Earnings Call Transcript - BRKR Q2 2022

Operator, Operator

Good day, and welcome to the Bruker's Second Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Justin Ward, Senior Director of Investor Relations and Corporate Development. Please go ahead.

Justin Ward, Senior Director of Investor Relations and Corporate Development

Thank you. Good afternoon. I would like to welcome everyone to Bruker Corporation's Second Quarter 2022 Earnings Conference Call. My name is Justin Ward, and I am Bruker's 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 CFO. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of 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 of the presentation. During 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 geopolitical and energy risks, the COVID-19 pandemic and supply chain, logistics and inflation challenges. 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 for the period ending December 31, 2021, as well as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and to our outlook as of today, August 3, 2022. We do not intend to update our forward-looking statements based on new information, future events or for other reasons, except as may be required by law, prior to the release of our third quarter 2022 financial results expected in early November 2022. You should not rely on these forward-looking statements as necessarily representing our views or outlook as of any other date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials for the second quarter and first half of 2022 in more detail and share updated fiscal year 2022 financial outlook. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Frank Laukien, President and CEO

Thank you, Justin. Good afternoon, everyone, and thank you for joining us on today's second quarter 2022 earnings call. Turning to our slide 4, in the second quarter of 2022, Bruker delivered robust bookings growth with organic bookings growth again outpacing organic revenue growth. In the second quarter, we launched several compelling product innovations across our portfolio and our strong organic revenue growth of 8.8% was 160 basis points above consensus. The solid performance came despite operational headwinds from significant supply chain and logistics delays, lockdowns in China, and the conflict in Europe. We again saw excellent demand for our differentiated, high-value scientific instruments and life science solutions, as evidenced by the strong momentum in organic bookings and revenue growth. For the second quarter of 2022, our Bruker Scientific Instruments or BSI segment, organic bookings were up double digits percentages year-over-year. And our BSI book-to-bill ratio remained greater than 1%. Finally, our BSI backlog remains very high. Bruker's second quarter 2022 reported revenues increased 3.1% year-over-year to $588.4 million, despite a strong foreign exchange headwind of minus 7.3%. On an organic basis, revenues increased 8.8%, which included 8.1% organic growth in BSI and 15.1% at BEST, net of intercompany eliminations, while growth from acquisitions added 1.6%. This implies constant exchange rate growth of 10.4% year-over-year. Our second quarter 2022 non-GAAP gross margin increased 180 basis points year-over-year to 51.8%, while non-GAAP operating margin was 16.6%, a decrease of 70 basis points year-over-year. Our gross margin expansion, despite inflation headwinds, is clearly benefiting from our Project Accelerate 2.0 margin mix as well as from volume leverage and currency tailwinds. In the second quarter, gross profit margin expansion was more than offset by our planned Project Accelerate 2.0 operating expense investments in Commercial and R&D capabilities. In the second quarter of 2022, Bruker reported GAAP diluted earnings per share of $0.33 compared to $0.38 reported in the second quarter of 2021. On a non-GAAP basis, the second quarter of 2022 diluted EPS was $0.45, up $0.01 from $0.44 in the second quarter of 2021. Gerald will discuss the drivers for margins and EPS later on. In summary, the second quarter of 2022 again saw strong demand for our differentiated products as we ramped our operating expense investments in Project Accelerate 2.0 to capitalize on the major opportunities in proteomics and spatial biology as well as in biopharma, applied markets, infectious disease diagnostics, cancer research and semiconductor tools. Moving on to slide 5, you can see Bruker's performance for the first half of 2022. Our revenues increased by 5.1% to $1.183 billion. On an organic basis, revenues grew 9.6% year-over-year, consisting of 8.8% organic growth in Scientific Instruments and 17.9% organic growth at BEST, net of intercompany eliminations. First half 2022 order bookings for Bruker's three Scientific Instruments groups grew double digits year-over-year organically and our BSI book-to-bill ratio for the first half remained above 1.1. Geographically, our first half 2022 order bookings were up double digits year-over-year organically in all major regions. Our first half 2022 non-GAAP gross and operating margins and GAAP and non-GAAP EPS performance are all summarized on slide five, and we are particularly pleased with our 160 basis points gross margin expansion year-over-year, which speaks to the value of our products and solutions. Our trailing 12-month return on invested capital, a non-GAAP measure, was 25.9%, which puts us among the leaders in our industry. We believe this is the result of our strong Bruker management process and our focus on disciplined entrepreneurialism and organic growth, supplemented by selected bolt-on acquisitions. Please turn to slides six and