Joshua S. Young - Vice President-Investor Relations Frank H. Laukien - Chairman, President & Chief Executive Officer Rene Lenggenhager - BioSpin Group President, Bruker Corporation Anthony L. Mattacchione - CFO, Senior VP-Corporate Finance & Accounting.

Steve B. Willoughby - Cleveland Research Co. LLC Brandon Couillard - Jefferies LLC Tim C. Evans - Wells Fargo Securities LLC Michael Ryskin - Bank of America Merrill Lynch Doug Schenkel - Cowen & Co. LLC Ross Muken - Evercore ISI Jonathan Groberg - UBS Securities LLC Tycho W. Peterson - JPMorgan Securities LLC Isaac Ro - Goldman Sachs & Co.

Bryan Kipp - Citigroup Bryan Paul Brokmeier - Cantor Fitzgerald Securities William March - Janney Montgomery Scott.

Good afternoon, and welcome to the Bruker Q3 2015 Earnings Release Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I'd now like to turn the conference over to Joshua Young. Please go ahead..

Thank you very much, Amy. Good afternoon. I'd like to welcome everyone to Bruker's third quarter 2015 conference call. My name is Joshua Young, and I am the Vice President of Investor Relations and Corporate Development for Bruker.

Joining me on today's call are Frank Laukien, our President and CEO; Tony Mattacchione, Bruker's Senior Vice President and Interim Chief Financial Officer; and Rene Lenggenhager our newly appointed President of the Bruker BioSpin Group.

In addition to the earnings release we issued earlier today, we will also be referencing a slide presentation as part of today's conference call. The PDF of this presentation can be downloaded by clicking on the earnings release hyperlink on Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. A reconciliation of our GAAP to our non-GAAP financial statements is included in our earnings release and in our webcast presentation. Before we begin, I'd like to reference Bruker's Safe Harbor statement, which I show on slide two.

During the course of this conference call, we will make forward-looking statements regarding future events or the financial performance of the company that involve risks and uncertainties. The company's actual results may differ materially from the projections described in 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, as well as other subsequent SEC filings. Also note that the following information is related to our current business conditions and our outlook as of today, November 4, 2015.

Consistent with our prior practice, we do not intend to update our projections based on new information, future events or other reasons prior to the release of our fourth quarter 2015 financial results in February 2016. We will begin today's call with Frank providing a business summary.

Rene will then have a few brief comments about the reason he joined Bruker, before Tony will cover the financials of the third quarter and the first nine months of 2015 in more detail. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukien..

Thanks, Joshua. Good afternoon, everyone and thank you for joining us on the call today. I am pleased to report that Bruker reported stronger, well balanced operational performance in the third quarter of 2015. Our organic revenue growth, operating margin expansion and free cash flow generation were all much higher on a year-over-year basis.

I will begin my presentation on slide four. We reported revenues of $396 million in the third quarter of 2015, which represented a decrease of minus $24 million or minus 6% from Q3 of 2014. Foreign exchange rates reduced our revenues by minus 11% year-over-year in the third quarter of 2015.

Our year-over-year organic revenue growth in Q3 2015 was plus 8%. This strong growth was driven by our CALID and our BioSpin group. CALID sustained it's a strong first half performance by delivering double-digit organic growth in the third quarter of 2015. Our BioSpin Group also delivered strong organic growth due to a rebalance in our NMR business.

Geographically, Europe and Asia Pacific were the primary drivers of organic growth in the third quarter. Our third quarter 2015 non-GAAP operating margin increased by plus 470 basis points year-over-year versus Q3 2014. While our CAM restructuring in 2014 helped to drive approximately plus 120 basis points of this improvement.

The remaining increase was related to positive mix and some accelerated customer acceptances in Q3 2015, which originally had been expected in Q4 of 2015. We also continue to make underlying operational improvement in our business.

We reported non-GAAP EPS of $0.19 in Q3 of 2015, which represented year-over-year growth of plus 36%, despite facing a higher tax rate and a year-over-year FX headwind of minus $0.02. Finally, we generated $45 million of free cash flow, a plus $41 million year-over-year increase due to higher profitability and more efficient working capital.

I would also note that we faced a weaker comparison in – with Q3 2014. Moving onto slide five, I show Bruker's performance through the first nine months of 2015. During the first nine months of 2015, we reported a revenue decline of minus 12%. This decline was primarily driven by currency effect in the 2014 CAM divestitures.

We reported year-over-year organic revenue growth of plus 2% in the first nine months of 2015. High single-digit organic revenue growth in our CALID group and low single-digit organic revenue growth in our NANO group more than offset a low single-digit organic revenue decline in our BioSpin group year-to-date.

Geographically, Europe and Asia were the strongest performing regions on a year-to-date basis. Our non-GAAP operating margin for the first nine months of 2015 expanded by 220 basis points to 11.5% compared to 9.3% in the same nine months period of 2014.

Our non-GAAP EPS for the first three quarters of 2015 were $0.51 a plus 11% increase compared to the same period of 2014. Excluding the effect of changes in foreign exchange rates, our EPS would have grown by plus 26% in the first nine months of 2015 year-over-year.

Finally, our free cash flow more than tripled year-over-year during the nine month period of 2015 primarily as a result of our strong performance in Q3 2015. So in summary, the operating performance trends through the first nine months of the year are very good. Our BioSpin business is starting to rebound after a slow start to the year.

And we are generating higher organic growth and we are we're driving higher operating margins and free cash flow. Please turn to slide six and seven now, where I will I'll provide additional details about the year-over-year performance of our three groups and of our best segments in the third quarter of 2015.

Let me begin with our BioSpin Group, which reported strong organic revenue growth as a result of a rebound in our Nuclear Magnetic Resonance or NMR business. Our NMR revenues grew in all geographies and we also benefited from timing as we were able to complete several installations in Q3 of 2015 that we had expected to finish later in the year.

