Good morning, and welcome to the Bruker Corporation First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. .

I'd now like to turn the floor over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead. .

Thank you, and good morning, everybody. I would like to welcome everyone to Bruker Corporation's First Quarter 2024 Earnings Conference Call. My name is Justin Ward, and I am Bruker's Senior Director of Investor Relations and Corporate Development.

Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our Executive Vice President and CFO. .

In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events & Presentations section of Bruker's Investor Relations website. During today's call, we will be highlighting non-GAAP financial information.

Reconciliation of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. .

Before we begin, I would like to reference Bruker's safe harbor statement, which is shown on Slide 2 of the presentation.

During this conference call, we will be making forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent and pending acquisitions, geopolitical risks and wars as well as supply chain, logistics and inflation.

The company's actual results may differ materially from such statements. .

Factors that might cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K for the period ending December 31, 2023, as updated by other SEC filings, which are available on our website and on the SEC website.

Also, please note that the following information is based on current business conditions and to our outlook as of today, May 2, 2024. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any date after today. .

We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the first quarter of 2024 in more detail and share our updated 2024 financial outlook. .

Now I'd like to turn the call over to Bruker's CEO, Frank Laukien. .

Thank you, Justin. Good morning, everyone, and thank you for joining us on today's first quarter 2024 earnings call.

I am excited to announce that we have just closed our ELITech acquisition on April 30, ahead of schedule, after we received all required regulatory clearances and also after the completion of the pre-closing carve-out of the ELITech clinical chemistry business that we did not wish to acquire. .

Accordingly, please note that in addition to our earnings release, we simultaneously have issued a second press release this morning, 7:00 a.m. Eastern, on the closing of our ELITech acquisition. We do encourage you to read both press releases for complementary information and perspectives.

As a result, we are pleased to raise our constant exchange rate revenue growth guidance for fiscal year 2024 by 400 bps to 12% to 14%, as explained in detail later during this call. .

Turning to our earnings release and Slide 4.

Bruker finished the quarter of 2024 with 1.6% organic and 5.5% constant exchange rate or CER revenue growth despite about $15 million of revenue slippage into the second quarter and primarily because of a rather tough comparison to a very strong first quarter of 2023, in which, if you recall, we posted 17.6% organic growth a year ago..

So keep in mind that we had expected low single-digit organic revenue growth anyway in Q1 because of some pull forward of about 15 -- similar pull forward of about $15 million of revenues into the fourth quarter of '23 when customer site readiness and shipments just worked very well.

So underlying demand for Bruker's products and solutions has remained solid with first quarter '24 book-to-bill for our BSI segment just below 1.0. So in the second quarter of 2024, we expect a reacceleration of our organic revenue growth, and we also expect double-digit constant exchange rate or CER revenue growth year-over-year. .

As expected in the first quarter of '24, our margins compressed year-over-year, primarily because of the tough comparison to an unusually strong first quarter of '23 but also as a result of transitory factors such as the expected initial margin dilution from our recent acquisitions as well as less favorable mix in this quarter.

We expect significant sequential margin improvement in the remainder of the year. .

As we look to the remainder of 2024, with our solid backlog and pipeline, we expect to achieve above-market organic revenue and organic non-GAAP EPS growth. Accordingly, we are maintaining our fiscal year '24 guidance for organic revenue growth of 5% to 7%.

Since our prior guidance in mid-February, we have closed the Chemspeed acquisition in the first quarter and now the ELITech acquisition on April 30. Both are now included in our updated guidance today. .

As a result, we are increasing our reported revenue guidance by $60 million for reported revenue growth of 11% to 13% year-over-year, and we are increasing our non-GAAP EPS guidance by $0.08 to 8% to 10% non-GAAP EPS growth year-over-year.

Please note that our updated May 2 guidance today does not yet include the pending NanoString acquisition, which is expected to be EPS dilutive and which we hope to close in the second quarter. For further information on the pending NanoString acquisition, I refer you to our press release issued on Monday, April 22..

Continuing on Slide 4. Bruker's first quarter '24 reported revenues increased 5.3% year-over-year to $721.7 million, which included an M&A tailwind of 3.8%.

On an organic basis, revenues increased 1.6%, which included flat organic revenues in our BSI segment and 18.9% organic growth at BEST net of intercompany eliminations, while the FX headwind was minor at 0.1%. This all implies constant exchange rate or CER revenue growth of 5.5% year-over-year..

Our first quarter 2024 non-GAAP operating margin was 14.0%, down 630 bps due to the factors that I described earlier. In the first quarter of '24, Bruker reported GAAP diluted EPS of $0.35 compared to $0.52 in the first quarter of '23. On a non-GAAP basis, first quarter '24 diluted EPS was $0.53, down from $0.64 in the first quarter of '23. .