seven, where we highlight the first half 2022 performance of our three Scientific Instruments groups and of our BEST segment, all on a constant currency and year-over-year basis. In the first half of 2022, BioSpin Group revenue was $318 million and grew in the high single digits percentage. Please note there was 1 gigahertz class NMR system recognized in revenue in the first half of '22 compared to 2 in the first half of '21. We continue to expect 4 gigahertz class NMRs in revenue in 2022, with 1 in the second quarter and we expect 1 in the third quarter and 2 in the fourth quarter. BioSpin saw robust growth in Applied Markets revenues as well as from Services and Support. BioSpin achieved organic bookings growth in excess of 20% in the first six months of 2022. BioSpin innovations of note include our new single-story 1.0 gigahertz magnet to make gigahertz NMR accessible for more functional structural biology and drug discovery laboratories. We also launched advanced capabilities on our Benchtop Fourier 80 FT-NMR system to enable broader applications in pharmaceutical and applied markets analysis. Switching to CALID. For the first half of 2022, the CALID Group revenue of $394 million increased in the high single-digit percentage with strong growth in life science mass spectrometry and microbiology aftermarket, but also with the supply chain delays slowing revenue execution. Our timsTOF proteomics platform saw robust demand for applications in 4D proteomics, epiproteomics and metabolomics. In the second quarter, we launched the timsTOF HT, our high throughput system, as a higher throughput instrument that includes a novel fourth-generation TIMS-XRcell and 14-bit digitizer for greater dynamic range, enhanced peptide coverage and more accurate quantitation in unbiased 4D plasma and tissue proteomics. More on that on a later slide. Microbiology revenue delivered strong growth, driven by demand for MALDI Biotyper consumables. This was coupled with a gradual recovery in our tuberculosis molecular diagnostics products. We are excited about the launch of selected Liquid Array next-generation syndromic panels at ECCMID 2022 in April with more to come later this year. Please turn to slide 7 now. First half 2022, Bruker Nano revenue was $361 million and grew in the mid-teens percentage. Nano's industrial and semiconductor metrology markets all remain strong. Revenues for our advanced x-ray and Nano surfaces tools delivered strong growth in the first half. Nano's microelectronics and semiconductor metrology tools performed well, again, with strong bookings and backlog. Nano Life Science fluorescence microscopy revenue was up sharply on product innovation and strong research demand. And our Canopy subsidiary launched a next-generation CellScape ChipCytometry instrument for high throughput in C2 spatial biology with subcellular resolution and best-in-class quantitation. Finally, first half 2022 BEST revenues grew in the high teens percentage net of intercompany eliminations, driven by share gains and strong superconductor demand by our MRI OEM customers. BEST demand appears healthy, but we continue to navigate through supply chain and logistics challenges. Moving to slides 8 and 9, we are making significant progress with our Project Accelerate 2.0 initiatives, which accounted for about 54% of total revenues in 2022. On slide 8, we showcase three recent orders received in the second quarter for our compact single-story 1.0 gigahertz system for Calvin Magnet. This system, which is quite a technological marvel, enables structural biology researchers, pharmaceutical companies, individual principal investigators, and universities to access gigahertz NMR, a powerful tool for pathology and fundamental biology research, as well as metabolomics. It now fits into a single-story lab, has a smaller footprint, is easier to deliver and install, and significantly reduces helium consumption by nearly two-thirds. The orders originated from Japan and two were from Spain, which we are very pleased about. All three orders were received in the second quarter following our product launch at a conference in early April. Moving on to slide 9, a very important platform for proteomics, but also from metabolomics is, of course, our timsTOF platform. It now has a number of family members and the latest one that we launched was the timsTOF HT that we launched at the ASMS conference in Minneapolis in June of 2022, as sort of the ultimate high throughput workhorse and in particularly also suitable for plasma proteomics. I won't go through this slide in detail, but in terms of performance, higher and higher numbers of peptides and proteins that can be identified and quantified with excellence, one percentage false discovery rates, which is really essential, I think, for certainly for discovery applications and without suffering from the inevitable antigen cross-reactivity. As a bit of an update, as of the end of June, as of the end of the second quarter of 2022, our total timsTOF installed base of paid units is greater than 500 units. And our revenue run rate now is greater than $125 million per annum. So excellent continued growth and excellent progress. So in summary, Bruker again experienced strong demand for our differentiated instruments and solutions across our portfolio. Our Project Accelerate 2.0, high-growth, high-margin initiatives performed well, and we continue to ramp investments in R&D and in our Commercial infrastructure in compelling opportunity areas. With that, let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 financial performance and our fiscal 2022 outlook in more detail. Gerald?

