Bruker Corp: Form 10-Q for the period ended Mar 31, 2025

The following discussion of our financial condition and results of operations should be read in conjunction with our interim unaudited condensed consolidated financial statements and the notes to those statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q, and in conjunction with the audited consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2024.

Any statements other than statements of historical fact contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report on Form 10-Q may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “may,” “will,” “intend,” “estimate,” “should” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements include, but are not limited to, statements regarding:

• the impact of supply chain challenges on our business and operations;
• our working capital requirements and the sufficiency of our cash, borrowings and proceeds of indebtedness to fund our operations and investment activities;
• our plans to make capital investments;
• the impact of changes to tax and accounting rules and changes in law;
• fluctuations in estimates impacting costs related to our self-funded health insurance plan;
• our expectations regarding backlog and revenue;
• our expectations and the impact of our restructuring initiatives or success of our acquisitions;
• the impact of our global IT transformation activities;
• the impact of foreign currency exchange rates and changes in commodity prices; and
• any other statements that address events or developments that the Company intends or believes will or may occur in the future.

Actual results may differ from those referred to in any forward-looking statements due to a number of factors, including, but not limited to, the risks described in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024 and in this Quarterly Report on Form 10-Q. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.

We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:

• general economic conditions, including inflation, uncertainties caused by recent banking industry volatility, the threat of recession, financial liquidity, currency volatility or devaluation, supply chain or manufacturing capabilities, and uncertain economic conditions in the United States and abroad, and additional tariffs, including those imposed or that may be imposed by the new presidential administration in the U.S.;
• geopolitical tensions, including those on our customers, such as the conflict between Russia and Ukraine and related economic sanctions, the conflict in the Middle East and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences, the ongoing tensions between the United States and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are significant to the Company’s supply chain operations, such as Taiwan and China;
• potential energy shortages in Europe where the Company has significant operations and overall higher energy and transportation costs;
• the impacts of climate change and certain weather-related disruptions;
• the timing of governmental stimulus programs and academic research budgets;
• the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;
• foreign currency exchange rates;
• the worldwide shortage of semiconductor chips, components and raw materials, such as copper;
• changes in raw material, component and logistics costs;
• the time it takes for us to receive critical materials to manufacture our products;
• the time it takes to satisfy local customs requirements and other export/import requirements;
• the time it takes for customers to construct or prepare their facilities for our products;
• the time required to obtain governmental licenses;
• our ability to identify suitable acquisition targets and successfully integrate and manage acquired business; and
• costs related to acquisitions of technology or businesses.

Several of these factors have in the past affected and may continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.

OVERVIEW

We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major research and development and manufacturing centers in Europe, Asia and North America and we have commercial offices located throughout the world. Bruker is organized into four reportable segments: the Bruker Scientific Instruments (BSI) BioSpin Segment, the BSI CALID Segment, the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

Consolidated Results

The following table presents a summary of our consolidated results as of the three months ended March 31, 2025 and 2024 (dollars in millions):

Discussion of GAAP financial measures follows in the Results of Operations paragraphs.

Non-GAAP Financial Measures

Uses and definitions:

Although our unaudited condensed consolidated financial statements have been prepared in accordance with GAAP, we believe that describing revenue excluding the effects of foreign currency, and expenses excluding costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other costs (“non-GAAP adjustments”), provides meaningful supplemental information regarding our performance but should not be considered in isolation from or as a replacement for the most directly comparable GAAP financial measures. We rely internally on certain measures that are not calculated according to GAAP. These measures include constant exchange rate (“CER”) currency revenue growth, organic revenue growth, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating margin, and free cash flow.

Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance and are useful measures to evaluate our continuing business. Additionally, management believes free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt.

We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and it may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

We define our non-GAAP financial measures as follows:

• CER currency revenue growth as GAAP revenue excluding the effect of changes in foreign currency translation rates.
• Organic revenue growth as GAAP revenue excluding the effect of changes in foreign currency translation rates and acquisitions.
• Non-GAAP gross profit as GAAP gross profit excluding certain non-GAAP adjustments.
• Non-GAAP gross profit margin as GAAP gross profit margin excluding the impact of certain non-GAAP adjustments.
• Non-GAAP operating income as GAAP operating income excluding non-GAAP adjustments.
• Non-GAAP operating income margin as GAAP operating income margin excluding the impact of non-GAAP adjustments.
• Free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment.

Reconciliations of GAAP to Non-GAAP financial measures:

The amounts listed below are in millions of dollars. Where relevant, we have also included the associated percentage margins.

GAAP revenue to non-GAAP CER currency revenue:

The increase in non-GAAP CER revenue growth was driven primarily by higher growth in industrial and biopharma markets, and revenue from acquisitions.

