q2 2016 earnings presentation - bruker corporation
TRANSCRIPT
Bruker Corporation (NASDAQ: BRKR)
Q2 2016 Earnings Presentation Frank Laukien, President & CEO
Anthony Mattacchione, SVP & CFO Stacey Desrochers, Treasurer & Director of
Investor Relations August 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.
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Business Update Q2 2016 & H1 2016
3
Q2-2016 Performance
Revenue decline of -$24M, or -6.1% y-o-y − Jordan Valley acquisition adds +3.1% y-o-y
Organic revenue decline of -9.2% y-o-y, driven primarily by delays in European academic funding and weaker industrial markets
Non-GAAP gross profit margin expands +250 basis points y-o-y to 47.6%
Non-GAAP operating margin of 10.8%, flat y-o-y
Non-GAAP EPS grows by +5% y-o-y
Q2 Financials
4
Revenues [$ m]
396 372
Q2-15 Q2-16
Non-GAAP EPS
Despite revenue decline in Q2, we expanded gross profit margin and grew EPS
-6%
+5%
$0.19
$0.20
Q2-15
Q2-16
H1-2016 Performance
Revenue decline of -$2M, essentially flat y-o-y − FX lowers revenue by -0.4% y-o-y − Jordan Valley acquisition adds +2.3% y-o-y
Organic revenue decline of -2.2% y-o-y, driven primarily by delays in European academic funding and weaker industrial markets, but also by weaker MALDI Biotyper business in the US and China
Non-GAAP gross profit margin expands by +110 basis points to 47.2%
Non-GAAP operating margin expands by +120 basis points y-o-y to 11.7%
GAAP EPS grows by +35% y-o-y to $0.23
Non-GAAP EPS grows by +28% y-o-y to $0.41
H1 Financials
5
Revenues [$ m]
749 747
H1 2015 H1 2016
Non-GAAP EPS
Operational improvements and acquisition result in gross and operating margin expansion >100 bps on flat H1-16 revenue, EPS grows >25% y-o-y;
0%
+28%
H1 2015
H1 2016
$0.32
$0.41
Bruker BIOSPIN Group Achieved mid-single-digit (MSD) revenue growth and continued margin
expansion
NMR benefits from volume, pricing, mix, and 2015 restructuring
Good applied markets demand for NMR FoodScreeners™ and for NMR metabolic research systems in international Phenome Centers
Good after-market revenue and margin growth with LabScape™
Low-single-digit (LSD) revenue decline, cost actions underway
Daltonics revenue declined due to delays in European academic funding and lower MALDI Biotyper sales in China and the US
Exciting new Daltonics products MALDI PharmaPulse, timsTOF and rapifleX TOF/TOF are expected to be profitable growth drivers in FY17
Optics business grew revenue with meaningful margin expansion
GROUP OVERVIEW:
H1 2016 Performance
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Bruker CALID Group
Bruker NANO Group LSD revenue decline due to European academic funding delays and
very weak industrial markets
Semiconductor metrology revenue more than doubles with Jordan Valley acquisition and rapid adoption of X-ray tools by major customers
AXS with weaker margins on lower revenues, right-sizing underway
Nano Surfaces revenue declines with margin improvements due to cost actions; order growth in multi-photon and super-resolution microscopy
BEST Segment MSD revenue decline and lower margins after phase out of ITER and
DESY projects in 2015
Good revenue growth for superconducting wire as a result of strong backlog and long-term contracts
High-temperature superconducting (HTS) tapes make good progress, commercial deliveries accelerated to Q4-16
GROUP OVERVIEW:
H1 2016 Performance
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Innovation with Integrity
ANALYTICA & ASMS CONFERENCE ANNOUNCEMENTS IN MAY AND JUNE 2016:
Exciting new products for life-science research, applied and bio-/pharma markets
