Good day, and welcome to the Bruker Corporation First Quarter 2021 Earnings Conference Call. Please note, this event is being recorded. I would now like to turn the conference over to Miroslava Minkova, Senior Director of Investor Relations and Corporate Development. Please go ahead.

Thank you, Sarah. Good morning, everyone. I would like to welcome everyone to Bruker’s First Quarter 2021 Earnings Conference Call. My name is Miroslava Minkova, Senior Director of Investor Relations and Corporate Development. Joining me on today’s call are Frank Laukien, our President and CEO; and Gerald Herman, our Executive Vice President and Chief Financial Officer. In addition to the earnings release we issued earlier today, during today’s conference call, we’ll 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’ll be highlighting non-GAAP financial information. A 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 we show on Slide 2. During the course of this conference call, we will make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to the ongoing COVID-19 pandemic as well as ongoing worldwide semiconductor chip and other supply shortages. The company’s actual results may differ materially from 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 as updated by our other SEC filings, 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, May 5, 2021. We do not intend to update our forward-looking statements based on new information, future events or for other reasons prior to the release of our second quarter 2021 financial results expected in early August 2021, except for any forward-looking statements regarding medium-term outlook that we may share at our upcoming Investor Day in June. Therefore, you should not rely on these forward-looking statements as representing 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 first quarter in more detail. Now I’d like to turn the call over to Bruker’s CEO, Frank Laukien.