Right. Please turn to Slides 5 and 6 now, where we highlight the first quarter '24 CER performance by our 3 Scientific Instruments groups and of our BEST segment all year-over-year. In the first quarter of '24, BioSpin Group revenue was $183 million with low single-digit percentage CER growth.

BioSpin saw growth across biopharma, academic/government and industrial research markets without any gigahertz-class system in Q1 '24 revenue. By the way, in 2024, we expect revenue from 3 gigahertz-class NMRs, including one in the second quarter.

We also closed the Chemspeed Lab automation acquisition, and we will be talking about that further in the future when we update you on our medium-term targets. .

Moving on to CALID in Q1 '24. Our CALID Group had revenue of $228 million, and its CER declined in the low single-digit percentage, primarily due to the timing of shipments slipping from Q1 into Q2 as well as to top comps in the prior year first quarter. .

On Slide 6. Q1 '24 Bruker NANO revenue was $240 million, and NANO achieved CER revenue growth in the mid-teens percentage with strong revenue growth in academic/government, aca/gov, industrial and semiconductor metrology.

The artificial intelligence or AI mega trend continues to be a tailwind for our semiconductor metrology and advanced packaging tools business. .

Finally, Q1 '24 BEST CER revenues grew in the high teens percentage net of intercompany eliminations, driven by solid superconductor demand as well as by growth in Big Science and FUSION research projects and our emerging key extreme UV or EUV technologies for semiconductor lithography tools by a very large OEM customers, also in support of strong AI demand.

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Let me take a quick excursion from financials to a couple of further product introductions on Slide 7 and 8. At U.S. HUPO, in the first quarter, we continued with 40 proteomics tools and workflows and software.

And in this year, we highlight both immunopeptidomes, which are very important in immuno-oncology, and separately, glycoproteomics, of course, all of the 4D versions that we do on our timsTOF platform. .

And without going into a lot of details here, both of them are excellent examples of things that are not templated in the DNA. They're not in our genes, at least not in any way that we know. So they are excellent examples of additional post-genomic information that is absolutely needed to understand biology and disease biology.

And we are a leader on that same timsTOF platform, in 4D-Proteomics and its applications, the 2 examples that are both quite important in immunopeptidomics and 4D glycoproteomics. .

The other examples are from product introductions that we had at our recent most important NMR conference of the year, the ENC, which was actually in April in California.

And we introduced both new enabling scientific capabilities -- for new scientific capabilities in structural biology, particularly of membrane proteins of -- aggregates of many membrane proteins are important targets or our signaling proteins. .

And there, by the way, they're also not something that AlphaFold or cryo-EM or crystallography handled very well. They're one of the very important areas where NMR plays a crucial role. And again, without scientific details, having ultrafast spinning probes give us much higher resolution for things that could never be seen before by scientists.

And a separate introduction of a technology for DMP, which stands for dynamic nuclear polarization, can increase sensitivity for some of these methods, in fact, by factors of the order of 100. So it's really game-changing and enabling. .

On the other hand, we also want to make -- broaden the adoption of NMR and make it much more accessible. A really wonderful new magnet introduction is this Ascend Evo 600 NMR magnet with a 1-year Helium hold time. This is more than doubled from before. So it's quite a technological marvel.

And again, I think it will be warmly welcomed by all existing NMR labs but also the new labs in biopharma research, in clinical metabolism, clinical research, where previously, they hadn't handled NMR but would like to use it. Makes it much more accessible and available for broader markets..

And last but not least, for biotech and biopharma process analytical integration or PAT integration, the Fourier 80, which is our noncryogenic benchtop FT-NMR, if you recall, has now been more broadly available for this biopharma QC world. All very, very good developments on which we want to update you from time to time. .

Now in summary, and as I wrap up my remarks, Bruker delivered solid constant exchange rate growth, albeit with weaker margins and EPS in the first quarter of 2024. We expect some margin and EPS dilution from our acquisitions in 2024 because we have been able to acquire several strategically very important businesses at reasonable valuations. .

We expect that our Bruker management process applied to these acquired businesses will significantly improve their financial performance over time and drive their long-term profitable growth.

We anticipate also that these strategic acquisitions will enable strong returns on invested capital or ROICs in the future, something that is important to Bruker's business culture of disciplined entrepreneurialism and also for long-term shareholder value creation. .

So with those comments, let me turn the call over to our Chief Financial Officer, Gerald Herman, who will review Bruker's first quarter financial performance in more detail and provide our updated fiscal year '24 guidance and assumptions.

Gerald?.

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide some more detail on Bruker's first quarter 2024 financial performance starting on Slide 10, which shows the revenue bridge for the first quarter of 2024. .

Revenue was up $36 million or 5.3%, reflecting organic growth of 1.6%. Acquisitions added 3.8% to our top line, while foreign exchange was a 0.1% headwind, resulting in constant exchange rate revenue growth of 5.5% year-over-year. Frank has already covered the drivers of revenue growth for the quarter..

