Hello, and welcome to the Bruker Corporation Q4 2020 Earnings Conference Call. All participants will be in listen-only mode. Operator instructions were provided. Please note, today's event is being recorded. I would now like to turn the conference over to Miroslava Minkova. Ms. Minkova, please go ahead.

Good morning. I would like to welcome everyone to Bruker's fourth quarter and fiscal year 2020 earnings conference call. My name is Miroslava Minkova, Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our Chief Financial Officer. In addition to the earnings release we issued earlier this morning, during today's conference call, we will be referencing a slide presentation. The PDF of this presentation can be downloaded from the latest results section on Bruker's Investor Relations website. During today's call, we will be highlighting non-GAAP financial information. Reconciliations 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. During the course of this conference call, we will make forward-looking statements regarding future events and the expected future financial and operational performance of the Company that involve risks and uncertainties, including risks and uncertainties related to the COVID-19 pandemic. The Company's actual results may differ materially from projections described in 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 and subsequent Form 10-Q filings, all of which are available on our website and on the SEC's website. Also, note that the following information is related to current business conditions and to our outlook as of today, February 16, 2021. Consistent with our prior practice, we do not intend to update our forward-looking statements based on new information, future events or other reasons prior to the release of our first quarter 2021 financial results expected in May 2021. Therefore, you should not rely on these forward-looking statements as representative of our views or outlook as of any date subsequent to today. We will begin today's call with Frank providing a business summary. Gerald will then cover the financials for the fourth quarter and the fiscal year 2020 in more detail. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Miroslava, and good morning, everyone. Thank you for joining us on today's call. During the fourth quarter, we saw continued sequential quarter-over-quarter recovery in our financial performance from the revenue and margin dip experienced in the first half of 2020 due to the pandemic and its economic repercussions. Our Q4 2020 revenues were above prior year levels on a reported basis and essentially flat organically compared to Q4 2019. Encouragingly, our Q4 2020 non-GAAP gross margin, operating margin and EPS and free cash flow all exceeded the Q4 2019 levels. Over the course of 2020, we stepped up investments and made significant progress in three areas of substantial long-term growth potential: proteomics; second, spatial and single cell biology; and third, molecular viral diagnostics. We also initiated further operational excellence programs for productivity improvements, including restructurings in our Bruker NANO Group and BEST as well as for capacity expansion, particularly in our BioSpin and CALID groups. Turning to Q4 results now on Slide 4. We're pleased with our continued sequential recovery in the fourth quarter of 2020. Q4 2020 revenues of $627.5 million rose $28 million or 4.6% year-over-year, including favorable foreign currency translation of $27 million or 4.6%. On an organic basis, revenues were just minus 0.4% below the Q4 2019 level. Our Q4 BSI revenues were flat year-over-year, while BEST revenues declined minus 6.8% organically net of intercompany eliminations; acquisitions added 0.4% to revenue growth in the quarter. Our Q4 2020 non-GAAP gross margin expanded 80 basis points year-over-year to a new high of 51.7% and our non-GAAP operating margin expanded 40 basis points year-over-year to 22.5%. The improvements in non-GAAP gross and operating margins were realized despite significant foreign exchange headwinds that resulted from increases in Project Accelerate revenues in our mix and continued SG&A expense control in the quarter. In Q4 2020, Bruker's GAAP diluted EPS were $0.45 compared to $0.44 in Q4 of 2019, and our non-GAAP EPS were $0.58, an increase of 9.4% compared to $0.53 in Q4 of 2019. Continuing on Slide 5, we show Bruker's performance for the full year. In 2020, Bruker's revenue decreased by $85 million or 4.1% year-over-year to $1.99 billion, reflecting the impact of the pandemic and the related economic slowdown. On an organic basis, revenues declined 6% year-over-year comprised of a 5.5% organic decline in the scientific instruments business and an 11% organic decline at BEST net of intercompany eliminations. Acquisitions added 0.5% to our top line, and foreign currency translation was a benefit of 1.4%. During 2020, our key 4D-Proteomics, infectious disease diagnostics, ultra-high field NMR, biopharma and aftermarket initiatives continued to perform strongly. Microelectronics and semiconductor metrology also grew nicely year-over-year. Other businesses, including our broader academic revenue base, industrial research and the applied market, stabilized and improved further in the fourth quarter. Fiscal year 2020 order bookings for Bruker Scientific Instruments groups increased low single digits organically. Our BSI orders continue to strengthen sequentially, and in the fourth quarter of 2020, BSI achieved approximately 10% organic order growth year-over-year. The strong Q4 '20 bookings likely included some catch-up from delayed activity early in the year, particularly in our academic, industrial and applied businesses. Our Q4 2020 order rates also reflected continued strong performance in our proteomics, microbiology and molecular diagnostics, biopharma and microelectronics and semiconductor metrology businesses. Fiscal year 2020 non-GAAP gross margin decreased 130 basis points year-over-year, while non-GAAP operating margin declined 160 basis points. Growth and operating margins benefited from expense controls and cost reduction measures taken earlier in the year, but this was more than offset by lower volume in revenues in 2020 compared to 2019. As noted already, both growth and operating margins recovered in the back half of 2020 and, in fact, finished above prior year levels. On a GAAP basis, Bruker reported EPS of $1.02 in 2020 compared to $1.26 in 2019. FY 2020 non-GAAP EPS was $1.35 compared to $1.57 in 2019. Please turn to Slides 6 and 7 now, where we provide further highlights on the 2020 performance of our three scientific instruments groups and of our BEST segment, all on a constant currency basis and in comparison to 2019. Fiscal year 2020 BioSpin group revenue declined mid-single digits to $600 million. The revenue decline at BioSpin was due to COVID-19 related customer disruption and installation delays, mostly in the first half of 2020. In fiscal year 2020, BioSpin NMR and PCI systems revenues declined year-over-year. In the fourth quarter, we received customer acceptance of an additional 1.2 gigahertz NMR system, ending with three 1.2 gigahertz NMR systems accepted in 