Thank you, Miroslava. Good morning, everyone, and thank you for joining us on today’s call. Bruker had an excellent first quarter with a strong start to 2021. We saw a significant recovery in many of our businesses previously impacted by the pandemic. Our Project Accelerate initiatives continued to deliver strong growth and value. And our financial performance stepped up accordingly, reflecting strength in competitive business and end market dynamics. We also continue to make progress in the expansion of Project Accelerate, which we now call Project Accelerate 2.0. So Q1 first quarter 2021 revenues grew 30.8% to approximately $555 million. Foreign currency translation was a tailwind of 6.2%, while acquisitions added 0.8% to revenue growth in the quarter. On an organic basis, Bruker’s revenues increased 23.8% year-over-year from a pandemic impact at Q1 2020 when our revenues were down approximately 8% organically. The reported and organic revenue increases in Q1 of 2021 reflected strong demand for our high-performance life science tools, scientific instruments and diagnostic solutions with continued uptake of our Project Accelerate growth initiatives and a strong recovery in end markets globally. Our first quarter 2021 non-GAAP gross margins stepped up 460 basis points year-over-year, while our non-GAAP operating margin reached 18.4% from 7.6% in the first quarter of 2020. The improvements reflect our revenue and volume increase, positive operating leverage and higher Project Accelerate revenue in the mix. In the first quarter of 2021, Bruker reported GAAP diluted earnings per share of $0.37. On a non-GAAP basis, first quarter 2021 diluted EPS were $0.44, more than tripling compared to $0.14 in the first quarter of 2020. First quarter 2021 order bookings for Bruker’s scientific instruments groups grew mid-teens organically year-over-year. This reflected continued strong order growth for our innovative proteomics and biopharma solutions and a strong recovery in our academic, applied and industrial research businesses. Demand for microelectronics and semiconductor metrology systems also remained robust. During the first quarter, we made further progress in three areas of significant long-term growth potential: unbiased proteomics, spatial and single-cell biology, and microbiology and molecular diagnostics. At the US HUPO conference in March, researchers presented exciting new results in deep, unbiased plasma 4D proteomics using our unique TIMS/PASEF solutions. We believe that plasma proteomics is the next frontier for proteomics researchers, particularly for liquid biopsy multiomics biomarker development using cancer proteogenomics methods. In late February of 2021, a seminal publication by the groups of Professor Matthias Mann and Fabian Theis published in Nature Communications described collision cross-sections, or CCS, on the timsTOF platform as an essential intrinsic property of peptide ions. The Mann and Theis publication suggested that accurate large-scale collision cross-section values, which are unique to timsTOF, can increase confidence in peptide and protein group identification. In spatial and single-cell biology, in March, we announced the formation of Acuity Spatial Genomics, a new company with a majority investment by Bruker. Acuity Spatial Genomics has core intellectual property with an exclusive license to certain innovations made at Harvard University in Professor Ting Wu’s lab. I will discuss Acuity Spatial Genomics in more detail later on the call. Finally, in our microbiology and diagnostics business, we began the U.S. rollout of the FDA-cleared MBT Sepsityper IVD Kit for the rapid identification of bacteria and fungi directly from positive blood cultures. We are very pleased with how our Project Accelerate 2.0 initiatives are unfolding. We will do a deeper dive into these areas at a planned Virtual Investor Day on June 17. Last but by no means least, we continue to drive operational excellence and productivity programs. These should support further operational gains and reinvestments in our business in 2021 and beyond. With that, please turn to Slide 5 and Slide 6 now, where I provide further highlights on the first quarter 2021 performance of our three scientific instruments groups and of our BEST segment, all on a constant currency and year-over-year basis. First quarter 2021 BioSpin group revenue grew in the mid-20s percentage to $259.4 million, as customer demand and instrument deliveries improved. BioSpin system revenue was up strongly and included customer acceptance of a 1.2 gigahertz system and of a 1.0 gigahertz system, both in Europe. During the quarter, in addition to strengthening academic markets, demand for BioSpin’s industrial and applied solutions began to recover as well. BioSpin’s aftermarket and software revenues also grew. First quarter 2021 CALID Group revenues