I would also remind you that BioSpin had a weak first half of 2015 and benefited from some catch-up in Q3 2015. Our new order bookings for NMR continued to remain healthy and we believe that the market is recovering from the weak demand that we experienced last year.

Our BioSpin Preclinical Imaging or PCI division posted mid-single-digit organic revenue growth in the quarter, which was driven by our preclinical MRI product. Even though the division posted reasonable revenue performance in Q3, our PCI new order bookings are weak on a year-to-date basis.

As a result of this weakness, we have decided to restructure the molecular imaging business of PCI to better align our cost structure with the lower revenue outlook. In addition to healthy revenue growth, BioSpin also posted significant profitability improvement in the third quarter as a result of two primary factors.

First, the BioSpin Group benefited from higher volume and a favorable product mix after unfavorable product mix in the second quarter of 2015. Second, we are seeing margin benefits from our restructuring and operational excellence action. Overall, BioSpin had a much improved third quarter, but some of this outperformance was related to timing.

Next, I will turn to our CALID group, which generated healthy double-digit organic revenue growth in the quarter and improved profitability. CALID saw healthy demand in Europe and Asia including China in the quarter.

One of the drivers of this performance was our Daltonics Division, which experienced broad-based strength in nearly all product lines and geographies in Q3 of 2015. We have spent a lot of time working with strengthening the product portfolio of Daltonics and we're seeing improved demand.

Our Detection Division, which is part of CALID also continued its strong year with another quarter of exceptional revenue growth as a result of its new explosives trace detection product or ETD, which we delivered in Q3 of 2015 in Europe. Detection is a lumpy business and after a weak 2014, we are seeing a strong year in 2015.

One should note that there will be much less explosives trace detection business in the immediate future as the European airports now mostly have been upgraded to newer technology. Please turn to slide seven now, where I will discuss the performance of our Bruker NANO Group and our BEST segment.

The NANO Group reported an organic decline in revenues and new order bookings in the third quarter primarily as a result of weaker demand from our industrial customers.

The bright spot for the NANO Group continues to be our AXS Division, which posted mid single-digit organic revenue growth in Q3 2015 and is benefiting from higher demand for its x-ray diffraction product as well as some timing effects due to improved execution for its order to revenue processes.

Revenue in our NANO Surfaces division declined in the quarter with particular weakness in the semiconductor and data storage industry.

We currently don't see any signs that demand for the division's products will improve in the short-term, but we continue to be strong believers in the long-term potential of our technologies and products in semiconductor metrology.

This conviction is reflected by our recent – very recent acquisition of Jordan Valley Semiconductor, which was announced earlier this week. The closing of the acquisition was announced earlier this week.

The acquisition is expected to enable us to capitalize on the secular trends, towards smaller and smaller feature sizes and three dimensional structures in the semiconductor metrology market. I will talk more about this transaction on the next slide.

Finally, turning to our BEST segment despite an organic revenue decline of 3% in Q3 2015, BEST expanded its non-GAAP operating margin to almost 10%. The decrease in revenue is the result of a difficult year-over-year comparison due to ITER back in Q4 – Q3 of 2014 and some RI-GmbH revenue shift into Q4 of 2015.

Additionally, the ROSATOM pilot lines effectively shifted out of the third quarter and this pilot line will present approximately $6 million of low gross margin revenue in Q4 of 2015.

We are very pleased that our BEST segment in the first nine months of 2015 have seen more than 20% order growth year-over-year, with large superconducting wire orders from major MRI manufacturers, who have determined that the excellent performance, timeliness and highest quality of our BEST superconductors enable them to achieve lowest overall cost.

On slide eight, I would like go into more detail about the rationale of our Jordan Valley Semiconductor acquisition. You can see on this slide that the ongoing digital revolution in social media, cloud computing, and smaller portable electronics is changing the types of tools required to serve the semiconductor metrology markets.

Semicon customers are demanding faster and more precise metrology of smaller and smaller feature sizes and three dimensional structures at advanced semiconductor node.

Jordan Valley provides x-ray metrology and defect-detection equipment for semiconductor process control, that will enable Bruker to be a bigger player in what we believe will be a fundamentally attractive market. Not many other metrology tools can provide useful results at these emerging advanced nodes.

By combining Jordan Valley's core metrology strength with Bruker's complementary x-ray technologies, we believe we are very well positioned to capitalize on the adoption of new technologies and the next cycle of growth in semiconductor metrology.

I would like to wrap up my presentation on slide nine, where I show the key messages that have emerged after our performance in the third quarter. Earlier this year, I conveyed to you that my highest priority in 2015, was to ensure that Bruker delivered on its financial guidance for the full year.

I'm pleased to report that after nine months, we are in an excellent position to meet or exceed our original fiscal year 2015 guidance for organic revenue growth, operating margin expansion and EPS.

Our strong performance in Q3 2015, has put us in a position, where our year will be somewhat less dependent on Q4, which should help de-risk the full year. Our BioSpin Group is recovering after a weak start to the year, as a result of better performance from our NMR business.

I'm encouraged by both the revenue and new order bookings performance from NMR and I'm optimistic that this trend will continue. Our CALID Group is having a much stronger year and we're seeing good growth for new broad products and for core franchises.

With the elimination of our CAM losses at the end of 2014, CALID has significantly improved its profitability. Finally, we are attracting exceptionally experienced top notch managers to join both our senior management team and our Board of Directors. During the third quarter, we announced that Dr.

Hermann Requardt, the former CEO of Siemens Healthcare and John Ornell, the former CFO of Waters had joined Bruker's Board of Directors. We are excited to add two highest quality executives such as Hermann and John. We've also been strengthening our management team even further.

We recently announced that Rene Lenggenhager will take over as President of Bruker BioSpin and I will introduce Rene to you in a moment. In addition, we recently hired Christian Busch as BioSpin Group, EVP of Finance. Christian joined us from Novartis to take over the leadership for the BioSpin Group finance function.