2020, a major development milestone for us. BioSpin's aftermarket grew slightly year-over-year, whereas BioSpin scientific software revenues were substantially higher, although from a modest base. Moving on to the CALID Group. Fiscal year 2020 revenues of $654 million grew mid-single digits compared to 2019. CALID's performance accelerated sequentially with low teens growth in the fourth quarter. CALID's Daltonics, microbiology and molecular diagnostics and life science mass spectrometry businesses delivered double-digit revenue growth in the full year. This reflected, in part, the uptake of nucleic acid extraction and SARS-CoV-2 PCR kits as well as of MALDI Biotyper consumables which all grew significantly year-over-year. Q4 2020 COVID-19 nucleic acid extraction and PCR test kit revenues totaled just under $14 million. For the full year 2020, we grew our COVID-19 PCR business to approximately $30 million in revenue, virtually all in Europe and select other countries. In December, we introduced our FluoroType winter four-plex PCR panel in Europe, detecting COVID-19, Flu A, Flu B and RSV. And we also began to market two different types of fast antigen tests in Europe in collaboration with partner companies. In late December, we received U.S. FDA clearance for the MALDI Biotyper Sepsityper kit. The MBT Sepsityper allows for rapid identification of more than 425 microorganisms, including bacteria and yeast, from a positive blood culture on our MALDI Biotyper platform. The Sepsityper workflow typically takes less than 30 minutes from a positive blood culture to identification, saving valuable time in the diagnosis and treatment of critically ill sepsis patients. We anticipate that this will provide a meaningful tailwind to our MALDI Biotyper business in the U.S. in 2021 and beyond. Our timsTOF unbiased 4D-Proteomics business had strong revenue growth in 2020 despite the challenging conditions in academia. We exited 2020 with very strong order and revenue growth and an installed customer base of more than 250 timsTOF instruments globally. Our CALID molecular spectroscopy revenues declined year-over-year due to the weakened FTIR and Near IR markets earlier in 2020. FTIR, Near IR and molecular spectroscopy demand strengthened substantially in the fourth quarter of 2020. Please turn to Slide 7 now. Bruker NANO revenues declined low teens year-over-year to $556 million in fiscal year 2020. This reflects last year's academic market slowdown and weakened industrial and industrial research demand. The NANO group's X-ray, NANO Surface and nano-analysis tools revenues all declined in 2020 against the backdrop of reduced academic and industrial research demand. Revenue for NANO's microelectronics and semiconductor metrology products grew double digits as semiconductor markets were strong. In the fourth quarter of 2020, we initiated additional restructuring and cost actions within the NANO group to improve the fundamental cost structure while investing in NANO's spatial biology and targeted multi-omics strategy. We anticipate these restructuring actions to benefit NANO's financials in late 2021 and in 2022. Finally, fiscal year 2020 BEST revenue declined low double digits net of intercompany eliminations on reduced superconductor demand by MRI companies. This was partially offset by growth in BEST big science projects. We also took restructuring and cost actions in BEST in Q4 of 2020, which are expected to benefit BEST performance in 2021. Turning to Slide 8 now. During 2020, we further expanded investments in our Project Accelerate, high-growth, high-margin initiative programs, which we now refer to as Project Accelerate 2.0. We have broadened our proteomics initiative to include plasma proteomics, cancer proteomics translational research, emerging true single-cell proteomics, targeted proteomics and multi-omics as well as biomolecular condensate research by NMR and fluorescence microscopy. Our microbiology and diagnostics initiative now also covers viral molecular diagnostics primarily with a fast-growing PCR business and emerging antigen detection. Importantly, we launched a spatial biology and single-cell biology initiative in our NANO group. As presented at the recent JPMorgan Healthcare Conference, each of proteomics, spatial biology and microbiology and molecular diagnostics addresses large additional total addressable markets or TAMs. In 2020, for the first time, our six Project Accelerate initiatives together comprise more than 50% of our revenues, and on average, they grew in the high single digits organically year-over-year. Turning to Slide 9. We continue to make excellent progress with timsTOF 4D proteomics as our workflows and capabilities keep expanding and publications increase rapidly. We are currently serving a $750 million to $1 billion served addressable market or SAM, with timsTOF within a $5 billion to $6 billion overall proteomics instrumentation TAM. We exited 2020 with an installed base of greater than 250 timsTOF instruments and significant growth. In 2020, we also made substantial progress with our ultra-high field NMR program for functional structural biology and biomolecular condensate research, receiving customer acceptance of our first three 1.2 gigahertz systems. New capabilities of gigahertz-class NMR enable research discoveries in diseases with significant societal impacts, such as COVID-19, Alzheimer's and other neurodegenerative diseases, cancer and cardiovascular disease. For example, a recently published structure of intrinsically disordered regions of the SARS-CoV-2 nucleocapsid protein contribute to membraneless organelles, also known as biomolecular condensates, which enable viral RNA replication in host cells. Interestingly, without these biological condensates, there would be no COVID-19 pandemic. But unfortunately, there also would be no life to begin with. As in recent years, science has learned that these ubiquitous biological condensates that we can study with NMR and fluorescence microscopy are really crucial for many key cell biology functions in healthy cell biology as well as in many disease processes — a very exciting new area for us. In 2021, we anticipate continued ultra-high-field NMR growth with customer acceptances of 4 to 5 gigahertz-class systems. So in conclusion, Bruker's performance strengthened sequentially in Q4 as customer activity continued to recover. Our high-growth initiatives have expanded with Project Accelerate 2.0, and our core margin initiatives are progressing with ongoing programs underway. We are very excited about our future opportunities in proteomics, structural functional biology, spatial and single cell biology, as well as in microbiology and molecular diagnostics. We enter 2021 with BSI order momentum and a solid backlog, and we anticipate high single-digit organic revenue growth at our BioSpin and NANO groups and low double-digit organic revenue growth at our CALID group. We also expect healthy non-GAAP operating margin expansion and very strong non-GAAP EPS growth in 2021 for Bruker overall. And with that, I'd like to turn the call over to our CFO, Gerald Herman, who will review our financial performance in more detail. Gerald?