Geographically and on an organic basis in the first quarter of 2024, our Americas revenue grew in the mid-single-digit percentage. European revenue grew in the high single-digit percentage. Asia Pacific revenue declined in the single-digit percentage range, primarily due to softness in Japan, all year-over-year.

For our EMEA region, first quarter 2024 revenue was up mid-teens percentage year-over-year. .

Slide 11 shows our Q1 2024 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 51.2% decreased 220 basis points from 53.4% in the first quarter of '23, impacted primarily by mix, acquisition and FX headwinds and a challenging prior year comp. .

First quarter 2024 non-GAAP operating margin of 14.0% was 630 basis points lower than the 20.3% margin we posted in the first quarter of '23. This decline is attributable to most of the same factors impacting gross margin, product mix, acquisition and foreign exchange headwinds and a challenging prior year comp.

We expect Bruker's non-GAAP operating margins to improve sequentially in the second quarter and significantly in the second half of 2024..

For the first quarter of 2024, our non-GAAP effective tax rate was 26.7%, a modest improvement from the 27.8% in the first quarter of '23, resulting from favorable jurisdictional mix.

Weighted average diluted shares outstanding in the first quarter of 2024 were 145.9 million, a reduction of 1.7 million shares or 1.2% from the first quarter of '23, resulting from our share repurchases..

Finally, Q1 2024 non-GAAP EPS of $0.53 was down 17.2% compared to the first quarter of 2023, primarily due to the margin compression factors previously detailed. We experienced about $0.05 of non-GAAP EPS dilution from the Bruker Cellular Analysis, formerly PhenomeX, acquisition in the first quarter of 2024.

With the rightsizing actions we've already taken, we expect our BCA business to reach breakeven by 2026. .

We generated $21.8 million of operating cash flow in the first quarter 2024. Our capital expenditure investments were $21.4 million, resulting in free cash flow of $0.4 million in the first quarter of 2024.

This reflects a decrease in cash flow of approximately $62.1 million over Q1 of '23 driven by lower net income and higher working capital levels, mostly impacted by our recent acquisitions. .

We finished the first quarter with cash, cash equivalents and short-term investments of approximately $340 million. During the first quarter, we used cash to fund acquisitions, capital expenditures and select Project Accelerate 2.0 initiatives..

In the first quarter of 2024, we completed a series of debt financing actions to fund our recent acquisitions, including the larger ELITech transaction.

We upsized our revolving credit facility to $900 million issued CHF 431 million private placement senior notes with 10-, 12- and 15-year maturities at average interest rates of about 2.6% and closed on a CHF 450 million term loan structure with 5-, 7- and 10-year maturities carrying interest rates of about 3%.

These financings provide us with flexibility to support strategic acquisitions like ELITech and our pending NanoString acquisition and delever over time. .

Turning now to Slide 14. We are maintaining our organic revenue growth guidance and organic non-GAAP EPS prior guidance from February 13, '24. We're updating our 2024 outlook to include the recently closed acquisitions of ELITech and Chemspeed as well as changes in foreign currency.

It does not include the pending NanoString acquisition, which was covered in our April 22nd press release. .

Our updated guidance for reported revenue is $3.29 billion to $3.35 billion, up $60 million from prior guidance, representing growth of 11% to 13% compared to 2023. As noted earlier by Frank, this guidance maintains our full year '24 organic revenue growth of 5% to 7% year-over-year.

It also reflects an estimated foreign currency headwind of about 1% and acquisitions contributing now about 7% to revenue growth year-over-year. This guidance now implies constant exchange rate, CER, revenue growth of 12% to 14% in full year 2024 year-over-year. .

For non-GAAP operating margins in 2024, following strong organic operating improvement of about 130 basis points in 2023, we expect 2024 organic operating margin improvement of about 50 basis points.

For non-GAAP operating margins all in, we expect about a 60 basis point decline from the prior year due to a combined acquisition and foreign exchange headwind of about 110 basis points. As we explained in the simultaneous ELITech closing press release this morning, we expect ELITech to be immediately accretive to Bruker margins. .

On the bottom line, we're now guiding to non-GAAP EPS for 2024 in a range of $2.79 to $2.84, up $0.08 from the accretive ELITech acquisition. This translates to non-GAAP EPS growth guidance of 8% to 10% compared to 2023. Other guidance assumptions are listed on the slide.

Our fiscal year 2024 ranges have been updated for foreign currency rates as of March 31, 2024..

One additional note on quarterly phasing for the year. We expect second quarter organic revenue to be up mid-single digits organically year-over-year. We also expect to see sequential improvement in non-GAAP operating margin performance in the second quarter of 2024 and significant improvement in the second half of 2024. .