Gerald Herman, CFO

Thank you, Frank, and thanks, everyone, for joining us today. I'm pleased to provide some more detail on Bruker's second quarter 2022 financial performance starting on slide 11. In the second quarter of 2022, Bruker's reported revenue increased 3.1% to approximately $588 million, which reflects an organic revenue increase of 8.8% year-over-year. We reported GAAP EPS of $0.33 per share compared to $0.38 in the second quarter of 2021. On a non-GAAP basis, Q2 2022 EPS was $0.45 per share, an increase of 2.3% from the $0.44 in the second quarter of 2021. Our Q2 2022 non-GAAP operating income decreased 1.1% and our non-GAAP operating margin decreased 70 basis points year-over-year to 16.6%, with expanding gross margins more than offset by our planned Project Accelerate 2.0 investments. We finished the second quarter with cash, cash equivalents and short-term investments of approximately $723 million. During the quarter, we used cash to ramp selected Project Accelerate 2.0 investments, fund capital expenditures, complete several key inorganic investments in strategically relevant technologies, and fund share repurchases. You may recall that in May 2021, our Board approved a two-year share repurchase authorization up to $500 million through May of 2023. In the second quarter of 2022, we repurchased nearly 1 million shares for approximately $16 million and year-to-date, we repurchased 2.6 million shares for approximately $166 million. As a reminder, in the full year of 2021, our repurchases totaled 2.1 million shares for approximately $153 million. We used $44.4 million of operating cash in the second quarter of 2022, largely to build inventories for our planned revenue ramp in the second half of the year as well as to protect against supply chain risks. Operating cash flow was also impacted by the timing of tax payments and customer advances. Our capital expenditure investments were $17.9 million, resulting in a decrease of $62.3 million in free cash flow in the second quarter of 2022. This compares with the free cash flow decrease in the second quarter of 2021 of $0.7 million. Slide 12 shows the revenue bridge for the second quarter of 2022 as discussed earlier. Compared to the second quarter of 2021, BioSpin's second quarter organic revenue for 2022 grew in the low double-digits percentage and benefited from revenue recognition of one 1.2 gigahertz system in the second quarter of 2022, where there wasn't one in the second quarter of 2021. Nano organic revenue grew in the high single-digit percentage, driven by strength in NANO's industrial research and semiconductor businesses. CALID organic revenue grew mid-single-digit percentage, as this group was constrained by supply chain issues. Q2 2022 BSI Systems and aftermarket revenue both increased in the high single-digit percentage range organically, compared to the second quarter of 2021. Geographically and on an organic basis, in the second quarter of 2022, our North American revenue grew in the high single-digit percentage. Asia Pacific grew in the low 20% range, while European revenue had low single-digit percentage growth, all year-over-year. Our Rest of World, which is small as we categorize it, Q2 2022 revenue declined in the high-teens percentage range. Slide 13 shows our Q2 2022 P&L performance on a non-GAAP basis. Non-GAAP gross margin of 51.8% increased to 180 basis points from 50% in Q2 2021, benefiting from our Project Accelerate 2.0 mix, volume leverage and currency tailwind, partially offset by supply chain and logistics inflation. 2022 non-GAAP operating margin of 16.6% was 70 basis points lower than the 17.3% margin delivered in the second quarter of 2021, as our gross margin expansion was more than offset by increased sales and marketing investments to invest in higher-growth, higher-margin Project Accelerate 2.0 initiatives. As expected and noted in our first quarter call, in the second quarter of 2022, our sales and marketing OpEx ramp outpaced our revenue ramp, particularly due to supply chain delays. For the second quarter of 2022, our non-GAAP effective tax rate was 28.2% compared to 26.7% in the second quarter of 2021, primarily due to unfavorable discrete tax items. Weighted average diluted shares outstanding in the second quarter of 2022 were 149.8 million, a reduction of 3.1 million shares or 2% from the second quarter of 2021, resulting from our share repurchases over the past 12 months. And finally, Q2 2022 non-GAAP EPS of $0.45 was up 2.3% compared to the second quarter of 2021. Slide 14 shows the year-over-year revenue bridge for the first half of 2022. Revenue was up $58 million or 5.1%, reflecting organic growth of 9.6%. Acquisitions added 1.3% to our top line, while foreign exchange was a 5.8% headwind and Frank has already covered the drivers for the first half of 2022. Non-GAAP P&L results for the first half of 2022 are summarized on slide 15, with the drivers largely similar to the second quarter of 2022 and as explained on the slide. Turning now to slide 16. In the first half of 2022, we used $3.5 million of free cash flow compared to positive free cash flow of $72.6 million in the first half of 2021. First half 2022 free cash flow use was used principally to build inventory to facilitate the second half revenue ramp and to address supply chain risks. It was also impacted by the timing of tax and other payments. Our cash conversion cycle at the end of Q2 2022 was 257 days, an increase of 18 days compared to the second quarter of 2021. And we continue to carry elevated inventory to manage supply chain risks as well as to meet growing backlog from our excellent bookings. Turning now to slide 18. Given the strength in revenue and bookings growth in the first half of 2022 and our record backlog, we're maintaining our guidance for high single-digit organic revenue growth for the full year 2022, while reducing our outlook for reported revenue growth due to a stronger foreign exchange headwind. Our updated outlook for the full year of 2022 now includes the following. First, no change to our prior guidance of organic revenue growth of 7% to 9% year-over-year. We now estimate a foreign currency headwind of approximately 6%, stronger than our 3.5% prior foreign exchange headwind guidance on the basis of a stronger US dollar against most major currencies. We expect acquisitions to contribute about 1.5% to growth, unchanged from our May 3 guidance. This is now expected to lead to reported revenue growth in a range of 2.5% to 4.5%. We expect supply chain and logistics delays to continue throughout the second half of 2022. We are maintaining our guidance of 30 to 60 basis points of operating margin expansion in 2022 from the 19.4% level in 2021. On the bottom line, we reiterate our non-GAAP EPS estimated range of $2.29 to $2.33 for fiscal year 2022, which would represent non-GAAP EPS growth of 9% to 11% compared to 2021. We're projecting a non-GAAP tax rate of approximately 29.5% for the full year 2022. Other guidance assumptions are listed on the slide. Our full year 2022 ranges have been updated for foreign currency rates as of June 30, 2022. To give you some color on the third quarter of 2022, we expect supply chain and logistics delays to impact our third quarter with mid-single-digit year-over-year organic revenue growth. On non-GAAP EPS, we do not expect to repeat the unusual tax favorability of the third quarter 2021 and anticipate third quarter 2022 non-GAAP EPS to be down year-over-year, but up sequentially from the second quarter 2022 by 10% to 20%. As you've just heard, this does not change our full year 2022 outlook for organic revenue growth or non-GAAP EPS, as we expect to catch up in the fourth quarter of 2022. So finally, to wrap up, Bruker delivered another solid quarter of solid organic revenue growth and continued strong bookings and backlog. We also posted very encouraging gross margin expansion in the quarter as our teams delivered remarkable execution under challenging conditions.

