q2 2014 earnings slides
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Bruker Corporation (NASDAQ: BRKR)
Q2 2014 Earnings Presentation
Frank Laukien, President & CEO
Charles Wagner, EVP & CFO
Joshua Young, VP, Investor Relations August 6, 2014
Innovation with Integrity
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, 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, 2013. 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.
Bruker Corporation
Safe Harbor & Reg. G Statement
© Bruker Corporation 2
Q2 & YTD 2014 Business Update
© Bruker Corporation 3
$0.18
$0.21
Q2 13
Q2 14
Q2 Financials
Revenues [$ m]
Non-GAAP EPS
Operating performance in Q2 was in line with
expectations
+1%
+17%
© Bruker Corporation 4
455 457
Q2 13 Q2 14
Q2 2014 Performance
Revenue growth of 1% y-o-y, compared to
strong Q2 2013
1.Mid-single digit growth in BioSpin and solid
BEST performance drive revenues
2.CALID declines mid-single digits due to
weak CAM performance & Detection delays
3.BMAT flat, following good Q1 2014
Non-GAAP operating margin down by 20 basis
points y-o-y, due to higher opex spending
Non-GAAP EPS growth of 17% y-o-y
Free cash flow (FCF) improves by $29M, with
$5M in Q2 2014, compared to ($23M) in Q2
2013
$0.26
$0.32
H1 2013
H1 2014
H1 Financials
Revenues [$ m]
Non-GAAP EPS
In H1 2014 we have delivered a solid combination of
revenue growth, margin expansion and higher FCF
+4%
+23%
© Bruker Corporation 5
848 881
H1 2013 H1 2014
H1 2014 Performance
Revenue growth of 4% y-o-y
1.Low to mid-single digit growth from all
Groups
2.BEST revenues up 12%
3.Mid-single digit revenue growth in Asia
and Europe
Non-GAAP operating margin expands by 50
basis points y-o-y
Non-GAAP EPS growth of 23% y-o-y
FCF improves by $71M, totaling $15M in H1
2014, compared to ($56M) in H1 2013
Bruker BioSpin Group
Mid-single digit revenue growth, with strongest growth in the
Americas; Asia growth benefits from 2013 Japanese stimulus
Revenue recognized from installation of world’s first horizontal 21
Tesla magnet for FT-ICR at NHMFL in Tallahassee, FL
Pre-Clinical Imaging (PCI) Division growth driven by solid
performance from Molecular Imaging products
Lower 2H 2014 revenue outlook due to higher percentage of order
bookings occurring later in the year than originally planned
Bruker CALID Group
Mid-single digit revenue decline; weak CAM and Detection results
LSC Division drives low-single digit growth; successful ASMS launch
MALDI Biotyper business continues strong growth
Solid uptake in US; approval from Chinese FDA
CAM Division performance suffers as restructuring efforts begin
CAM expects ~$20M y-o-y revenue drop in H2 2014
Detection Division Q2 revenues impacted by export license delays
6 © Bruker Corporation
GROUP OVERVIEW:
Q2 2014 Performance & Outlook
Bruker MAT Group
BMAT Group revenues flat, compared to Q2 2014
Academic & research markets are healthy
No pickup in demand from microelectronics markets
Flat Q2 BMAT bookings contribute to lower outlook for H2
Bruker Nano Surfaces Division growth from Prairie acquisition,
while AXS and Elemental divisions post weaker 2nd quarter
Completed Vutara acquisition: fast 3D super-resolution technology
strengthens Bruker’s cellular fluorescence microscopy portfolio
BEST Segment
Revenue growth of 12% and non-GAAP operating margin of 10.9%
Good growth in low temperature superconducting wire for MRI
magnets and big science & energy research applications
Most of 2014 growth and profitability achieved in 1st half
Customer has delayed delivery of Rosatom pilot line to Russia, so
~$10M drops out of Q3 2014 revenue plan
GROUP OVERVIEW:
Q2 2014 Performance & Outlook
7 © Bruker Corporation
Q2 2014 Financial Update
© Bruker Corporation 8
NON-GAAP FINANCIAL PERFORMANCE:
Q2 2014 Overview
[$ m, except EPS] Q2 2014 Q2 2013 Δ
Revenues 457.4 454.9 1%
Operating Income 52.7 53.3 -1%
Margin (%) 11.5% 11.7%
EPS 0.21 0.18 17%
Free Cash Flow 5.4 -23.2 28.6M
Q2’14 revenues in line with expectations after strong Q1’14, and compared to relatively strong Q2’13
Currency headwind and SG&A spending result in slightly lower operating margins y-o-y
Continued improvement in working capital helps to improve free cash flow
9 © Bruker Corporation
COMMENTS
[$ m] Jun 30,2014 Dec 31,2013 Δ
Net Cash 101.9 83.7 22%
Working capital (WC)* 789.5 822.6 -4%
WC-to-revenue ratio 0.42 0.45 -0.03
* WC = (Accounts Receivable + Inventory – Accounts Payable)
Q2 2013 Organic Currency Acquisition Q2 2014
454.9 457.4
Q2 2014 revenue bridge
Stronger Euro is primary driver for positive currency contribution
Acquisition benefit relates to BMAT acquisition of Prairie Technologies’ fluorescence microscopy products
10 © Bruker Corporation
Q2 2014 DRIVERS
Q2 2014 Revenue Bridge [$ m]
-9.9 10.3 2.1
Organic Currency Acquisitions & Divestitures Total
-2.2% 2.3% 0.5% 0.6%
Q2 2014 Revenue Growth for Bruker Corp.
