Joshua S. Young - Vice President-Investor Relations Frank H. Laukien - Chairman, President & Chief Executive Officer Anthony L. Mattacchione - Senior Vice President and Chief Financial Officernce & Accounting.

Brandon Couillard - Jefferies LLC Steve B. Willoughby - Cleveland Research Co. LLC Jack Meehan - Barclays Capital, Inc. Tim C. Evans - Wells Fargo Securities LLC Miroslava Minkova - Stifel, Nicolaus & Co., Inc. Doug Schenkel - Cowen & Co. LLC Tycho W. Peterson - JPMorgan Securities LLC Bryan Brokmeier - Cantor Fitzgerald Securities Steve C.

Beuchaw - Morgan Stanley & Co. LLC Jonathan Groberg - UBS Securities LLC Luke Sergott - Evercore Group LLC Aurko Joshi - William Blair & Co. LLC Michael Ryskin - Bank of America Merrill Lynch Daniel Arias - Citigroup Global Markets, Inc. (Broker) Joel Harrison Kaufman - Goldman Sachs & Co. Sung Ji Nam - Avondale Partners LLC Eric J.

Criscuolo - Mizuho Securities USA, Inc..

Good afternoon, and welcome to the Bruker's First Quarter 2016 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Today's conference call is also being recorded. At this time, I'd like to turn the conference call over to Mr.

Joshua Young, VP of Investor Relations and Corporate Development. Sir, please go ahead..

Thank you very much, Jamie. Good afternoon. I'd like to welcome everyone to Bruker's first quarter 2016 earnings 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; and Tony Mattacchione, Bruker's Senior Vice President and Chief Financial Officer. In addition to the earnings release we issued earlier today, we will 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 number two. During the course of this conference call, we will be making 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 current business conditions and our outlook as of today, May 4, 2016. 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 second quarter 2016 financial results in August.

We will begin today's call with Frank providing a business summary. Tony will then cover our financials for the first quarter of 2016 in more detail. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukien..

Thank you, Joshua. Good afternoon, everyone and thank you for joining us on the call this afternoon. I will begin today's earnings presentation on slide four. I am pleased to report that Bruker's momentum continued in the first quarter of 2016 as we reported solid organic revenue growth and operating margin expansion.

We clearly started off the year on a positive note. That being said, our performance reflected a mix of both positive business drivers and demand challenges in parts of our portfolio. We reported revenues of $375 million in Q1 of 2016 with year-over-year organic revenue growth of 5.6%.

This growth was driven by our BioSpin and CALID Groups which both posted strong performance in the first quarter. Geographically, North America and China were the primary drivers of organic growth in the first quarter. Our first quarter 2016 non-GAAP operating margin increased by 245 basis points year-over-year versus Q1 of 2015.

Some of this outperformance resulted from the completion of our first shielded Aeon 1-gigahertz NMR system ahead of schedule. We reported non-GAAP EPS of $0.21 in Q1 of 2016 which represented year-over-year growth of 50%. This strong performance was a combination of operating performance and a lower tax rate.

Please turn to slide five and six now, where I will provide additional details about the year-over-year performance of our three groups and of our BEST segment for the first quarter of 2016. Let me begin with our BioSpin Group which had a very strong first quarter and delivered double-digit organic revenue growth.

This performance was a combination of an easier year-over-year comparison in Q1 and the higher order growth the BioSpin Group generated throughout the year 2015. All of our BioSpin businesses performed well in the first quarter of 2016, with NMR driving most of the improvement due to higher volume and pricing increases implemented last year.

Additionally, during the first quarter, we finished the installation of our first actively shielded 1-gigahertz magnet at the University of Bayreuth. This installation is a technological milestone for Bruker and was one of several positive contributors to our growth and operating margin expansion in the quarter.

We experienced steady growth for the NMR products we are selling into applied and clinical research markets, and we also had a strong quarter of performance for selling service and aftermarket offerings under our newly branded offering called LabScape.

Finally, we substantially completed the closure of our BioSpin Rheinstetten manufacturing facility during the first quarter. The restructuring actions taken by BioSpin in 2015 helped lower the Group's expenses, which was a driver of our higher operating profitability in the first quarter.

Moving onto our CALID Group, the CALID Group reported a strong first quarter of revenue growth as all of its businesses reported higher year-over-year revenues. Our Optics business, which had faced top-line challenges in 2015, delivered a strong first quarter of revenue growth driven by its near-infrared and remote sensing products.

Optics also generated good order growth in the quarter. Our Daltonics business generated high single digit revenue growth in the quarter, primarily driven by strong performance of our MALDI Biotyper and an uptick in our services revenue, while orders in Q1 started more slowly.

Our detection business converted a large legacy order out of backlog and into revenue during the first quarter. This drove revenue growth, albeit at a low gross margin, on this legacy order. The detection business also faced a difficult year-over-year comparison due to a large high margin project that was recognized in Q1 of 2015.

Please turn to slide six now. The NANO Group in Q1 saw a continued soft demand from most industrial markets. Our AXS business generated strong revenue growth in 2015, but saw weak demand in Q1 of 2016 from both academic and industrial customers. Geographically, Europe was an area of incremental weakness for AXS.