GAAP revenue to non-GAAP Organic revenue:

The increase in non-GAAP organic revenue growth was driven primarily by higher growth in industrial and academic and government markets, which included one ultra-high field NMR system.

GAAP Gross Profit to non-GAAP Gross Profit:

Non-GAAP gross profit margin for the three months ended March 31, 2025 was at consistent levels with the non-GAAP gross profit margin for the three months ended March 31, 2024.

GAAP Operating income to non-GAAP Operating income:

The decrease in our non-GAAP operating margins in 2025 was primarily due to the impact from the NanoString acquisition.

GAAP Net operating cash flow to non-GAAP Free cash flow:

For the three months ended March 31, 2025, our free cash flow was $38.6 million higher than the same period in 2024, primarily due to lower acquisition-related expenses and related working capital requirements.

RESULTS OF OPERATIONS

Three Months Ended March 31, 2025, compared to the Three Months Ended March 31, 2024.

Consolidated Results

The following table presents our results for the periods presented (dollars in millions):

Revenue

The following table presents revenue, change in revenue, and revenue growth by reportable segment for the periods presented (dollars in millions):

(a) Represents product and service revenue between reportable segments.

Revenue increases, compared to the year ago quarter, were driven primarily by the impact of our 2024 acquisitions and by growing demand for our differentiated instruments and solutions. For the three months ended March 31, 2025, the BSI BioSpin Segment recorded significant revenue from the sale of one GHz-class NMR system, and growth from the Chemspeed acquisition. The increase in revenue in the BSI CALID Segment for the three months ended March 31, 2025, relates primarily to the ELITechGroup acquisition and modest revenue growth across industrial and biopharma segments. The BSI NANO Segment revenue increase for the three months ended March 31, 2025, was driven by the NanoString acquisition.

Geographically in the three months ended March 31, 2025, our North American revenue grew 10.0%, compared to the year ago quarter, primarily from the ELITechGroup and NanoString acquisitions that occurred in the second quarter of 2024. In addition, Asia Pacific revenue increased by 4.4%, and European revenue increased by 16.5% compared to the same period in 2024, which were also driven primarily by 2024 acquisitions.

Gross Profit

The following table presents gross profit and gross profit margins by reportable segment for the three months ended March 31, 2025 and 2024 (dollars in millions):

The increase in gross profit and slight decrease in gross profit margin, compared to the prior year quarter, were both driven primarily by the impact of the ELITechGroup and NanoString acquisitions that occurred in 2024.

Selling, General and Administrative

Our selling, general and administrative expenses for the three months ended March 31, 2025, increased to 28.1% of total revenue, from 27.1% of total revenue for the comparable period in 2024. The increase as a percentage of revenue was a result of increased spending related to additional headcount and personnel expenses from our 2024 acquisitions.

Research and Development

Our research and development expenses for the three months ended March 31, 2025, increased to 12.1% of total revenue from 11.3% of total revenue for the comparable period in 2024. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, and the mix of research and developments costs from 2024 acquisitions.

Other Charges, Net

Other charges, net for the three months ended March 31, 2025, increased to $36.9 million compared to $10.9 million for the comparable period in 2024. The year over year increase was primarily due to $18.6 million of acquisition-related litigation charges that primarily relate to the acquisitions of BCA and NanoString, $7.6 million of restructuring charges related primarily to restructuring programs as described in Note 10, Restructuring and asset impairments, as well as an increase of $2.1 million in acquisition-related expenses due to costs from 2024 acquisitions. Please refer to Note 9, Other Charges, net for more details on our other charges, net costs.

Operating Income

The following table presents operating income and operating margins on revenue by reportable segment for the periods presented (dollars in millions):

(a) Represents corporate costs and eliminations not allocated to the reportable segments.

The decrease in operating income was primarily due to the NanoString and Chemspeed acquisitions. The decrease in operating margin was primarily due to the ELITechGroup, NanoString, and Chemspeed acquisitions.

Interest and Other Income (Expense), Net

The increase in interest and other income (expense), net in the three months ended March 31, 2025, as compared to the same period in 2024 was primarily due to higher interest expense of $13.1 million due to increased borrowings.

Income Tax Provision

The effective tax rates for the three months ended March 31, 2025, and 2024 were 34.7% and 27.7%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix and net unfavorable discrete activities.

The Organization for Economic Co-operation and Development introduced its Pillar Two Framework Model Rules (“Pillar 2”), which provides guidance for a global minimum tax. Various countries have either enacted or are in the process of enacting legislation to implement this framework. Our income tax provision for the three months ended March 31, 2025, reflects currently enacted legislation and guidance related to the model rules. This enacted legislation and guidance had an impact on our income tax provision, resulting in an increase to the Company’s effective tax rate of 2.1% for the three months ended March 31, 2025. The Company continues to monitor the countries in which it operates as they enact legislation implementing Pillar 2.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows

We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have used the liquidity generated from cash flow from operations, debt financings and issuances of common stock to finance our growth and operating needs. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or, if available, will be obtained on terms favorable to us.