We expect to host a follow-up call with investors and sell-side analysts within a few weeks after the closing of our NanoString acquisition.

During this call, we plan to provide additional information on our recent significant acquisitions, including Chemspeed, ELITech and NanoString, and update our medium-term outlook for fiscal year 2026 financial targets. .

Finally, I echo Frank's earlier comments on the importance of these recent acquisitions.

While we expect some margin dilution initially from certain acquisitions, these are excellent additions to complement the portfolio transformation underway at Bruker and expected to contribute solid profitable growth and strong ROIC performance to our shareholders over the next few years. .

To wrap up, Bruker delivered solid constant exchange rate revenue growth in the first quarter of 2024, and we're well positioned to deliver above-market revenue growth and organic non-GAAP EPS growth in 2024..

With that, I'd like to turn the call over to Justin to start the Q&A section. Thank you very much. .

Thank you, Gerald. I'd now like to turn the call over to the operator to begin the Q&A portion of the call. [Operator Instructions] Operator, we're ready for the Q&A portion. .

[Operator Instructions] Our first question today comes from Puneet Souda from Leerink Partners. .

My first one is on the revenue slippage you talked about.

Is that just a pull forward into the 4Q '23 and thus not expected going forward? And just overall, with the mid-single-digit expectations for the second quarter, can you just elaborate what you're seeing in terms of the overall demand, your ability to deliver from the backlog and any bookings growth that you can talk about? And then I have a follow-up.

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Yes. Thank you, Puneet. It's Frank. So yes, as you recall, our Q4 of last year was strong, even stronger than we had expected. Usually, some things slip into Q1, and all the site readiness and export permits, I mean, it was near -- nearly everything went flawlessly.

And so yes, with that, we had already expected a low single-digit organic revenue growth for Q1, and we had signaled that previously. .

And then it was a little lower than we would have liked with about $15 million that's slipping into Q2, which is what we acknowledged here. There's essentially no risk of any of that getting canceled. That will come in, in Q2. Those were the usual export permits, site readiness or sometimes some logistical issues that the system does not go in.

But there's no risk issue, and it's not a reflection of any demand. .

With that, we ended up at the 1.6% organic growth, which is a bit weaker than we would have liked. But as always, it's best to look at Bruker as an average over several quarters. And I think we'll have a decent mid-single-digit or perhaps better Q2 organic revenue growth and expect double-digit CER growth in the second quarter. So that's the cadence. .

Got it. Super helpful. And then, Frank, I mean, I can't recall a time when Bruker had these many number of acquisitions in such a short period of time. So look, first of all, it's great to see you picking up a number of these excellent technologies for the post-genomics era that you've talked about. But 2 questions that investors are struggling with.

When we look at -- what do these acquisitions mean for potential dilution? And I know you're going to talk about that on the follow-up call, but any sort of directional read that you can provide us on into how to think about these in 2025?.

And then more importantly, I mean, if you could elaborate a bit on how your plants are looking in terms of integration priorities and -- because it does seem like there's significant undertaking versus what Bruker might have done in the past, and that is likely to have some impact on the inorganic growth and EPS in the near term and medium term as well.

So maybe just talk to us about the integration and how you're thinking about that. .

Yes. So I'll sort of do it in reverse order, Puneet. I'm actually very confident on the integration and that we have the bandwidth to do this. It turns out because we are -- we have 3 very strong groups plus BEST, we really have the management capacity and the integration capacity as if we were almost 3 companies.

I mean obviously, we're one company, but it turns out the ELITech business and a number of these smaller acquisitions that were done by our Bruker Optics division previously, that's all within CALID. And they're handling that really, except for financing and some high-level corporate matters. Really very, very focused.

And I'm convinced they're going to handle that very well. And they're handling very well the smaller ones that they've done already. .

Chemspeed and some of these software acquisitions that you've seen recently are very much part of the BioSpin Group. So we have a really a separate group. It's kind of a modular setup where they're pursuing that and really are doing a great job with that.

So again, it doesn't -- it's not that these things are all piling up on us except at the highest level where we provide the strategic direction and the support and the financing, of course. And ultimately -- and that's where there is more work to be done.

I mean we did not expect either that we would be able to acquire the former PhenomeX, now Bruker Cellular Analysis. And then that NanoString would already in Q2 run into their Chapter 11 reorganization. .

And so this wasn't going to wait until Q4 or until we get around until next year. This was an opportunity, a strategic opportunity that's incredible. A complicated situation, we'll admit that. But on the other hand, what an opportunity to build -- to buy not only a gene expression business. Their gene expression business with nCounter is quite nice.

But really hopefully close to -- I mean, this hasn't closed yet, but to acquire hopefully soon, and it's under agreement, in an asset deal, the spatial biology business, which is one of the leading spatial transcriptomics businesses, as you know. .