We did not see any change in recent trends for our NANO services business as most markets remained weak in the quarter. A bright spot for the NANO Group is that we began to see higher demand for our semiconductor metrology tools.

Our order growth was good and we are increasing our backlog which should result in higher semiconductor metrology revenues later this year. Finally, our BEST segment reported flat revenues despite the growth in its core superconducting wire business as a result of the phaseout of two multiyear programs, namely ROSATOM and DESY.

At BEST, we made technical and quality progress with our high temperature superconducting, or HTS tapes, which have significant long-term potential. We expect our first commercial HTS revenue in 2017 and HTS may benefit our ultra-high field 1.2 gigahertz NMR business in 2018 and beyond.

Over the past two months, we have participated in three important customer and industry conferences – Pittcon, the Experimental Nuclear Magnetic Resonance Conference known as ENC and the European Congress of Clinical Microbiology and Infectious Diseases or ECCMID.

On slide seven and eight, I walk through some of the product introductions and announcements we had at these conferences. I'd like to start with a completion of the world's first shielded Aeon 1-gigahertz NRM magnet and system. The system was installed at the research center for macro – for biomacro molecules at the University of Bayreuth in Germany.

This system is going to enable researchers to expand their studies in structural biology, membrane proteins and Intrinsically Disordered Proteins or IDPs.

Along with other NMR cryoprobe and other experimental methods innovations, this gigahertz class magnet will enable researchers to explore larger protein structures with NMR and to better understand the role of Intrinsically Disordered Proteins and the Dark Proteome.

With this installation, we have also significantly reduce the space required to install magnets of 1-gigahertz or higher. We have also eliminated the need for liquid nitrogen and reduced the liquid helium consumption to essentially zero. On slide eight, I show three of the products that we introduced at the ENC and ECCMID conferences.

We are bringing the power of NMR to the applied markets, specifically to the food and beverage industry.

Our new honey profiling module of the NMR FoodScreener solution is quickly gaining acceptance by major global food analysis labs and honey packers due to its unique capabilities to rapidly and cost-effectively detect adulteration and mislabeling of content or origin.

We have already seen leading companies such as Famille Michaud use our products to increase the scope of their analysis while reducing their honey test time to result from two days with manual labor to just 20 minutes by NMR.

Next, or similarly, our NMR wine screener module in its latest version is gaining traction because it is an easy cost-effective NMR solution to conduct comprehensive screening of high-value wine.

Bruker has developed a proprietary database of authentic wine samples that allows manufacturers to determine authenticity parameters such as grape variety, geographic origin and vintage.

Our NMR wine screener solution combines quality control and testing of safety issues and authenticity in a unique way and we are expecting strong growth for this solution in the future.

Finally, switching to microbiology, at ECCMID, we announced enhancements to the MALDI Biotyper workflow, as we expanded the assay menu to include selected high-value resistance testing for clinical microbiology research.

The MBT Biotargets 96 shown on the slide, which were introduced, helps to reduce operator error and save time in running tests on the Biotyper solution. We also announced new MALDI Biotyper research use-only capabilities for rapid testing for strains and of selected antibiotic resistant mechanisms.

Moving on to slide nine, Bruker's key priorities for 2016 remain unchanged from last quarter, and we are making good progress for each of the key priorities listed on the slide. So, overall, we're off to a good start in 2016 and significant work remains to achieve our full-year operating goals.

With that, let me turn the call over to our CFO, Tony Mattacchione..

days inventory outstanding decreased 32 days to 201 days; days sales outstanding decreased 10 days to 57 days; and days payable outstanding increased nine days to 32 days, all compared to Q1 2015. During the first quarter of 2016, we repurchased 3.4 million shares.

Since the inception of the share buyback program until March 31, 2016, we have repurchased 6.2 million shares at an aggregate cost of $148.1 million. As of the end of Q1 2016, we had approximately $77 million of remaining authorization to buy back shares as part our $225 million share buyback program that we announced in November 2015.

We also paid our first quarterly dividend in Q1 2016. Now turning to slide 16, Bruker's guidance for the full year remains unchanged. We continue to expect organic revenue growth of approximately 3%, an increase in non-GAAP operating margin by approximately 100 basis points and non-GAAP EPS in the range of $0.97 to $1.02.

We expect changes in foreign exchange rates to increase our full-year 2016 reported revenues by 1%, with only a nominal positive effect on our non-GAAP EPS. Our currency assumptions have changed modestly as the Japanese yen, euro and Swiss franc all have strengthened versus the dollar in the first quarter of 2016.

Our currency assumptions include a yen to U.S. dollar rate of 113, our U.S. dollar to euro rate of $1.114 and a Swiss franc to U.S. dollar rate of 0.96. We continue to assume a non-GAAP tax rate in the range of 25% to 28% for the full year of 2016 and we are assuming a fully diluted share count of approximately 163 million to 165 million shares.

We continue to expect CapEx of approximately $50 million for the full year of 2016. I would remind investors that much like 2015 we expect the majority of our profitability and cash flow to be generated in the second half of 2016.