Q2 2014 Non-GAAP Results
Gross margin benefits from positive mix, particularly in BioSpin Group
SG&A expenses higher due to selling and marketing investments; $2M of increase due to currency
Lower R&D reflects restructuring actions taken in lower growth businesses
Good EPS growth over comparably strong Q2’13
11 © Bruker Corporation
COMMENTS [$ m] Q2 2014 Q2 2013 Δ
Total Revenues 457.4 454.9 1%
Gross Profit 211.8 206.5 3% Margin (% of sales) 46.3% 45.4%
SG&A -114.6 -106.7 7%
(% of revenues) 25.1%
23.5%
R&D -44.5 -46.5 -4% (% of revenues) 9.7% 10.2%
Operating Income 52.7 53.3 -1%
(% of revenues) 11.5% 11.7%
Tax Rate 30.0% 31.1% -110 bps
Net Income* 34.9 29.9 17%
EPS $0.21 $0.18 17%
Shares Outstanding 169.5 168.4 NM
* Attributable to Bruker Sum of items may not total due to rounding
Q2 2014 Reconciliation of GAAP and
Non-GAAP Results
[$ m] Q2 2014 Q2 2013
GAAP Operating Income 35.4 43.5
Restructuring Costs 10.7 1.8
Acquisition Related Costs 0.5 0.3
Purchased Intangible Amortization 4.8 5.1
Other Costs 1.3 2.6
TOTAL 17.3 9.8
Non-GAAP Operating Income 52.7 53.3
Non-GAAP Net Interest Income (Expense) & Other -2.3 -9.3*
Non GAAP Profit Before Tax 50.4 44.0
Taxes -15.1 -13.7
Non-GAAP Tax Rate 30.0% 31.1%
Minority Interest -0.4 -0.4
Non-GAAP Net Income** 34.9 29.9
Non-GAAP EPS $0.21 $0.18
12 © Bruker Corporation
* Excludes $1.5M of gains ** Attributable to Bruker Sum of items may not total due to rounding
H1 2013 Organic Currency Acquisition H1 2014
848.3 881.1
H1 2014 revenue bridge
H1 2014 y-o-y revenue growth in line with initial expectations
Positive currency benefit primarily due to the strong Euro, especially in Q2’14
All Groups generate low to mid-single digit growth in H1 2014, compared to H1 2013
13 © Bruker Corporation
H1 2014 DRIVERS
H1 2014 Revenue Bridge [$ m]
16.0 10.3 6.5
Organic Currency Acquisitions & Divestitures Total
1.9% 1.2% 0.8% 3.9%
H1 2014 Revenue Growth for Bruker Corp.
H1 2014 Non-GAAP Results
[$ m] H1 2014 H1 2013 Δ
Total Revenues 881.1 848.3 4%
Gross Profit 399.0 386.0 3% Margin (% of sales) 45.3% 45.5%
SG&A -223.7 -213.2 5%
(% of revenues) 25.4% 25.1%
R&D -90.5 -95.9 -6% (% of revenues) 10.3% 11.3%
Operating Income 84.8 76.9 10% (% of revenues) 9.6% 9.1%
Tax Rate 28.5% 29.9% -140 bps
Net Income* 53.6 43.3 24%
EPS $0.32 $0.26 23%
Shares Outstanding 169.4 168.2 NM
14 © Bruker Corporation
Sum of items may not total due to rounding * Attributable to Bruker
H1 2014 Reconciliation of GAAP to
Non-GAAP Results
[$ m] H1 2014 H1 2013
GAAP Operating Income 56.0 55.7
Restructuring Costs 13.1 5.0
Acquisition Related Costs 1.6 0.9
Purchased Intangible Amortization 10.0 10.2
Other Costs 4.1 5.1
TOTAL 28.8 21.2
Non-GAAP Operating Income 84.8 76.9
Non-GAAP Net Interest Income (Expense) & Other* -7.5 -14.1
Non GAAP Profit Before Tax 77.3 62.8
Taxes -22.0 -18.8
Non-GAAP Tax Rate 28.5% 29.9%
Minority Interest -1.7 -0.7
Non-GAAP Net Income** 53.6 43.3
Non-GAAP EPS $0.32 $0.26
15 © Bruker Corporation
Sum of items may not total due to rounding *Excludes $0.3 and $2.4 million of gains for 2014 and 2013 **Attributable to Bruker
Balance sheet
[$ m] Jun 30, 2014 Dec 31, 2013 Δ
Cash, Cash Equivalents & Short-term investments
457.6 438.7 4%
Financial Debt 355.7 355.0 NM
Net Cash 101.9 83.7 22%
16 © Bruker Corporation
[$ m] Jun 30, 2014 Dec 31, 2013 Δ