increased in the high 20s percentage to $192.4 million. The growth at CALID reflected strong demand for life science mass spectrometry and for FTIR/NIR/Raman molecular spectroscopy products. During the quarter, we continued to see robust order and revenue growth for our timsTOF unbiased 4D proteomics platform, while demand for other mass spec products also improved. Microbiology and molecular diagnostics revenue was higher on contributions from SARS-CoV-2 diagnostic products. During the first quarter of 2021, revenue from COVID testing was approximately $7 million, virtually all incremental growth year-over-year, but down sequentially from the fourth quarter of 2020. Revenues for our molecular spectroscopy products were sharply higher year-over-year amid excellent new product ramps and strengthened industrial, applied and academic markets. Please turn to Slide 6 now. Bruker Nano revenues increased in the mid-20s percentage to $154.4 million. In the quarter, Nano saw a rebound in its industrial research product lines and a recovering academic business. Demand for Nano’s microelectronics and semiconductor metrology products remained strong. First quarter 2021 Nano revenue also included a modest contribution from our September 2020 Canopy Biosciences single-cell targeted proteomics acquisition. In the first quarter of 2021, Nano’s advanced X-ray and Nano Surface revenues grew strongly year-over-year and nano-analysis revenues stabilized. First quarter 2021 microelectronics and semiconductor metrology revenue grew significantly compared to first quarter 2020 on healthy demand. And finally, Nano’s fluorescence microscopy revenue was slightly higher year-over-year, but with very good order growth. Moving on to BEST. BEST revenue in the first quarter 2021 grew in the mid-single digits, net of intercompany eliminations on contributions from BEST Big Science projects. During the first quarter, underlying demand for BEST superconductor products for health care and MRI began to recover after a slowdown in 2020, primarily attributed to the pandemic last year. Moving to Slide 7. I would like to share some highlights on the recent U.S. and Americas rollout of an enhanced Fourier 80 Benchtop FT-NMR with applications in applied industrial, pharmaceutical and academic teaching markets. The Benchtop Fourier 80 is the next-generation, higher-performance system, featuring a permanent magnet, so therefore no need for cryogen refills. The system is routinely equipped for gradient spectroscopy and has industry-leading automation options. We believe this system is poised to democratize NMR to a broad range of labs and applications, as it does not have the cost, space or cryogen requirements of high-field superconducting NMR systems. Turning to Slide 8. In March 2021, Acuity Spatial Genomics was formed with a majority investment by Bruker. Acuity aims to open a new frontier in spatial 3D genomics and multiomics analysis for basic research and discovery. Acuity leverages innovations developed in the lab of Professor Ting Wu, who is a professor of genetics at Harvard Medical School, and specifically the OligoFISSEQ methods and technology, which makes it possible to see the three-dimensional genome in situ and at single cell and subcellular resolutions. Capabilities enabled by Acuity include, for example, a deeper understanding of the three-dimensional chromatin structure and insights into transcription and regulatory programs that drive cell type, cell state, pathogenesis and function. Such fundamental cell biology discoveries could help address complex problems in oncology, neuroscience and cell development. Acuity is an important addition to our emerging spatial and single-cell biology portfolio. We look forward to sharing more information on this area at our upcoming Investor Day. So let me conclude by reiterating that our first quarter 2021 got us off to a strong start. We saw a recovery in most of our core businesses and our high-growth Project Accelerate initiatives continued to deliver. As discussed on our February call, we are planning further investments this year to support the growth of our business and Project Accelerate 2.0, including in R&D and CapEx. At the same time, we also continue to drive our operational excellence programs, which are already partially reflected in the strong recovery of our core businesses. We are raising our fiscal year 2021 outlook for revenue growth, non-GAAP operating margin expansion and non-GAAP EPS, as you can see from our press release. I am confident that Bruker is emerging from the pandemic in a very strong position, and I look forward to further updating you on our many exciting opportunities at our Virtual Investor Day in June. Let me now turn the call over to our CFO, Gerald Herman, who will review our first quarter 2021 financial performance and guidance in detail. Gerald?