We also expect our organic revenue growth in operating profitability to see significant fluctuations from one quarter to another, due in part to the large transactions that can occur in several of Bruker's businesses.

I will continue – I will close, excuse me – I will close by stating that we are proud to report solid year-over-year revenue performance, operating margin and EPS improvements in Q1 2016. And we expect 2016 to be another good year of operating margin expansion and earnings growth.

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

Thank you. Jamie, please assemble the Q&A roster..

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

Hey, thanks, good afternoon.

Hey, Tony, just to make sure I was sort of – make sure we're understanding the messaging right – I mean, was the first quarter beat and your reiteration of sort of the full year guide, just a reflection of timing – perhaps it was the 1 gigahertz order, maybe a couple of other items – is that a fair assessment?.

That's correct. That's correct. The 1 gigahertz magnet was – is in our full year guidance – and we installed it Q1. We thought it would install in Q2, but yes it's baked into the guidance in just that way..

Sure enough.

And then does – to what extent does your full year outlook contemplate perhaps another 1 gigahertz placement? Is that something you have the capacity to satisfy in a single year – two installations? And then, Frank, would love to hear your thoughts on what you sort of view as the service opportunity in BioSpin and how you could perhaps better monetize the offering there?.

Yeah, Brandon this is Frank. To your first question, no, we do not expect another gigahertz this year. We're building out the capacity, but we may expect two next year in 2017. But the next one will probably move into early 2017.

We obviously expect to ramp up our capacity for this type of system in the years 2018 higher than two per year, but so, no, this year we do not expect an additional 1 gigahertz system.

To your second question, Brandon, yes, we do expect our service and aftermarket business in a number of divisions including BioSpin to grow faster than the corporate average.

That's a somewhat under-leveraged opportunity in most of Bruker and we are working very diligently to grow these areas which tend to be also profitable for us and help us with customer satisfaction. So, yes to that..

Our next question comes from Steve Willoughby from Cleveland Research. Please go ahead with your question..

Hi, good evening. Frank, I was just wondering after a strong 2015 of NMR orders, you're starting to see some of those orders turn into revenue over the last couple of quarters.

Could you just comment regarding what orders for NMR look like over the last three months and where your backlog looks like compared to the past couple of quarters for NMR?.

Yes, Steve, we don't going into orders and bookings and backlog in detail. Compared – we had pretty strong NMR orders throughout all of last year – but particularly strong orders in Q1 of last year, which is actually unusual but that's how it happened last year. Our Q1 2016 NMR orders were solid but not as high as in Q1 of last year..

Okay, and then just one quick follow-up, after buying back quite a bit of stock over the last five or six months, I'm cognizant of the amount that's remaining on the current authorization, but just was wondering what your thoughts are on future capital deployment from here?.

Yes, we're comfortable with the way we are set up right now, obviously having implemented the dividend; we expect to do that quarterly as you would expect. And we do – we have the authorization as you know – that's a two-year authorization it goes to November of 2017.

We bought a little bit more in the first five or six months thinking that our stock continues to be a good value. How we continue from here, and we assess that from quarter-to-quarter, and we obviously won't speculate about what we will do in future quarters and we've just reported in what we did in Q1, of course..

Our next question comes from Jack Meehan from Barclays. Please go ahead with your question..

Hi, thanks and good afternoon.

I just wanted to start with the margin improvement in the quarter and just how much you thought was driven by maybe the one large gigahertz placement and just maybe how you feel like you're tracking relative to the 100 bps you talked about for the full year?.

Yes, go ahead Tony..

Yeah, maybe I'll start on that one. So, we're confirming the 100 basis points guidance, first of all. The 1-gigahertz magnet did have a positive effect on the gross profit margin, but there were a lot of puts and takes in the gross profit margin, including some of the continued soft markets we're seeing in our industrial businesses.

But there's puts and takes, we're fully confirming the 100 basis points, and Bayreuth obviously did help in Q1..

Got it. And maybe just one more on your latest views on the funding environment in Europe and just curious, making progress toward some of the IDP initiatives that are looking to go in place in the next couple of years? Thanks..

Yeah, this is Frank again. Jack, as you may know in Europe there has been more funding for ultra-high field NMR, and so it's getting additional funding for 1 gigahertz or gigahertz class systems.

I think we believe this first installation, where we've installed a system and got it accepted with beautiful data at a customer site, is going to encourage additional groups in the Americas and in Asia as well as in Europe, but in the Americas and Asia there's more catch up quite honestly due to ask for funding and to get this new type of technology now that it has been demonstrated and proven.

As you know, until the funding cycles and the procurement cycles in this business are long, so until that turns into additional orders and revenue, will take some time and obviously that's not going to happen this year anymore.

But, nevertheless, we think it's a milestone, that together with the new science that is possible on these systems, will encourage a number of groups to hopefully successfully apply for funding particularly in the Americas. And the funding situation in Europe is a little unclear.

Some of our divisions didn't really notice very much; a couple of our divisions thought that funding in Europe in Q1 started out a little soft. But you know it's only a quarter and quite honestly, the data from any given quarter especially in any given division for us is just not very statistically meaningful.

