brandon Couillard with Wells Fargo.

Frank, it would be great to get an update just on the timsTOF platform. Any updated installed base figures you have, a revenue run rate for that platform, how you think about growth in '25?

Yes. So timsTOF is doing better again. Obviously, we had some competitive dynamics there when that other instrument first came out and we've recovered from some of that with some very good further improvements of the various timsTOF models and timsTOF is more of a platform with multiple models, both at ASMS and then also, quite importantly, at the International HUPO last year. So our win rate has come back and it remains competitive. There's 2 good platforms on that market, and that's good for the market overall. So somewhat muted the growth. But with the win rate improving more recently, I think that will pick up again. And yes, it's about not far from a $200 million business, so it's a meaningful business for us and also tends to have good margins and of course, it's strategically very important to us. You'll see a lot of activity this year in terms of further improvements, refinements, new models and things like that. So we invest -- a lot of our investments are going in this direction for the -- for proteomics and the various flavors of that from proteoform profiling of intact to all the way to lipidomics, metabolomics, glycomics. It's a very key -- it's one of the breakout -- along with spatial biology, it's one of the breakout opportunities of the company, and we're very heavily investing there. So it's doing good and its growth rate is recovering.

And then two questions for Gerald. Could you break out the impact of currency on operating margin guidance for the year? And then secondly, inventories came down a lot sequentially. Maybe that was currency. Just how are you thinking about free cash flow conversion in '25?

Yes. So on the first question, Brandon, yes, I think generally, for '25, we're expecting a 3% foreign exchange headwind right now. And that's just where it is. We'll see how it all plays out as we get down further. In 2025, we start to see some movement thereafter. And on the cash flow conversion, we had quite a good quarter, I would say, notwithstanding some acquisition-related expenses in the fourth quarter. We generated a significant amount of working capital improvement in the fourth quarter and I'm expecting to see that continue as we move into 2025. Our cash flow conversion has improved, I think, significantly after, I would say, some challenges, especially related to initial working capital associated with our acquired businesses. But overall, we're pretty pleased with the performance in the fourth quarter and expect to continue to see it.

Yes, our operational teams and our finance teams are doing a great job with free cash flow conversion that's already improving, as you've seen in Q4. And it will be another big focus for '25, obviously, as we either further deleverage or do more share buybacks. I think that's a priority. It gives us more flexibility. I think maybe one earlier modeling question that you had, Brandon, on our 140 bps '25 operating profit margin expansion, the net headwind between a larger M&A headwind and a smaller FX tailwind is about -- the net headwind is about 20 bps. I hope that helps and addresses your question.

The next question will come from Doug Schenkel with Wolfe Research.

This is Madeline Mollman on for Doug. For Gerald, if conditions with the NIH or in China do deteriorate, can you talk through what levers you have at your disposal to protect the margin and EPS guidance? And then thinking about the NIH funding, specifically, if the environment does deteriorate, are there things that you can do to reduce adoption -- friction to adoption of products like funding for capital -- if funding for capital equipment becomes more challenging?

It's sort of -- as I said earlier, it's kind of baked in, right? We have done some sensitivity modeling. We read your research. So for instance, we did model an 8% decline, which we don't think will happen, but it could happen in the first half, maybe with some catch-up in the second half. And so those type of reasonable scenarios, including delays and also a flat out reduction in NIH budget this year by, for instance, that 8% figure that's floating out there mathematically, we think we've got -- we've put that into the guidance. That's why, otherwise, maybe our guidance would have been a little higher, but this is something we've really tried to take into account. Can you predict everything this year? Of course, not. But I think we've done a reasonable job in putting some unpleasant NIH scenarios into our guidance. Have we put in a worst case? Of course, not, no, but I think there won't be a worst case, but a reasonable contingency has been built in. And we've also, as you've seen, have taken that through margins and EPS. So it's also built into that not only at the revenue growth level. So we think we have enough strength. Gerald, you would like to add something to that?

I was just going to say with respect to your other part of your question on '25, in the company, I'd just remind folks that the company is still quite a global organization. And we still have significant revenue performance in other geographies outside of the United States, 70-plus percent of our revenues coming ex U.S. So there's still a significant order backlog. Our performance across most of our other areas of growth are continuing, here I'm talking about the 2 areas Frank highlighted, the semiconductor metrology area, our microbiology and infectious disease businesses. We have very solid performance across industrial businesses in other geographies. So I think the general portfolio of the company is really pretty transformed to a level where it's not really only about academic government research funding and even if it's more focused on that, it's -- there's plenty of global opportunities outside of the U.S.

Great. And then on the topic of the Make America Healthy Again movement, can you talk a little bit how Bruker is positioned to benefit from things like increases in food, water, environmental and PFAS testing? What's your exposure there? And do you have anything built into your guidance around that?