Thank you, Frank, and thanks for joining us on the call today. I'll be reviewing the fourth quarter and full year 2020 financial highlights, starting on Slide 11. Bruker's reported revenue in the fourth quarter of 2020 increased 4.6% year-over-year to $627.5 million, which reflects a modest organic revenue decline of 0.4%. Despite relatively flat organic revenue results, our non-GAAP operating profit grew 6.5% year-over-year and our non-GAAP operating margin expanded 40 basis points year-over-year. We delivered this operating margin expansion while absorbing approximately 80 basis points of negative foreign exchange translation effects. We reported GAAP EPS of $0.45 per share compared to $0.44 in the fourth quarter of 2019. Fourth quarter 2020 GAAP EPS included material restructuring charges related to the Bruker NANO Group and BEST segment intended to strengthen long-term financial performance of those businesses. On a non-GAAP basis, fourth quarter 2020 EPS was $0.58 per share, a 9% increase compared to $0.53 in Q4 2019. We exited the fourth quarter of 2020 in a strong cash and liquidity position with $731.8 million in cash, cash equivalents and short-term investments, higher sequentially and compared to the fourth quarter 2019. This reflects strong cash generation in the fourth quarter and for the full year of 2020. Our net debt position as of December 31, 2020 showed a slightly lower net debt position compared to a year ago. During the fourth quarter, we continued to deploy cash to fund strategic capital investments, dividends and our stock buyback program. In the fourth quarter of 2020, we repurchased 1.4 million shares of Bruker stock for a total of $68.2 million. This brings our total buyback activity for the full year of 2020 to 2.7 million shares and $123.2 million. As of December 31, 2020, we had $34.5 million remaining on our share repurchase authorization, which is valid until mid-May of 2021. At the end of the fourth quarter of 2020, our working capital to revenue ratio remained elevated versus a year ago on lower 2020 revenue and as we carried higher inventory to address supply chain risks related to the pandemic and set ourselves up for a strong organic growth in the first quarter of 2021. Slide 12 shows the revenue bridge for the fourth quarter of 2020. As noted earlier, organic revenue in the quarter was down 0.4%. We had a positive revenue contribution from foreign currency translation of 4.6% and a modest positive contribution from acquisitions of 0.4%. From an organic revenue perspective, the fourth quarter 2020 BioSpin revenues declined low single digits against a strong comparison a year ago. CALID revenues increased low teens, led by greater than 20% growth in CALID's microbiology and mass spectrometry businesses on the strength of CALID's infectious disease consumables and the uptake of timsTOF proteomics. NANO revenues declined high single digits as NANO continued to experience softness in its core academic, industrial and industrial research markets partially offset by solid microelectronics and semiconductor demand. For our three BSI groups, fourth quarter organic systems revenue declined mid-single digits, while aftermarket revenue grew in the low teens organically year-over-year. Our BSI book-to-bill ratio in the fourth quarter of 2020 was 1.1. We exited 2020 building BSI backlog year-over-year. BEST revenues declined 6.8% year-over-year, net of intercompany eliminations due to reduced superconductor demand partially offset by higher big science revenue. Geographically, and on an organic basis in the fourth quarter 2020, our European revenues grew quite strongly in the mid teens year-over-year. North American revenue declined high teens. Asia-Pacific revenues grew low single digits. The rest of the world revenues declined year-over-year. Slide 13 reflects our P&L results for the fourth quarter of 2020 on a non-GAAP basis. Fourth quarter 2020 non-GAAP gross profit margin of 51.7% increased 80 basis points from 50.9% in the fourth quarter 2019. This year-over-year improvement in gross margin reflects favorable mix trends and operational efficiencies within our BSI groups partially offset by a headwind from foreign exchange. Non-GAAP SG&A expenses were flat year-over-year in the fourth quarter of 2020, reflecting solid cost discipline in the quarter, largely offsetting the unfavorable impact of foreign currency translation. In the fourth quarter, we continued to support the expansion of Project Accelerate 2.0 initiatives with our R&D investments up compared to a year ago. All in, we delivered record non-GAAP operating margin of 22.5% in the fourth quarter, an increase of 40 basis points from the fourth quarter of 2019 driven by improved gross margins and SG&A expense control, which more than offset an approximately 80 basis points foreign currency translation headwinds on operating margin. Fourth quarter 2020 non-GAAP interest and other expense of $7.1 million was similar to that in the fourth quarter of 2019. For the fourth quarter 2020, our non-GAAP effective tax rate was 31.9% compared to 34.4% in the fourth quarter of 2019. Although below the year-ago level, our fourth quarter 2020 tax rate was impacted unfavorably by jurisdictional tax mix. Weighted average diluted shares outstanding in the fourth quarter of 2020 were 153.8 million, a reduction of approximately 1.6 million shares from the fourth quarter of 2019, reflecting our share repurchase