So those were incredible strategic opportunities, and again, at valuations that are absolutely compelling and will lead to great ROICs. So that is very unusual for Bruker to have done many acquisitions. But on the other hand, the opportunities that we had and the flexibility and the organizational bandwidth that we have allow us to do that. .

On '25 and '26, if I may defer you to this little mini Investor Day that we hope to do within -- as a virtual call only within weeks after we close NanoString. Hopefully, we get to close NanoString in the second quarter.

And then hopefully, within weeks, Justin will be setting up a 2-hour call where we present and have the division leaders of those new businesses, present Chemspeed, present ELITech and hopefully present NanoString. And then, of course, Gerald and I will wrap it all up and tell you how that affects and accelerates our medium-term outlook for 2026.

That's our present plan. .

Other than that, we prefer not to comment on NanoString today because it's still pending. And as you know, we tend to be very disciplined. Now we talk about ELITech now that it's closed, and we'll talk about NanoString more when that closes, hopefully in the second quarter. .

Our next question comes from Patrick Donnelly from Citi. .

Frank, maybe just one on kind of the order backdrop, a little more real time. It sounds like the book-to-bill was a little bit below 1 in BSI.

Can you just talk about what you're seeing on the order front, maybe on the academic side, in particular, what the conversations there with customers are and just expectations as we go forward here?.

Yes. Our -- we didn't use up much backlog in the first quarter because of some revenue slippage. So our backlog coverage is still about 7.5 months. So that's remained strong. And academic/government in the U.S. and in Europe has been decent. We've had also reasonable, except for China, reasonable bookings in biopharma, diagnostics.

MALDI Biotyper is doing well, certainly on the consumables side. .

So it's not a fantastic macro environment out there, right? But it's decent, and it's sort of the bookings and in all the various markets, geography or by market -- by end market are about as expected, which is slower growth but still organic growth for us. Yes. So the macro environment isn't exciting, but it is also not deteriorating.

And it is about as we expected given our tool set and portfolio transformation, which, as you've seen, does allow us with above-market 5% to 7% organic revenue growth this year. We're really quite confident with that. .

Okay. That's helpful. And then maybe you touched on China briefly in the answer there. Can you just talk about the trends over there? I mean there's been some debate about stimulus loan program, whatever you want to call it. What you're seeing there, what the conversations look like in China and expectations for the year would be helpful. .

Patrick, it's Gerald. I'll take this one. So from a perspective of China, I mean our -- we are -- it's still early days, I guess I'd say, with respect to this loan stimulus program that's being considered. We've heard some conversation on the Street about how that's going to play out.

We don't expect to see that transfer itself into real orders probably until certainly the second half. .

Our understanding is that it's a relatively broad stimulus program targeting equipment upgrade. And certainly in the technology area over multiple years, our expectation is that will ultimately result in a tailwind for Bruker. But we don't really have any further details on exactly the timing or exactly which products would be impacted.

That's what I guess I can say about that. We still continue to feel pretty strong about the overall performance in China over time. But obviously, there's been some challenges there from a macro perspective. .

Very fundamentally, China has again made and clarified they are very strong and exceptionally strong commitment to science and technology. And that's a very high priority for them and for their investments as a country, which bodes well for the entire industry.

It also does bode quite well for us with more of an academic/government exposure or, I mean, more participation in China, whereas we got a little lucky that we're not so exposed to their biopharma or CRO markets, which obviously have been and probably continue to struggle to some of that -- to some extent also because of geopolitical risks.

Anyway, so that's bypassing us mostly. .

Our next question comes from Rachel Vatnsdal from JPMorgan. .

So first, I wanted to push a little bit on the 2Q guide. You mentioned that you're expecting mid-single-digit organic growth next quarter. So that came in a little bit lighter than expectations. You also mentioned that $15 million slipping from 1Q to 2Q.

So can you help us understand the puts and takes there? What are the underlying assumptions embedded in 2Q? Is there any level of conservatism? Or is this more of a realistic guide based on what you're seeing in the market right now?.

Yes. No, I mean hopefully, it's in the -- sorry, mid-single digit, this is somewhat conservative guide because we just missed a little bit in Q1, right? So we like to not have that repeat. But -- so there's some upside to that.

But on the other hand, it's also a realistic color for the second quarter with potential for upside that we'd like to be in an area where there's no downside to that in Q2. .

Okay. Great. That's helpful. And then just on 2025, you pulled forward some of the 2025 -- or the 2026 estimate to 2025 last quarter. I appreciate you're going to host this mini Analyst Day in the coming months here.

But I guess just to clarify, are you assuming that any of the underlying assumptions within that 2025 framework that you touched on last quarter have changed? Or are you really just pointing towards an update given some of the recent M&A and deals closing between ELITech and NanoString on the horizon?.