Justin Ward, Senior Director of Investor Relations and Corporate Development

Thank you, Gerald. I'd now like to turn the call over to the operator to begin the Q&A portion of the call.

Operator, Operator

Thank you. We will now begin the question-and-answer session. Our first question comes from Derik De Bruin of Bank of America Merrill Lynch. Please go ahead.

Mike Ryskin, Analyst

Hey, guys. This is Mike Ryskin on for Derik. I got a quick one on the updated guide and then a follow-up. First, on the guidance, I want to make sure I got this right. So it seems like the biggest change in the guide or really, the main change in the guide is the FX assumption is now 2.5 points higher because organic is unchanged. M&A is unchanged and your margin guidance unchanged. So I'm just wondering, how are you able to maintain the adjusted EPS guide? Is there something in the nonoperating lines that we're missing? Or is this just some rounding in the numbers somewhere in terms of higher end of the range, lower end of the range? Just given the 2.5 points more reported revenue headwind, you would think that EPS will be impacted as well.

Gerald Herman, CFO

Yeah. So it's Gerald here. So first of all, your assumption is correct. We are only modifying the foreign exchange element to the guide. The other elements, both organic revenue growth and non-GAAP EPS we're holding, reiterating those. So that's the first part of your question, I think. On the second part, yes, we obviously are facing some cost pressures on a number of fronts, including you've heard some of the story around supply chain challenges. But fundamentally, we continue to believe that our organic revenue numbers are solid, and we're quite comfortable with that. And on the EPS side, we're continuing to post solid gross margin activity through two quarters now. We've seen excellent OpEx management, I think, over those two quarters, and we're pretty comfortable on where we are at the EPS line given that.