activity. Finally, the fourth quarter 2020 non-GAAP EPS of $0.58 increased 9.4% year-over-year on favorable mix, expense control and the lower tax rate. Slide 14 shows year-over-year revenue bridge for the full year 2020. Revenue declined $85 million or 4.1%, including a full year 2020 organic decline of 6.0%. This reflects an organic decline of 5.5% at the three BSI groups collectively and an 11% organic decline at BEST net of intercompany eliminations. Geographically and on an organic basis in the full year of 2020, Bruker's European revenue was up low single digits year-over-year. North American revenue declined mid-teens. Asia-Pacific revenues declined mid-single digits with similar mid-single-digit declines in both China and Japan. Our revenues in the rest of the world were also lower year-over-year. On Slide 15, our full year 2020 non-GAAP gross profit margin of 48.7% decreased 130 basis points year-over-year. Lower volume and reduced productivity from COVID-19 disruptions earlier in the year and its related economic slowdown drove the decline relative to 2019. Full year 2020 non-GAAP operating expenses declined 3.5% year-over-year on cost control and cost reduction measures. All in, our non-GAAP operating margin in the full year of 2020 was 16.0%, 160 basis points below 2019. Interest and other expense of $22.5 million was slightly above the 2019 level, while our interest costs were lower in 2020, following our December 2019 debt financing; this was offset by a net loss on foreign exchange transactions associated with unfavorable currency movements during the year. Finally, non-GAAP EPS of $1.35 was down 14% relative to the full year 2019. Turning now to Slide 16. Free cash flow in 2020 was approximately $235 million, $95 million higher than that in 2019; an increase in customer advances and favorable other items in 2020 more than offset reduced cash generation from lower net income, inventory build to address risks related to the pandemic and continued capital expenditures in higher capacity and productivity. Our cash conversion cycle at the end of the fourth quarter of 2020 of 220 days worsened from 198 days a year ago due to the step-up in DIO partially offset by a reduction in DSO on improved receivables collections. Turning now to Slide 18. We are resuming guidance for 2021. While we cannot rule out further temporary business disruptions related to the pandemic, our visibility for the full year of 2021 has improved compared to 2020 as major end markets have stabilized. We entered 2021 with a healthy backlog in all three BSI groups. Together with some anticipated catch-up from delayed spend and installations from 2020, for the full year 2021, we anticipate our revenues to grow 7% to 9% on an organic basis. Foreign currency is expected to contribute approximately 4% to revenue growth. We therefore expect 2021 reported revenue growth in a range between 11% and 13%. Baked into this projection is the assumption that all three of our BSI groups will drive growth, while BEST revenue is expected to be flat to down organically on a full year basis. We expect our 2021 non-GAAP operating margin to expand 150 to 190 basis points compared to the 16.0% reported in 2020. This also absorbs an expected foreign currency headwind of approximately 80 basis points on operating margin. On the bottom line, we expect 2021 non-GAAP EPS in a range between $1.72 and $1.77, which would represent an increase of between 27% and 31% compared to 2020. At the midpoint, this would also represent double-digit growth from the $1.57 2019 pre-pandemic non-GAAP EPS level. Our 2021 projected non-GAAP operating margin expansion and non-GAAP EPS take into account a very deliberate increase in R&D investment to approximately 10% of revenues as we fund further investments in Project Accelerate 2.0 expansion areas. Other assumptions for 2021 include a projected non-GAAP tax rate of approximately 28%, fully diluted share count of approximately 152 million to 153 million shares and capital expenditures of about $100 million. We continue to project elevated capital expenditure levels in 2021 as we fund important capacity expansions and productivity enhancements. Foreign exchange rate assumptions are listed on the slide. And while we don't provide quarterly guidance, I'd like to give you some additional color on our first quarter 2021 expectations. Given the relatively weak comparisons from the first quarter of 2020, we currently expect our first quarter 2021 financial performance to be relatively strong. Barring any major additional adverse pandemic impact, we expect greater than 15% organic revenue growth and a greater than 100% non-GAAP EPS growth year-over-year to be likely. To wrap up, we concluded 2020 with a solid financial performance in the fourth quarter, delivering sequential quarterly improvements in revenue, margins, EPS and cash flow. Under challenging business conditions, we entered 2021 with strong backlog and momentum and with an expectation of solid organic revenue growth and very good earnings growth year-over-year. The strategic investments we made in 2020 production expansion, operational excellence, acquisitions and in Project Accelerate 2.0 give us confidence that Bruker is emerging out of the pandemic a much stronger company. We look forward to updating you on our progress on future calls. And with that, I'd like to turn the call over to Miroslava to start the Q&A session. Thank you very much.

