Conference Transcript - BRKR 2026-06-04

Tucker Peterson, Analyst — Healthcare Group

We're going to kick it off. I'm Tucker Peterson from the Healthcare Group. It's my pleasure to introduce Bruecker. We've got Gerald with us. Welcome.

Frank Laukien, CEO

Thank you very much.

Tucker Peterson, Analyst — Healthcare Group

Let's maybe just kick off with a quick 1Q recap. You know, results solid, bookings increased across the portfolio, rate-to-rate a guide, incrementally de-risked the top line. Just give us an overview of the quarter and some of the momentum coming out of it.

Frank Laukien, CEO

Yeah, I think the highlight of the quarter was our order performance. We had good, strong order performance in the first quarter, coming off a fairly good performance on orders in Q4. So I think actually at a high level, we are sort of moving into the third quarter. If we look at the second quarter growth performance this quarter as well, it looks like we're going to have three quarters in a row of book-to-bill over 1.0. So we've seen some pretty good strength in a number of areas. Semi-metrology, which is getting a lot of attention at the moment, strong bookings performance. Our ACA-Gov performance outside of the U.S. was also quite strong in the first quarter. We've seen that continue as well into the second quarter. Pharmaceuticals and the biotech pharma area was a little weaker for us in the first quarter. But that comes off of a fairly strong Q4 and looks like we're sort of rebounding again in the biopharma space in the second quarter of this year. So industrial and applied businesses were okay. More stronger order performance growth in some of our Asia and European markets than we saw here in the U.S. but still overall pretty good overall industrial and applied market performance in orders. I think we, generally speaking, had a monogamous revenue perspective. We had a decline in the first quarter that was expected. We had a very strong Q1 of 25, and comparatively speaking, we still saw some overall revenue performance challenges, particularly in China. and in ACAGov U.S. specifically. So our revenue is expected to turn into an organic growth story starting in the second quarter. So far, again, order performance looks good, so execution is going to be the key for us in the second quarter. And I think, generally speaking, we overperformed on the EPS line versus our own expectations and certainly against the street expectations. So we feel like we're kind of moving to pivoting to another period of growth for Bruker. We had several years of that sort of pre-24, and the expectation now is it looks like we're moving into that direction again as we start to go through the rest of 26. So it's kind of a big picture view of Q1.

Tucker Peterson, Analyst — Healthcare Group

And maybe just jumping into some of the end markets here. I mean, you're still calling for academic and gov down low single to 10 on the year. Just talk a little bit about what you're seeing there. I mean, it sounds like orders could start to pick up. Do you think it's big-ticket NMR-type orders, or is it kind of mid-level instruments?

Frank Laukien, CEO

Yeah, I think with respect to the U.S. ACA-Gov condition, it's still very challenging, I would say. I mean, as I mentioned earlier, outside the U.S. ACA-Gov performance was quite solid, especially in Europe and China and Japan. But in the U.S., we're still seeing sort of the funding, I call it, hangover. We are very clearly seeing grant approvals through NIH and NSF. I mean, many of our larger-scale instruments are included in those grant applications, and those have actually been awarded by many of the agencies. But at this stage, we just haven't seen significant funding with respect to those instruments or those projects more broadly. This is, I guess, the second quarter in a row in which we had high expectations that funding would occur in Q1 relative to the U.S. ACA-Gov market. That followed, of course, by the congressional approval of more modest funding, but certainly way above what the U.S. administration was proposing. So overall, our expectation for Q1 One was that we would see some funding and certainly here we are sitting in June and we're still not seeing a lot of movement in funding from an ACA gov perspective. It's not about whether the grants got approved by NIH and it's not about whether or not the NSF has looked at these particular projects and they have actually been approved in general. We know our instruments included in some of those applications. We just haven't been able to see the funding side. So we are currently expecting to see something similar to what we saw in fiscal year 25, where we had funding delays that pushed through the second quarter into the third quarter. Suddenly there was a large flush of money that occurred at the end of the government fiscal year, which is September. We saw a flurry of order activity in September and in October of 25, and it feels like this is sort of shaping up to be something similar. For us, this is meaningful or important because, you know, if we don't get these orders placed until some point in Q3, it's pretty unlikely that those would have any impact on our 2026 fiscal year performance. Those would fall, because of our execution and our production activities, those would mostly fall into fiscal year 27. So that's kind of the big picture for us on the U.S. ACA GOV side. I do think that most of the instruments that we have been involved with in terms of the grant applications to these agencies in the U.S. are still high ticket instrument values. It's not a lot of consumable products. It's mostly, you know, high-end instruments, either in our life science mass spec area or in our NMR space or in some x-ray and microscopy-related products. But I would say these are generally big-ticket items, which is why it would be wonderful if those would hit from a funding perspective into Q2 or in early Q3, that we could try to translate those into real revenue in 26, but likely that will be a more 27 story, at least for

