BRUKER CORP

Three Months Ended June 30, 2024, compared to the Three Months Ended June 30, 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)

Revenue increases were driven by growing demand for our differentiated instruments and solutions. For the three months ended June 30, 2024, the BSI BioSpin Segment recorded significant revenue growth across biopharma, academic & government, and industrial research segments. The increase in revenue in the BSI CALID Segment for the three months ended June 30, 2024, relates primarily to acquisitions and modest revenue growth across academic & government and biopharma segments. The BSI Nano Segment revenue increase for the three months ended June 30, 2024, was driven by an acquisition completed during the quarter.

Geographically in the three months ended June 30, 2024, our North American revenue grew 30.1% from biopharma and academic & government markets, Asia Pacific revenue increased by 1.5%, and European revenue increased by 23.8% compared to the same period in 2023, which was also driven by biopharma and academic & government markets.

Gross Profit

Gross profit increased and gross profit margin decreased in the three months ended June 30, 2024, as compared to the same period in 2023, a result of increased revenue offset by restructuring and acquisitions costs, and an increase in purchased intangible amortization.

Selling, General and Administrative

Our selling, general and administrative expenses for the three months ended June 30, 2024, increased to 27.6% of total revenue, from 26.1% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of planned investments in sales and marketing and operating expenses from newly acquired acquisitions compared to the same period in 2023.

Research and Development

Our research and development expenses for the three months ended June 30, 2024 increased to 11.5% of total revenue from 10.4% 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 from newly acquired acquisitions.

Other charges, net for the three months ended June 30, 2024, consisted primarily of $17.5 million of acquisition-related charges which relate mainly 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. Also included in other charges, net are costs associated with our global information technology (“IT”) transformation activities which consist of a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems, professional fees from ongoing litigations related to the acquisitions of BCA and NanoString, and restructuring costs principally related to the BCA acquisition.

Other charges, net for the three months ended June 30, 2023, consisted of $2.9 million of acquisition-related charges related to acquisitions, $0.3 million of restructuring costs, $0.6 million of costs associated with our global IT transformations activities, and $1.6 million of other charges.

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 and operating income margin decreased in the three months ended June 30, 2024, as compared to the same period in 2023, due to higher revenue offset by profitability decrease related to acquisitions and an increase in purchase intangible amortization across the BSI BioSpin, BSI CALID and BSI Nano segments.

The increase in interest and other income (expense), net in the three months ended June 30, 2024, as compared to the same period in 2023 was primarily due to higher interest expense of $15.7 due to increased borrowings, and impairment of certain minority investments of $20.2, offset by $9.0 million currency gain related to currency fluctuations in the second quarter.

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 June 30, 2024, and 2023 were 67.4% and 25.7%, respectively. The increase in the Company's effective tax rate was primarily due to change in jurisdictional mix and the impact of valuation allowance recorded on capital loss carryforwards related to the impairment charges on strategic investments.

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.

Consolidated Results

Six Months Ended June 30, 2024, compared to the Six Months Ended June 30, 2023

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)

Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing improvements offset by the negative impact of foreign currency translation. The BSI BioSpin Segment revenue increase related primarily to acquisitions and strong demand for our instruments, especially in the MRS business. The BSI CALID Segment increase in revenues was driven primarily by acquisitions, especially ELITechGroup. BSI Nano Segment increase in revenue was driven by the NanoString acquisition and strong demand in its academic & government market. The BEST revenue increase was driven by strong superconductor demand from our magnetic resonance imaging original equipment manufacturer customers.

Geographically in the six months ended June 30, 2024, our North American revenue grew 22.0% related to Bruker’s biopharma and academic & government markets, Asia Pacific revenue decreased by 3.1%, and European revenue increased by 17.0% driven by biopharma and diagnostics markets compared to the same period in 2023.

Gross Profit

Gross profit increased and gross profit margin decreased in the six months ended June 30, 2024, as compared to the same period in 2023, a result of increased revenue offset by restructuring and acquisitions costs, and an increase in purchased intangible amortization.

Selling, General and Administrative

Our selling, general and administrative expenses for the six months ended June 30, 2024, increased to 27.4% of total revenue, from 24.9% of total revenue for the comparable period in 2023. The increase as a percentage of revenue was a result of increased costs from recent acquisitions compared to the same period in 2023.

Research and Development

Our research and development expenses for the six months ended June 30, 2024, increased to 11.4% of total revenue from 10.2% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased research and development related costs from our recent acquisitions.

Other charges, net for the six months ended June 30, 2024, consisted primarily of $21.6 million of acquisition-related charges which relate mainly 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. Also included in other charges, net are costs associated with our IT transformation activities which consist of a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems, professional fees from ongoing litigations related to acquisition of BCA and NanoString, and restructuring costs principally related to the BCA acquisition.

Other charges, net for the six months ended June 30, 2023, consisted of $5.8 million of acquisition-related charges related to acquisitions, $0.6 million of restructuring costs, $1.1 million of costs associated with our global IT transformations activities, $3.2 million of other charges.