Thank you, Frank. I’m pleased to join you today and review Bruker’s first quarter 2021 financial highlights starting on Slide 10. Bruker’s revenue increased 30.8% to approximately $555 million in the first quarter of 2021, which includes an organic revenue increase to 23.8%. We reported GAAP EPS of $0.37 per share compared to $0.07 in the first quarter of 2020. On a non-GAAP basis, Q1 2021 EPS was $0.44 per share, an increase of 214% from $0.14 in the first quarter of 2020. Our first quarter 2021 non-GAAP operating income and non-GAAP operating margin stepped up significantly year-over-year given the increased revenue and volume. Coupled with our disciplined management of expenses, this resulted in a significant drop-through to the bottom line as our first quarter 2021 non-GAAP operating margin reached 18.4% compared to 7.6% in the first quarter of 2020. At the end of the first quarter 2021, our balance sheet cash and liquidity position remained healthy and improved sequentially from the fourth quarter of 2020. We ended the first quarter with $746.8 million in cash, cash equivalents and short-term investments and a modest net debt position. During the quarter, we again used cash to fund strategic capital investments, our stock buyback program and our dividend. In the first quarter of 2021, we repurchased approximately 531,000 shares of Bruker stock for a total of $32.8 million. We have completed our share buyback authorization, which was valid until mid-May of 2021. Free cash flow in the first quarter of 2021 was a healthy $73.3 million. And our working capital to revenue ratio improved relative to December 31, 2020, driven by efficiency gains. Slide 11 shows the revenue bridge for the first quarter 2021. As noted earlier, organic revenue in the quarter increased 23.8%. We had a positive revenue contribution from acquisitions of 0.8% and a foreign currency tailwind of 6.2%. From an organic revenue perspective, BioSpin revenue increased in the mid-20% range. CALID revenue increased in the high 20% range, and Nano grew in the low 20% range. BEST revenue was up in the mid-single digits, net of intercompany eliminations. Frank has already reviewed the primary drivers earlier in this call. Systems revenue for each of our 3 BSI groups increased in the high 20% range organically, and aftermarket revenue also grew approximately 20% organically compared to the first quarter of 2020. Geographically, and on an organic basis in the first quarter of 2021, European revenue increased close to 40%, including the 2 gigahertz class NMRs, while Asia Pacific revenue grew in the mid-20% range and North American revenue grew in the mid-single digits. Rest of the world revenue was slightly higher year-over-year. Slide 12 shows our first quarter 2021 P&L performance on a non-GAAP basis. The first quarter 2021 non-GAAP gross margin of 51.3% increased 460 basis points from the 46.7% in the first quarter of 2020, driven by volume leverage on increased revenue and higher Project Accelerate mix. Over the past few years, we’ve added new capabilities to our high-performance instrument portfolio, which are now delivering solid margin improvements in addition to the higher volume we experienced in the first quarter of 2021. Q1 2021 non-GAAP operating expenses increased 9.8% compared to the first quarter of 2020. Our operating expenses in the first quarter reflect solid cost management as we navigated through a significant foreign exchange headwind in the quarter. We anticipate that our planned Project Accelerate 2.0 investments, which did not impact the P&L in a significant way in the first quarter, will ramp up over the remainder of the year. As a result, our first quarter 2021 non-GAAP operating margin stepped up over 10 percentage points year-over-year to 18.4%, a record level for us in the first quarter. This reflects significantly higher revenue, improved gross margin and favorable operating leverage compared to the first quarter of 2020. We also absorbed an approximate 70 basis point foreign exchange headwind on our operating margin in the quarter. For the first quarter of 2021, our non-GAAP effective tax rate was 31.1% compared to 23.9% in the first quarter of 2020, primarily up due to discrete items and jurisdictional mix. Weighted average diluted shares outstanding in the first quarter of 2021 were 153.2 million, a reduction of approximately 2.2 million shares or 1.4% from the first quarter of 2020, resulting from our share repurchase activity over the past 12 months. And finally, first quarter 2021 non-GAAP EPS of $0.44 stepped up significantly from the $0.14 in the first quarter of 2020, driven primarily by higher revenue and margins. Turning to Slide 13. Our free cash flow in the first quarter 2021 was $73.3 million, reflecting sharply higher net income year-over-year. First quarter 2021 cash flow also benefited from the timing of income tax payments and other items as well as slightly lower year-over-year capital expenditures. Our cash conversion cycle at the end of the first quarter of 2021 was 243 days, a decrease of 33 days compared to the first quarter of 2020. The reduction was due to our strengthening cash collection process and improvements in days inventory and days payables outstanding. We continue to carry significant inventory in order to manage supply chain risks, with new risks emerging related to semiconductor chip and other supply shortages as the major economies recover from the pandemic. Turning now to Slide 15. We are raising our guidance for 2021 to reflect our strong start to the year and favorable trends we see in our business. While we cannot rule out further risks, including those related to the pandemic or to the supply chain, demand for our products and solutions have strengthened across our portfolio, and major end markets appear to be recovering. For fiscal 2021, we now expect organic revenue growth of 11% to 13%, representing an increase of 4 percentage points from our February guidance. Foreign currency is now expected to contribute approximately 3% to revenue growth, a slight reduction from the approximate 4% tailwind projected earlier. This now calibrates reported revenue growth for 2021 to a range of 14% to 16% compared to 2020. Baked into this projection is the assumption that our 3 BSI groups will continue to be the primary drivers of this growth. We now expect our 2021 non-GAAP operating margin to expand 210 to 250 basis points compared to the 16% reported in 2020. This is an increase of approximately 60 basis points compared to our prior outlook. For the full year 2021, we now estimate a foreign currency headwind of approximately 50 basis points on operating margin, more favorable than the 80 basis point foreign exchange headwind we projected in our February call. On the bottom line, we expect 2021 non-GAAP EPS in a range between $1.82 and $1.87, a $0.10 increase compared to our February guidance range and representing non-GAAP EPS growth of 35% to 39% compared to 2020. This also represents mid- to high-teens growth from the $1.57 pre-pandemic non-GAAP EPS level in full year 2019. By 2021, projected non-GAAP operating margin expansion and non-GAAP EPS continue to assume an increased R&D investment of approximately 10% of revenue as we fund investments in Project Accelerate 2.0 growth initiatives. We are increasing our non-GAAP tax rate projection for 2021 to approximately 30%. This is due to a change in the jurisdictional revenue mix we now anticipate for the full year. Other assumptions for 2021 are listed on the slide, along with our updated foreign exchange rate assumptions as of April 30. While we do not provide quarterly guidance, I’d like to add some additional color to our expectations for the second quarter. Given the relatively weak comparisons from the second quarter of 2020, we currently anticipate our second quarter 2021 financial performance improvements to again be quite strong, with 15% or greater organic revenue growth year-over-year. Unlike the first quarter of 2021, we do not expect any gigahertz class systems revenue in the second quarter due to timing reasons. This, combined with our planned ramp-up in Project Accelerate 2.0 investments, may result then lighter than first quarter sequential operating margin and EPS performance in the second quarter of 2021. To wrap up, we began 2021 with an excellent competitive position in strengthening end market demand for our products in many key markets. In the first quarter, we saw strength, particularly in proteomics, biopharma, applied, semiconductor and industrial research markets. Our innovative product portfolio, combined with recovering end markets, positioned us well to deliver strong year-over-year improvements in revenue, margin, EPS and cash flow in the first quarter. We also took a meaningful step up in our outlook for the full year. The strategic investments and sound operating actions we took in 2020 are expected to further strengthen our financial performance in 2021 and beyond, and we look forward to updating you on our upcoming Virtual Investor Day and on future earnings 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 would now like to turn the call over to the operator to begin the Q&A portion. Operator, we are ready to begin the Q&A.