Yes, we have an applied markets business as well. So we do some PFAS testing and PFAS research testing. Some other companies have more of that than we do, but we are involved in some of those markets as well. Clearly, as people are looking at validation studies on -- I think in my -- the MAHA in some ways, Make America Healthy Again in my way of thinking, very, very much supports that you look at -- now I'm going to get a little nerdy, but that you look at the phenome, that you look at the post-genomic total organism, the patients and don't just do genomic medicine and things like that because they don't change so much with food and environmental factors. So in a subtle way, but perhaps in a fundamental way, it's going to drive us much more towards this old human phenome biology testing and not -- and that's all very much where we're aligning directionally. So there is a subtle long-term effect that I think will be very powerful for what -- for the type of medical research that we are prepared to support and that this new administration seems to be focusing on. Nobody has quite said it that way, but if you think about it more deeply, it's actually going to very much accelerate this post-genomic era and the whole human phenome biology. A little bit much for a financial call but I think it's important.

The next question will come from Rachel Vatnsdal with JPMorgan.

Perfect. So I wanted to dig into this first quarter guide. You mentioned that you're assuming flat organic growth, mid-single-digit CER. So that's really implying a mid-single-digit contribution from acquisitions. It looks like The Street was modeling a double-digit number for the first quarter in terms of M&A contribution. So can you unpack those M&A assumptions for us in the first quarter? Are there any one-timers? Is there conservatism baked into the M&A assumption? And then what type of cadence are you assuming for M&A contribution throughout the year?

Right. It will have the biggest impact in the first quarter, Rachel, of course, right? Because the 2 larger acquisitions closed back to back in April 30 and May 6 from what I remember, that's ELITech and NanoString, whereas Chemspeed closed somehow in the middle of the first quarter. So indeed, our M&A benefit in the first quarter will be mid- to high single digits perhaps. And accordingly, that's very satisfactory. Since we're aiming for overall revenue growth, we're managing the quarters not for one of these elements that go into it, but overall revenue growth, so it will be -- that will be reasonable for us and that fits our cadence. M&A will then have a moderate impact -- benefit in the second quarter, and then it will fall off in Q3 and Q4 as all of these things will by then be organic.

Got it. That's helpful. Then just for my follow-up, just regarding China stimulus. You mentioned that you had $15 million of stimulus orders in the back half of 2024. Can you walk us through what are you assuming in terms of benefit from China stimulus into the 2025 guide versus what would be upside? And then also just where are you seeing orders either from a provincial level, from a product level, any color there would be helpful as well?

Rachel, it's Gerald. I'll take that. On the stimulus orders, in the guide, we would simply assume that it's -- first of all, we did see some improvement in stimulus orders in the fourth quarter of '24, but we're expecting to see those orders spread out in -- continue to be spread out in the first half of '25. So we expect to see more in the first quarter, for example, in '25. And then the benefit itself from a revenue perspective to mostly hit into the second half of '25 and into the first half of '26. So those are already essentially baked in, but I think we have not assumed substantially large numbers in those cases, largely due to the delays that we have seen and continue to see with respect to that.

So modest levels are baked in and we're not about to prematurely harvest potential higher levels because of NIH uncertainty. So maybe that will end up offsetting itself, but it remains to be seen. We baked in. In an isolated world, we've probably been quite conservative and China stimulus being baked in because of other uncertainties that we're all aware of. Hope that helps.

The next question will come from Tycho Peterson with Jefferies.

A couple on guidance as well. I guess, the 2% to 3% from M&A, could you maybe just delineate between NanoString? I know that had been running below plan, Chemspeed had been running above plan. And then ELITech, are you seeing synergies with the MALDI business there yet? And then also, Gerald, expectations for further backlog reduction in '25, intentionally bringing that down. And are you guys assuming a reversal of the import/export restrictions? And then lastly, Frank, semi -- could semi accelerate from here? I think you've got a new gated architecture replacing FinFET. There's a lot more sampling and process steps needed. And maybe just talk a little bit about whether semi could actually pick up from here.

So yes, NanoString, it's doing okay. I mean it's not quite running at the $10 million per month, $120 million run rate, a little bit lower, but maybe it's running at $110 million or so. And that's in a year, remember, when -- of course, we all remember where biopharma was relatively weak and often that tends to be 1/3 of NanoString revenue, and that was just a weak part. So we expect that to pick up. We don't expect NanoString to go back yet in '25 to its pre-Chapter 11 levels, but we expect nice growth in NanoString as well as in Cellular Analysis this year. ELITech is just chugging along. It's just like, my God, I've never had such a predictable business. It's good. It's -- as you may recall, from JPMorgan, it had more placements of instruments last year than we had expected. That bodes well for these instruments then coming up to full speed and having the consumables pull-through by maybe the middle of this year, so that they're doing great. Chemspeed is doing better than expected. Semi is so strong already and it's on such a good trajectory. I don't know that it would further accelerate. But I also, to your point, maybe don't expect any deceleration in our semi portfolio. So it's just a delight and it's been on a good growth trajectory with terrific margins. And I missed something on import/export, I apologize, what was the question on that?