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Raman Microscope used in laboratories for forensics, pharmaceutical, materials and life-science research
Intact protein analysis for biopharma
Revolutionary MALDI PharmaPulse™ label-free UHTS for drug discovery
Breakthrough novel Trapped Ion Mobility separation on ESI-QTOF mass spec for separation of unresolved compounds
SENTERRA™ II rapifleX™ TOF/TOF timsTOF™
2016 Key Priorities
Continue Margin Expansion as we transition from our three-year Transformation phase to our next phase of Operational & Commercial Excellence
Strengthen systems and management insights by harmonizing business processes and ERP platforms
Accelerate profitable growth in four strategic growth markets
Reemphasize strong focus on customers, as well as on product and business innovation
9
Financial Update Q2 2016 & H1 2016
10
NON-GAAP FINANCIAL PERFORMANCE:
Q2-2016 Overview
[$ m, except EPS] Q2-2016 Q2-2015 Δ
Revenues 371.7 396.0 -6%
Operating Income 40.0 42.9 -7% Margin (%) 10.8% 10.8%
Non-GAAP EPS $0.20 $0.19 +5%
Free Cash Flow 8.9 -9.2 +18M
[$ m] Jun 30, 2016 Jun 30, 2015 Δ
Net Cash 77.4 129.0 -40%
Working capital (WC)* 589.9 642.2 -8%
WC-to-revenue ratio 0.36 0.38 -0.02
11
COMMENTS
Flat operating margin despite MSD revenue decline. EPS increased due to share buyback.
Positive free cash flow of $9M
Share buyback and dividend result in lower net cash
Working capital ratio improvement due to good inventory and receivables management
* WC = (Accounts Receivable + Inventory - Accounts Payable)
Q2 2015 Organic Currency Portfolio Q2 2016
$396.0M $371.7M
Q2 2016 revenue bridge
Organic Currency Portfolio Total
-9.2% 0.0% +3.1% -6.1%
Organic revenue decline of -9.2% driven by academic funding delays in Europe and Japan, weakening industrial markets, and lower MALDI Biotyper sales in China and the US
Jordan Valley acquisition and accelerating adoption of X-ray semicon metrology tools adds to revenue growth
No effect on revenue growth from foreign currency translation
12
Q2 2016 DRIVERS
Q2-2016 Revenue Bridge [$ m]
-$36.3 $0.0 +$12.0
Q2 2016 Revenue for Bruker Corp.
Q2 2016 Non-GAAP Results
[$ m, except EPS] Q2 2016 Q2 2015 Δ Total Revenues 371.7 396.0 -6%
Gross Profit 176.9 178.4 -1% Margin (% of revenues) 47.6% 45.1%
SG&A -100.1 -98.0 2% (% of revenues) 26.9%
24.7%
R&D -36.8 -37.5 -2% (% of revenues) 9.9% 9.5%
Operating Income 40.0 42.9 -7% (% of revenues) 10.8% 10.8%
Tax Rate 12.0% 10.3% +170 bps
Net Income* 32.6 31.9 +2%
EPS $0.20 $0.19 +5%
Shares Outstanding 162.4 169.7 -4%
Gross profit margin expansion driven by NMR revenue growth, price increases, favorable mix, 2015 BBIO restructuring, plus strong semicon metrology business
Academic and industrial revenue declines lowered NANO and CALID Group gross profits and margins
Flat operating margin
Q216 tax rate impacted by settlement of audits, valuation allowance reversal
EPS increase due to lower share count
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COMMENTS
* Attributable to Bruker Sum of items may not total due to rounding
H1 2015 Organic Currency Portfolio H1 2016
$749.5M $747.1M
H1 2016 revenue bridge
Organic Currency Portfolio Total
-2.2% -0.4% +2.3% -0.3%
Revenue essentially flat y-o-y with the acquired Jordan Valley revenue
Organic revenue decline of -2.2% driven by same dynamics affecting Q2 results
Immaterial foreign currency impact
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H1 2016 DRIVERS
H1-2016 Revenue Bridge [$ m]
-16.5 -$3.1 +$17.2
H1 2016 Revenue for Bruker Corp.