So before we make any geographic or markets funding trends, we tend to want to stitch together two or three quarters. But there was – we acknowledged a little bit of funding weakness in Q1 – but I'm not sure that that will continue. That may just be a one timer – remains to be seen..

Our next question comes from Tim Evans from Wells Fargo Securities. Please go ahead with your question..

Thanks.

Frank, I just want to clarify on the NANO Group weakness, how much of this was macro driven versus any specific product line dynamics? I hear you when you were talking about the funding issues, but I think the slide also had something about the single crystal product, so I just want to get a big picture feel for whether you feel like you're addressing the demand that's there versus just weak demand overall?.

You are completely correct. So, I'll give you a three-part answer on that one. The macro in most industrial business – and you know that Pharma, Biopharma, we don't include in industrial obviously – most industrial businesses, the macro demand continued to be weak and really no particular trends in Q1.

We had reported that previously so this is not new news, but it's about the same type of sluggish demand environment.

On the product side and you focused in on that, it turns out then in our X-ray crystallography product line which is part of the AXS business in the NANO Group, there, initial demand initially at the beginning of this year looked really quite weak after a very strong 2015 with strong demand for crystallography last year, particularly in India and China and as well as in Europe, so we sometimes have these non-macro related cycles in certain product lines.

If you recall last year, preclinical imaging was pretty weak and so, yes, this year we're seeing a weak start to crystallography that doesn't seem to be related to macro that just – they had a strong year last year – looks like they're going to have a weaker year this year.

And the last thing that I did want to add is that while our semi-metrology – semiconductor metrology tools revenue in Q1 was still weak – we're just bringing Jordan Valley into the company and integrating it.

The bookings and backlog there are actually looking healthier, so we expect to see encouraging contributions from semiconductor metrology tools in the next three quarters. Maybe those are the three things that are noteworthy..

So, it sounds like you feel a little bit better about semiconductors, is that specific to Jordan Valley or is that kind of your semiconductor business overall might be seeing a little bit of improvement?.

Well, I think it's pretty specific to our tools, our Atomic Force Microscopy AFM tools and x-ray tools. They are, of course, being acquired for smaller nodes or for 3-D structures because they can do unique things. These are not really capacity buys.

These are primarily still technology demonstration and validation, so I'm not sure that what we are reporting here is relevant for the semiconductor macro, although that might be getting a little better as well, although there we hear mixed news from the markets.

So I think it's primarily related to the particular capabilities that we have, the unique capabilities that I think – which make us optimistic that we'll generally see good secular demand drivers in semiconductor metrology tools in the remainder of the year and hopefully in the years to come – on top of whatever macro cycle we will see..

Our next question comes from Miroslava Minkova from Stifel. Please go ahead with your question..

Yeah, hi, guys. Thank you for taking my question.

I wonder if you could help us understand more specifically, how much did the 1 gigahertz installation contribute to sales in the first quarter or to organic growth in the first quarter? And specifically, should we expect now that the second quarter maybe weaker because of that – the timing of that? And I do have a follow-up..

I think – this is Frank again – qualitatively, you are correct. I mean, these systems, this one sort of worked on first try and when you have leading-edge systems and technology like this, sometimes you have to – it takes several times and debugging steps – so from the timing that I think what your assumption is correct, or good.

We're not disclosing the exact amount of revenue or margin contribution from the gigahertz. It was not the only reason why we had outperformance but it was one driver..

Okay. Okay. And, clearly, you've had a very strong start to the year here, particularly with organic growth, but also operating margin.

Just wonder if I could have you reflect a little bit on your full-year outlook and what gives you the pause? Why is the full-year guidance unchanged appreciating it is a little bit early in the year?.

Yeah, it's early in the year for us. I mean, one quarter really doesn't give us enough data. We're not a consumables company where a quarter might give you enough data to – we need to stitch together two or three quarters. I confirm the timing effect that you have mentioned, with the gigahertz already being in Q1; that has contributed.

And yes, there are just also – there are some demand weaknesses and there are some uncertainties, so I think our guidance remains perhaps – I'm sorry, I shouldn't say that. We think our guidance remains achievable but it's also far from a shoo-in and there remains a lot of work to achieve that..

Our next question comes from Doug Schenkel from Cowen & Company. Please go ahead with your question..

Good afternoon. My first question, I guess, is just a clean-up probably for Tony. Heading into the year, you had expected the majority of operating margin expansion to be driven by gross margin expansion.

Is this still the case in light of strong operating leverage we saw in Q1 but the weaker than expected gross margin performance?.

Good question, Doug. Yes, we still expect a fair amount of the improvement to come from gross profit margin and the Q1 dynamic may lead you to think otherwise. But we are monitoring operating spending very closely and we will use that as a way that – that will contribute to our 100 basis points operating profit margin expansion going forward.

So, as we see the year develop, we'll be spending appropriately but that is a lever that we have to meet our commitments..

Okay. That's helpful. Second question is, you noted that growth in both North America and China was strong.