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 and operating income margin decreased in the six months ended June 30, 2024, as compared to the same period in 2023, due to increased revenue but more than offset due to profitability from our recent acquisitions, acquisition related costs, and increased purchased intangible amortization across the BSI BioSpin, BSI CALID and BSI Nano segments as compared to the same period in the prior year.

The increase in interest and other income (expense), net in the six months ended June 30, 2024, as compared to the same period in 2023 was due to higher interest expense of $20.7 due to increased borrowings, and impairment of certain minority investments of $20.2, offset by higher foreign currency exchange gains of $17.9 million driven primarily by a foreign exchange realized gain recognized on a forward contract taken to minimize risks from fluctuations in the Euro currency related to the closing of our acquisition of ELITechGroup during the quarter ended June 30, 2024, the purchase price of which was denominated in Euro. As of June 30, 2024, the Company recorded a realized foreign exchange gain of $10.4 million in interest and other income (expense), net, related to this forward contract.

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 six months ended June 30, 2024, and 2023 were 37.6% and 27.1%, respectively. The increase in the Company's effective tax rate was primarily due to change in jurisdictional mix, and the impact of valuation allowance recorded on capital loss carryforwards related to the impairment charges on strategic investments.

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.

Effective in the quarter ended June 30, 2024, the Company entered into a multi-currency notional cash pooling agreement with a financial institution to manage cash flow more efficiently and optimize liquidity. See Note 1, Description of Businessin the Notes to our Unaudited Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for more information on our notional cash pooling agreement.

Cash and cash equivalents at June 30, 2024 and December 31, 2023 totaled $169.7 million and $488.3 million, respectively, of which $278.6 million and $398.4 million, respectively, related to cash, cash equivalents and short-term investments held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, India, and China. We aggregate all bank accounts that are subject to the notional pooling arrangement into a single balance on our consolidated balance sheets. As of June 30, 2024, the Company was not in a net overdraft position with respect to the notional cash pooling arrangement.

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 six months ended June 30, 2024, resulted primarily from consolidated net income adjusted for non-cash items of $144.7 million, partially offset by a change in operating assets and liabilities, net of acquisitions of $121.8 million. Net cash provided by operating activities during the six months ended June 30, 2023, resulted primarily from consolidated net income adjusted for non-cash items of $225.6 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $125.1 million. The decrease in net income adjusted for non-cash items was due to lower net income as result of increased costs from recent acquisitions, acquisition related costs, and increased purchase intangible amortization as compared to the same period in the prior year. The change in operating assets and liabilities, net of acquisitions decreased primarily due to increased inventory to handle supply chain challenges and increase in net payables, offset by a net decrease in customer advances and deferred revenue generally from a softness in biopharma demand and increase in tax payments.

Net cash used in investing activities during the six months ended June 30, 2024, resulted primarily from cash paid for acquisitions of $1,576.5 million, purchases of property, plant and equipment of $46.0 million, and minority investments of $10.0 million, offset by $2.5 million of proceeds from cross-currency swap agreements and $0.9 million of net proceeds from sales of property, plant and equipment. Net cash used in investing activities during the six months ended June 30, 2023 resulted primarily from acquisitions of $102.7 million, purchases of property, plant and equipment of $48.5 million, and minority investments of $9.3 million, offset by $11.8 million of proceeds from sale of minority investment and $10.7 million of net proceeds from sales of property, plant and equipment.

Net cash provided by financing activities during the six months ended June 30, 2024, was primarily from proceeds from our revolving line of credit of $1,073.3 million, proceeds from long-term debt of $805.7 million, proceeds from our public offering of common stock, $402.9 million, offset by the repayment of our revolving line of credit of $840.1 million, the repayment of our 2012 Note Purchase Agreement of $100.0 million and the payment of dividends to common shareholders of $15.0 million. Increased borrowings were used primarily to fund our major acquisitions during the period. Net cash used in financing activities during the six months ended June 30, 2023, was primarily from cash paid for purchases of common stock under our repurchase program of $22.4 million and $14.7 million for the payment of dividends.

Share Repurchase Program

During the three and six months ended June 30, 2024, we did not purchase any shares under the 2023 Repurchase Program. Please read Note 13, 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.

Public Offering

In May 2024, the Company completed an underwritten public offering (the “Offering”) in which the Company issued and sold 6,000,000 shares of its common stock at a public offering price of $67.29 per share. The Company received net proceeds of approximately $403.0 million after deducting underwriting fees and other offering expenses.

The Offering was made pursuant to an automatically effective registration statement on Form S-3 and accompanying prospectus filed with the SEC on May 29, 2024, and a final prospectus relating to the Offering filed with the SEC on May 31, 2024.

Credit Facilities

We have a total outstanding debt of $2.1 billion as of June 30, 2024, 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.

For a summary of the fair and carrying values of our outstanding debt as of June 30, 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 June 30, 2024, we had no off-balance sheet arrangements.

As of June 30, 2024, we were in compliance 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.