H1 2016 Non-GAAP Results
[$ m, except EPS] H1 2016 H1 2015 Δ Total Revenues 747.1 749.5 0%
Gross Profit 352.3 345.5 +2% Margin (% of revenues) 47.2% 46.1%
SG&A -192.1 -192.1 0% (% of revenues) 25.7%
25.6%
R&D -72.9 -74.7 -2% (% of revenues) 9.8% 10.0%
Operating Income 87.3 78.7 +11% (% of revenues) 11.7% 10.5%
Tax Rate 15.0% 18.2% -320 bps
Net Income* 66.9 55.0 +22%
EPS $0.41 $0.32 +28%
Shares Outstanding 163.3 169.7 -4%
Gross profit margin expansion driven by same dynamics as in Q2
Operating expenses slightly lower on flat revenue
Operating margin increases +120 bps
Audit settlements, valuation allowance reversal, jurisdictional mix lower tax rate
Share buybacks add 2 cents to EPS increase
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COMMENTS
* Attributable to Bruker Sum of items may not total due to rounding
H1 2016 Cash Flow Statement
[$ m] H1 2016 H1 2015 Δ
Net Income 38.4 30.0 +8.4
Depreciation & amortization 26.7 26.7 0.0
Changes in working capital* -15.0 14.4 -29.4
Other -46.0 -45.6 -0.4
Operating cash flow 4.1 25.5 -21.4
Capital expenditures -17.2 -13.4 -3.8
Free cash flow -13.1 12.1 -25.2
Y-o-y free cash flow comparison driven by:
– Increased BioSpin, BEST, and Jordan Valley inventory needed for H2
– Higher 2015 bonus payments in Q1-16
– Q1-16 tax payments associated with 2015 cash repatriation
– Higher capex in H1-16 compared to H1-15
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COMMENTS
* WC = (Accounts Receivable + Inventory - Accounts Payable)
2016 Outlook
17
Revised FY-2016 Guidance
Reported Revenue Growth Approximately flat
Non-GAAP Operating Margin Expansion y-o-y
Approximately 75 - 100 bps
Non-GAAP EPS $0.97 - $1.02
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Lowering Revenue Guidance, Maintaining EPS Guidance
Organic revenue decline: ~ -2%
Acquisition revenue growth: ~ +2%
FY 2016 tax rate: 20% - 23%
Fully diluted share count: 163M shares
Capex: ~ $35 - 40M
Current currency assumptions: Yen/USD: 103 USD/EUR: 1.11 CHF/USD: 0.98
2016 ASSUMPTIONS
Appendix
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Q2 2016 GAAP Results
[$ m, except EPS] Q2 2016 Q2 2015 Δ
Total Revenues 371.7 396.0 -6%
Gross Profit 170.1 169.4 NM Margin (% of sales) 45.8% 42.8%
SG&A -100.9 -98.5 2% (% of revenues) 27.1% 24.9%
R&D -36.8 -37.5 -2% (% of revenues) 9.9% 9.5%
Operating Income 20.4 31.6 -35% (% of revenues) 5.5% 8.0%
Net Income* 14.5 21.9 -34%
EPS $0.09 $0.13 -31%
Shares Outstanding 162.4 169.7 -4%
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* Attributable to Bruker Sum of items may not total due to rounding
Q2 2016 Reconciliation of GAAP and Non-GAAP Results
[$ m, except EPS] Q2 2016 Q2 2015
GAAP Operating Income 20.4 31.6
Restructuring Costs 3.7 5.2
Acquisition-Related Costs 8.1 -2.8
Purchased Intangible Amortization 5.4 5.2
Other Costs 2.4 3.7
TOTAL 19.6 11.3
Non-GAAP Operating Income 40.0 42.9
Non-GAAP Interest & Other Income (Expense), net* -2.6 -6.0
Non GAAP Profit Before Tax 37.4 36.9
Non-GAAP Income Tax Provision -4.5 -3.8
Non-GAAP Tax Rate 12.0% 10.3%
Minority Interest -0.3 -1.2