Mike Ryskin, Analyst

Okay. All right. And then for the follow-up, I guess, on the book-to-bill comments and on the backlog, you continue to have really positive commentary on book-to-bill over 1.1, strong demand across most of the business. Could you give us a little bit of clarity on backlog conversion? When do you think some of those orders are going to be able to convert to revenues? Can you just sort of walk us through how that's going to flow through the business?

Frank Laukien, President and CEO

Well, as is typical for us, Mike, the second half tends to be stronger in terms of revenue and in terms of margins than the first half. That's our typical seasonality. We expect that. As you just heard, Q3 will not be as strong. We think Q4 will be stronger in helping us catch up. So, I mean, backlog conversion isn't going to be done. I mean, we always carry backlog, but it's not going to be normalized yet this year, as I think supply chain and logistics issues still prevail and are out there certainly for the remainder of this year. Some of that backlog, we expect to be somewhat unusually high backlog we also expect to carry into next year.

Mike Ryskin, Analyst

Okay. Thanks.

Operator, Operator

The next question comes from Puneet Souda of SVB Securities. Please go ahead.

Puneet Souda, Analyst

Thank you, Frank and Gerald, for addressing my question. First, I wanted to ask about China; can you provide some details on what you've observed there? Additionally, regarding the impact on EPS, I'm trying to understand your expectations for operational margins, especially since you have significant operations in Germany. Are you anticipating any challenges in that region due to energy costs and related factors? Some of your competitors have mentioned similar concerns, so I wanted to get your perspective on this geographically as well.

Gerald Herman, CFO

If I may, Puneet, it's Gerald. I'll take the first part of your question regarding China and Frank can talk more intelligently about German situation. So with respect to China, a very solid quarter for us in terms of revenue performance, despite a lot of the China lockdowns. I would say, the teams performed extremely well from the logistics perspective under challenging conditions. We saw a little softness in the order performance in China in the second quarter, but I don't read too much into that. We had very strong performance in the first quarter. So, what we understand on the ground is that things have opened up or are beginning to open up. There's still some challenges there, but our expectation is that, that will improve over time as we execute further into the second half of the year. We are anticipating logistics are going to improve there. And certainly, we've got a lot of backlog to be able to execute on for the second half of the year.

Frank Laukien, President and CEO

We were careful in how we set our guidance for the year, which is why we feel confident about our margin expansion and EPS expectations. Regarding Germany, there are some new risks, particularly related to energy and gas in Europe. It's important to note that Bruker does not rely heavily on natural gas, so this isn't a major issue for us. Other industries that depend on gas may face supply chain challenges, potentially affecting us indirectly. While we are not significant consumers of energy, we do require a steady power supply, which introduces some risk. We are also making efforts to conserve energy like everyone else in Europe, especially in Germany. Most of our factory managers in Germany do not foresee any energy rationing or blackouts this winter, although there is some risk, similar to past events like the California fires. We recognize that energy costs are rising, but much of this increase is being mitigated by government interventions to protect consumers and businesses. The overall environment remains dynamic, challenged by the pandemic, supply chain issues, and now additional energy risks in Europe. While we are not directly impacted, we are monitoring the situation closely and planning contingencies to navigate through it.

Puneet Souda, Analyst

Got it. That's very helpful, Frank. Regarding Ascend EVO, the 1.0 gigahertz and the three orders you had, including one from Riken, when do you anticipate delivering those? Should we now expect three to four ultra-high frequency NMRs to be ordered instead of the initial estimate of three to four, potentially increasing the number for 2023 based on these orders and the current order book?

Frank Laukien, President and CEO

Good question and with some insight, of course, we now, of course, that gives us more capacity, right? The two-story, 1.1, 1.2 gigahertz systems, we have a certain capacity for those. The capacity for the 1.0 gigahertz is almost separate in addition. So in many ways, we've more than doubled our capacity in principle. So that doesn't have an effect yet on 2022, and we're not going to project 2023, '24 right now, but it does help us to have essentially two lines, the two-story magnets and the four Calvin single-story magnets. And we are just delighted that now early on, there's been some interest and kind of showing a, going into Asia Pacific or in this case, into Japan for biological research. And then if a country like Spain needs two of those, well, there are very many other countries or larger universities, or even high-end biopharma companies that will need this functional structural biology and disease research tool. So we think that it's a great start for that product line. But of course, we don't expect that in revenue this year, that will take a while.

