BRUKER CORP

Three Months Ended March 31, 2024, compared to the Three Months Ended March 31, 2023

Consolidated Results

The following table presents our results (in millions):

Revenue

The following table presents revenue, change in revenue and revenue growth by reportable segment (in millions):

(a)

Represents product and service revenue between reportable segments.

Revenue increases were driven by growing demand for our differentiated instruments and solutions as well as pricing actions taken primarily to address inflation cost pressures. For the three months ended March 31, 2024, the BSI BioSpin Segment recorded modest revenue growth across biopharma, academic & government, and industrial research segments. The decrease in revenue in the BSI CALID Segment for the three months ended March 31, 2024, relates primarily to the timing of shipments which are expected to occur in the second quarter of 2024. Bruker Microbiology & Infection Diagnostics (BMID) revenues increased modestly for the three months ended March 31, 2024, driven by MALDI BioTyper consumables growth. The BSI NANO Segment revenue increase for the three months ended March 31, 2024, was driven by strong demand across all key markets.

Geographically in the three months ended March 31, 2024, our North American revenue grew 13.5%, Asia Pacific revenue decreased by 7.3%, and European revenue increased by 10.1% compared to the same period in 2023.

Gross Profit

Gross profit and gross profit margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, a result of product mix, acquisitions, and unfavorable foreign exchange rate movements.

Selling, General and Administrative

Our selling, general and administrative expenses for the three months ended March 31, 2024, increased to 27.1% of total revenue, from 23.7% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of inflation and increased planned investments in sales and marketing compared to the same period in 2023. Primary investments are related to additional headcount and personnel expenses as well as increased consulting and professional fees related to, tax, audit and audit-related fees.

Research and Development

Our research and development expenses for the three months ended March 31, 2024 increased to 11.3% of total revenue from 10.1% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, especially in our key Project Accelerate 2.0 initiatives. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.

Other Charges, Net

Other charges, net for the three months ended March 31, 2024, consisted of $4.1 million of acquisition-related charges, $0.8 million of costs associated with our global information technology (IT) transformation activities, $1.2 million of long-lived asset impairment, $1.3 million of other charges and $3.5 million of restructuring costs principally related to the BCA acquisition as detailed in Note 14 Other Charges, net. Acquisition-related charges relate primarily to transaction costs on potential and consummated acquisitions, integration costs of newly acquired entities, and stock-based compensation expense related to the fair value changes of hybrid instruments. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.

Other charges, net for the three months ended March 31, 2023, consisted of $2.9 million of acquisition-related charges related to acquisitions primarily completed in 2023, $0.5 million of costs associated with our global IT transformation activities, $0.3 million of restructuring costs and $1.6 million of other charges. Acquisition-related charges relate primarily to the integration costs of newly acquired entities and the cost of post combination employment services in the period acquired. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.

Operating Income

The following table presents operating income and operating margins on revenue by reportable segment (in millions):

(a) Represents corporate costs and eliminations not allocated to the reportable segments. Unallocated costs include general and administrative expenses not directly incurred by the segments such as professional fees incurred for the quarterly reviews and annual audit of the consolidated financial statements, personnel costs of corporate accounting, finance, legal and IT resources, and other expense items.

Our operating income decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to higher selling, general and administrative expenses, research and development costs, as well as higher acquisition and restructuring costs as compared to the same period in the prior year.

Our operating income margin decreased in the three months ended March 31, 2024, as compared to the same period in 2023, due to unfavorable product mix, the impact of foreign exchange rate movements, acquisitions, and inflation offset by favorable pricing and volume leverage.

Interest and Other Income (Expense), Net

The increase in interest and other income (expense), net in the three months ended March 31, 2024, as compared to the same period in 2023 was due to higher foreign currency exchange gains of $8.9 million driven by strengthening of the U.S. dollar against other currencies. This foreign exchange gain includes an unrealized gain recognized on a forward contract taken to minimize risks from fluctuations in the Euro currency in anticipation of the closing of our acquisition of ELITechGroup in the quarter ending June 30, 2024, the purchase price of which is denominated in Euro.