Non-GAAP Net Income** 32.6 31.9
Non-GAAP EPS $0.20 $0.19
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Sum of items may not total due to rounding * Excludes $0.2 million of net losses for Q2 2015 **Attributable to Bruker
H1 2016 GAAP Results
[$ m, except EPS] H1 2016 H1 2015 Δ
Total Revenues 747.1 749.5 NM
Gross Profit 336.9 329.6 +2% Margin (% of sales) 45.1% 44.0%
SG&A -193.6 -193.1 NM (% of revenues) 25.9% 25.8%
R&D -72.9 -74.7 -2% (% of revenues) 9.8% 10.0%
Operating Income 54.4 46.8 +16% (% of revenues) 7.3% 6.2%
Net Income* 38.1 28.4 +34%
EPS $0.23 $0.17 +35%
Shares Outstanding 163.3 169.7 -4%
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* Attributable to Bruker Sum of items may not total due to rounding
H1 2016 Reconciliation of GAAP and Non-GAAP Results
[$ m, except EPS] H1 2016 H1 2015
GAAP Operating Income 54.4 46.8
Restructuring Costs 7.5 8.5
Acquisition-Related Costs 10.0 -2.6
Purchased Intangible Amortization 10.8 10.4
Other Costs 4.6 15.6
TOTAL 32.9 31.9
Non-GAAP Operating Income 87.3 78.7
Non-GAAP Interest & Other Income (Expense), net* -8.2 -9.5
Non GAAP Profit Before Tax 79.1 69.2
Non-GAAP Income Tax Provision -11.9 -12.6
Non-GAAP Tax Rate 15.0% 18.2%
Minority Interest -0.3 -1.6
Non-GAAP Net Income** 66.9 55.0
Non-GAAP EPS $0.41 $0.32
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Sum of items may not total due to rounding * Excludes $0.2 million of net losses for H1 2015 **Attributable to Bruker
Q2 2016 Cash Flow Statement
[$ m] Q2 2016 Q2 2015 Δ
Net Income 14.8 23.1 -8.3
Depreciation & amortization 13.5 13.2 +0.3
Changes in working capital* -13.7 -16.1 +2.4
Other 3.5 -21.7 +25.2
Operating cash flow 18.1 -1.5 +19.6
Capital expenditures -9.2 -7.7 -1.5
Free cash flow 8.9 -9.2 +18.1
Y-o-Y free cash flow comparison driven by:
– Inventory increases
– Dividend payment
– Large estimated tax payments
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COMMENTS
* WC = (Accounts Receivable + Inventory - Accounts Payable)
Balance sheet
[$ m] Jun 30, 2016 Dec 31, 2015 Jun 30, 2015
Cash, Cash Equivalents & Short-term Investments
420.4 468.3 493.6
Financial Debt 343.0 265.8 364.6
Net Cash 77.4 202.5 129.0
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[$ m] Jun 30, 2016 Dec 31, 2015 Jun 30, 2015
Total Assets 1,720.5 1,730.0 1,820.4
Working Capital* 589.9 584.6 642.2
Intangibles, Net & Other Long-Term Assets
268.3 267.4 232.8
* WC = (Accounts Receivable + Inventory - Accounts Payable)
Q2-16 GAAP SEGMENT RESULTS:
BSI and BEST GAAP Performance
[$ m] Q2 2016 Q2 2015 Δ
REVENUE
Scientific Instruments (BSI) 345.8 366.2 -6%
Organic Revenue Growth (%) -8.7% 0.6%
Energy & Supercon Technologies (BEST) 28.5 30.8 -7%
Organic Revenue Growth (%) -8.9% -8.1%
Corporate Eliminations -2.6 -1.0
Total Revenue 371.7 396.0 -6%
OPERATING INCOME
Scientific Instruments (BSI) 18.9 28.7 -34%
Energy & Supercon Technologies (BEST) 1.4 2.6 -46%
Corporate Eliminations 0.1 0.3
Total Operating Income 20.4 31.6 -35%
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Sum of items may not total due to rounding