Our first question comes from Doug Schenkel with Cowen.

This is Chris on for Doug. Gerald, I think updated full year organic revenue growth guidance implies that the average 3-year stack growth rate in Q2, Q3 and Q4 collectively is just 2%. I know you increased full year guidance beyond the Q1 revenue beat, but the stacked growth rate is well below the 8% you just delivered in Q1, even if we adjust for the 2 gigahertz systems. So with that in mind, I am curious, how conservative you think updated guidance is and if there are any other factors we should consider as we update our models?

We can’t follow your numbers. They don’t agree with our numbers.

I guess said differently, if you just look at a stacked growth rate in Q1 of ‘21, you just put up, I think.

What’s the stack rate?

That stack growth rate of 8% is just lower than what guidance implies for the rest of the year. So I’m curious, there are any factors we should consider as we update our models. Or how conservative you think updated guidance is for the balance of the year?

We think the guidance is reasonable and they still don’t follow the numbers that you’re citing to us because they don’t coincide with our numbers. But we think our guidance for the second quarter and for the remainder of the year is reasonable.

Okay. We could follow up after. But my second question. Frank, could you just help us contextualize the market opportunity for the FT-NMR system? Does that replace some of the lower magnetic field strength NMR systems you have? Or is that more complementary?

Good question. Yes. No, I think it’s a new, still rather small market segment. There are some other, smaller companies out there that have been in that market. We’re somewhat of a late follower here. But I think we now have a very good second-generation, high-performance, very stable, highly automated product with a lot of benefits. So it’s its own little market niche. I don’t think it will cannibalize the superconducting NMR market of 400 megahertz or above; that’s just a different performance envelope. But I think for the first time, and that’s really what we were aiming for, it makes a benchtop FT-NMR something you could put into any lab, just as you could put a small GC or LC, a single- or triple-quadrupole mass spectrometer, or a small benchtop FTIR system into any analytical, chemistry, or teaching lab. NMR always was mostly relegated to central research facilities with a few exceptions, and I think we’re really breaking that paradigm. NMR is incredibly useful, but it wasn’t as easily and broadly accessible to all sorts of chemistry labs as it now is becoming. So I think it’s a small niche, but it has a lot of growth potential for the future.

Our next question comes from Puneet Souda with SVB Leerink.

This is Scott following on for Puneet. So I want to talk about single-cell proteomics. You guys kind of mentioned in a call actually held with us about a single-cell proteomic instrument that’s delayed the launch in 2022. Is it based on a breakthrough paper from the Mann Group? I don’t want to front run the Investor Day, but maybe just more high level how you’re thinking about the system and how it fits into the portfolio with Canopy and some of the other initiatives you guys have ongoing in the single cell arena.

Yes, Scott, that’s a good one. In fact, of course, we are doing single-cell targeted proteomics. That’s not so unique and there’s not many companies that can do it. We’re one of them with our Canopy Biosciences investment and single-cell targeted proteomics primarily for clinical and translational research on both fresh frozen and FFP tissue or on suspended cells is something that we’re doing, and we have very nice panels for that now. That’s why we did that Canopy acquisition. However, unbiased, bottoms up, if you like, unbiased single-cell proteomics that’s quantitative and beyond just a few signals, that’s really novel. And having that with a large number of protein groups and peptides identified was in that seminal paper that you just mentioned by the Mann Group. And yes, so we’re developing that system. We hope to launch that in early 2022, and it really is a new scientific capability, single-cell proteomics, which goes with spatial proteomics within a tissue. You’ll obviously want to cut out individual cells. If you have a tissue with some laser capture microdissection mechanism. That’s not a Bruker’s tool, but these tools are out there. And then looking at these cells in an unbiased way, and not only the few targeted things that you can look at today. But of course, also then things that targeted can’t give you, you want to look at post-translational modification. Phosphorylation is tremendously important in cancer and in tissue microenvironment. Similarly, cell-surface glycosylation is something that’s tremendously important, all the things that only unbiased proteomics realistically can give you. So it’s really going to be a very important new open window that’s opening up for spatial and single-cell science in general. I think the biology is tremendously important because single-cell proteomics is far more quantitative than single-cell RNA. It’s great because that technology is out there. But because of low copy numbers, it’s not biologically quantitatively very meaningful, and we’re big believers in quantitative biology. So stopping there, the instrument will be a very dedicated niche high-end system, probably around the $1 million mark. But we think there will actually be quite a bit of demand for that. I don’t say it’s going to be a volume product, but in certain specialized markets, I think it will be very well received and we’re getting inquiries and first orders already.

Okay, great. Yes. That was very helpful. If I could go back to the NMR business, you guys have had very good success placing these systems in recent years and having some strong momentum here. But, it seems like U.S. and APAC, maybe adopt maybe particularly with the gigahertz class. What are the main barriers of adoption for these regions? And do you expect these regions to kind of represent the next leg of growth for the NMR business? Maybe how does the Fourier 80 announcement today maybe accelerate on that adoption in this week?

Yes, two good questions, both NMR-related. Gigahertz NMR in Asia Pacific and the Americas, especially the U.S., is well behind. There’s a lot of momentum in the community and hopefully in federal funding agencies, plus some private foundation-funded efforts to improve that, so we’re somewhat optimistic about various approaches to raising NIH and NSF funding. How that will be negotiated in the end nobody knows, but the telltale signs point to some substantial increases in funding that would benefit many areas. That level of support from NIH, DOE, NSF and perhaps others in the U.S. would likely be required to fund this badly needed infrastructure, where Europe has in fact moved first. By the way, growth in Europe isn’t over yet; even in Q4 we had another order in Switzerland, so there’s still European activity as well. The Fourier 80 is a very different budget item — it’s more around the low $100,000 level — so it can come out of many budgets, from colleges to chemistry and pharma research to forensic labs. Many labs previously would have sent samples to a centralized facility or relied on mass spec or FTIR, but now if they can get NMR data easily in their own lab with a benchtop system that they don’t need to worry about, it opens up a much broader market. I don’t think this is a geographic limitation: we started in Europe and we’re now launching in the U.S. and Canada. We want to ensure the product earns an excellent reputation and overcomes many of the performance and stability shortcomings of first-generation products so it can fully fulfill the promise. We’re taking it slow, but it is a very high-quality, highly automated, very stable product that should be a joy to use and own.