And we made an important hire in our Daltonics Division, where Dr. Dietrich Hauffe has been named as the Executive Vice President of our Life Science Mass Spectrometry business. Dietrich have joined us from PHN and he also had a very successful career working for Dionex previously.

So, with the improved performance of BioSpin, the continued momentum of CALID and key new managers joining Bruker, I feel good about what we have accomplished in the first nine months of the year. Now, before Tony dives into the financial details of Q3, I'd first like to turn the call over to Dr. Rene Lenggenhager to introduce himself to all of you.

Rene, please..

Thank you, Frank. Even though today is only my third day at Bruker, I though it would be helpful to provide you some perspective on why I joined Bruker and what I see as the opportunity in the BioSpin Group. Bruker has a strong culture built on customer intimacy, innovation with integrity, and product leadership.

This culture fits well with my past experience at Mettler Toledo, and attracted me to join the company. I also joined because I'm excited about the potential of the BioSpin Group. Bruker is a market leader and NMR will be a critical technology to help enable new scientific discoveries as new applied clinical and industrial solutions in the future.

We will continue the tradition of innovation, but it will also forward the operational excellence and lean initiatives, an ongoing journey that can continue to bring improvements year-after-year. I'm very familiar with the advantages and the challenges of managing business franchises, where you have a market leader position.

At my previous company, I completed many operational excellence projects ranging from R&D, sales and marketing, operations and logistics. From commercial perspective, I was responsible for enhancing the value selling capabilities of our sales force while strengthening our processes and delivering sustainable growth and margin expansion.

I understand that the customer success and financial success need to go hand-in-hand and I see many opportunities to work with Frank and help make group of BioSpin an even more successful all around high performance franchise. In the near-term, I'm focusing on several key priorities.

First, I will be working to gain a deeper understanding of the BioSpin business, customers and markets. Second, I will work with the organization to finalize business targets and goals for 2016. Third, I will ensure that the group successfully completes its ongoing restructuring initiatives.

And finally, I will ensure that we continue to drive operational and commercial excellence to new levels all with a focus on customers, innovation and profitable growth. So, I will close by stating that I'm excited to be part of the Bruker team.

I see tremendous potential in the BioSpin business and I look forward to meeting our shareholders and analysts in the coming year. Now, I will turn the call back over to Tony Mattacchione..

Thank you, Rene and welcome to the Bruker leadership team. I will now provide some additional details on our financial performance in Q3 2015 and for the first nine months of 2015. Financially, Bruker had a very good third quarter in all respects.

Organic revenue increased 8.1%, gross and operating margins expanded by 190 basis points and 470 basis points respectively. And EPS increased $0.05 or 36%. Finally, we generated $45 million of free cash flow in the quarter, which is at a high watermark for us this year. On slide 11, I show a snapshot of our Q3 2015 non-GAAP results.

Our total revenues were $396 million, a decrease of 6% from the third quarter of 2014. Our non-GAAP operating income was $52.8 million, a 47% increase from Q3 2014 and our non-GAAP operating margin increased 470 basis points year-over-year to 13.3% from 8.6% in Q3 2014.

While we had an easy comparison compared to Q3 2014, our profitability improvement reflect a strong quarter in both our nuclear magnetic resonance, and mass spectroscopy businesses. We also benefited from improvements we have made to our portfolio, our operating capabilities and our fixed cost structure.

An offset to these improvements was continued weak demand from most of our semi-data storage and industrial customers, and our Bruker NANO Group. The net result of these drivers was that our non-GAAP earnings per share increased 36% to $0.19 a share in the quarter.

As I mentioned, we generated $44.7 million of free cash flow in Q3 reflecting a strong year-over-year improvement, which I will elaborate on in a minute. Our higher free cash flow combined with continuous improvements in our working capital ratios led to a strong year-over-year improvement in our net cash position.

On slide 12, I show the revenue bridge for Q3 2015. Despite a 2.8% negative effect from the 2014 CAM divestitures and a 10.9% negative effect from changes in foreign currency translation, organic revenue grew 8.1% in the third quarter of 2015.

Organic revenue growth of $33.2 million in Q3 2015 was driven by our CALID and BioSpin groups as Frank had mentioned. I would also note that our CALID group in particular had a very strong quarter of performance. On slide 13, our Q3 2015 non-GAAP gross margin of 46.1% increased 190 basis points on a year-over-year basis.

Foreign currency translation decreased our gross profit by $20 million in the quarter, but had a small positive effect of 20 basis points on our gross margin percentage. The benefits of our CAM restructuring added another 65 basis points to our gross margin in Q3 2015.

The roughly 100 basis points of remaining gross margin improvement was primarily the result of higher volume and a more profitable product mix in the quarter.

BioSpin had a very strong quarter of gross margin performance due to a number of factors including the positive effect of the restructuring and operational improvements we've completed over the last couple of years. We also benefited from earlier than expected revenue recognition on some systems with higher gross margins in the quarter.

Our Q3 2015 operating expenses were down approximately $20 million year-over-year. Approximately $15 million of this decrease was related to foreign currency translation with the remaining decline primarily related to our CAM restructuring.

Careful management of our fixed cost structure has resulted in more pull-through of gross profit increases to our operating process. Non-GAAP operating margin improved 470 basis points compared to Q3 2014.

In addition to the higher gross margin, another factor in driving our higher operating margins was an R&D expense decline of 130 basis points year-over-year. CAM and FX represented most of this increase but we also selectively cut back R&D project spending in our NANO and BioSpin groups.

Our Q3 2015 non-GAAP tax rate was 32.2% which was 5.2% higher than the previous year third quarter and this was caused by a change in our jurisdictional mix including an expected decrease in U.S. profit as a result of the weakness in the NANO group. Our full year 2015 non-GAAP tax rate is now expected to be between 24% and 25%.