Would you be willing to provide a little more commentary on what were the key end markets and can you talk about how performance in these geographies compares to the expectation that you had coming into the year?.

Yes, so we're referring to revenue, obviously, sometimes for us revenue and bookings can be out of sync by a couple of quarters. And I really would – even we internally, we try to not draw too many conclusions from one quarter because things can change in the following quarter. So, we try to look at trends after two or three quarters.

But it is correct and as we've stated, that in terms of revenue, the best growth in the first quarter of 2016 – year-over-year growth – came from China and came from the U.S. I wouldn't read too much color into that.

The only other thing that I have mentioned is from a market is semiconductor's really seeing an uptick; crystallography in the product line is clearly getting a weak start. And in a couple of areas, we had some weaker orders in Europe in Q1 that we perhaps hadn't expected, so we'll be monitoring that as well..

Okay. Sorry, go ahead..

Yeah, just one quick point on China. While the broader economic environment is obviously weak there, there is a focus on fundamental research by the Chinese government and that helps us. So, to your point about where the focused markets will be, it's more on the academic side in China going forward..

Okay. Thank you guys for all that color. Very helpful commentary and I appreciate you taking the questions..

Our next question comes from Tycho Peterson from JPMorgan. Please go ahead with your question..

Hey, thanks. First question just on cash flow, it was a big swing from $76 million you put up in the fourth quarter.

Obviously, there were tax payments and bonuses and things that kind of factored into that, but can you maybe just talk a little bit about how we should think about cash flow conversion for the next couple of quarters?.

Yeah. The way I would look at it, Tycho, is we're still expecting – the quality of earnings is improved – and we're thinking cash flow should come out for the year around what net income will come out at. So, we're not really changing our thinking in that regard.

Some of the Q1 use of cash was just because of the very high order entry we had last year this time, and all the down payments that we got on that, which we didn't have that level this year. So, we're not really concerned with the use in Q1 and feel that the goal for the year is achievable..

And then you guys highlighted service and aftermarket offerings, as a source of strength. We don't hear much from you guys than maybe some of the other tool companies about pushing service.

Can you maybe just talk on what you're seeing in terms of attach rates and what you see as the incremental opportunity to build up the service business?.

Yeah, without getting too quantitative but there is – in just about every business we're in, we've put some very focused and experienced management on service and aftermarket business.

That's true in Bruker BioSpin; that would be true in our Optics business, in Daltonics, in some businesses we had started earlier, and other businesses we started more recently. But I'd say we're playing catch-up there a little bit. We're coming a little bit from behind compared to some other companies that have driven that for many years.

And clearly, this is not something where you're growing to the levels that you think you should be at within a year or two, but over a five or seven-year period, I think we can get there, and we're making actually pretty good progress..

Okay.

Last one on operating margin, could you just break out price versus maybe other factors – supply chain, lean manufacturing, some of the other initiatives that you put in place in terms of contributions to the margin expansion this quarter?.

No, we don't go into that level of granularity. I mean, there's many moving pieces but we're not trying to quantitate each and every one of them..

Our next question comes from Bryan Brokmeier from Cantor Fitzgerald. Please go ahead with your question..

Hi, good afternoon. You highlighted the strong interest that you're seeing in the NMR high-end screener and the wine screener.

Is the success of those products surprising you and driving any increased investments in the development of other application-specific NMR solutions?.

It is driving additional investment in Application Solutions. Yes, one does not always need new hardware. These systems – we have with the NMR food screener – we have a very good basic platform and we're expanding that as a project for edible oils. There's a project for spices.

Some of them sometimes are even hard government-funded because government and government regulators have an interest in that. So yes, we are expanding and accelerating our investments in other applied markets where the very high degree of automation – you don't need any separation, no GC, no LC – and you get very, very good quantitation with NMR.

It's not a trace detection method because of its sensitivity, but it is just outstanding in giving you sort of an overview of the top 100, 200 metabolites and the metabolic fingerprints that's very, very quantitative – and easy sample prep – no separation; many things that are favorable. Now having said all of that, it starts from a small base.

It's not really moving the needle yet in a very major way. But it's getting there and it's seeing some of the best growth rate within Bruker and within the BioSpin Group within the NMR business. So, we're pretty excited about it.

But, and we think it has a lot of runway in the applications that we've launched already, wine, pretty big market, honey perhaps a little esoteric but interesting if a lot of people switch over to it or becomes a decisive of standard.

I think there's many from alcoholic – other alcoholic beverages to other, as I said, edible oils, spice, other things; there's many more applied food markets. There are also the clinical research markets for clinical metabolome where NMR is also seeing increasing success.

So, very enthusiastic about it but we caution everybody it's not a big – it's not moving the needle in a big way yet in 2016. But by 2017, 2018, at the growth rate which we're going, this will become more and more interesting. And I think it's going to be a good margin business..

Okay.

And do you have any update on the Tissuetyper such as where you are with the development of the library and when we could really start to see this out in the market?.

Yes, I would say that has a bit of a slow start simply because there isn't much content yet and really the early adopters that are then looking to develop content and libraries and so on, they're – will be getting going through the remainder of this year. But in terms of commercial impact, the Tissuetyper is even smaller.