Yes, it's all about M&A, Rachel. So Chemspeed this year adds about $10 million per quarter in revenue and is neither EPS dilutive nor accretive. We think by next year, they will be somewhat EPS accretive and get back into growth mode. They had all that -- they have a lot of changes going from switching to U.S.

GAAP and product accounting rather than percentage of revenue. Too much detail, and we'll give you more at our mini Investor Day there or mini Investor Call. So they'll be mildly accretive. .

ELITech will be -- it looks like it continues to be very nice, high single digits, sometimes low double digits organic revenue growth business. And clearly, somewhat margin accretive. Clearly, EPS accretive. So that all comes in. .

And then as we close up -- when we close NanoString. As we have spelled out without a lot of detail, but just as a heads up in our April 22nd announcement of the asset purchase agreement for NanoString, we won't give '24 guidance on NanoString for reasons explained in that press release.

Obviously had considerable disruption from Chapter 11 and other litigation-related materials. We won't get into that today. .

So we'll see how that business settles. We just want to give the Street a heads up that there is a meaningful dilution from that in '24. We estimated $0.15 to $0.20. Happy to take that next year, we expect that to be lower next year. But we're not going to be able to go into that today, right, because it hasn't closed. .

So it is all fundamentally -- all the incremental changes are all about these acquisitions and how the -- and I guess the supporting financing that we've done at -- that Gerald has done at an incredibly extractive rate with our banking partners. Very, very pleased with how our capital structure is supporting all of that in a very attractive way.

So we'll pull all of these things together because there are too many moving pieces for you all, quite honestly, to be able to try to figure it all out. So we'll hope to really assist you with that and give you the ability to then model '26 and '25, in between, although we're not going to give '25 guidance.

But I think you'll be in a much better position to understand how all these pieces come together. .

Our next question comes from Doug Schenkel from Wolfe Research. .

This is [ Colleen ] on for Doug.

I just want to know how you're framing book-to-bill normalizing for the bolus in China stimulus bookings in Q1 of last year and the timing of delay of bookings in Q1?.

So the book-to-bill is for the first -- the book-to-bill that Frank quoted of roughly 1 is for the first quarter of this year, right? So that bodes well. Now last year in China, we had a bolus of orders in the first quarter. But then we had basically an air pocket of orders in the third quarter of last year from China.

So there was a lot of distortion in bookings in China last year..

For the full year in last year in China, we had bookings up nicely in the double digits along with revenues. So as you look at 2024, there's quite a bit of distortion on the year-over-year comp in China for bookings. And for that reason, we really think it makes sense to look at kind of full year picture from bookings. Hopefully, that's helpful. .

And just one follow-up on leverage. So with the NanoString deal, we estimate your debt-to-EBITDA will approximate about 3.5x.

Is that right? And if so, is it fair to assume this is the limit of what you'd be willing to take the balance sheet?.

Let's -- we'll talk more about that actually in the mini Investor Day. But what I'd say is, first of all, we need to make sure we're talking about gross versus net on the calculation. And we'll talk -- again, I think I'll just defer that to our call coming up.

Overall, of course, we're pleased with the financing actions we've already taken, and we'll talk more about options as we march into the forward investors and sell-side analyst discussion. .

But approximately, with your question, you're approximately right. Leverage -- gross leverage of about 3.5. Net leverage will be lower. And generally, that's not where we normally operate. We prefer to operate more in the 2 to 2.5 range. And obviously, there will be time -- there will be opportunities to delever.

Very clearly, our goal will be to delever from that level again. .

Our next question comes from Jack Meehan from Nephron Research. .

I had a couple of just financial questions for you guys. On the income statement, could you just explain, I guess, like below the line, other income? I was modeling like $7 million of other expense, but it was kind of the opposite.

How -- were there any factors that drove that in the quarter?.

One of the other significant items coming out of the quarter is, of course, as you likely know, we moved a series of -- took a series of actions on the foreign exchange side to be able to secure the EUR 807 million ELITech transaction. So that's part of what you see there.

There's a substantial foreign exchange gain that came between the euro and the Swiss franc. So that's what you see. We also had, as I think I mentioned in my prepared remarks, a more favorable tax rate that we had in the prior year. We're fundamentally pleased with that from a jurisdictional mix perspective. So those are the 2 pieces. .

Great. Okay. That makes sense. And then the second question was just on the PhenomeX solution. Could you talk about just how the integration is going, number one? Number two, I think I heard $0.05 of dilution. I think previously, you were talking about $0.02 to $0.03 a quarter.

Just what was the delta there?.

Yes. PhenomeX or now as we call it Bruker Cellular Analysis, we are estimating $0.10 to $0.12 dilution for the year '24. If you recall, we had $0.14 of dilution in Q4 before we could trigger the WARN Act. So it took us -- while we made the decisions right away, it took us some time to reduce head count and cost.