Are you assuming that gets unwound, the restrictions on China?

So we have certain semi restrictions on China. They're not going to go away. Those were already implemented 2, 3 years ago for very high-performance equipment that you cannot export to China. That's completely baked in as of years ago. And these other more recent stuff that came out just in early January, none of that affected us. And so therefore, it won't go away, Tycho, but only because it doesn't affect us. These instruments, mostly do bottom-up proteomics. And the few instruments that we have that do top-down proteomics, they come from Switzerland or Germany. So they're not affected directly.

Okay. And then, Gerald, can you comment on the backlog dynamics? And then also, I had people asking about first quarter operating margins. It looks like they're pretty soft. So could you touch on that as well?

Yes, right. We -- so as we said, we think the cadence will be that operating margin improvements will be more in the -- not only back half, but in the Q2 through Q4. So Q1 will be not strong on operating profit margin. That is correct, simply because that's still mathematically a quarter where the NanoString dilution is new to us year-over-year last Q1 '24, I'm stating the obvious or we didn't have NanoString yet, so therefore, it didn't have its dilutive effect yet. So it's -- honestly, it's just math. There is nothing more than that in there. It's just how the math comes together.

And Tycho, with respect to your question on backlog in '25, we're not assuming any significant change. I mean at this point, to be blunt about it, we've talked about dragging that backlog down over multiple years. And our order performance, particularly in the fourth quarter, has just made that challenging, as Frank mentioned earlier.

In a good way.

So we haven't been able to bring it down significantly because of the order.

But that's the put or the take, I don't know which it is. But if NIH was really just terrible for the rest of the year, and there was no new political consensus of how to redeploy those savings into research infrastructure and maybe uncertainty would be the biggest problem, right? I think we have that -- we're sitting on that extra 2 months of backlog cushion that we'd like to not use up this year. We don't think we will. But that comes down a little bit this year is fine and also baked into this a little bit, but we're not expecting to go from 7 to 5 months, but that's kind of the -- that's the free variable that we can choose to come down by half a month or by 4 months this year, depending on how order patterns are. That's why we are in an unusual position to where we can -- we have that other steering wheel that we can -- that just nicely counteracts any other uncertainty.

The next question will come from Subbu Nambi with Guggenheim Securities.

Frank, you mentioned timsTOF, that the new product launches is back on track. Where are you seeing most growth in terms of geography? Given recent macro funding events, especially in the U.S., could you lay out what your mass spec exposure is in the U.S. and then what is assumed in the 2025 guide?

Yes, timsTOF, so indeed, yes, we've signaled that the [indiscernible] will be launched hopefully at ASMS, but sometime this year, that's sort of an unusual new field of proteoform analysis within mass spectrometry. So we hope that we'll have a launch this -- we're sure -- we're pretty sure, we're confident that we have a launch this year hopefully at ASMS. There will be other improvements. That for competitive reasons, we don't want to hint that right now, but there's a lot in the pipeline. The geographic contribution on timsTOF is not that unusual. It's obviously U.S. heavy and Europe heavy, but there is a meaningful contribution also from Asia Pacific, China but also Japan, Korea, this Korea stimulus package that's now coming along, biopharma and biosciences is part of that. We're also benefiting from the battery part, another driver of strength. So timsTOF had been suffering also a little bit from weaker biopharma funding. So we think that may begin to gradually reverse this year. So that might be another driver that lifts all boats, maybe that's -- and a lot of that biopharma funding tends to be primarily in the United States. A lot of it in Europe, a lot of it in Asia Pacific, but the U.S. is clearly leading there. Hope that helps, Subbu.

Yes. So that means the NIH funding is probably not going to just have an isolated effect on mass spec. One thing you said interactome, does that mean it's top down? And should we worry about something else? Or is this what you told, Tycho, that it's manufactured elsewhere, not in the U.S.?

Did you say -- did you use the word interactome?

Yes, interactome for me...

Interactome is different from top down. A lot of people use bottom-up proteomics to look at protein-protein interaction, interactome is also very much studied by NMR, ultra-high field NMR. So the approach -- anyway, I think that without getting into too much scientific details on the financial call, none of this matters, all of these instruments, none of these instruments, interactome is not top down, so those are separate. But either way, none of this restricts any of our products that for these type of applications are all made in Europe. We're out of time.

Yes, sir. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Joe Kostka for any closing remarks. Please go ahead.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an investor event or speaking with you directly during the first quarter. Feel free to reach out to me to arrange any follow-up. Have a good day.