Our next question comes from Derik De Bruin with Bank of America.

A couple of questions, Frank, Gerald. I guess the first one is a margin question. You did 17.6% adjusted operating margin in 2019. Guidance this year basically assumes 18.1% to 18.5%. I guess the question is, how do we think about margins as we go into 2022? You’ve been tracking somewhere in the 70 to 100 basis point increases. I realize you’re making some incremental investments and other things are going on, but can you explain how you expect margins to grow from this year’s levels?

Well, first, Derik, we’re pretty pleased with what we delivered in the first quarter, coming off a solid fourth-quarter performance on the operating margin side, especially given the significant foreign exchange headwind in the first quarter. I can’t comment specifically on 2022. Please join us for the Virtual Investor Day and we’ll talk more about those forward years. I can say we discussed this a bit in the prepared remarks: we are seeing good end-market recovery in many areas we didn’t see even a year ago. We have an innovative product portfolio and we’re seeing a good uptick in both revenue and orders so far. So we’re optimistic on the operating margin line, but there are still a few quarters to go before we talk too much about 2022.

I mean initially in February, we thought we’d bounce back to 2019 margins. Now we’ve raised that, as you’ve seen this morning, to where we think we can exceed 2019 operating margin with a 50 basis point headwind from currency. And, if you like, a 100 basis point headwind, which is a choice because we’re investing 10% instead of 9% in R&D. I think we’re delivering very good margin expansion, but we’re also investing in growth. So it’s that balance, and with our shareholders we generally discuss that from time to time when we have individual meetings. They’re all very comfortable with our long-term strategy of delivering good operating margin expansion year over year, obviously disrupted in 2020. But also not absolutely optimizing that in any given year, instead focusing on the growth opportunities, and that remains our philosophy. So we expect to generally continue our margin expansion, of course. But again, we’re not focusing on the fastest margin expansion possible but on investing in our future and our profitable growth opportunities while delivering gradual annual margin expansion in a pattern that you’ve seen from us for many years, except for 2020.

Great. That’s really helpful. And just one quick follow-up. We’re getting a lot of questions on the semiconductor markets, metrology markets. In 2 ways, the ultimate potential on sort of this chip shortage and what it could mean for your business, both from a revenue potential. And also, is there any risk to the chip shortage on impacting your supply chain, and you not being able to get materials to manufacture given some of your high-tech items? Just some color on both the supply and demand curve on the metrology and semiconductor side.

Yes. Let me add that we have a semiconductor, metrology and microelectronics tools business, which is a significant part of our Project Accelerate initiatives. That business has very good margins, strong incremental margins, and has been on a very good trajectory. It delivered greater than 30% organic growth year-over-year in Q1, and we’re benefiting from that. On the risk side, we acknowledge there are risks in the operating environment, particularly supply chain risks for chips, which you’ve read about in the automobile industry, and we are working on that very hard. We have taken that risk into account in our guidance for the year and have highlighted it as a risk factor. Between pandemic lockdowns and current supply chain strains, you never know how variances will play out, and it’s a lot more work to get chips, boards and other components delivered. The industrial boom is also stretching logistics, shipping and even materials like wooden pallets, so while we’re confident in our ability to deliver in Q2 and in Q3 and Q4, there are additional risks and we are actively managing them.

Our next question comes from Jack Meehan with Nephron Research.

I wanted to dive a little bit more into CALID. So over 20% growth, I’m getting closer to 30%, but I was wondering if you could talk about the relative performance of proteomics within that. In the past, you’ve talked about kind of the S-curve of the timsTOF row. Do you have any updated thoughts around how the order book is going and where you think you are on that curve?

Yes. It’s going well. When I talk about proteomics, I mean unbiased proteomics, the timsTOF business you asked about. We also have targeted proteomics with Canopy, which is much smaller for us so far. For unbiased proteomics, timsTOF Pro orders and revenue are very strong, with year-over-year growth greater than 30%. It’s one of our growth drivers, and both orders and revenue look very, very good thanks to many of the new capabilities we announced and that I highlighted earlier in the call. I would say we are at the beginning of the steeper part of the S curve.

Great. I want follow-up also on CALID, the COVID tailwinds, it’s not huge, but I was just curious what you were seeing there. I think $7 million was a little lighter than what you previously talked about. Do you think this is starting to fade as the cases come down?