Puneet Souda, Analyst

Got it. Okay. All right. Thank you.

Operator, Operator

The next question comes from Brandon Couillard of Jefferies. Please go ahead.

Brandon Couillard, Analyst

Hey, thanks. Good afternoon. Frank, on the timsTOF platform, I appreciate the update on the installed base and revenue ramp. Looks like you've already placed 75 systems in the first half of the year. Just curious, if you could speak to the new HT introduction and whether that system will appeal to a broader customer base and then update us on where you think the installed base could ultimately go for the timsTOF platform, let's say, over the next two or three years?

Frank Laukien, President and CEO

Thank you, Brandon. The timsTOF HT will integrate with the timsTOF Pro, meaning some future orders will be for the timsTOF HT, which indicates a strengthening of our product line. High throughput customers and those in plasma proteomics will find the HT to be even more powerful, offering higher dynamic range. This will be particularly beneficial for plasma proteomics, liquid biopsy research, cancer biomarkers, and multiomic strategies, making it an attractive option. This development adds further capabilities to our expanding timsTOF platform. Your observations about the number of units shipped and revenue in the first half are correct, and we anticipate growth in this product line, which continues to see double-digit growth. Although supply chain issues have affected revenues, our order performance remains strong, and we are on track as we introduce new workflows and software. We've also invested in companies to enhance our offerings in consumables and sample prep automation, which will take some time to roll out but will broaden our footprint in proteomics.

Brandon Couillard, Analyst

And a follow-up really for Gerald. Can you just clarify, so the FX headwind on the topline, is that actually an incremental tailwind to full year margins? Just help us understand the impact of currency on the OPM line for the year. Thanks.

Gerald Herman, CFO

Yes, Brandon. Generally, when the US dollar strengthens significantly, we face a revenue headwind while benefiting in terms of gross margin and operating margin. By the time we reach the earnings per share line, the impact is almost neutral. We did see some positive effects in the second quarter. However, we experience fluctuations from quarter to quarter due to these currency changes. Additionally, it's important to note that our currency exposure extends beyond just the US dollar against the Euro or Franc; we deal with various other currencies as well. So, it's a complex situation, but that’s the general overview.

Frank Laukien, President and CEO

This year, we are facing challenges from inflation and logistics costs. Although we have implemented pricing strategies for Bruker, these adjustments take time due to our high backlog. Overall, we estimate a net headwind of around 20 to 30 basis points for the full year, considering inflation could present a headwind of up to 100 basis points and an FX tailwind on margins that may be in the range of 60 to 70 basis points. While there is some offsetting effect, it ultimately results in a net headwind to margins this year.

Brandon Couillard, Analyst

Great. Thanks.

Operator, Operator

The next question is from Jack Meehan of Nephron Research. Please go ahead.

Jack Meehan, Analyst

Thanks. Good afternoon. I wanted to start just on CALID. You talked about some of the supply chain constraints in the quarter. Is it just possible to quantify what the revenue impact might have been? My back of the envelope was something like $5 million to $10 million. I don't know if that's a good ballpark or not?

Frank Laukien, President and CEO

For Bruker overall, we do not want to break it up into groups or quantify it, as that would be akin to maintaining separate accounting records. We experienced revenue delays from Q2 to Q3, and we anticipate further delays from Q3 to Q4, amounting to tens of millions, though not in the high tens of millions. This situation significantly impacts us, and we expect it to affect Q3 and likely Q4 as well until it resolves, which we anticipate will happen next year. Despite these delays, we still have a strong organic growth rate. The high book-to-bill ratio and robust backlog are a result of these revenue delays from quarter to quarter, which stem entirely from supply chain and logistics issues. Occasionally, a customer site may not be fully prepared, but that situation is common. The lack of demand is reassuring, and we are not facing competitiveness issues; we are performing exceptionally well. However, the supply chain and logistics do experience a certain level of disarray, which continues to be challenging.

Jack Meehan, Analyst

Yes, it makes sense. And then I wanted to talk about MALDI. So coming out of AACC, one of the big themes I was hearing is just automation, given staff shortages. I was wondering how you think this is going to play out in the microbiology lab and just how the instrument placements for MALDI are trending this year? I know you talked about over 600 last year. Is it possible to talk about just where they're going to land this year?