Thank you, Gerald. I'd now like to turn the call over to the operator and begin the Q&A portion. In order to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up. Thank you. Operator, we are ready to begin the Q&A.

Yes, thank you. As mentioned, we will now begin the question-and-answer session. Operator instructions were provided. And this morning's first question comes from Dan Leonard with Wells Fargo. Please go ahead, Mr. Leonard. Your line is live.

Apologies, I was on mute. Thanks for taking the question. First off, could you elaborate on your expectations for bookings growth in 2021? And also touch on your pipeline for the gigahertz class NMR systems?

Hi, Dan, it's Frank. Bookings growth for 2021 remains to be seen; we will report on that as we go forward. We have not set formal guidance for that. Our gigahertz pipeline is certainly fully booked for 2021 and 2022 and we expect further growth during these years in terms of revenue and into 2023.

Okay and just a quick follow-up on the tax rate. Gerald, do you still see the low 20s tax rate as feasible? And what would drive that? Thanks.

Yes, we do, Dan. And I would say, like we saw, we had some unfavorable jurisdictional tax mix for the fourth quarter, which helped to pull that rate up. But fundamentally, there's still some interesting opportunities in front of us, which we're going after. I think about some of our movement of production activities to Malaysia, for example, where we have some tax holiday available to us as well as in Switzerland, and there are some very good opportunities there, both in terms of the Swiss patent box as well as other favorable rates. We continue to have a fairly strong demand in the semi and microelectronics area, which should favor us from a U.S. base rate perspective, depending, of course, on what happens with the Biden administration corporate rates. But fundamentally, we think we can still move into that area. We've kept the 28% rate for the full 2021 on the basis that our mix is still leaning towards more of our European business growth.

Thank you. And the next question comes from Dan Arias with Stifel.

Frank, maybe just an overarching question here. As you enter the New Year and you guys have kind of taken stock of the business and where you want to go with it in relation to some of the initiatives that you've laid out in the past, where, if anywhere, has the pandemic sort of put you behind the pace that you were hoping for? And on the flip side, are there things that you would call out at this point that you've sort of accelerated or pulled forward as you reprioritize things in the portfolio in the set of things that you're looking to do and just sort of look at what's more important versus less important relative to maybe 6 or 12 months ago?

Sure, Dan. So clearly, the academic markets took quite a hit in 2020 and have not fully recovered. They tend to be more recovered in China and in Europe. In the U.S., the academic markets have not recovered yet for us. Industrial is gradually recovering but is also not fully recovered. Applied moved pretty strongly in Q4 but throughout 2020 took a hit. And last but not least, BEST certainly declined last year and will not be all that strong in 2021 either, mostly because the MRI markets that we serve indirectly with our superconductors are weak. So that's the list of the challenges, although I have to say almost all of them are showing recovery, although we're not projecting a full recovery yet for the first half of 2021. Regarding Project Accelerate initiatives, they have grown, as we said, high single digits organically throughout last year. That's pretty impressive. And we continue to see higher-than-average growth, although our core business also will see good growth in 2021. Certainly, proteomics and ultra-high-field NMR for protein functional structure elucidation are great markets. Our microbiology business has held up remarkably well, particularly the consumables. And of course, we are now emerging also as a molecular diagnostics company. We are starting on scientific software, on spatial biology, on single-cell targeted multi-omics; we're starting at modest levels, but we think those will become great additional growth drivers in 2021 and beyond, and we're investing pretty heavily in that. Our biopharma market business has done really well with good double-digit organic growth in 2020. Our differentiated NMR and mass spec solutions for various pharma and biopharma discovery and development problems have continued to grow very nicely. That's secular growth. Of course, the biopharma industry is healthy anyway. So that's becoming a bigger and bigger part of our business. Finally, microelectronics and semiconductor metrology tools were a problem area financially in 2019, and they've done really well in 2020. So that part of our industrial exposure is a big plus right now because these markets are healthy and are likely to remain healthy for the foreseeable future.