Tucker Peterson, Analyst — Healthcare Group

U.S. AgaGov at this stage. And I guess relative to 25, obviously there's multi-year grants, you know, that are increasingly, you know, part of the mix, and then you have the midterms. I mean, how do you think about those as factors to a recovery, Angie? Yeah, I think it's still a journey

Frank Laukien, CEO

is the way I would think about it. It's not going to be quite as snapback as some of us would have liked. I think it's just going to stretch some of the challenges out a little bit further. You know, I still think that, you know, when you look at, you know, the academic government markets in the United States, I still think this is one of the most important research markets in the world. You know, we have instruments and technology that's at the top end of those. Our instruments are largely used in high-end research discovery. So I still have a lot of faith and belief that it's going to improve. We just haven't seen it so far through the early part of 26.

Tucker Peterson, Analyst — Healthcare Group

And then just rounding it out, I guess Europe, A&G, you said it was strong. Can you quantify what you saw in 1Q in Europe, A&G specifically, and then how durable are the trends and how widespread is it?

Frank Laukien, CEO

Yeah, I mean, our overall order performance from an A&G outside of the U.S., including Europe, was quite strong. I mean, we had greater than, you know, 20% order growth in A&G, you know, in the European and the Asian markets. And so it feels pretty durable for us at the moment. I don't expect that we would continue a trend of orders at that level. But nonetheless, I think it just suggests pretty healthy conditions, especially in Europe. But we also saw a bit of a rebound in ACA-Gov spending in Japan and certainly China. And one of the advantages of the Chinese markets are that, you know, once the five-year plans are set out and you define individual sectors or technologies that support that sector, you know, the Chinese fund it fairly quickly and we start to see, you know, impact there more broadly. So, yeah, I'd say the European markets were quite healthy, stronger than we might have expected, and I wouldn't expect that to continue sort of every quarter, but certainly, you know, I think mid-single-digit growth, you know, from an ACA.gov perspective in Europe is what we would normally expect.

Tucker Peterson, Analyst — Healthcare Group

And then how about biopharma? Obviously, biotech funding's been better. We've heard from some of your peers April, May was better for pharma. Just talk a little bit about the biopharma and markets.

Frank Laukien, CEO

Yeah, so the biopharma markets for us just generally have been a bit mixed. I think fundamentally we had a solid fourth quarter of 25, and our Q1 performance was a little down on the pharma side. We don't have as much exposure to the biotech side as some of our peers. I'd say, kind of broadly speaking, the biotech piece for the U.S. is probably about 4% of our total revenue picture, so it's not that significant or that material in the bigger scheme of things. The biopharma condition, I would say more broadly, including in Europe and Asia, has seemed quite a bit stronger for us than we saw in the U.S. There's been some strength, you know, specifically in large pharma in Europe, and then I would say also in Japan. And the biotech business in China in particular, and even the pharmaceutical side, you know, was quite solid for us in the first quarter. And our expectation for the second quarter is something similar to that in China and in Europe. Again, I know that the IPO markets in the biotech side here in the U.S. seem to be improving. But generally speaking, for a lot of our instruments, you know, biotech, you know, you've got to have enough funding to be able to secure instruments at the price points for many of our technology elements. And so it's not been a big part of our total story with respect to the biotech piece here in the U.S. But, I mean, very encouraged to see what we see in Europe and in particular in China on the biotech side.

Tucker Peterson, Analyst — Healthcare Group

And I guess in China specifically, you've talked about improving order trends off easier comps. How much of this is just true end market demand recovery versus normalization off a week, 20, 25 base?

Frank Laukien, CEO

Yeah, it's a fair question, Tycho. I mean, I think we are, generally speaking, you know, we're coming off some very weak years of China demand. I do believe, I have a slightly more bullish view, I think, on China than some of our peers. We continue to see growth in a number of the markets in China for us. I mean, industrial, applied, the semi-space, those products we can sell in to China for semi are quite robust. Biotech, pharma seems to be pretty good from our side. So, I mean, I do think GDP performance in China is likely going to outperform most of the other economies. And, you know, we have a good, strong commercial operation in China, so expectations are pretty positive for, again, coming off of a low base, but I think will we get back to the levels of, you know, the 2021s and 23s? Probably not. But we can still see significant growth coming out of China, I think, in 26 and in 27 for sure, on the base of multiple technologies that fit neatly into the kind of broader five-year plan that the Chinese government has laid out and are starting to fund.