It may have very big opportunities over a long time period – seven to 10 years – but in terms of short-term commercial impact, it is rather modest.

And it really takes a – I think a lot of patience and some investment by us quite honestly – to work with key opinion leaders and to build out that content and to look what are the best type of applications.

Is it more towards proteomic liquid biopsies? Is it in the direction of anatomical pathology? There is a lot of opportunity, and luckily we don't have to wait for – we sell a lot into clinical research, but I think at this point this is – this market is starting slowly..

Our next question comes from Steve Beuchaw from Morgan Stanley. Please go ahead with your question..

Hi, good afternoon. So, just two clarification questions for Tony, and then one more of a perspective question for Frank. Tony, the CALID order, I believe it was referred to as a large legacy order, that saw delivery in the quarter.

Was that in the full-year guidance and what was the original timing expectation? Second clarification, also for Tony, was on tax. Was this resolution of an issue contemplated in the original guidance for the full year and does this give you any bias relative to the tax guidance range? And then, I'll just go ahead and round it out, this one for Frank.

Frank, it would be really helpful to hear you spend a minute on how you want to go about rolling out some of the new functionality on the MALDI Biotyper; some of this functionality on resistance testing was pretty widely anticipated. I know it's early days, but it'd be really helpful to hear you talk about how you want to see that roll out? Thanks..

So Steve, on the first question, yes, it was contemplated in the plan and guidance, and in Q1 as well. So, yes to both of those. On the tax, basically, we had a reversal of a reserve because of a completion of a tax audit. And we've changed sort of our transfer pricing strategy; we won't have these needs for these reserves going forward.

So that was kind of a one-off not contemplated, but it's hard to project these things as well. So, the range continues to be the 25% to 28% that we have out there, and could another discrete item come up? That's possible but we're not counting on that at this point.

I think the third question was for Frank?.

Yes on the new functionality for the MALDI Biotyper workflow for strain typing and high-value resistance. You're right. We're still working on this for some time and we've talked about it as work in progress.

To put together all the kits and to really begin to validate that, does take some time and we were very pleased at ECCMID in Amsterdam that about a month ago – or less than a month ago – we introduced initially a research use-only kit for the carbapenamase resistance mechanism which is very, very relevant; very, very important.

We hope to get that towards an IVDC [Institute of Veterinary Drug Control] status where we can sell it not only into research but into routine clinical microbiology in Europe and some other countries by the end of this year or early next year.

Before that gets FDA or Chinese FDA clearance, it's likely to be at least another year after that, so also some of these things build up slowly. But I think they could, over time, grow into something pretty significant and an additional growth curve on top of – more on the consumables and aftermarket – for the MALDI Biotyper.

I would add – and hopefully that's not too much detail – we were actually encouraged in that we got some additional resistance mechanisms for which we didn't even have to develop new kits.

But by introducing a very robust software and methods for strain typing beyond the species ID that we've offered all along, for strain typing as a research use-only feature, we've actually been able to discover some important additional resistance mechanisms.

We didn't expect that that would lead us to additional resistance mechanisms, and that the proteomic fingerprinting approach that we are using would already be amenable to that. But, so we were delighted to actually get some easy wins there, with additional resistance mechanisms for which we don't even have to develop a different workflow and kit.

So that was in a way a bonus and was introduced at the same time that exceeded my expectations as even a few months ago. But it will also take some time before this moves the needle.

On the other hand, all this additional work in research use-only and then IVDC new capabilities that are being released or that are in the pipeline for 2017 certainly also increases the demand and the competitive positioning for our system overall.

So, we're actually really quite delighted with what we've been introducing there, as additional capabilities beyond fast identification on the MALDI Biotyper workflow..

Our next question comes from Jonathan Groberg from UBS. Please go ahead with your question..

Great, thanks. Frank, could you be willing to quantify maybe for the quarter or trailing six months what your book-to-bill is, if you want to be specific.

Just kind of north of – can you specify north of one or south of one?.

Yes. We don't quantify our orders and our backlog or book-to-bill. Yes, I gave one hint and a little bit of color in that last year in Q1, we had very strongly, really unusually strong NMR orders, whereas this year Q1, NMR orders were at a normal healthy level..

Yeah, I get that on a year-over-year basis, but just, whatever.

I guess a lot of people are just trying to figure out – would you be willing to say the first quarter results – were they in line with your plan overall or were you thinking – better than you expected? I guess just given what your expectations were going into the first quarter, how would you kind of qualitatively describe how the quarter played out?.

Well, it was mixed. I mean, generally was positive. Cash flow started a little slower than we had expected. Gross margin was fine; there was steady increase over the average for last year. We just had the usual comparison from high gross margin in Q1 of last year. OpEx was a little better than we had expected.

And as was discussed earlier on the call, we weren't sure that we would have the gigahertz in Q1; we thought more likely that it would be, after an iteration, perhaps in Q2 or even Q3.

Well, we're delighted that it worked sort of on first try, and so that's kind of, I think, a reasonable mix – a reasonable perspective – mostly positive but as always, not everything going perfectly in one quarter..

