Bruker Corporation (NASDAQ: BRKR) · Q3 2016 Earnings Presentation Frank Laukien, President & CEO...
Transcript of Bruker Corporation (NASDAQ: BRKR) · Q3 2016 Earnings Presentation Frank Laukien, President & CEO...
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
points y-o-y to 14.9%
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
points y-o-y to 47.8%
Non-GAAP operating margin expands by +130 basis
points y-o-y to 12.8%
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%
Operating Income 58.6 52.8 +11%
(% 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%
Operating Income 145.9 131.5 +11%
(% 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 $0.51 +43%
Shares Outstanding 162.7 169.1 -4%
Gross profit margin
expansion driven by NMR
pricing, mix and 2015
restructuring actions.
Nano Surfaces and
Optics also contribute.
Operating expenses
approx. flat, including
acquired JV expenses
Operating margin
increases +130 bps
Audit settlements,
release of tax valuation
allowances, jurisdictional
mix lower tax rate
Share buybacks add
3 cents to EPS increase
15
COMMENTS
* Attributable to Bruker Sum of items may not total due to rounding
YTD Q3-2016 Cash Flow
[$ 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
* WC = (Accounts Receivable + Inventory - Accounts Payable)
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%
Operating Income 45.9 28.2 +63%
(% of revenues) 11.7% 7.1%
Net Income* 46.5 11.8 +294%
EPS $0.29 $0.07 +314%
Shares Outstanding 161.5 168.7 -4%
20
* Attributable to Bruker Sum of items may not total due to rounding
Q3 2016 Reconciliation of GAAP and
Non-GAAP Results
[$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%
(% of revenues) 9.7% 9.5%
Operating Income 100.3 75.0 +34%
(% of revenues) 8.8% 6.5%
Net Income* 84.6 40.2 +110%
EPS $0.52 $0.24 +117%
Shares Outstanding 162.7 169.1 -4%
22
* Attributable to Bruker Sum of items may not total due to rounding
YTD 2016 Reconciliation of GAAP and
Non-GAAP Results
[$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
* WC = (Accounts Receivable + Inventory - Accounts Payable)
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
* WC = (Accounts Receivable + Inventory - Accounts Payable)
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