Tucker Peterson, Analyst — Healthcare Group

So can you maybe just quantify what you think the structural growth rate is in China in the next couple of years?

Frank Laukien, CEO

Yeah, I mean, I think we're pretty flat on our growth expectations with respect to 26, but I think that could have some upside. I think looking at low single-digit, mid-single-digit growth structurally for that business, I think, is pretty reasonable for us going forward. Like I said, we have a really good footprint in terms of our commercial activities there. And, you know, we are also looking at some other opportunities potentially to have more assembly and production activities in China to meet some of the local competitive demand there that we might be missing at the moment. And there's still quite a bit of opportunity for us in China, and China makes up around 13-plus percent of our overall revenue today, and at one point was much larger. So it's an important market for us, and we're still very focused on it.

Tucker Peterson, Analyst — Healthcare Group

And competitively, I mean, high-end instruments are generally more protected, but what are you seeing on local competition there?

Frank Laukien, CEO

Well, I think our diagnostics business, particularly in the MALDI franchise, I think was impacted by some local competitive environment. We have some of our microscopy business that we see also being challenged in that area. The higher end instruments, particularly in the life science mass spec space or the NMR space, we're just one of the few players that have those instruments. And I would note that proteomics, multiomics continue to be a very significant focus of attention for the Chinese markets, including the Chinese government. So the Chinese, while the U.S. is struggling a little bit from a funding perspective, the Chinese are moving very dramatically into those areas and have done some remarkable, some incredible proteomics research. So I expect the high-end instruments still to perform well in that space, at least for the next few years, for sure.

Tucker Peterson, Analyst — Healthcare Group

Made it this far without asking about semiconductors, but I've got to go there. So let's start, I guess, with what you saw in the quarter. You had the $40 million push-out. How much was recaptured in the first quarter?

Frank Laukien, CEO

Yeah, we captured about, I'd say, between $10 million to $15 million in Q1. We expect a similar amount in Q2 and Q3. Just to clarify, most for our semi-business, we're dealing with large-scale customer base there. They determine when that revenue is actually going to be recognized when they want the products delivered and shipped. We don't drive that timing. So we did have some push-out of Q4, 25, into what's now going to be Q1, Q2, and Q3. So I think those are relatively modest in the bigger scheme of the overall picture. But still, that's the way it plays out in that particular business.

Tucker Peterson, Analyst — Healthcare Group

And then the overall guide there seems to have kind of migrated up, I'd say, from low-single digit to maybe mid-single. Can you clarify what the messaging is on that?

Frank Laukien, CEO

Yeah, look, I mean, I think we started, just to give a little bit of background here, in the semi-space, we had relatively lumpy order performance in 2025. We had a Q1 that was quite strong, and Q2 and Q3 were weaker, and Q4 was quite strong. So we got into a position, I think, where when we set the guide earlier on, we were mostly concerned about making sure that we could meet or exceed that. And fundamentally, we didn't see strong enough order growth to justify something other than low single-digit growth. Now, where we are today, I'd say looking at the order growth performance we had in the first quarter, which was quite strong, and again, what we've seen so far in the second quarter also looks quite strong. I think fundamentally we're more optimistic about that business for the rest of fiscal year 26 and beyond. I think we are, you know, just with everything else, there's some puts and takes in our business around the guide. We have some parts of the business that are overperforming, some parts that are underperforming our expectations relative to the guide. And so just as we normally do each quarter, we'll look at our guide situation to determine whether we need to make adjustments accordingly as a result.

Tucker Peterson, Analyst — Healthcare Group

And, you know, another question we've got, you're obviously adding capacity, potentially, you know, being able to double the business. Over what time frame, you know, do you think you could double it?

Frank Laukien, CEO

Yeah, I mean, I think we're adding capacity capabilities in that business in the first quarter and the second quarter this year. Most of these orders that we've seen in the first and second quarters will not be delivered until either the end of the year or into 2027 just because of our kind of backlog and production queue. So it seems to me that we would be able to at least double the scale of our capacity in that business by the end of 2026, which I think should meet the demand that we have currently or expect to see. I would say just more broadly, if the numbers, particularly in the QAQC elements of SEMI, were to go way beyond that, we'd have to expand our capacity in a number of areas. For those of you that aren't that familiar with it, we have basically three technologies that we are applying into the semi-space. We have an x-ray technology business, an auto AFM business, and a white light interferometry business. Each of those elements are produced in different places around the globe. But fundamentally, we think we have enough capacity to be able to double the size of the business in short order from all elements of those three technologies going forward.