Our next question comes from Ross Muken from Evercore ISI..

Hey, guys, it' Luke in for Ross. I guess just on – you guys announced a lot of new products in the beginning of the year and end of last year.

If you could quantify kind of the contribution of those new products to this year – to this quarter's growth?.

I don't need to frustrate you but we don't do that either.

So, as is the case with many of our new products, when the press release comes out, people get excited but until they are funded, that often takes another six months and until we then deliver and turn things into revenue, in a way where it begins to move the needle – sorry, I've been using that terminology too much today – often is a year from the release of a new product.

Of course, for a kit or a consumable or service offering, it's much faster. But bottom line is we don't quantify the impact of each product. We're sometimes giving some color, as I have on a number of the products we've released, but we don't go into it quantitatively for competitive reasons, quite honestly..

Our next question comes from Amanda Murphy from William Blair..

Hi. This is Aurko in for Amanda Murphy. I just had a question about the IDP market and how that is developing. If you can add some more color beyond funding in terms of customer readiness.

And secondly, where is – given the tough comps from last year for the large detection orders, maybe you can add some color as to where the largest growth drivers you think will be situated in the business for this year? Thanks..

And you were asking about IDPs – Intrinsically Disordered Proteins or IVD – In Vitro Diagnostics? I am sorry..

IDP. Thank you..

IDP. Okay, well, first of all, the announcement that the first gigahertz system with the shielded magnet has been installed successfully at a customer site, I think is a pivotal event to get demand going. I mean, the lot of people – a lot of customers have said, well, yeah, we believe it when you see it.

Yes, you're probably talking about it but once you really got it installed and we see publications of these systems, then we may very well go out and get funding from our funding agencies or wherever they get their funding from around the world.

So, I think for IDP, for our business around this, the first installation is key even though before that generates that additional funding, additional business it's going to be more than a year; but nevertheless, a key event.

And one other point that I would like to make is that, if you recall in early April or late March, we had a very large order that included an additional gigahertz system from the Weitzman Institute and that had a number of other MRI and EPR and other magnetic resonance research technologies.

But the biggest ticket item was an additional third gigahertz instrument, something probably would go into revenue next year. So, I think there is some incremental funding but more importantly, I think this is a pivotal event – hey, this stuff really works now and look what people can – customers can do with it.

So, I think that will generate a lot of fundraising activity..

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

Hi. It's actually Mike Ryskin calling in for Derik. Congrats on the quarter. I just had a quick follow-on question, something you were talking about – you called out in the slides was – actually back-to-back, you're talking about the 1-gigahertz system, the really high end NMRs, but then you're also talking about some of the lower end applied markets.

And you talked about how the food screener is coming off of a low base and hasn't really moved the needle for you, I'm going to use your phrase.

But just wondering where you see that growing long-term over the course of the year and further out, how big you see the applied markets getting for Bruker as opposed to some of the more traditional academic settings? And as a follow-on on that, also in terms of how we should think of your R&D spend and where you're looking to innovate, what the shift is for you in terms of innovating more towards the higher end instruments versus applications or additional modules for the food screener?.

Okay. Taking it in sequence then, Mike, so – and this is fairly long-term for us by 2018 or so and beyond – I could see that the ultra-high field segment, at least for a few years, could be something like a $50 million to $75 million revenue contributor per year.

Not yet this year and not yet next year, but by 2018, 2019, we might get to these types of run rates. And actually, somewhat similar numbers are maybe feasible for the applied food and clinical metabolomics markets for NMR.

So those still will not be the largest markets of NMR, there's traditional core bread-and-butter business of course, that's larger. But those would be areas that are growing from a small base, and really would contribute nicely to the growth rate.

So as a three- to five-year estimate, each one of these market segments, the ultra-high field for IDPs and NMR applied to structural biology to globular proteins that are larger than what is possible today.

That's also happening in parallel despite – in addition to all the IDP excitement – and the applied markets, food analysis, authenticity and clinical metabolomics could each be a $50 million to $75 million segment at – perhaps in three to five years from now. Accordingly, we are actually investing about equally in both of them.

We are investing in HTS materials and magnet technology and new growth technology. We're also investing a lot in proprietary models and algorithms and collaborations with customers for new applications. I would weigh them equally, roughly. We're also investing a lot in Pharma Applications in NMR.

We didn't talk about that today but there's a lot of development going on that maybe I'll highlight on a future earnings call..

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

Yeah, hi. Good afternoon and apologies but I just wanted to go back and take one more shot at understanding the impact of NMR here.

Tony, I appreciate that you're not looking to call out the financials associated with specific deals, but can you maybe just help us with roughly how much of the 250 basis points of op margin expansion came from the overall BioSpin segment during the quarter?.

It had a strong contribution of course, but there is a lot of offsets as well with our industrial businesses and some unfavorable mix we had in the quarter, as we said, in CALID and in other areas.

So, NMR was a significant driver of revenue and profitability in the quarter, but as we talked earlier, that's been expected – that's in our plans and it's come earlier as well..

Also, NMR had a pretty weak start last year – actually in the first two quarters of last year – so there's also a question of the year-over-year comparison..