We aggregate all bank accounts that are subject to our notional cash pooling arrangement into a single balance on our consolidated balance sheets. Our notional cash pooling arrangement is managed by a third-party financial institution and as of March 31, 2025, it was in a positive position. The cash and cash equivalent balance held outside of the United States in our foreign subsidiaries was primarily located in the Netherlands, Switzerland, and Hong Kong.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):

Net cash provided by operating activities during the three months ended March 31, 2025, resulted primarily from consolidated net income adjusted for non-cash items of $55.7 million, and a change in operating assets and liabilities, net of acquisitions of $9.3 million. Net cash provided by operating activities during the three months ended March 31, 2024, resulted primarily from net income adjusted for non-cash items of $85.2 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $63.4 million.

The decrease in consolidated net income adjusted for non-cash items was primarily due to lower income as result of unfavorable margin mix and increased costs related to 2024 acquisitions.

In the first quarter of 2025, the change in operating assets and liabilities was not significant in the context of our working capital. In the first quarter of 2024, the net decrease in operating assets and liabilities was primarily attributable to an increase in inventory balances.

Net cash used in investing activities during the three months ended March 31, 2025, resulted primarily from purchases of property, plant and equipment of $26.0 million. Net cash used in investing activities during the three months ended March 31, 2024, resulted primarily from acquisitions of $274.5 million, purchases of property, plant and equipment of $21.4 million, and minority investments of $10.0 million.

Net cash used in financing activities during the three months ended March 31, 2025, was primarily from net repayments of our revolving line of credit of $28.0 million, repayments of long-term debt of $7.7 million, and cash paid for purchases of common stock under our repurchase program of $10.0 million, offset by proceeds from long-term debt of $2.9 million. Net cash provided by financing activities during the three months ended March 31, 2024, was primarily from cash received from the revolving line of credit of $268.9 million, offset by cash paid for repayment of the 2012 Note Purchase Agreement of $100.0 million, repayment of long term debt of $3.4 million, and dividend payments of $7.3 million.

Share Repurchase Program

During the three months ended March 31, 2025, the Company purchased a total of 200,731 shares at an aggregate cost of $10.0 million under the 2023 Repurchase Program. During the three months ended March 31, 2024, the Company did not purchase any shares under the 2023 Repurchase Program. Refer to Note 21, Shareholder's Equity, in the Notes to our Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information on our share repurchase program.

Credit Facilities

As of March 31, 2025, we have total outstanding debt of $2.1 billion and a revolving credit facility that provides for up to $900.0 million of backup liquidity to finance working capital needs, refinance or reduce existing indebtedness, and for general corporate use. In addition, the facility provides for an uncommitted incremental facility whereby, under certain circumstances, we may, at our option, increase the amount of the revolving facility or incur term loans in an aggregate amount not to exceed $400 million. As of March 31, 2025, we were in compliance with all covenants of our debt agreements.

For a summary of the fair and carrying values of our outstanding debt as of March 31, 2025, and December 31, 2024, refer to Note 15, Debt and Note 16, Fair Value of Financial Instruments to our unaudited condensed consolidated financial statements included in this report. For additional information on our outstanding debt and credit facility refer to Note 21 Debt, to our unaudited condensed consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates since December 31, 2024. Refer to our Annual Report on Form 10-K for the year ended December 31, 2024 for a discussion of our critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

Information regarding recent accounting standard changes and developments is incorporated by reference from Part I, Item 1, Unaudited Condensed Consolidated Financial Statements, of this document and should be considered an integral part of this Item 2. Refer to Note 2, Recent Accounting Pronouncements in the Notes to the Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for recently adopted and issued accounting standards.

Information concerning market risk is contained in Item 7A “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2024. As of March 31, 2025, there were no material changes in our exposure to market risk from December 31, 2024 other than the following:

Tariff Risks

During the first quarter of 2025, various tariffs were announced on imports into the U.S. On April 2, 2025, the U.S. announced a new universal baseline tariff of 10%, plus significant additional country-specific tariffs for select trading partners, on all U.S. imports. The reciprocal country-specific tariffs were subsequently paused for 90 days on most countries. The imposition of the baseline 10% tariff will increase our costs of goods sold. We are conducting an internal review and are assessing how the increased reciprocal tariffs may affect operating profitability, business operations, and strategies to mitigate potential cost increases.

We have established disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) by others within our organization. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2025. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of March 31, 2025.

Management concluded that the unaudited condensed consolidated financial statements contained in this Quarterly Report on Form 10-Q fairly state, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with GAAP.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the three months ended March 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. The risks described in this report and in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.