Yes. Okay. That's helpful. And then you referenced capacity expansion and BioSpin in some of the earlier parts of your remarks. Can you just update us on the site consolidation in Germany? Are you still tracking to your 2021 goal there? And is that something that you might call out as either a source of risk given the pandemic or maybe a sort of margin benefit if you just think that you're in a place to recognize some productivity gains this year? Where do things stand there?

No, that stayed very much on track. Remarkably, the construction activity and some initial moves have occurred already and are on track and on time. We expect that by mid-2021 we'll have consolidated those German BioSpin sites. Similar activity, slightly smaller in scale, is going on at BioSpin in Switzerland, and we've expanded our ability to deliver ultra-high-field NMRs there as well — some capacity expansion and a lot of consolidation in terms of site — and that over time also supports our long-term margin expansion goals. In addition, we began expanding in 2020 and are accelerating in 2021 and 2022 our life science mass spectrometry and diagnostics capacity, including facilities associated with that. We're expanding in Phase II in Penang, Malaysia for Bruker NANO final assembly and systems test, which provides cost advantages as well as tax advantages. So, a lot of good investments going on; they stayed on track remarkably, and nothing there really fell behind. Those are all very good investment opportunities. Some of that will help on productivity. Some of that is margin expansion and capacity expansion. Both productivity and capacity expansion for our Project Accelerate initiatives are expected to provide not only margin expansion this year but continued margin expansion in future years.

Thank you. And the next question comes from Doug Schenkel with Cowen.

Good morning and thank you for taking my question. My first question is just a guidance clarification question, and then I want to come back and talk a bit about Project Accelerate. Just on guidance, I was hoping you could provide a bit more detail on the growth expectations within BSI really by segment. Specifically, I'm curious why NANO is expected to grow only high single digits despite a favorable low teens year-over-year decline. I would think that could be a little bit higher. And then on the flip side, I believe you said you expect CALID to grow low double digits in 2021. That's pretty robust. Keeping in mind, the year-over-year comp is a little bit tougher at mid-single-digit growth. So I'm just curious what's driving those assumptions? And are there specific things you can point to that gave you confidence to set expectations at those levels? I'll pause there and then I'll come back to Project Accelerate.

Okay, Doug. The NANO group — we do not expect the U.S. academic markets and the industrial research markets to fully recover immediately. We don't think they have fully recovered at this time. We'll keep observing that throughout the year and through the first half of 2021. So we expect a partial recovery there. We have lots of good indications, including order bookings that show it's on its way, but it is not a full recovery yet. On the flip side, CALID — mass spec, microbiology and molecular diagnostics — had decent growth in 2020 and we expect continued very solid growth in 2021 there as well. So it turns out that all three of our BSI groups in 2021 are expected to have comparable growth rates in the high single digits organically, with CALID a little bit higher. We also expect BioSpin to have high single-digit organic growth in 2021. The only laggard is really BEST, which is smaller, and its recovery may take into 2022 or the second half of 2021.

Okay. And then on Project Accelerate, Frank, I think you said that Project Accelerate grew at high single-digit levels in 2020. Did that include COVID-19 revenue? I'm just hoping to clarify.

These figures included about $30 million of COVID-19 revenue — nucleic acid extraction and the PCR tests. So yes, that's included.

Thank you. And the next question comes from Puneet Souda with SVB Leerink.

Frank, so the first question is on the strong greater-than-15% growth that you're projecting here. Just wondering, how much of testing is included in that and how much of the COVID-related benefit is included in that? I assume that's also part of Project Accelerate. I just wanted to get that given the easier comps, but wondering how much of that is COVID?

Yes. So the greater-than-15% organic revenue growth for Q1 2021 year-over-year is in part a recovery versus a weaker Q1 2020 comparison. We expect our COVID testing business to continue to grow in 2021, although perhaps not explosively. In Q4 2020, it was about $14 million. So maybe it will be $15 million, $16 million or $17 million in Q1. So it's not all COVID-driven, but it is one of the elements that helps us with Q1, though it's not the major factor. Of course, year-over-year in Q1 2020 we had essentially no COVID business, so that $15 million to $17 million of PCR COVID testing business is all incremental. But there are many other healthy growth drivers in Q1 as well.