Tucker Peterson, Analyst — Healthcare Group

And I guess from the outside, for things investors should be paying attention to, is it a new way for starts? I mean, what's most important for investors?

Frank Laukien, CEO

Yeah, I mean, I think the way to understand our business a little bit is that we have a heavier lean. There are two elements in our business areas. We have a heavier lean into production in QAQC, a lighter lean into R&D, which is really based on sort of lower node research activities. I would say that's something like two-thirds of our overall business, which is somewhere in the range of $300 million for our semi-metrology business. Two-thirds of that is really associated with QAQC. and that business, I think, could be more directly connected to wafer activity. I think the other parts of the business, which is about another 100 million of that 300, that 100 million is connected directly to R&D activities, about half of it, and the rest of it is really around mask repair. As most of you may know, these large semi-businesses are using masks for sort of lithography elements. And of course, over time, these masks get damaged and have to be ultimately repaired. So we have a, let's say, roughly $50 million kind of business in that category. So when you're calibrating this business, relatively speaking, I would say the R&D and the mask repair businesses should not be calibrated specifically to wafer production or activity because that's a bit of an overstatement. These are still strong growth levels, better than average, broker average growth levels in these other two parts of the business. But I think the one that seems to be hot at the moment for sure is in the QA, QC production area. And there, I think it's a question of this is being driven largely by AI demand, and the scale of that seems to be still evolving, let's say it that way. There's a lot of demand across the industry. I would also point out that a lot of our own order demand is coming from multiple customers. We have large customers that carry a lot of weight in the industry and these customers specifically are all starting to place orders related to mostly in this production, you know, QA, QC area that's being driven mostly by AI demand and the level of fab production that's going, or new fab production that's going on. Some of you may know, you know, Japan, for example, has nine new fab facilities that are being built on one coast. Of course, Europe has a number of fab facilities that are being built, and here in the United States, there's at least Ohio and Arizona that I'm familiar with. So a number of these semiconductor companies are building their own capacity up with more fab activity. And our tools that play into that specifically are in the production QAQC area. And fundamentally, it's kind of a copy paste. If you're in Taiwan and you're building another facility in Japan, you're likely to kind of take the tools of record that you're using in Taiwan and apply those into the new fab facilities that are active in or about to be active in Japan or other countries. So I think tagging that $200 million range of semi-metrology in our business to more wafer production makes sense. I think the other $100 million probably should not be calibrated to way for production activity because those are more more random based elements another business

Tucker Peterson, Analyst — Healthcare Group

that's gotten more attention that could also double is just defense curious how much of that is you know airport screening versus military how much of this is you know budget expansion

Frank Laukien, CEO

versus short cycle procurement yeah these are good questions I mean we have relatively sort of low level of activity for many many years in our security and detection business and suddenly it's growing dramatically. This business was somewhere under the $30 million range, and now I think we're looking at something north of $60 to $70 million. So it's got good growth. I think in general, it's coming from both European and U.S., mostly security and detection related items. The fastest growing element of that really is explosive trace detection. These are either handheld devices that are used in airport security screening or in air cargo security screening elements, and I think we've seen significant growth in those markets, not only in the United States but also in the European markets. It feels like a pretty durable experience at the moment. Maybe the growth rates may moderate a little bit from where we are just now. But certainly in Europe, it doesn't appear as if the number of wars or activities that are going on in the Middle East and Europe is tempering at the moment. And here in the U.S., there seems to be a shift, at least within this current administration, towards a more significant kind of security detection element across particularly our cargo, but also even in airport security. So it feels like it's a pretty durable business for us. It's being, you know, we're deploying a lot of the technologies that we have from other elements of our business into it and the growth has been good. It carries a pretty good margin profile as well I would say so we've relocated some of the elements of the business out of the U.S. into Europe and took a lot of costs out of that business so I think overall pleased with how that growth is going and that should help our mix ultimately in future years as well as the growth continues. Maybe bring it back

Tucker Peterson, Analyst — Healthcare Group

Back to healthcare, just looking at KALID, mid-single-digit growth, setting aside U.S. academic government, we kind of talked about that, but where are you feeling better on the KALID business overall?