Income Tax Provision

The 2024 and 2023 effective tax rates were estimated using projected annual pre-tax income on a jurisdictional basis. Expected tax benefits, including tax credits and incentives, the impact of changes to valuation allowances and the effect of jurisdictional differences in statutory tax rates were also considered in the calculation.

The effective tax rates for the three months ended March 31, 2024 and 2023, were 27.7% and 28.0%, respectively. The decrease in the Company's effective tax rate was primarily due to change in jurisdictional mix, and the impact of discrete items. The Company also recorded discrete tax impacts during the three months ended March 31, 2024.

Equity in Income of Unconsolidated Investees, net of tax

Equity in Income of Unconsolidated Investees, net of tax represents the Company’s proportional share of the earnings or losses as reported by equity-method investees.

Net Income Attributable to Noncontrolling Interests

The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES

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 financed our growth and liquidity needs through cash flow generation from operations and a combination of debt financings and issuances of common stock. 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.

Cash, cash equivalents at March 31, 2024 and December 31, 2023 totaled $340.1 million and $488.3 million, respectively, of which $300.9 million and $398.4 million, respectively, related to cash and cash equivalents held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, and China.

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, 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 net income adjusted for non-cash items was due to lower net income. The increase in the change in operating assets and liabilities, net of acquisitions and divestitures was primarily due to higher working capital requirements for newly acquired businesses, strategic inventory management to handle supply chain challenges, timing of shipments which are expected to occur in the second quarter of 2024, increase in tax payments, and payables offset by modestly higher collections of receivables due to increased revenues at the end of the period.

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, offset by $1.2 million of net proceeds from cross-currency swap agreements and $0.5 million of net proceeds from sales of property, plant and equipment. Net cash used in investing activities during the three months ended March 31, 2023, resulted primarily from acquisitions of $88.1 million, purchases of property, plant and equipment of $25.0 million, and minority investments of $8.2 million, offset by $10.7 million of net proceeds from sale of property, plant and equipment.

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 $268.9, offset by cash paid for repayment of the 2012 Note Purchase Agreement $100.0 million, repayment of long term debt $3.4 million, and for the payment of dividends $7.3 million. Net cash used in financing activities during the three months ended March 31, 2023, was primarily from cash paid for purchases of common stock under our repurchase program of $22.4 million, and $7.4 million for the payment of dividends.

Share Repurchase Program

In May 2021, our Board of Directors approved a share repurchase program (the “2021 Repurchase Program”) authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. Authorization for the remaining $94.4 million on the 2021 Repurchase Program expired in May 2023.

In May 2023, our Board of Directors approved a share repurchase program (the “2023 Repurchase Program”) authorizing the purchase of up to $500.0 million of our common stock over a two-year period, in amounts, at prices, and at such times as we deem appropriate, subject to market conditions, legal requirements and other considerations. At March 31, 2024, $369.9 million remains available for future purchase under the 2023 Repurchase Program.

During the three months ended March 31, 2024, we did not purchase any shares under the 2023 Repurchase Program.

During the three months ended March 31, 2023, we purchased a total of 315,318 shares at an aggregate cost of $22.2 million under the 2021 Repurchase Program.

In August 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. The IRA introduced new tax provisions, including a 1.0% excise tax on stock repurchases. We expect additional guidance and regulations to be issued in future periods and will continue to assess its potential impact on our business as further information becomes available. The estimated excise tax on stock repurchases is not material and is recorded in other current liabilities and additional paid in capital. No additional accrual was recorded for estimated excise tax for the three months ended March 31, 2024.

Credit Facilities

We have a total outstanding debt of $1.4 billion as of March 31, 2024, and a revolving credit facility that provides for up to $900 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. Outstanding borrowings as of May 10, 2024, drawn from this facility were $805 million in aggregate.

For a summary of the fair and carrying values of our outstanding debt as of March 31, 2024, and December 31, 2023, please read Note 8, Debt and Note 9, 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 please read, Note 12, Debt, to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

As of March 31, 2024, we had no off-balance sheet arrangements.

As of March 31, 2024, we were compliant with the financial covenants of these debt agreements.

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. See Note 2 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.