Yes. That's helpful. Thanks for the details. And on proteomics, one of the questions we've been getting is the exposure that you have today in proteomics and, obviously, timsTOF is core to that. The instrument is doing well. You obviously have experience with the instruments now a couple of years in the market. As you look at the current proteomics exposure that you have and what it could be — an important growth driver — maybe give us a sense of where it is today and where it could be in a few years. And also, what are you assuming for timsTOF for the full year guide? Thanks.

timsTOF is growing very nicely. It is certainly north of $50 million per year now. We have other proteomics and protein analysis instrumentation, from SPR to x-ray crystallography, and particularly gigahertz NMR structural biology. Our total proteomics and multi-omics exposure in 2020 is around $200 million to $250 million, and timsTOF is part of that. It's not the largest part yet, but it is the fastest-growing part. Over time, we expect the timsTOF franchise, especially as it branches into spatialomics and true single-cell proteomics derived from that platform, to grow substantially — with potential product introductions in early 2022. We expect continued double-digit growth in timsTOF proteomics. Last year, our orders grew more than 30% in timsTOF across product points. We don't expect to maintain that exact growth rate necessarily, but we expect growth north of the company average, certainly double-digit growth in proteomics and timsTOF in particular. The demand, reception and publications with that system are going very well; satisfied customers are driving word of mouth.

That's great. And if I could squeeze a last one on U.S. gigahertz magnets — I know you're providing a guide for four to five of those — do you expect those to be in Europe as well, or will North America pick up some time?

The acceptances and revenue we're expecting in 2021 for the four to five systems are actually from previous orders and are all in Europe. We do have an order in for the U.S. and one for Asia in backlog. We expect the U.S. and certain Asian countries to begin recognizing the benefits of gigahertz-class NMR for disease research and functional structural biology. We anticipate strong momentum in driving funding and additional orders in the next one to two years from the U.S. The U.S. academic community needs those capabilities but cannot easily hop on a plane and go to Europe right now.

Thank you. And the next question comes from Tycho Peterson with JPMorgan.

Frank, I'm wondering how you're sizing the market for spatial and single cell and when that could start to become more material to revenues? Is it the same $12 billion-ish TAM we've heard about from some competitors? And can you also talk about some of the investments you just alluded to — the new single-cell system? Maybe talk about investments you need to make there?

Good questions, Tycho. For us, spatial biology and single-cell multi-omics starts at a modest level — around $25 million to $30 million today. It's not all aspirational; we have a real business already. We estimate a more conservative TAM of about $4 billion for the portions of spatial biology and single-cell multi-omics that we target. That's still very large and offers significant growth potential. Different people have different TAM estimates; ours are more conservative. Regarding investments, we are investing in product development for true single-cell proteomic systems and other technologies to expand our capabilities. These investments cover R&D, production capacity and specialized consumables and workflows that will be required to scale the business.

Okay. And then on the fourth quarter, you called out a bit of budget flush specific to BSI. Can you touch on that dynamic? Did you see it in other parts of the portfolio? Anything you can quantify?

Budget flush was not a dominant driver overall, because a lot of our business is not driven by short-cycle consumables. That said, BSI average organic bookings growth was about 10% year-over-year in Q4, which is excellent. We believe some of that was catch-up for activities delayed in Q2 and Q3, but we do not think it was all catch-up; there are healthy secular growth drivers as well. It's hard to precisely quantify how much was catch-up versus secular growth, but we expect recovery to continue without assuming every quarter will maintain that 10% rate.

Thank you. And the next question comes from Dan Brennan with UBS.

Great. Maybe, Frank, just with the new Project Accelerate 2.0, which rolled out earlier this year, I'm just wondering if we think about the long-term growth profile that you laid out previously on Project Accelerate 2.0. How do the new initiatives that you have in larger TAMs position Bruker over the longer term? I know we're going to get an update at Investor Day, but can you give a sense of what impacted new markets are opening up in terms of your growth rate?

This will be qualitative for now. Proteomics — both targeted and unbiased — is a very large opportunity for Bruker, and we expect it to be a major growth driver. Spatial biology, including single-cell multi-omics and targeted multi-omics, will be significant and we expect to be a major player here with multiple technologies. As we become a more sizable diagnostics player focused on infectious disease diagnostics and translational research, that will add to long-term growth opportunities, although not necessarily a major contributor to 2021. Among the Project Accelerate 2.0 initiatives, the three I would highlight as very large are proteomics, spatial biology and infectious disease diagnostics. We are well positioned in each case and have unique tools that will contribute to future revenue and margin expansion.

Great. And then just a follow-up on the 15% organic guide for Q1 — even when you back out the COVID contribution, that guidance looks stronger than the full-year guide would imply given the easy comp. Is there something we should be aware of at the beginning of the year that causes that?

Q1 and Q2 of last year were weaker for us, so the relative growth will be strong. We also have strong order momentum and a solid backlog in all three BSI groups. We provided the Q1 color to help with modeling; we believe we'll see very good organic growth across the year but particularly strong in Q1 and Q2 given those weaker comparisons and current backlog.