Finally, non-GAAP EPS of $0.19 represents a $0.05 or 36% increase from Q3 2014 despite facing a $0.02 headwind from foreign exchange. On slide 14, I show a reconciliation of our GAAP to non-GAAP financial results for the third quarter. In Q3 2015, we excluded $24.6 million of operating cost from our non-GAAP results.

This was a decrease of $6.4 million from Q3 2014. This decrease is driven by lower restructuring and other costs. I would also note that our non-GAAP interest in other income and expense net line increased by $2.4 million year-over-year, as a result of higher FX foreign currency transaction losses.

On slide 15, I show the revenue bridge for the first nine months of 2015. We reported organic year-over-year revenue increase of 1.9% after the first nine months of 2015. Changes in foreign currency translation lowered our revenues by 11.1% or approximately $145 million with a weaker euro driving most of year-over-year difference.

On slide 16, I show our non-GAAP P&L for the first nine months of 2015. Our non-GAAP gross margins have improved by 120 basis points compared to the first nine months last year. The gross margin improvement through the first nine months is a similar story to what we saw in Q3 2015.

From a group perspective, CALID drove most of this improvement as savings from our CAM restructuring added 65 basis points to the gross margin improvement through the first nine months of the year. Changes from foreign currency rates added another 20 basis points of improvement with the remaining increase related to a more profitable revenue mix.

The CAM restructuring and FX represented all of the $67 million year-over-year decrease in operating expenses in the first nine months of 2015.

Our non-GAAP operating margin increased by 220 basis points year-over-year, though the first nine months of 2015 with CAM representing a little over 100 basis points of this increase and roughly 100 basis points coming from fundamental improvements in the rest of our businesses.

On the bottom line, we reported $0.51 in non-GAAP EPS, which was $0.05 or 11% higher in the first nine months of 2014, primarily due to the strong operating earnings growth in Q3 2015. Changes in foreign currency translation rates reduced our EPS by $0.07, whereas the absence of the divested CAM businesses increased EPS by $0.07 as well.

On slide 17, we show the GAAP to non-GAAP reconciliation for the first nine months of 2015. We excluded operating costs of $56.5 million compared to $59.8 million in the first nine months of 2014. Lower restructuring costs were offset by higher other costs in the first nine months of 2015.

The biggest drivers of the higher other costs are related to outsourcing of our – the outsourcing of our pension plan in Switzerland and higher IT costs related to our ERP, financial consolidation and human resource transformation system initiative. On slide 18, I show our cash flow statement for the third quarter of 2015.

We generated free cash flow of $44.7 million in Q3, compared with $3.6 million in the same period in 2014, which is a $41 million improvement. Higher GAAP net income together with lower restructuring costs, lower depreciation and amortization and improved working capital efficiency, all contributed to the free cash flow increase.

Also contributing to the increase were approximately $12 million of tax refund resulting from settled audits in Germany. Our cash conversion cycle improved by 19 days compared to the Q3 2014. This would comprise of the following. DIO decreased by 24 days to 206 days. Our DSO decreased by four days to 56 days.

And this was an improvement that was partially offset by a reduction in our days payable outstanding which totaled 38 days, compared to 48 days in Q3 2014. Overall, we are pleased with the improvement in our working capital, but we do have further room for improvement.

During the third quarter, we repurchased 395,000 shares as part of our share buyback program. On a year-to-date basis, we have repurchased approximately 1.25 million shares. Now, turning to the guidance, I show Bruker's updated guidance for the full year of 2015.

As a result of our performance in Q3 2015, we are increasing our guidance for non-GAAP operating margin expansion and for EPS.

We continue to expect to generate organic revenue growth of approximately 1% but with our year-to-date profitability improvement, we now expect to increase our non-GAAP operating margin by 150 basis points or more, compared to our previous guidance of 100 basis points or more.

We now expect that our non-GAAP EPS will be in the range of $0.75 to $0.80 compared to our previous guidance of approximately $0.75. We expect changes in foreign currency exchange rates to reduce our reported revenue by approximately 10% for the full year in 2015, which refines our earlier guidance of 9% to 10% adverse effect.

This will generate a headwind to our non-GAAP EPS of roughly $0.10 for the full year in 2015. Our currency assumptions include a yen to U.S. dollar rate of $1.2 and a U.S. dollar to euro rate of 1.12, which were the spot rates at the end of Q3 2015.

We expect fiscal year 2015 CAM related revenues to decrease by $50 million in 2014 – sorry, in 2015 compared to 2014. As I mentioned earlier, we now expect the non-GAAP, our non-GAAP tax rate to be between 24% and 25% for the full year in 2015.

So, I will close by reiterating that the third quarter was a very good quarter of overall financial performance, performance improvements for the company. The strong outperformance in Q3 put us in an excellent position to deliver our full year of attractive operating margin, earnings growth and cash flow improvement and commitment.

With that, I'd like to turn the call back over to Joshua to start to the Q&A session..

Amy, could you please assemble the Q&A roster..

Certainly. Our first question comes from Steve Willoughby at Cleveland Research..

Hi, good evening, guys. Thanks for taking my question. Frank, you went from a mid single-digit year-over-year decline in your BioSpin business last quarter to calling it out as an area of strength here in the third quarter.

I was just wondering given your relatively positive commentary regarding orders the last few quarters, should we expect the NMR business to kind of turn the corner now and expect a more positive result to continue in the fourth quarter and going into next year?.

Yes, Steve. I do think there is a sustainable improvement in NMR with orders for the full year that you're expected to clearly be stronger than last year, which are pretty weak orders, as you recall.

In the first half of this year, we had some execution issues in that Bruker BioSpin business that I think we've fixed to a great extent and clearly, at least we made very significant improvement in Q3.