Frank Laukien, President and CEO

It's still early in the year, so I'm not sure what the final numbers will be by year-end. Last year, we experienced very strong unit growth, which is not expected to be the case this year. Additionally, we previously had some MALDI Biotyper business in Russia, which won't occur this year due to the lack of business there. We recently launched new MALDI automation solutions for Europe at ECCMID, developed with our subsidiary in the Czech Republic. There are also more workflows being developed to increase automation. Currently, that area is only partially automated, and much of it remains manual, which has been the norm. However, we recognize the trend towards increased semi-automation. Not all processes require $1 million automation solutions; many customers are looking for simpler options. We have developed automated solutions for more repetitive and labor-intensive steps, although regulatory approval is typically needed. Some of these solutions have been launched in Europe with the necessary approvals, and we anticipate eventual approvals in other markets as well. We are actively developing more in this area. We believe in the trend towards automation and are responding accordingly, improving not only our assays, software, and instruments—which are best-in-class—but also the availability and capabilities of our automation solutions to enhance support, similar to what we are doing in proteomics.

Operator, Operator

The next question comes from Josh Waldman of Cleveland Research. Please go ahead.

Josh Waldman, Analyst

Thank you for taking my questions. Frank, the presentation mentioned that supply chain constraints are present in optics and regarding CALID. What is the situation with the rest of the business? Have there been any areas of sequential improvement? When we consider the implied guidance for the second half, it appears conservative based on the comparisons we are using. We are seeing pricing improvements. Is the cautious approach in the guidance mainly due to supply chain issues, do you think?

Frank Laukien, President and CEO

Absolutely. That's exactly the situation. No one is exempt from supply chain challenges. While we haven't discussed it in detail, every division is dealing with ongoing problems. We have implemented additional inventory buffers, but they can only do so much. Our teams are managing well overall, though there have been some additional issues in Bruker Optics and investments, primarily related to delays. These delays are not isolated; they are widespread and impact all businesses that rely on electronics or similar materials. At this point, I cannot say that the situation is improving. We do not see any signs of that yet. We anticipate that these supply chain issues will persist until the end of the year and into early next year, which is why we are taking a cautious approach. Without these supply chain constraints, we could convert more of our backlog this year. We expect a strong second half of the year, but some of our improved backlog heading into 2023 is not just a matter of choice; it is largely due to supply chain limitations.

Josh Waldman, Analyst

Got it. And Gerald, I wondered if you could talk through how costs in the second quarter materialized versus your expectations and how you're thinking about margin progression through the remainder of the year?

Gerald Herman, CFO

I'm sorry, I didn't hear your earlier part of your question? Can you just repeat it?

Josh Waldman, Analyst

Yes. I wondered if you could comment on how costs in the second quarter materialized versus your expectations picking mainly, but maybe OpEx as well?

Gerald Herman, CFO

Sure, as you may remember, we indicated in the first quarter earnings call that we anticipated our operating expenses would exceed our revenue in the second quarter, and that’s essentially what happened. We still achieved strong earnings per share performance and met consensus expectations for the quarter. Fundamentally, we are making significant investments in key initiatives within Project Accelerate 2.0, which is evident in our sales and marketing spending, as well as in research and development during the second quarter. Additionally, we did experience cost pressures due to inflation, but overall, our teams managed that effectively, especially in light of the supply chain challenges described by Frank. I am very pleased with our cost management in the second quarter, and we will need to maintain a similar approach in the third quarter. As you probably know, we expect the third quarter to be slightly affected by supply chain issues, which means we anticipate a stronger performance in the fourth quarter.

Operator, Operator

The next question comes from Max Masucci of Cowen. Please go ahead.

Max Masucci, Analyst

Thanks for taking the questions. In light of Perkins business divestitures earlier this week, do you see potential to pursue a similar sort of Perkin type divestiture strategy? Or do you feel like you've already executed on that strategy and covered the bases under Project Accelerate 1.0 and 2.0?

Frank Laukien, President and CEO

Yes, we're not planning any divestitures. We're very satisfied with our major businesses. While we are making significant investments in certain areas, we don’t have any legacy businesses. Everything we have is a core business, and we are particularly focused on growing high-margin opportunities in new fields like spatial biology and proteomics. Therefore, divestiture is not a topic for us. We did make some smaller adjustments before Project Accelerate 1.0 between 2012 and 2015, but those were not large-scale divestitures. We reduced some product lines and business areas where we stopped investing. However, what we currently have is quite healthy, and many of our core businesses performed very well last year and continue to thrive. Project Accelerate contributes to this success by enhancing our gross margins and driving growth. This is all possible because we have a strong foundational business that is crucial to many aspects of Project Accelerate. Without a solid multi-top business, we wouldn’t be successful in microbiology, and there are many similar examples. Our businesses are solid, and we're comfortable with our blend of core operations and Project Accelerate.