Frank Laukien, CEO

Yeah. Well, KALID is an interesting mixture of a number of things. We saw some very good business in our molecular spectroscopy business, which is part, I mean, these are essentially high-end microscopes. That business continues to do well, again, maybe outside the U.S. and U.S. ACA Gov, but fundamentally a good, strong business there. I think our LSMS business, our life science mass spec business, has had some challenges, particularly from a competitive perspective. I would say in 25, we're starting to see some pretty strong order performance in 26, especially in Q1 on the life science mass spec side. So that part of the business, you know, performing, I would say, quite well. We have in the audience here Wolfgang Pusch, who's the leader of our microbiology and diagnostics business. That business is performing quite well. This includes our multi-biotyper franchise as well as our newly acquired, it's a couple of years now, but newly acquired Elatech business. And that particular part of the business has performed really well. I mean, we've seen growth both in the multi-biotyper instruments level as well as sort of double-digit growth in the consumables side of that franchise. But then in the Elatech side, we've seen quite strong instrument placements in the Elatech business, which is fueling more consumables activity over time. And so I would say we're well ahead of our original acquisition model with the Elatech deal, which was one of the largest acquisition transactions we did in our history. I'm very pleased with the growth there. Just to remind folks, the Elatech business is a sample-to-answer PCR-based tools. It focuses largely on mid-sized hospitals, mostly European-focused at the moment. but we do think there's some significant growth opportunities even within Europe, but even beyond that into the U.S. and potentially into the APEC and LATAM regions. So it's a really, that part of the business continues to fuel quite good growth. I think overall feel pretty good about that whole Caled organization and how it's being set up at the moment.

Tucker Peterson, Analyst — Healthcare Group

And Micro and Bio and Molecular are both tracking a well-able plan. I mean, I think you were 40% ahead in the first quarter. You know, how much of this is new growth factors emerging versus maybe competitive wins?

Frank Laukien, CEO

Well, I think there's been clearly some improvement in taking market share in that space. I do think a lot of it is just the sort of standard fare of what we do. I mean, our instruments are generally more differentiated in the marketplace. The MALDI system in particular, the MALDI biotyper, has been kind of the leading microbial and infectious disease tool out there. It's broadly applied across most large labs across the globe. We're doing hundreds of millions of identifications on that system. So I think it's the differentiation in the tools. We've added quite a lot of capabilities in terms of software, so easy or easier use for our customer base to be able to access that. And the same is true for the MyGeniusInGenius product portfolio in the Elotech space. So got really good. That business feels very strong to us at this stage.

Tucker Peterson, Analyst — Healthcare Group

I want to make sure we hit on margins in the closing minute or two here. I guess, you know, long-term goal, obviously, mid-20s operating margins. You know, how much of the kind of near-term improvement you're baking in is, you know, structural versus dependent on revenue recovery?

Frank Laukien, CEO

Yeah, the bulk of the 26 story is really based on our cost-saving actions. We've taken north of $140 million of cost savings out of Bruker. That's a lot of cost savings for a company our size. so I think generally speaking the operating margin movement that we expect to see in 2026 is largely going to be driven by the cost saving actions as we look forward into 27 28 I think there's going to be some elements of mix we've talked a little bit about where we're seeing some improved mix story going forward I would also add that the volume picture for Bruker is much better as we continue to ramp to more organic revenue growth going forward compared to where we were surely in 25. The volume impact, the volume leverage impact is quite significant for us. When our factories get moving at a higher volume level, we drop a lot more down to the operating margin in the EPS lines. So between volume mix and what costs we've already taken out. I think we are setting ourselves up for a pretty significant step up in operating margin performance, both in 26 and I would say in 27. We are expecting sort of, I'd say, double-digit growth on the EPS side for multiple years. Now, we've stepped that up pretty significantly through cost actions, but I do think that having improved market conditions across the globe, maybe with the exception of our ACAGov story here in the United States, I think gives us a better step up along the way. And actually, Frank and I spoke to some investors a week or so ago, and we did communicate a step up in 2027 of expected operating margins to between 150 and 200 basis points in the 27 period. So we're taking a big step up you know almost 300 basis points in 2026 we expect to take another big step forward you know the goal as you correctly point out our target is to get back to 20% operating margins you know in the next few years so we have to take some big steps in both 26 and 27 in order to be able to hit those targets and that's our that's our expectation great we're out of time we'll leave it at that