And you still -- some of that also still outside of the United States. Some of that cost reduction takes a little longer to have an effect. So you have -- $0.05 was the number, correct, for PhenomeX. And the average this year may be $0.02 to $0.03, maybe $0.03 on average, but it will be more front loaded. So good catch again, Jack.

It was higher than the average in Q1. .

Yes. Jack, as you'd imagine, the dilution is going to gradually taper from PhenomeX over time. What we've said is we expect it to be basically breakeven by 2026, but a lot of that dilution will really taper off in the first half of this year. So that's how we're thinking about the -- yes. .

Our next question comes from Dan Brennan from TD Cowen. .

Frank and Gerald, I know we're going to get more color on NanoString once it closes, but is it possible to speak at all to the work that you've done on the patent situation? Just because I think that likely caught many people by surprise, the fact that they've got these cases ongoing, and they lost the genomics case earlier this year, which obviously they're appealing, and they have the CosMx case.

I'm just wondering, any color you can provide on the work you did, the comfort you got and/or any remedies you might have in place if these cases go against NanoString?.

Yes, that's really something we're -- first of all, talking -- we're not going to talk even after the closing about litigation, potential litigation outcomes or litigation strategies. Today, we certainly cannot talk about it because it hasn't been closed.

It's obviously a key issue for the NanoString, that NanoString company, right? I mean that, to a significant extent, drove them into Chapter 11 reorganization.

Then once they were in the Chapter 11 reorganization, I'm not telling you anything you don't know, there was a favorable interim ruling at the European patent court that lifted the CosMx preliminary injunction, at least outside of Germany, if I have all my facts right. .

So there's been some positive news. But that's all intermediate, subject to appeal, subject to final ruling. So there is a lot of moving pieces and a lot of separate litigations and challenges and dirty hands and antitrust counterclaims and all of that.

And how that plays itself out, we can discuss a little bit more, and hopefully, we don't spend our entire mini -- we will not, I promise you, spend our mini Investor Day on IP items. But we can give you a little bit more color to the extent we can comment on ongoing litigations, which is very limited, as you might guess. We're very aware.

We're very aware. .

Okay. And maybe just one on the semi business. You called out the AI-related positioning.

Just wondering if you can help us kind of size that? Like how did semis do in the quarter? Any specific color on how much that AI is driving your semi and packaging business? And kind of what do you kind of assume implicit in the guide for the year?.

We tend to do that more on an annual basis because, of course, quarterly fluctuations. But I think our semiconductor metrology business as a total percentage of revenue is now at high single digits and probably marching towards -- eventually towards 10% and higher. And maybe the -- and so that did well in terms of revenues in Q1..

The additional fees, that's still modest and below 1% of our revenue. That will now be our BEST and their research instrument subsidiary participate in the semiconductor late data.

The extreme UV or EUV technologies are now going into lithography, which is, of course, this semiconductor manufacturing for smaller and smaller feature sizes, which are needed particularly for AI but also perhaps for other high-performance computing applications..

And there are some unique technologies where we're supplying the supply chain. We don't deliver complete systems of the largest EV lithography supply chain that is out there. Anybody can guess who that might be. And we're very pleased we're providing some unique technologies from our research instruments business.

And I'm sure you've never heard of, but it's not insignificant anymore. Maybe it's $20 million or something like that in the supply chain. These aren't systems.

But it's a very, very key and very unique technology position that just adds a little bit of cherry on top of our semiconductor and advanced packaging metrology business that you're more familiar with. .

Yes, this is just -- that's a very good trend. And it's unusual for a life science or post-genomic company. But indeed, we have it in our NANO tools to some extent, are just very applicable and very unique there. It's wonderful. .

Our next question comes from Dan Arias from Stifel. .

Frank, I really do apologize for asking this because you said you'll be addressing NanoString later. And so this may be an unfair question. But if I -- it's less about the details in the financials and more just about the rationale.

Can you speak to whether this is a deal where you just felt like the price is right to your point earlier or one where the diligence led you to a point where you felt like you were comfortable either with the legal side of the equation or the technical side of the equation and work around for some of the problems that are actually leading to the legal side? Can you just talk a little bit about how comfortable you got with the deal? Because obviously, it's a controversial one.

.

Yes. So probably the answer is no because I don't want to talk about any of the litigation and all of these other things. But strategically, having a much bigger play in spatial biology with being able to acquire at a very reasonable valuation, 1 of the 2 leaders in spatial transcriptomics is an unbelievable strategic opportunity.

That's completely what drives this deal. We're very pleased with their gene expression and counter-profiling business. We think that has some growth opportunities and has good margins. Wonderful. .

But the driver was spatial transcriptomix. So the GeoMx and CosMx and related product -- software and other product lines. And that is a really big deal if you want to be a leader in spatial biology. We have a complementary but much, much smaller spatial proteomics business with Canopy. They really are in adjacent markets. They don't really overlap.