And so, I think with healthy orders in NMR this year compared to last year and improved execution, I think we're on a good path to hopefully be able to call that in another one or two quarters for sustainable improvement. I'm optimistic here..

Just one follow-up on that, Frank. In regards to the strength of the orders you're seeing in NMR, I know you've been calling it out as healthy for the past several quarters.

Was the strength in orders in NMR any different here in the third quarter as compared to what you saw in the first or second quarter?.

The NMR orders fluctuate even more from quarter-to-quarter, that's even lumpier. So looking at orders in any given quarter, Q3 orders were excellent, but there also was an also ultra-high field order. As you may recall, we had a press release in some of our ultra-high field orders.

Some of which of course won't get delivered and turn into revenue for several more years. But overall, it's been – it's been – for the year it's healthy single digits that's healthy for the full year.

And in any given quarter, it really goes up and down a little bit, I really wouldn't want to comment quarterly on BioSpin orders because they fluctuate too much. For the year, they're healthy as we said before and that implies single digits. But....

Thanks, very much. Okay. Thanks, Frank..

Yes..

The next question is from Brandon Couillard at Jefferies..

Yes. Good afternoon.

Frank, in terms of the – I guess the more balanced second half revenue cadence here, I mean was that largely a function of luck or better management of the cadence? And how much control do you – can you really exert on this dynamic to perhaps level it out more so in the future?.

We work very, very hard on it, Brandon and then we got lucky. Sometimes, you work very hard and you don't get lucky and things fall out, but we worked very hard. We've made a very concerted effort to do better than our own previous internal forecasts for Q3 and we succeeded.

So that was good, because I was not comfortable with the way Q3 and Q4 were shaping up with Q4 is always the strongest quarter of the year, that will never be changed. But it was too much with – would have come in from Q4 and I wanted to achieve more in Q3 already. But keep in mind that Q3 was a mix, there was some favorable mix.

There was some favorable timing for which we worked very hard, but they also were from improving fundamentals. It's really a mix of those three things coming together..

Thanks. And a quick one for Tony.

Could you give us the impact of currency in terms of operating profit dollars in the third quarter?.

Sure. Actually, let me get that back – get that to you later..

Super. Thanks..

The next question is from Tim Evans of Wells Fargo..

Thank you. Frank, on pre-clinical imaging business, you said it was weak and you decided to take a restructuring. So I'm assuming that you are anticipating that weakness will continue.

Can you talk about what's going on in that business a little bit more broadly?.

Well, if you – which you do I know of course, Tim, If you followed our press releases, you'll notice that in the third quarter, we had some of the most significant product introductions in that. We have a new preclinical PET SPECT system, we call it the Albira Si, which we think is going to be performance leading.

We came out with a cryogen-free 3 Tesla magnet and an MRI PET combination and also optical molecular imaging, a new system. So major, major product introductions in PCI in Q3, but of course, you don't get orders and revenue from that yet. That's going to take probably a couple of quarters before that begins to ramp up.

So we're not only doing restructuring. Although we did some restructuring or we are in the process of doing some restructuring in some of the optical molecular imaging product line, which we're streamlining and integrating into another R&D site and factory..

Okay. And just one ....

I don't know if I answered all of your questions, but that's sort of the big picture..

That is helpful. And I just wanted to squeeze one in on your margin guidance, you said greater than 150 basis points of expansion. If I just kind of triangulate on revenue and EPS, I could get to a margin number that is meaningfully more than 150 basis points of expansion.

I want to make sure that I'm calculating that correctly and there is nothing below the line that would kind of maybe make the margin a little bit lower and still allow you to come in to EPS guidance?.

There is just still a lot of risk every fourth quarter, (41:57) by a significant margin, well I try not to use the word margin here. But the fourth quarter will be the biggest quarter of the year in every respect and so therefore there is risk if some sites are not ready or the magnets don't make it to field and things like that.

I think we're, the 150 bps guidance or greater than 150 is reasonable, there is upside to that, but there is also risk..

Okay. Thank you..

Tim, there is nothing below the line noteworthy and as both have Frank and I'd mentioned in our comments we had very positive mix in Q3. We don't expect that mix to continue in Q4 and we do have from lower margin business that we expect to revenue in Q4 as well. So, we don't expect that mix to continue.

And if I may just to go back to Brandon's question the FX impact on operating profit was about $5 million in the third quarter..

$5 million negative?.

Negative..

The next question is from Derik de Bruin at Bank at America Merrill Lynch..

Hi, good evening, it's actually Mike Ryskin calling in for Derik. Thanks for taking my question. Kind of a follow-up on something that's been asked before about the third quarter, fourth quarter split. Most of you – as you mentioned, most of your second half strength usually comes from 4Q, you alluded to that in some guidance earlier this year.

But then today, you also mentioned that you saw some strong sales in CALID with explosive trace detection, which was lumpy non-recurring. Then you had some orders in BioSpin move up from 4Q, and those two groups really drove your performance.

Could you provide some color on how much of an effect you think those two factors will have in 4Q? And whether or not we should expect sort of similar ramp that we've seen in prior years, especially given the difficult comp you have with 2014?.

Yeah. Mike, like we just mentioned Q3 we had – the timing of Q3 there was more acceptances that we expected, those won't continue into Q4. And we – yeah, so we benefited from the timing. The year-over-year Q4 is not expected to be much higher or much lower as well. So, that will play an effect on the sequential comparison..

Yeah. I mean, so being a little less dependent on Q4 is a healthy thing. I'd like to make that – I'd like to reach that, achieve that in every year. Q4 will still be a very strong quarter. And I think you kind of always – we're giving guidance for the full year.

We're reporting the first nine months, so you can really triangulate what we're thinking about the fourth quarter.

But as always, keep in mind that for Bruker even though we have better and better tools to predict, there is still a plus/minus $15 million type of uncertainty and that's very fundamental because we deal with bigger systems and customer acceptances and insights that can or that may or may not be ready.