Total Assets 2,003.9 1,988.3 1%
Working Capital* 789.5 822.6 -4%
Intangible & Other Assets 245.1 256.9 -5%
* WC = (Accounts Receivable + Inventory - Accounts Payable)
H1 2014 Cash Flow Statement
Cash conversion cycle improves by 7 days compared to Q2’13
– DIO: 229
– DSO: 57
– DPO: 42
– CCC: 244
Lower Capex reflects timing of projects; expect acceleration of spending in H2 2014
17 © Bruker Corporation
COMMENTS [$ m] H1 2014 H1 2013 Δ
Net Income 26.8 29.0 -2.2
Depreciation & amortization 30.0 30.2 -0.2
Changes in working capital* 18.8 -41.6 60.4
Other -44.1 -42.5 -1.6
Operating cash flow 31.5 -24.9 56.4
Capital expenditures -16.8 -31.1 14.3
Free cash flow 14.7 -56.0 70.7
2014 Guidance
© Bruker Corporation 18
Bruker’s revised FY 2014 Guidance
Revenue Growth (reported) 1% to 2%
Non-GAAP Tax Rate ~29%-30%
Non-GAAP EPS $0.78 to $0.81
19 © Bruker Corporation
Updated FY 2014 Guidance
Lowering guidance due to additional CAM weakness after restructuring announcement, drop-out of Rosatom pilot line revenue in Q3’14, and reduced H2 growth outlook in BioSpin and BMAT Groups
Less than $50M of capex expected in FY2014
Expect revenues in H2 2014 to be flat y-o-y
Anticipate very weak Q3’14 and sequentially stronger Q4’14
Current currency assumptions: Yen/USD: 101 EUR/USD: 1.37
ASSUMPTIONS
Appendix
© Bruker Corporation 20
Q2 2014 GAAP Results
[$ m] Q2 2014 Q2 2013 Δ
Total Revenues 457.4 454.9 1%
Gross Profit 200.5 201.6 -1%
Margin (% of sales) 43.8% 44.3%
SG&A -115.0 -107.1 7%
(% of revenues) 25.1% 23.5%
R&D -44.5 -46.5 -4%
(% of revenues) 9.7% 10.2%
Operating Income 35.4 43.5 -19%
(% of revenues) 7.7% 9.6%
Net Income* 16.4 22.9 -28%
EPS $0.10 $0.14 -29%
Shares Outstanding 169.5 168.4 NM
21 © Bruker Corporation
* Attributable to Bruker Sum of items may not total due to rounding
H1 2014 GAAP Results
[$ m] H1 2014 H1 2013 Δ
Total Revenues 881.1 848.3 4%
Gross Profit 380.2 376.1 1%
Margin (% of sales) 43.2% 44.3%
SG&A -224.5 -213.9 5%
(% of revenues) 25.5%
25.2%
R&D -90.5 -95.9 -6%
(% of revenues) 10.3% 11.3%
Operating Income 56.0 55.7 1%
(% of revenues) 6.4% 6.6%
Net Income* 25.1 28.3 -11%
EPS $0.15 $0.17 -12%
Shares Outstanding 169.4 168.2 NM
22 © Bruker Corporation
Sum of items may not total due to rounding * Attributable to Bruker
Q2 2014 Cash Flow Statement
Improved free cash flow is the result of continued improvements in working capital and lower capital expenditures
23 © Bruker Corporation
COMMENTS [$ m] Q2 2014 Q2 2013 Δ
Net Income 16.8 23.3 -6.5
Depreciation & amortization 14.8 15.0 -0.2
Changes in working capital* 1.8 -21.1 22.9
Other -20.4 -23.9 3.5
Operating cash flow 13.0 -6.7 19.7
Capital expenditures -7.6 -16.5 8.9
Free cash flow 5.4 -23.2 28.6
Q2 SEGMENT RESULTS:
BSI and BEST GAAP Performance
[$ m] Q2 2014 Q2 2013 Δ
REVENUE
Scientific Instruments (BSI) 421.5 421.6 NM
Organic Revenue Growth (%) -2.5% 7.7%
Energy & Supercon Technologies (BEST) 41.4 37.1 12%
Organic Revenue Growth (%) 6.3% 40.0%
Corporate Eliminations & Other -5.5 -3.8
Total Revenue 457.4 454.9 1%
OPERATING INCOME
Scientific Instruments (BSI) 31.2 39.6 -21%
Energy & Supercon Technologies (BEST) 4.4 6.6 -33%
Corporate Eliminations and Other -0.2 -2.7
Total Operating Income 35.4 43.5 -19%
24 © Bruker Corporation
Sum of items may not total due to rounding
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