bruker corporation (nasdaq: brkr) · q3 2016 earnings presentation frank laukien, president &...

Bruker Corporation (NASDAQ: BRKR)

Q3 2016 Earnings Presentation

Frank Laukien, President & CEO

Anthony Mattacchione, SVP & CFO

Miroslava Minkova, Head of Investor Relations November 2, 2016

Innovation with Integrity

BRUKER CORPORATION

Safe Harbor & Reg. G Statement

Any statements contained in this presentation that do not describe historical facts may constitute

forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995.

Any forward-looking statements contained herein are based on current expectations, but are subject to

risks and uncertainties that could cause actual results to differ materially from those projected, including,

but not limited to, risks and uncertainties relating to adverse changes in conditions in the global economy

and volatility in the capital markets, the integration of businesses we have acquired or may acquire in the

future, our ability to successfully implement restructuring initiatives, changing technologies, product

development and market acceptance of our products, the cost and pricing of our products,

manufacturing, competition, dependence on collaborative partners and key suppliers, capital spending

and government funding policies, changes in governmental regulations, realization of anticipated benefits

from economic stimulus programs, intellectual property rights, litigation, and exposure to foreign

currency fluctuations and other risk factors discussed from time to time in our filings with the Securities

and Exchange Commission. These and other factors are identified and described in more detail in our

filings with the SEC, including, without limitation, our annual report on Form 10-K for the year ended

December 31, 2015 and subsequently filed Quarterly reports on Form 10-Q. We will also be referencing

non-GAAP financial measures in this presentation. A reconciliation of non-GAAP to GAAP results is

available in our earnings press release and in this presentation.

2

Business Update

Q3 2016 & YTD 2016

3

Q3-2016 Performance

Revenue decline of -$2M, or -0.6% y-o-y

− Jordan Valley acquisition added +1.6% y-o-y

− foreign exchange added +0.2% y-o-y

Organic revenue down -2.4% y-o-y, driven primarily

by weakness in European academic and global

industrial markets, offset in part by China growth

Non-GAAP gross profit margin expands +280 basis

points y-o-y to 48.9%

Non-GAAP operating margin expands +160 basis


GAAP EPS of $0.29, an increase from $0.07 in Q3-15

Non-GAAP EPS of $0.32, an increase of +68% y-o-y

− non-GAAP tax rate ~6% due to release of tax

valuation allowances with sustained US profitability

Q3 Financials

4

Revenues [$M]

396 394

Q3-15 Q3-16

Non-GAAP EPS

Q3-2016: Despite continued slow demand, Bruker

delivered strong y-o-y margin and EPS expansion

-1%

+68%

$0.19

$0.32

Q3-15

Q3-16

YTD Q3-2016 Performance

Revenue decline of -$5M, or -0.4% y-o-y

− Jordan Valley acquisition adds +2.0% y-o-y

− FX lowers revenue by -0.1% y-o-y

Organic revenue decline of -2.3% y-o-y, driven

primarily by weak European academic and global

industrial markets, weak H1-16 MALDI Biotyper™

business, offset in part by China growth

Non-GAAP gross profit margin expands by +170 basis


Non-GAAP operating margin expands by +130 basis


GAAP EPS grows by +117% y-o-y to $0.52

Non-GAAP EPS grows by +43% y-o-y to $0.73

YTD Financials

5

Revenues [$ m]

1146 1141

YTD 2015 YTD 2016

Non-GAAP EPS

YTD Q3-2016: Operational improvements drive

+130 bps operating margin expansion and EPS growth

flat

+43%

YTD 2015

YTD 2016

$0.51

$0.73

Bruker BIOSPIN Group

Mid-single-digit (MSD) revenue growth and strong margin expansion

NMR benefits from better pricing, mix and 2015 restructuring

PCI stabilizes with improving orders after a weak 2015

Good applied markets demand for NMR FoodScreeners™ and for NMR

clinical research systems

Good after-market revenue growth with LabScape™

Mid-single-digit (MSD) revenue decline due to weakness in European

academic funding, challenging y-o-y Detection business comparison,

and lower H1-16 MALDI Biotyper sales in China and the Americas

Additional factory consolidation and restructuring underway

Exciting new Daltonics products MALDI PharmaPulse™, timsTOF™ and

rapifleX™ TOF/TOF expected to be profitable growth drivers in FY17

Optics business grew revenue with meaningful margin expansion

GROUP OVERVIEW:

YTD Q3-2016 Operating Performance

6

Bruker CALID Group

Bruker NANO Group

Low-single-digit (LSD) revenue decline (incl. Jordan Valley) due to

weak European academic funding and weak global industrial markets

AXS business revenue and margin weakness, additional factory

consolidation and restructuring actions underway

Nano Surfaces business revenue declines, margins higher due to cost

actions

Semiconductor metrology revenue more than doubles with Jordan

Valley acquisition and adoption of X-ray tools by major customers

BEST Segment

Revenue approximately flat y-o-y, margins lower after phase out of

ITER and DESY projects in 2015

Good revenue growth for superconducting wire business as a result of

product performance and quality, strong backlog and long-term

contracts

GROUP OVERVIEW:

YTD Q3-2016 Operating Performance

7

Innovation with Integrity

CALID ACQUIRES ASSETS FOR SYNDROMIC PANEL DEVELOPMENT:

New targeted PCR Assays and rapid Syndromic Panels

to complement successful MALDI BioTyper™ platform

8

• Bruker’s Microbiology business has acquired

infrastructure and IP for nucleic acid testing (NAT)

assay development and manufacturing

• Hired experienced R&D team to launch real-time

PCR-based assays for microbiology in 2017

• Development of targeted multiplex assays and

syndromic panels for rapid bacterial, fungal, viral

identification, and detection of resistance genes

• Highly complementary to accurate, broad-coverage,

untargeted proteomic identification from isolates

• Expect proteomic and NAT assays both on MALDI

Biotyper platform (>2,000 units worldwide)

• No material financial impact in 2016

2016 Key Priorities

Continue Margin Expansion as we transition from

three-year Transformation to phase of

Operational & Commercial Excellence

• Additional factory consolidations and restructuring actions

in 2016 with goal of >$10M annualized savings by H2-17

Strengthen systems and insights by harmonizing

processes and ERP platforms

Accelerate profitable growth in 4 strategic markets

with fundamentally higher GPMs

• Software, consumables and assay acquisitions to drive

microbiology strategy and after-market business

Reemphasize strong focus on customers, as well as

on product and business innovation

Focus on resumption of growth and further

margin expansion in 2017

9

Financial Update

Q3 2016 & YTD 2016

10

NON-GAAP FINANCIAL PERFORMANCE:

Q3-2016 Overview

[$ m, except EPS] Q3-2016 Q3-2015 Δ

Revenues 393.9 396.1 -1%

Operating Income 58.6 52.8 +11%

Margin (%) 14.9% 13.3% +160 bps

Non-GAAP EPS $0.32 $0.19 +68%

Free Cash Flow 27.1 44.7 -18M

[$ m] Sep 30, 2016 Sep 30, 2015 Δ

Net Cash 76.6 160.9 -52%

Working capital (WC)* 613.4 633.2 -3%

WC-to-revenue ratio 0.38 0.38 NM

11

COMMENTS

Operating margin up +160

bps y-o-y on operational

improvements, despite

modest revenue decline

Additional factory

consolidations and

restructuring underway

EPS increase driven by

margin expansion, non-cash

tax benefits, and lower

diluted share count y-o-y

Free cash flow of +$27M

Share buyback and dividend

result in lower net cash

Working capital ratio steady

* WC = (Accounts Receivable + Inventory - Accounts Payable)

Q3 2015 Organic Currency Portfolio Q3 2016

$396.1M $393.9M

Q3 2016 Revenue Bridge

Organic Currency Portfolio Total

-2.4% +0.2% +1.6% -0.6%

Organic revenue decline

driven by weak European

academic and global

industrial markets

Jordan Valley acquisition

and adoption of X-ray

semiconductor metrology

tools adds to revenue

growth

Minimal effect on

revenue from foreign

currency translation

12

Q3 2016 DRIVERS

Q3-2016 Revenue Bridge [$M]

-$9.7 +$1.2 +$6.3

Q3 2016 Revenue for Bruker Corporation

Q3 2016 Non-GAAP Results

[$ m, except EPS] Q3 2016 Q3 2015 Δ

Total Revenues 393.9 396.1 -1%

Gross Profit 192.6 182.7 +5% Margin (% of revenues) 48.9% 46.1% +280 bps

SG&A -96.1 -95.6 +1%

(% of revenues) 24.4%

24.1%

R&D -37.9 -34.3 +10% (% of revenues) 9.6% 8.7%


(% of revenues) 14.9% 13.3% +160 bps

Tax Rate 6.3% 32.2% -2590 bps

Net Income* 51.7 31.6 +64%

EPS $0.32 $0.19 +68%

Shares Outstanding 161.5 168.7 -4%

Gross profit margin expansion driven by NMR pricing, BBIO 2015 restructuring, strong Optics execution and operational improvements in all businesses