So, I think, this is you know, reasonable guidance, and I think, that's makes still for a very strong Q4, but I am glad that we moved a little bit more into Q3, otherwise Q4 would have been, we would have relied too much on Q4, I think, that's really all there is to it.

It's not that all of a sudden Q3 is stronger than Q4, but I think, it's just a healthier sequence of events as we now envision it..

Our next question is from Doug Schenkel at Cowen & Company..

Hey. Good afternoon, guys and thank you for taking my question. I only have one, but it does have four parts.

So, just related to NMR order improvements and the healthy order bookings, one, was the momentum pretty balanced across higher field products, and lower field products where your major competitor exited? Two, anything notable in terms of geographic strengths or weaknesses? Three, is it too early to determine with about the improvements in academic government budgets freeing up is helping order trends? And four, anything available data-wise, that would demonstrate that some of your newer product launches are starting to have an impact on driving a replacement cycle? Thank you..

We love your one single question, Doug. So, an NMR order, geographically we're pretty balanced, so there was strength everywhere, in the quarter year-to-date Europe was quite strong.

NMR orders ultra-high field has been, it was dormant – almost dormant last year, it has recovered a little bit, but it's not at its usual strength, and new orders for gigahertz systems and gigahertz class systems as these are, depending on field strength $10 million to $20 million types of funding that takes longer, so we don't have anything under our belt yet in that direction from new orders.

There's one 1.2 gigahertz order that we added in Frankfurt in the third quarter, sorry I don't want to skip that, but that's just been in the works and in the pipeline for a very long time and finally got funded.

So ultra-high field I would say partial recovery compared to 2014 but not as strong as we had seen some time ago and quite honestly not as strong as we might expect hopefully in 2016, 2017 as the gigahertz class NMR systems hopefully we'll generate along with the new applications particularly for intrinsically disordered proteins, which I think will be very important but that has not materialized into orders yet.

Academic trends, more or less as they have been, Japan is still weak, India, Middle East, Africa a little bit weak in BioSpin and Europe and the U.S. relatively healthy and China not bad.

New products, yes some of the more new products that don't require very large budgets like the Fusion, the Fusion Solution combining NMR and high revolution accurate mass spectrometry. Clearly we're seeing some initial traction or things like the food screener module for the wine profiler, the honey profiler, these things are getting traction.

Whereas that you expect things that cost $10 million or more, people are excited about them, people see the scientific need, but the fundraising there takes much longer. I hope that has addressed all four parts of your question..

That was perfect Frank. Thank you so much..

You're welcome, Doug..

Our next question is from Ross Muken at Evercore ISI..

Good afternoon, guys. So obviously, when Charlie departed, there was a lot of concern relative at least on the investor side to sort of the story of the management team and the like even though many of you've been together for a while.

But then, you added two really impressive board members which you mentioned and then, you brought on Rene not long ago. And clearly, you are a much, much strong organization, at least optically to us.

From an operation standpoint, is there any way you can give us some – that I know not everyone's been there for quite a long time yet, but any way you can give us some like anecdotal stories or examples, where these three individuals who came from obviously, much larger and diversified companies that had maybe a bit better of an operating trajectory historically? Give us examples of how they've already start to input, maybe add to the business? And how you've incorporated some of the ideas to sort of helping drive what seemingly have been better results here in the business? Obviously, a lot of this has been many years in the making.

I'm just trying to get a sense for some of the new voices..

Okay. I'll start with Rene because this is his – really his day four. He's my kind of guy, he started working on Sunday, on November 1. So, and he had an entire Saturday of vacation between jobs, so I'm optimistic that he will be a hard worker.

He's a very experienced guy and his very deep very technical background in innovation and R&D experience, including R&D management, but he really has outstanding operational experience. And operational defined very broad not only manufacturing or logistics or procurement.

So, I think that's one of the areas as you know, our operational and commercial excellence initiative. The lean initiative you've never done, we've implemented some of that, but you know, he has the experience, that he shared with me, that you can really do round after round after round, then you get a little better, each time.

And so driving, that relentlessly along with innovation, and he already visited, his first four customers in Cambridge, and Boston, this morning. So, that – those are the anecdotes for Rene, but it's very early days, so we'll have to observe that.

Hermann Requardt on the board, I mean – he obviously, has so much experience that's immediately applicable to our preclinical imaging business. Because he did the clinical imaging, at Siemens, as one of the world leaders, and so we have a lot of insight there from technology to trends to funding to – while patient reimbursement doesn't affect us.

So, we're learning a lot from him about – what to do, and what not to do, very valuable, and – he's just been, at one board meeting so far, it's early days. John Ornell is very active; he is sort of my partner, for the CFO search.

And I think, we're also learning a lot of things, about long-term tax planning – things that won't have an effect, not even on next year very much, but over time, can add up.

So he is an audit committee member, we're learning a lot from him, also on systems implementations, so incredibly valuable sounding board, it helps that he lives locally here, so we get to see him not only at board meetings, but sort of in some ways coaching us a little bit on a number of topics.

And those are my anecdotes, for the moment, it's all early days for all three of them..

Your next question is from Jonathan Groberg of UBS..

Great thanks for that....

Very poor audio Jonathan.

Anything you can do about that?.

Sorry, do you hear me okay..

Yeah, John, you're better now, go ahead. You can ask your question..

Okay.

I was just saying geographically, obviously Japan and China are two significant markets for you, can you maybe just give a little bit more color on what's interesting in those geographies?.

Yeah, John. This is Joshua. So, last quarter we talked about Japan being a point of weakness in the business. We saw those trends continue in the third quarter. In Japan, we saw weak revenue and weak orders with reasonable declines.

In terms of China, you know China we had a slow start to the year, but I'd say we certainly are seeing mixed results in some businesses. We're doing quite well in China, for example Daltonics and others not so well. The way that will shake out though is we still expect growth in both revenue and new order bookings for the full year in China..