Yes. No, definitely. I mean we had close to $14 million in Q4. So the $7 million, around $7 million of COVID testing, which for us is essentially all PCR—the PCR assays and PCR extraction. Antigen testing is a flooded market, and though we have two product offerings out, they aren’t getting much traction. So we’re refocusing mostly on the PCR testing and associated products. At $7 million, that was lighter and sequentially down, and we don’t have very high expectations for it. We expect that to remain below $10 million or so in Q2, and then we’ll see. It’s definitely coming down as far as we can tell. Some demand is shifting to antigen testing, although not everybody is fully pleased with that. Antigen testing plays a role, but it’s an oversupplied market, so we’re probably not going to enter it in a very serious way. We will further refine our PCR portfolio. We had the flu testing, the winter four‑panel, and there wasn’t much need for that because there was essentially no flu season in Europe this winter, which is good for the population. We’re also looking at a variant version; we now have an RUO version that we’re testing in Europe and we think that will be suitable for the market as we proceed. But overall, that revenue is down sequentially, and that’s fine with us. We don’t have much of a tailwind there, and it never was a very large part of our revenue for the second half of this year or next year.

Our next question comes from Tycho Peterson with JP Morgan Securities.

Frank, I want to dig into the BioSpin instrument a little bit. Just curious how much of the strength there you think was pent-up versus new customer wins. Can you talk as to how much of the revenues came out of backlog versus new business wins as well?

Well, for BioSpin in any given quarter most of it comes out of backlog. But orders in BioSpin were also healthy. The number I have is for all the BSI groups together, all three of them, and organic year-over-year order growth was in the mid-teens. BioSpin was healthy. But of course, in any given quarter you can pretty much assume that 80% of BioSpin’s revenue comes out of the ending backlog of the previous quarter, aside from service and aftermarket. So yes, BioSpin looks good.

And then on Nano, I appreciate the comments on kind of the semiconductor shortage in the near term. One of the questions we’ve gotten is just with infrastructure on the table here and things like broadband buildout and upgrading the electrical grid. Is there an opportunity there, do you think, for the Nano business to the extent you do cap with some of the petro dollars?

Yes. I mean the opportunity for the risk hasn’t really materialized for us, but we’re aware of it, just as we’re aware of the lockdown risks. The opportunity is very substantial. Our semiconductor and microelectronics business in the Nano Group, almost entirely in the Nano Group, has expanded very nicely with excellent growth in the second half of last year and again continuing greater than 30% organic growth. Growth was much greater in the first quarter of this year, with really good bookings. So we think that will be positive throughout this year. Longer term, semiconductor is somewhat cyclical, although the cycles aren’t what they used to be and are much longer. Long-term trends from artificial intelligence to 5G to cloud-based computing and many other drivers, including working from home, make that runway look very healthy and very long. Plus there is a lot of new investment in new technologies, 7- and 5-nanometer nodes, greater 3D stacking and more layers, which all play to our strengths. So we are very optimistic about our semiconductor metrology business.

Okay. And then a follow-up on cellular. Acuity, you’re doing is a majority investment. Can you just talk as to why that was the right strategy as opposed to acquiring? I know it’s early, and then how we think about that in relation to Canopy, just around the broader spatial and in situ offering?

Yes. There was nothing to acquire yet. That’s a business to be built. It’s a true start-up, and we found some very talented and enthusiastic people likely to join Acuity from the group that did that work in an academic setting. Those folks want to be entrepreneurial and do a startup. Instead of sending them to the usual VC funding route, they chose Bruker as a majority investor. We can also help them as a strategic majority investor with a lot of infrastructure and not just capital. That combination, including some of our key super-resolution microscopy products that are actually the basis for some of the Acuity Spatial Genomics solutions, which are more molecular biology-oriented and include software and services, I think makes for a much, much faster start for Acuity than if it truly were day one and they just received some seed money to get going. So I think it’s not a running start, but it also will not have the typical lead times of another startup. We’re excited about that, and we think we’ll tell you more about it on Investor Day. Will it contribute meaningfully this year? No, of course not. But it’s also not going to be three, four, or five years before it sees its first revenue, we’re hoping. I think it’s a fantastic and very creative way of getting into some of the most important new areas in science and spatial genomics in a unique manner and with a somewhat unique and clever business model that Mark Munch and colleagues are driving for us here from the Bruker Nano Group. Very exciting.

Okay. That’s helpful. And then one quick one for Gerald before I hop off. The increase in operating margin guidance, 210 to 250 basis points. Should we assume 2/3 of that is still from the gross margin line? I know that was kind of the rough rule of thumb.

Yes. I think that’s reasonable. We still see very solid gross margin performance in the next few quarters. So I think that’s a reasonable assumption for sure.

Our next question comes from Dan Brennan with UBS.

Great. Maybe the first one, just broadly on the academic and government market, Frank. What are you seeing from probably some of the delays that were happening during 2020, given the pandemic? Have you seen much of a catch-up yet in terms of instrument orders? And how would you characterize the overall environment given the increased funding that we’re seeing globally in that space?