NANO gross margin flat y-o-y despite weak industrial and EU academic markets

Operating margin up +160 bps y-o-y

Q3-2016 tax rate positively impacted by non-cash tax benefits

EPS increase on margin expansion, lower tax rate and share count y-o-y

13

COMMENTS

* Attributable to Bruker Sum of items may not total due to rounding

YTD 2015 Organic Currency Portfolio YTD 2016

$1,145.6M $1,141.0M

YTD Q3-2016 revenue bridge

Organic Currency Portfolio Total

-2.3% -0.1% +2.0% -0.4%

Revenue essentially flat

y-o-y with acquired

Jordan Valley revenue

Organic revenue decline

of -2.3% due to weak

European academic and

global industrial markets

Foreign currency impact

immaterial

14

YTD 2016 DRIVERS

YTD 2016 Revenue Bridge [$ m]

-$26.2 -$1.9 +$23.5

YTD Q3-2016 Revenue for Bruker Corp.

YTD Q3-2016 Non-GAAP Results

[$ m, except EPS] YTD 2016 YTD 2015 Δ

Total Revenues 1,141.0 1,145.6 0%

Gross Profit 544.9 528.2 +3% Margin (% of revenues) 47.8% 46.1% +170 bps

SG&A -288.2 -287.7 NM

(% of revenues) 25.3%

25.1%

R&D -110.8 -109.0 +2% (% of revenues) 9.7% 9.5%


(% of revenues) 12.8% 11.5% +130 bps

Tax Rate 11.4% 23.9% -1250 bps

Net Income* 118.6 86.6 +37%

EPS $0.73 $0.51 +43%


Gross profit margin

expansion driven by NMR

pricing, mix and 2015

restructuring actions.

Nano Surfaces and

Optics also contribute.

Operating expenses

approx. flat, including

acquired JV expenses

Operating margin

increases +130 bps

Audit settlements,

release of tax valuation

allowances, jurisdictional

mix lower tax rate

Share buybacks add

3 cents to EPS increase

15

COMMENTS


YTD Q3-2016 Cash Flow

[$ m] YTD 2016 YTD 2015 Δ

Net Income 85.4 42.9 +42.5

Depreciation & amortization 40.4 40.0 +0.4

Changes in working capital* -38.7 11.4 -50.1

Other -47.1 -14.7 -32.4

Operating cash flow 40.0 79.6 -39.6

Capital expenditures -26.0 -22.8 -3.2

Free cash flow 14.0 56.8 -42.8

Y-o-y free cash flow

comparison driven by:

– Higher cash earnings

offset by working capital

needed to fund Q4,

restructuring and tax

payments

– Inventory builds in

BioSpin and BEST

– Higher 2015 bonus

payments in Q1-16

– Q1-16 tax payments

associated with 2015

cash repatriation and

higher 2016 estimated

tax payments

16

COMMENTS


FY2016 Outlook

17

Revised FY-2016 Guidance

Reported Revenue Growth

Approximately -1%

Non-GAAP Operating Margin Expansion y-o-y

100 bps or more

Non-GAAP EPS $1.07 - $1.11

18

FY-2016 Guidance: tweaking revenue, raising

margin expansion, raising non-GAAP EPS on

margins and tax benefits

Organic revenue decline:

~ -3%

Acquisition revenue

growth: ~ +2%

FY 2016 non-GAAP tax

rate: 16% - 17% due to

release of tax valuation

allowances

Fully diluted share count:

162M-163M shares

Capex: ~ $35 - 40M

Current currency

assumptions:

Yen/USD: 101.4

USD/EUR: 1.12

CHF/USD: 0.97

2016 ASSUMPTIONS

Appendix

19

Q3 2016 GAAP Results

[$M, except EPS] Q3 2016 Q3 2015 Δ

Total Revenues 393.9 396.1 -1%

Gross Profit 185.2 167.5 +11%

Margin (% of sales) 47.0% 42.3%

SG&A -96.8 -96.1 +1%

(% of revenues) 24.6% 24.3%

R&D -37.9 -34.3 +10%

(% of revenues) 9.6% 8.7%


(% of revenues) 11.7% 7.1%

Net Income* 46.5 11.8 +294%

EPS $0.29 $0.07 +314%


20


Q3 2016 Reconciliation of GAAP and

Non-GAAP Results

[$M, except EPS] Q3 2016 Q3 2015

GAAP Operating Income 45.9 28.2

Restructuring Costs 5.3 12.7

Acquisition-Related Costs 0.4 1.2

Purchased Intangible Amortization 5.4 5.1

Other Costs 1.6 5.6

TOTAL 12.7 24.6

Non-GAAP Operating Income 58.6 52.8

Non-GAAP Interest & Other Income (Expense), net* -2.9 -4.6

Non GAAP Profit Before Tax 55.7 48.2

Non-GAAP Income Tax Provision -3.5 -15.5

Non-GAAP Tax Rate 6.3% 32.2%

Minority Interest -0.5 -1.1

Non-GAAP Net Income** 51.7 31.6

Non-GAAP EPS $0.32 $0.19

21

Sum of items may not total due to rounding **Attributable to Bruker

YTD Q3-2016 GAAP Results

[$M, except EPS] YTD 2016 YTD 2015 Δ

Total Revenues 1,141.0 1,145.6 Flat

Gross Profit 522.1 497.1 +5%

Margin (% of sales) 45.8% 43.4%

SG&A -290.4 -289.2 Flat

(% of revenues) 25.5% 25.2%

R&D -110.8 -109.0 +2%




Net Income* 84.6 40.2 +110%

EPS $0.52 $0.24 +117%


22


YTD 2016 Reconciliation of GAAP and

Non-GAAP Results

[$M, except EPS] YTD 2016 YTD 2015

GAAP Operating Income 100.3 75.0

Restructuring Costs 12.8 21.2

Acquisition-Related Costs 10.4 -1.4

Purchased Intangible Amortization 16.2 15.5

Other Costs 6.2 21.2

TOTAL 45.6 56.5

Non-GAAP Operating Income 145.9 131.5

Non-GAAP Interest & Other Income (Expense), net* -11.1 -14.1

Non GAAP Profit Before Tax 134.8 117.4

Non-GAAP Income Tax Provision -15.4 -28.1

Non-GAAP Tax Rate 11.4% 23.9%

Minority Interest -0.8 -2.7

Non-GAAP Net Income** 118.6 86.6

Non-GAAP EPS $0.73 $0.51

23

Sum of items may not total due to rounding * Excludes $0.2 million of net losses for YTD 2015

**Attributable to Bruker

Q3 2016 Cash Flow Statement

[$M] Q3 2016 Q3 2015 Δ

Net Income 47.0 12.9 +34.1

Depreciation & amortization 13.7 13.3 +0.4

Changes in working capital* -23.7 -3.0 -20.7

Other -1.1 30.9 -32.0

Operating cash flow 35.9 54.1 -18.2

Capital expenditures -8.8 -9.4 -0.6

Free cash flow 27.1 44.7 -17.6

Y-o-Y free cash flow

comparison driven by:

– Restructuring related

inventory increases and

payments

24

COMMENTS


Balance sheet

[$M] Sep 30, 2016 Dec 31, 2015 Sep 30, 2015

Cash, Cash Equivalents & Short-term Investments

441.5 468.3 532.3

Financial Debt 364.9 265.8 371.4

Net Cash 76.6 202.5 160.9

25

[$M] Sep 30, 2016 Dec 31, 2015 Sep 30, 2015

Total Assets 1,797.9 1,730.0 1,842.9

Working Capital* 613.4 584.6 633.2

Intangibles, Net & Other Long-Term Assets

291.8 267.4 224.1


Q3-16 GAAP SEGMENT RESULTS:

BSI and BEST GAAP Performance

[$ m] Q3 2016 Q3 2015 Δ

REVENUE

Scientific Instruments (BSI) 361.5 366.6 -1%

Organic Revenue Growth (%) -3.5% 9.3%

Energy & Supercon Technologies (BEST) 35.5 32.9 +8%

Organic Revenue Growth (%) +8.1% -2.6%

Corporate Eliminations -3.1 -3.4

Total Revenue 393.9 396.1 -1%

OPERATING INCOME

Scientific Instruments (BSI) 43.4 25.8 +68%

Energy & Supercon Technologies (BEST) 2.7 2.5 +8%

Corporate Eliminations -0.2 -0.1

Total Operating Income 45.9 28.2 +63%

26

Sum of items may not total due to rounding

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