Okay.

And then also I may have missed this, can you give some color on the MALDI-TOF, the (54:14) business and kind of what you are expecting there over the next bit?.

Yeah. This is Frank. So that continues to be healthy even in Europe where of course the market – you know we've been in the market much longer, the aftermarket business is growing very rapidly.

We're expecting for the full year healthy growth in the Americas, which is what we expected because we now have – or as of earlier in the year we had our second FDA claim accepted. And in China, we've seen very healthy market development year-to-date and expect more of that as we also got Chinese FDA clearance late last year.

So its particular strength in China and the U.S. and very satisfactory in general and also as predicted particular strength and now rapidly growing from a smaller base, but rapidly growing aftermarket business for the multi biocipher..

Frank, could you quantify that how big that business is now or how big you are expecting you see by the end of the year?.

Very broadly in the $80 million to $100 million range. I don't think we want disclose exact figures, nor do I have it at my finger tips..

Okay. All right..

Next question is from Tycho Peterson at JPMorgan..

Hey, guys.

The positive price mix dynamic you called out, was that specific to NMR or you kind of seeing an ability to kind of extract broader price increases across the portfolio?.

It was specific to NMR. We had a few high margin shipments, some of which benefited from timing. And if you look at, we had lower NMR gross profit shipments in the previous third quarter. So most of the product mix effects came from NMR..

Okay.

And then, on the weakness in NANO, can you may be just, Frank, talk a little bit about how you think about the cycle here? How long you think the order book here remains depressed and with the bolt-on you did there, does that smooth out a little bit of the cyclicality for that business?.

Yeah. I think that the, that business, that's an ongoing business there. They are not only depending on the cycle, but also on technology adoption and technology adoption and first pilot systems. That's a steadier process.

Of course, what we really would like to see is the technology adoption where we think we're in very, very good position for the next decade quite candidly and without having to wait for a decade even as we go from 14 nanometer to 10 nanometer eventually seven nanometer and five nanometer and of course, the trend toward 3D FinFET structures infrastructure in memory end process is ongoing already anyway.

But the cycle to build capacity that has not really been satisfactory for anybody in the metrology business, but we do know it's coming back it's an usually long down cycle.

But we're kind of feel good about that first of all we don't have too much exposure as a company overall, we do get the technology adoption part throughout and you were all patiently waiting for the cycle to pick up that will be the gravy, but in the meantime that's the situation.

I think some of the other industrial markets you're not surprised to hear, sometimes there are elements of that that's the Wall Street Journal business that's what you read about, so they are they didn't get stronger in the last three months to six months.

Keep in mind that NANO also has made a very conscious effort to have more of its mix from academic research and biology and life science research, particularly the florescent microscopy, florescent microscopy super resolution and multi-photon, those acquisitions that we did in the previous year that's getting into gear.

So the mix of NANO is also changing along the way in a way that in some areas where we see favorable funding trends from the brain initiative or from investments in cell biology.

So it's a mixed bag, it's not all just dependent on steel or metals or cement or so, although there is some elements of that we'll become more diversified and in some areas, we simply, in addition to the cycle, which we can't control and which isn't that favorable, where our technology adoption curves, where we're almost a must on that adoption curve and we're branching out more into life sciences.

So, it's strategically changing over time from the NANO that perhaps you remember from two years or three years ago. I hope that helps, that may have been too much color..

The next question is from Isaac Ro at Goldman Sachs..

Good afternoon. Thank you for taking the question here. Frank, maybe just a high level question on the CFO search, could you maybe give us an update on the progress there in terms of the pipeline kind of the qualities of the candidates you're currently evaluating, maybe when we might know a little more there. Thank you..

Yeah. It's a very active search and we're clearly looking at candidates and we're getting to see some good candidates. We have good external candidates and internal candidates.

We believe that, we're going to make a decision most likely in the first quarter of next year and at this point, it's just an intense process, that's proceeding and so I would think that we most likely will make a decision in the first quarter of next year..

Great. And then, just one product specific question on Biotyper. I think, you mentioned in the prepared comments, that it was strong, I was curious, if you could maybe try to put a little more color on what it contributed to growth. And then, more importantly, where do you think we are in the product life cycle.

I gather that we are still somewhat early days, based on I think our last conversation at ASM this year. But just curious on, as you think about sort of in baseball terms, what inning we are in, and maybe from here what kind of general investment you think, that you need to make to realize the opportunity, that'll be great. Thank you, guys..

Well, I mean, for the Biotyper, we don't want to get too granular in giving its growth rate and stuff. But it has healthy growth rates. It has – and has had for a number of years the highest growth rate within the Daltonics business as you know and we don't see that trend changing dramatically even though it's a larger business.

So the growth rates are good and we've also said directionally in the past and that continues to be true that its gross margins are above CALID average or Bruker average. To your – to the further questions, I think it depends a little bit what geography we're talking about.

In Europe maybe we're in the fifth inning or something like that, and now of course aftermarket – there is a lot more established. We are much further along.

Aftermarket, it's now starting to play a role in – first customers are also experimenting where they presently research use only not approved yet, resistance testing and approaches to maybe even to do susceptibility testing on that platform, which might add another S curve to the identification capabilities eventually and that's early days.

I think in the U.S., we are perhaps in the third inning and in China in the second. So they're still early days and still a lot of, lot of potential. I hope that's helpful..

The next question is from Dan Arias with Citi..

Hi. This is actually Bryan Kipp on behalf of Dan. Just a question on pacing in the quarter, just around the color you guys gave on the kind of the implied growth rate for 4Q.

How did the October pace just – and in conjunction with that, did you expect the $6 million ROSATOM to come forward in the back half of the year, can you remind me there?.

We expected that in the second half of the year and during the quarter, it became clear that it's going to move out of Q3 and into Q4..