Thank you. And the next question comes from Derik De Bruin with Bank of America.

Just a couple of quick ones. Gerald, can you talk a little bit about — and if I missed it, apologies — what the free cash flow target is for '21? And then I have a follow-up.

I would say generally we don't provide specific public targets for free cash flow. But you can see from 2020 that we reengineered our cash engine and had success in the fourth quarter. We'll talk more about multiyear cash flow concepts at our June Investor Day. Fundamentally, cash generation is healthy at the moment.

We would concede that our cash flow can fluctuate year-to-year. We had very strong cash flow in 2020, but history shows it does vary and could vary again.

Great, and just one more. Gerald, how should we think about the margin progression for this year? A very impressive guide in the numbers, given all things going on, but just some quarterly guidance would be helpful if you have any.

We don't provide quarterly margin guidance. Fundamentally, we're optimistic. We delivered record operating margin performance in Q4, and we expect a strong first quarter. Our mix is improving and helping gross margin, and SG&A discipline is contributing as well. We'll provide more as the year progresses, but I'm optimistic about gross margin and how that drops down into operating margin.

Thank you. And the next question comes from Jack Meehan with Nephron Research.

Frank, I was wondering if you could give higher level thoughts around what's going on in the academic end market now. I know you mentioned it took a hit in 2020, but what are you seeing entering 2021 in terms of research activity and willingness to invest in new capital equipment?

Academic demand is very strong in Europe and China. Throughout most of 2020, the U.S. academic market was weak and has not fully recovered. Industrial research is gradually recovering but is not fully back to pre-pandemic levels. Applied markets moved strongly in Q4 but were hit earlier in the year. Japan was weak through much of 2020 with early signs of improvement in Q4. India and Latin America lagged significantly. We expect improvement over the course of 2021, with more confidence toward the second half of the year, and we expect Europe and China to remain strong. The U.S. academic community should pick up as well with increased funding and NIH support under the new administration, but there remain budgetary and operational constraints at some institutions.

Great. And Gerald, could you give some color on cash flow — specifically what the guidance assumes for cash flow generation in 2021? Can you help with the working capital moving parts, like inventories that stepped up in 2020? When do you expect that to normalize? And also the increase in customer advances — what is that related to?

Good questions. We don't provide detailed cash flow guidance for every item. Qualitatively, in 2020 we saw strong customer advances due to strong order bookings. Many of our large equipment sales require advances when orders are booked, and strong order performance drove advance collections. We also reengineered cash processes, improving AR collections across all regions. Regarding inventory, DIO increased in 2020 as we built inventory to address supply chain risks related to the pandemic and to prepare for a meaningful rebound in 2021. We expect to manage inventory carefully through 2021 and see improvement, but we remain cautious given potential disruptions from variants. Finally, we project significant capital expenditure levels in 2021 to focus on production capacity increases and productivity enhancements; this will impact free cash flow in the near term.

CapEx in 2021 and 2020 will be comparable, perhaps slightly higher in 2021. We're likely to maintain somewhat elevated inventories until pandemic uncertainties subside to ensure we can deliver.

Thank you. And the next question comes from Patrick Daly with Citi.

Frank, maybe just to follow-up on one of the earlier questions on single cell and spatial: you did the Canopy acquisition late 2020 and have talked about it. Can you talk through how we should expect this business to progress in 2021? What are expectations? You said it's a real business now. What should we look out for this year?

Canopy ChipCytometry and related services will see continued fast product development. Combine that with our fluorescence microscopy business and launches like the Vutara VXL, and we will address not only spatial transcriptomics but also spatial genomics and high-resolution chromatin imaging. We cover multiple spatial scales — down to tens of nanometers — and have targeting technologies, software and flow labeling capabilities combined with microscopy that are unique. This multifaceted spatial biology portfolio will serve spatial biology and single-cell targeted proteomics and targeted multi-omics, and we expect it to perform well and ramp with good margins.

Great. That's helpful. And then maybe just a quick one on Europe — what trends have you seen recently on the academic side and expectations in 2021? I know you saw pockets of strength.

European academic funding is steadier and often not as dependent on tuition or campus-generated revenue. Allocation in Europe has favored scientific priorities aligned with our strengths, such as single-cell biology and proteomics. Southern Europe is somewhat weaker, but central Europe and countries with strong pharma sectors are quite strong. The U.K. is expected to invest in research and innovation post-Brexit. Overall, Europe's allocation to relevant scientific priorities has been favorable for us.

And that was the last question at the conference. I would like to return the call over to Miroslava Minkova for any closing remarks.

Thank you for joining us today. In the first quarter of 2021, Bruker will participate virtually in the SVB Leerink Global Healthcare Conference and the Cowen Annual Healthcare Conference. We invite you to meet at these conferences or reach out to us for a virtual meeting during the quarter. Thank you, and have a nice day.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.