Yes. I think we still have a few discrepancies. China and Europe did very, very well in academic funding and orders, and TOF is still lagging a little behind, although there are promising signals now and people believe there will be a rebound, along with healthy NIH, NSF and similar spending. I think universities will become more optimistic in areas from faculty hiring to how they allocate their budgets. So there’s optimism in the U.S., but that optimism still needs to translate into numbers and that may take until the second half of the year. The U.S. academic market is recovering, but it’s not nearly as strong as China and Europe. Japan is still very anemic and we’ll need to see how that plays out and whether that comes after the Olympics or not. We don’t have clear visibility there. Plus a few places, like India, of course have other problems that are far more severe. So it’s generally quite good, but Europe and China are particularly strong, the U.S. is lagging, and Japan and India are unclear or weak. That gives you a bit of geographic color to what is otherwise a pretty strong academic and government funding rebound that we see. Even with those areas of weakness or questions, it’s really quite healthy.

And I believe in the last downturn, coming out of it, you discussed kind of the delayed reaction maybe to your business given the timetable at which grants need to be written And then grants get rewarded and then money gets spent. So I’m just trying to think sort of within your guidance this year and as we think ahead beyond 2021, is there a potential really for maybe a significant step-up in growth beyond just comps given the spending levels from this catch-up on academic and the increased funding, or…?

There’s potential for sure, but it remains to be seen. We think that a lot of our business will benefit when funding comes back from NIH, NSF and similar institutions worldwide. The question is whether our instruments in proteomics, spatial and structural biology, NMR and so on are in the sweet spot. Generally, a rising tide is good for all boats, and we have positioned ourselves so that many of our key instruments are in that sweet spot. That also remains to be seen when large funding waves occur. Even if an agency like the NSF releases funds into grant programs for individual investigators, purchases of instruments take time and can actually take six to twelve months. On the other hand, given the strength we already have, I believe there’s a pretty good chance that U.S. academic spending will become quite strong, possibly in the second half of this year. That could be a nice driver for us next year.

Great. And then just maybe one on the balance sheet, obviously in great shape. I’m just wondering, you had this consistent kind of tuck-in M&A strategy. Does that continue going forward? Is there anything larger on the horizon? Can you just give us a flavor of what we can expect from that aspect?

Yes. No, nothing large on the horizon. And obviously, there are a lot of businesses out there right now that were challenging to figure out what valuations would be. For instance, if they have a big COVID bolus or some companies are still early in their revenue or have no revenue yet, it's difficult to assess. We're really very disciplined as an acquirer in terms of value, and we're blessed to have such incredible organic growth opportunity that you are not likely to see us focus on M&A because of some COVID headwind or something like that. I’ll never rule anything out, but quite the contrary, we’re very much focusing on Project Accelerate and operational excellence, and we think that can deliver excellent further performance improvements and growth without the valuation and operational risks associated with a lot of frantic M&A activity. So you’re very likely not going to see that from Bruker. Do we need to wrap it up? I think we have time for one last question.

And that question will come from Brandon Couillard with Jefferies.

Just a 2-part question for you, Gerald. Free cash flow is off to a great start in a seasonally weak first quarter. What are you penciling in for the balance of the year? And then the tax rate is going up again. Going back to the Analyst Day 2 years ago, you talked about runway to If we bring that down into the low 20s. Is that still a relevant sort of midterm bogey?

Yes. Well, let me answer your last question first, if I may. Relative to the tax rate, we did move our non-GAAP tax rate for guidance up for the full year, and that’s largely driven by the strength of our European businesses, particularly in Germany. That carries a very high tax rate. So we think it’s prudent to move what we currently see in the overall mix from a jurisdictional perspective. So that’s what’s driving the current thinking around guidance for 2021. I would say, we haven’t at all given up on further movements in the tax planning strategies that we have here at Bruker, and we’re still executing through on those. But as I said earlier, the management of how it all plays out from the business so far appears to be more leaning towards those higher tax rate jurisdictions. And then on your first question relative to cash flow, we actually had a very solid fourth quarter of 2020 and another good strong cash flow performance in the first quarter. Some of this has to do with timing and of course, including in this particular quarter, we had some improvements, I would say, in a couple of areas that are significant. It probably takes a longer conversation than we have today to go through that. But in general, I’m pretty optimistic about our cash flow improvement capabilities and how we delivered on that over the last couple of quarters.

This concludes our question-and-answer session. I would like to turn the conference back over to Miroslava Minkova for any closing remarks.

Thank you for joining us today. During the second quarter, Bruker will participate in the Bank of America, UBS and Jefferies Virtual Healthcare Conferences. In addition, we’ll be hosting a virtual Investor Day on Thursday, June 17, with registration information forthcoming. We look forward to meeting you at 1 of these events during the quarter. Thank you. And have a nice day.

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