And the pacing in the fourth quarter in the sense of – I know you guys are still working through your ERP system and trying to have visibility at month end. How is it pacing so far in the fourth quarter, just trying to get a sense of the plus and minus $15 million is still what you are thinking? Thank you..

I think we find out the plus or minus $15 million in the last three days or four days of each quarter. It's literally there so many installations and acceptances that I have no increased visibility and I wouldn't have it internally even by middle of December. It's literally whether or not we may exceed by up to $15 million.

I mean that's – that's at the high end of the variability or might be lower that really gets determined in many ways fundamentally and even with better systems and sort of the last week of each quarter. That's no different in Q4 and then that actually would be more or less also true in the Q3 or Q2. So the pace – the pacing is on track.

There's nothing remarkable there in Q4..

And just a higher level question, kind of more around strategy. You guys have not emerged not in a bad way, but on talking to you at length in regards to the rationalization of the portfolio, right-sizing the business and streamlining the company.

These tangible changes are helpful, but just thinking where are you guys are going forward in terms of product portfolio kind of dynamic? Do you have any interest in moving further downstream or do you think it's going to be five years to 10 years from now, the identity of Bruker is still going to be a leading kind of more upstream research analytical instrument provide?.

Well, I wouldn't want to use the category downstream or upstream.

But more we're looking for defensible high-margin areas where we can be one of the leading players and that can be a $10 million ultra-high field NMR system that's clearly what you would call a very high-end and perhaps upstream that can be a €50,000 or $50,000 explosive trace detector has new libraries and technology that goes far beyond what's generally has been found at airports before.

So, there, I would say we're very – we are not only a high-end only company. We're looking for high performance kind of sometimes come in innovative small packages or in user friendly packages with great content like the MALDI Biotyper.

That's not the most high-end MALDI (01:05:36) or mass spectrometer that's out there, but it's incredibly powerful solution because of the libraries and assays and consumables that come with it.

So, we're much less a niche high-end company today, but we still look to leverage performance for good margins and that can be really at either end of the market wherever we think we can find interesting profit and margin pools where we think we can have defensible positions..

Our next question is from Bryan Brokmeier at Cantor Fitzgerald..

Hi. Good evening.

Since introducing the Tissuetyper, how is the development of the library then?.

Very early days, very early days, Bryan. So, there is some early adopters that are now ordering this system, and they will all be – in most cases, they will all be collaboration partners.

This will – this in some ways will be a team sport, not unlike for the MALDI Biotyper, where there is no way that we can develop all the contents or library in-house, and so, we rely on many different collaborators to – who explore and discover new areas.

And then, we help organize validation, if they think they've discovered something, you've got to do it on multiple systems in multiple labs. So, it's very early days.

But in the meantime, even as there's no validated assays yet, it's in a system that generates a lot of excitement because of it, incredible tissue or anatomical pathology research capabilities. So, we benefit initially now from the research-oriented customers..

Okay.

And in the quarter, I guess really over the last couple of quarters, were any of the improvements that you're seeing – were any of the improvements you're seeing that has allowed for customers to take deliveries in these – from the fourth quarter into the third quarter? Is any of that a result of things you've done year-to-date? Or was it really just up to the customer and the customer readiness?.

Very strong execution in Q3. We really worked it at very hard, and that means, you lose some customers because they're not ready and you work with others. And you just make sure that we don't add to it by incomplete shipment or quality or not properly planning our resources.

So I really think the BioSpin colleagues and others in CALID and elsewhere, I think they just – I think our execution is getting better and better. I think our management processes, and information systems are getting better. They're not perfect yet, but I think there is a lot of improvement and it's pretty steady..

And just one point of detail here. It's not that customers are taking shipments, it's that we're completing installations of systems earlier than expected and they're meeting the specs as well..

Thank you..

Okay, great. Thank you..

The next question is from Paul Knight at Janney Montgomery Scott..

Hi, this is actually Bill March on for Paul.

How you guys doing?.

Good.

How are you?.

Doing well. I was just hoping you could provide a little more color on the recent Jordan Valley acquisition? And then, how we should think about kind of the pacing and/or lumpiness of revenue within that segment? Thank you..

Sure, Bill. So we've given some color on the rationale behind the Jordan Valley technology.

The X-ray metrology technology that they're pursuing, we think they can strengthen that even further with some of the components and other technologies that we can contribute, so there's some nice technical synergies, there's also some sales and customer support and service synergies between their global setup and our global setup that's all coming together nicely.

We have given some guidance that we think this will be that their revenue next year might be somewhere around $25 million, so Bill, what they contribute the remainder of this year will be negligible, but what they contribute next year might be around $25 million, and we expect this to be $0.01 to $0.02 accretive to non-GAAP EPS next year..

Just then a quick follow-up, just thinking about the revenue pacing, do you think that they'll have kind of a consistent mix or do you think that it could be kind of quarter-to-quarter or you could see lumpier revenues? Thanks..

Well, since they have high ticket items, I'm sure that particular business will have lumpiness, no question about it, but the more different businesses we have, these lumpiness are not in phase, so to speak, so within the much larger revenue stream of Bruker, I don't think this will materially or perhaps in anyway increase our lumpiness overall..

That's helpful..

Standalone business, yes, but at the Bruker level, it's the lumpiness, doesn't make such a big difference..

Great. Thanks for your help. Have a good evening..

That is all the time allotted for the call. I would like to turn the conference back over to Joshua Young for any closing remarks..

I want to thank everyone, for joining us this evening. If you're interested in meeting with Bruker management, we'll be presenting at the Citi and Credit Suisse Healthcare Conferences during the fourth quarter and the JPMorgan Healthcare Conference at San Francisco, in January 2016.

We also invite you to visit us at our headquarters in Billerica, Massachusetts. Thank for your attention and have a nice night..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..