Max Masucci, Analyst

Got it. One more for me. You called out the continued pace of proactive investment in the Commercial and operational teams supporting Project Accelerate 2.0. Like can you give us some additional detail just around where you're making headcount adds and just your general approach towards building out your Commercial presence for some of the newer proteomics metabolomics and spatial offerings that might require a slightly more specialized sales approach?

Frank Laukien, President and CEO

You mentioned various areas of focus, including proteomics, which now has many different aspects such as metabolomics and lipidomics. Additionally, there's spatial biology aligned with our investment in Canopy, although Acuity will not have any products ready next year. We are also making significant investments in software and enhancing our commercial capabilities, particularly in biopharma. Our main investment areas include proteomics, multiomics, spatial biology, and biopharma, along with strengthening our commercial efforts, marketing, specialized sales teams, and application support, all of which are proving effective. We believe that by developing our commercial infrastructure alongside our product offerings, we are well-positioned to meet our earnings and margin goals. We are committed to pursuing both areas effectively.

Max Masucci, Analyst

Great. Thanks a lot.

Operator, Operator

The next question is from Rachel Vatnsdal of JPMorgan. Please go ahead.

Rachel Vatnsdal, Analyst

Hi. Thanks for taking the question. So first up on Europe that region grew low single digits this quarter. So can you walk us through what you're seeing in that market specifically on the funding and academic and government in light of some of these recessionary concerns? And then what do you expect Europe to really be able to grow this year?

Frank Laukien, President and CEO

We've observed the growth trends this year. Currently, Europe is the slowest growing major region, following the rest of the world. This aligns with our expectations, and we do not anticipate significant changes in the second half of the year. Therefore, Europe is expected to grow in the low to mid-single digits for the year. Funding from academic and government sources in Europe remains quite stable. The major economies in Central and Western Europe are largely unaffected by factors like refugees, energy pricing, or defense spending because these elements do not strongly impact academic and government funding. Research commitments at both the European level and within individual countries are typically long-term and are expected to be sustained.

Gerald Herman, CFO

The order bookings performance for Europe in the segments you mentioned was quite solid for the first half. We're seeing good bookings growth in that area.

Operator, Operator

Great. And then a follow-up on some of your earlier comments around the assumptions for the back half of the year. You said that you're expecting mid-single-digit organic growth in 3Q in spite of the fact some of the supply chain pressures that you referenced, but that you'll be planning on making up for that in 4Q. However, it sounded like you're also anticipating some of the supply chain headwinds to continue into 2023. So, can you just clarify those supply chain comments and when you think they will really soften as a headwind? And then for 4Q, are you assuming any outside seasonality from 4Q budget flushes or any other thing that's driving that incremental strength in 4Q? Thank you.

Frank Laukien, President and CEO

Typically, budget flushes and similar factors don't significantly impact Bruker, especially compared to companies that rely more on consumables. For us, it is less relevant since although we receive good orders, they are often delivered three to nine months later, minimizing the impact on our results. We do expect supply chain and logistics delays to persist for the rest of the year. Despite this, our analysis indicates that Q4 appears to be stronger than Q3, which contributes to our full-year guidance, including maintaining our expectations for organic growth, margins, and EPS.

Operator, Operator

The next question comes from Patrick Donnelly of Citi. Please go ahead.

Unidentified Analyst, Analyst

Hi, this is Jason on for Patrick. Just one question for you. On inflation, you noted some pressure there. So I'm just curious what you're seeing more specifically across raw materials labor and freight sequentially? And is the second half still the right way to think about passing price due to some of those backlog dynamics? Thanks.

Frank Laukien, President and CEO

We're starting to notice some pricing improvements that are benefiting us more in the second half compared to the first half. However, most of the pricing measures we implemented at the start of the year and some in the middle will have a greater impact next year. We are experiencing a slight pricing boost in the second half, but it's still fairly modest, likely low single digits, probably under 200 basis points. Regarding inflation related to materials, logistics, and labor, it's too detailed for us to comment on extensively. We definitely see effects across the board, and there are certainly some spikes in logistics costs, but some of that should decrease over time. I don't believe all of it will be permanent.

Operator, Operator

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

Justin Ward, Senior Director of Investor Relations and Corporate Development

Thank you everyone for joining us today. Our leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Please feel free to reach out to me to arrange any follow-up. Have a great evening.

Operator, Operator

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