Okay.

So, if I just look at the implied step-down in expansion for the next couple of quarters, to the extent that you have visibility on that, is there any way that you might steer us towards modeling the year-over-year expansion to get to the 100 basis points for the year over 2Q, 3Q and 4Q?.

I think when we put our guidance out last quarter, we did say that a lot of the growth comes in the second half of the year and with the growth comes the profits as well. That's going to continue. I think when you look at the first half, things will kind of get back in line with what we were thinking, but most of it comes in the second half..

Okay. Thank you..

Our next question comes from Isaac Ro from Goldman Sachs. Please go ahead with your question..

Thanks for the question. It's actually Joel in for Isaac.

Could you provide any color on the competitive dynamics you're seeing in sort of the low- to mid-end in the NMR market just given some investments by a competitor of yours?.

Yes. I'd say the non-biological routine NMR chemistry and materials NMR is competitive and perhaps getting more competitive, again, in more geographies. So, we acknowledge that our Japanese competitor is making some investments and expanding into additional geographies, if you will..

And then, are you guys seeing any changes in customer demand patterns in Japan just given the moves we've seen in currency year-to-date?.

Demand in Japan, except in semiconductor where it is, of course, some semiconductor and data storage is also in Japan, not elsewhere in Southeast Asia or in China.

So, other than that semiconductor metrology piece, which is ticking up at least for us a little bit because of our new tools, customer demand in Japan mostly has been – continued to be relatively weak. But, yes, the yen helps us a little..

Yeah. I was just going to say also, we get some benefit where the yen is now in our operating profit..

Our next question comes from Sung Ji Nam from Avondale Partners. Please go ahead with your question..

Hi, thanks for taking my question. Just sorry, one more question on NMR.

Frank, could you maybe clarify for something like the 1-gigahertz NMR that you launched, is that largely driving – obviously, it's not a high-volume system – but is that driving a faster replacement cycle or are there opportunities to further expand the market as well? And then I guess additionally, can you guys see additional opportunities for pricing increases for NMR in general or is it pretty normalized for your people? Thanks..

So, Sung Ji, I think the gigahertz NMR class is a new class by itself. That's new investment; that's not a replacement cycle at all.

And, yeah, we do see, I mean – we do see that that business, hopefully, the gigahertz NMR-based could – as I said earlier might increase to something north of $50 million for us annually by 2018 or 2019, from obviously, pretty modest levels right now. So, it's not a replacement business.

The step-change in NMR pricing that we took last year and that's now starting to show a little bit in Q4, more throughout this year and some of it, of course, is going into 2017, I think that's really the one-time larger opportunity.

In NMR, like in any other business, where we're gradually increasing our service and aftermarket cost, and for some new products of course, we try to get – if they offer more customer value and unique value propositions – we try to get good margins on that.

But I think this was a one-time step change in NMR pricing, which really was badly needed after many years of deteriorating pricing that wasn't entirely rational in my opinion. But I think that you should think of that as a one-time event.

That, however, has an effect overall in the two-year subsequent period and we're sort of just at the beginning of that..

And our final question today comes from Eric Criscuolo from Mizuho. Please go ahead with your question..

Hey, good afternoon.

So, the 2016 tax guidance range, 25% to 28%, is that a range that we can kind of expect over the longer term or do you have any tax planning programs or initiatives to try to bring that down a little bit longer term?.

No, no. We are considering a lot of options we have on the tax planning side and we have initiatives going on as we speak around that. But you characterized it well – it will have more of a longer-term effect. And of course, for any tax planning program to be effective, it needs to be operationally driven and that's really what we're focused on.

So there's plenty of opportunity, but it won't be short-term; it will be more thoughtful and over a period of time..

Okay.

And then just on the – your end markets in general – Frank is there any ones that you want to call out in particular that either significantly improved or significantly declined from the fourth quarter into this quarter?.

If I have to highlight two things, a little bit more concerned about Europe after Q1 and a little more confident in semiconductor metrology tools..

And ladies and gentlemen, we've reached the end of the allotted time for today's question-and-answer session. At this time, I'd like to turn the conference call back over to Mr. Joshua Young for any closing remarks..

Thank you, Jamie. I'd like to thank everybody for joining us this evening. Bruker will be presenting at several Investor Healthcare Conferences during the second quarter and invite you to schedule meeting with the management team.

Additionally, for those investors attending the Analytica Conference in Munich next week, Bruker will host a press conference on Wednesday, May 11, from 12 to 1:15 Central European Time, and a private booth tour for investors will take place immediately after the press conference from 1:30 to 2:30 Central European Time at hall A2.310.

Bruker is also going to host a press conference at the ASMS Conference in San Antonio, Texas on Monday, June 6. The press conference will take place from 8 to 9 AM Central Time in the Texas Ballroom A of the Grand Hyatt Hotel. We invite you to meet us at these conferences or visit us at our headquarters in Billerica, Massachusetts.

Thank you and have a good evening..

Ladies and gentlemen, with that we'll conclude today's conference call. We thank you for attending. You may now disconnect your lines..