They're also -- what NanoString is doing is 100x larger. So this really puts us on the map in spatial transcriptomics. We like their plex-ing capability. A lot of research customers, that's really what they want. They're far ahead. And I think they're pretty fundamentally ahead in spatial transcriptomics. .

So they're one of the pioneers, and we want to continue to support their customers in doing their fundamental and then very much also the translational clinical research where these spatial single-cell transcriptomics tools are so needed for biomedical research.

And that's in addition to Proteomics and structural biology and glycoproteomics, spatial biology. And there, the bigger field is spatial transcriptomics, and we had no presence on that. So for us, this is a huge opportunity, and we seized it. .

Okay. I appreciate you indulging me on that.

And then I guess just the natural next question and one of the many ways is, are you still on the hunt for deals? Is this -- are you -- are we likely to do additional M&A from here?.

I think we're going to be in a deal diet for a little while. I mean there's always small deals that come through. Sometimes, as you know, a lot of the smaller deals, sometimes some of them at $5 million or $10 million in revenue.

And some of them were literally addressing gaps that we had in our product line, in preclinical imaging or in Raman process analytical technology or high-end Raman Microscope. Those are things that we've been eyeing for many years and sometimes more than a decade. .

And when some of the companies then became available that fit perfectly into our Bruker Optics or our BioSpin preclinical imaging, we said, wow, this is great. And yes, it all comes at the same time, whereas 2 years ago, it was very difficult with valuations then to agree on anything. So we are value conscious. We are ROIC conscious.

So yes, this is -- but in terms of larger deals, we obviously need to -- we do wish to delever for a while. And that's -- I think that's the answer on larger deals. I would not expect any additional larger deals until we delever some. .

[Operator Instructions] our next question comes from Josh Waldman from Cleveland Research. .

I'll ask 2 and then hop off. First, Frank, can you comment on year-over-year orders in DESY in 1Q and whether the guide assumes any sequential improvement in order rates from here? I guess just more context on how you're thinking about the order cadence to support the full year organic guide would be helpful. And then for my follow-up, Frank again.

I wondered if you could comment or provide more context on the moving pieces within the CALID business. I mean maybe more color on the revenue slippage. You mentioned tougher comps. I can't help but notice you didn't highlight timsTOF this round. I guess just any more context here being on the order front.

How are you thinking about timsTOF growth? And any other kind of one-off or onetime pressures the segment may have seen this quarter?.

Yes. So trying to take as many of the questions. So bookings, I think we expect the normal seasonality that we have with bookings. Always weakest in Q1, strongest in Q4 and in between in Q2, Q3. There tend to be more comparable in terms of bookings. So that's what we expect this year as well.

So normal booking seasonality to where -- to your first question, I think it would imply a sequential step-up, not only revenues and margins, which we've mentioned, but also in bookings throughout the remainder of the year..

TimsTOF, I did mention, of course, the 4D-Proteomics and immunopeptidomics, glycoproteomics. That's all. There was a picture of a timsTOF Ultra. That's all on the timsTOF platform. Very significant workflow and software and capabilities increases that we showed at the U.S. HUPO meeting.

In March, we have an ASMS around the corner, right? That's coming up in the second week of June in Anaheim. So that's obviously a biggie in the mass spec world. .

And yes, timsTOF is doing well and many platforms and many new capabilities. It's just such a beautiful platform. It's -- as you peel the onion, there's not only proteomics and then maybe plasma proteomics or single-cell proteomics. And now there's a middle down, top down. There is intact.

There are these immunopeptidomics and unique PGMs and glycoproteomics. There's protein-protein interactions. It's such a rich field that one really now has to look at like a dozen subfields that all constitute proteomics and related fields.

And the instrument is very, very suitable for that and along with new [ whiteware ] consumables with new software, with new workflows. So plenty going on there. .

Frank, I guess just on the revenue slippage.

Was that timsTOF? Or is it something else within CALID?.

No. It was also not only CALID. It also was semiconductor metrology tools. Sometimes when one of these facilities buy one of our large semiconductor metrology tools get slipped by a quarter or 2, and those very large customers that you all know by name tell you, no, ship that in March, ship that in whatever and in Q2 and some time. So some of that.

Some of that was NMR and preclinical imaging, MRI related. So this wasn't just -- this was not just on CALID. But CALID had a very strong comp year-over-year. I think one of the strongest. .

In Q4, there was quite a bit pulled forward into Q4, including within, for example, the optics business, which is within CALID. So those caused quite and distortion in this. The primary driver of the lower organic growth in the first quarter..

All right. Operator, I think we're all set with questions. So we want to thank everyone for joining us today on the call. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the second quarter. Please feel free to reach out to me to arrange any follow-ups. Have a great day. .

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