NetApp Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 3, 2023

There are 11 speakers on the call.

Operator

Good morning, and welcome to Bruker's Second Quarter 2023 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 also note that this event is being recorded today. I would now like to turn the conference over to Justin Moore, Senior Director of Investor Relations and Corporate Development.

Operator

Please go ahead, sir.

Speaker 1

Thank you, and good morning. I would like to welcome everyone to Bruker Corporation's 2nd Quarter 2023 Earnings Conference Call. My name is Justin Ward, and Iamercord's Senior Director of Investor Relations and Corporate Development. Joining me on today's call are Frank Lau Keen, 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 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.

Speaker 1

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 be making 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 risks 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 ks for the period ending December 31, 2022, and as updated by other SEC filings, which are available on our website and on the SEC website. Also, please note that the following information is based on current business conditions and to our outlook as of today, August 3rd, 2023.

Speaker 1

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 Q3 2023 financial results expected in early November 2023, You should not rely on these forward looking statements as necessarily representing our views or outlook as of any date after today. We will begin today's call with Frank providing an overview of our business progress. Gerald will then cover the financials The Q2 and first half of twenty twenty three in more detail and share our updated fiscal year 2023 financial outlook. Now, I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Speaker 2

Thank you, Justin. Good morning, everyone, and thank you for joining While we acknowledge that General market conditions are becoming softer in more cyclical, applied, semicon metrology and industrial markets. Bruker continues to see good demand for our truly differentiated Scientific Instruments and Life Science Solutions. In the Q2 of 2023, we saw continued bookings growth from academia, Government and academic medical centers and contra retail industry trends, we are pleased with our continued growth in bookings in biopharma as well as in China, both in the second quarter and in the first half of twenty twenty three. We attribute this resiliency to our technologies and solutions often unique and differentiated capabilities and performance, which can partially shield us from customer budget reductions and market weakness.

Speaker 2

We expect Solid mid single digit to high single digit organic revenue growth in the second half of twenty twenty three, But we also intend to be agile in managing our costs in this choppier macro environment. We will continue our strategic investments in our transformative Project Accelerate 2.0, particularly in proteomics and spatial biology, but also in recently acquired additional growth drivers in proteomics consumables, proteomics Drug Discovery Services, neuroscience Research Tools, Applied Market Solutions and Scientific Software. Turning to Slide 4. In the Q2 of 2023, Bruker delivered another solid quarter with organic Revenue growth of 13.5 percent and non GAAP EPS growth of 11.1% year over year. Bruker's Q2 'twenty three reported revenues increased 15.9% year over year to $681,900,000 which included a slight currency tailwind of 0.5%.

Speaker 2

On an organic basis, revenues increased 13.5%, which included 13% organic growth in Scientific Instruments and 18.4 percent in our BEST segment, net of intercompany eliminations, while growth from acquisitions added 1.9%. This implies a constant exchange rate growth of 15.4 percent year over year. Our Q2 2023 non GAAP gross margin decreased 90 bps year over year to 50.9 percent with a decline attributable both to unfavorable product mix in the quarter as well as to currency and inflationary headwinds. Our non GAAP operating margin was 15.3%, A decrease of 130 bps year over year due to the decline in gross margin as well as the already anticipated partially transitory currency and acquisition headwinds to our OpEx, as we had explained when we gave initial 2023 guidance Earlier in the year. In the Q2 of 'twenty three, Bruker reported GAAP diluted EPS of $0.39 compared to $0.33 in Q2 of 2022, an increase of 18.2%.

Speaker 2

On a non GAAP basis, Q2 2023 diluted EPS was $0.50 up 11.1 percent from $0.45 in the Q2 of 2022. Gerald will discuss the drivers for margins and EPS later in more detail. Moving to Slide 5. You can see Bruker's strong performance and excellent execution in the first half of twenty twenty three with organic revenue growth of 15.6% and non GAAP EPS growth of 22.3%. More specifically, with our first half twenty twenty three revenues increased By 15.5 percent to 1st half revenues grew 15.6% year over year, consisting of 15.7 percent organic growth in Scientific Instruments and 14.1% organic growth net of intercompany eliminations.

Speaker 2

First half twenty twenty three order bookings for our BSI segment grew double digits Year over year organically, driven by Bruker BioSpin and CALID and our Bruker Scientific Instruments book to bill ratio for the first half Our first half twenty twenty three non GAAP growth and operating margin And GAAP and non GAAP EPS performance are all summarized on Slide 5, and you can see the strong non GAAP EPS growth of Our trailing 12 months return on invested capital, a non GAAP measure, was 23.7%, A metric that highlights our strong Bruker Management process and our Please turn to Slide 67 now, where we highlight the first half twenty twenty three performance of our 3 Scientific Instrument groups and of our best segment, all on a constant currency and year over year basis. In the first half of twenty twenty three, the BioSpin Group revenue was 342,000,000 and grew in the high single digits. Please note that there were no gigahertz class NMR systems in revenue in the first half of twenty twenty three compared to 1, 1.2 gigahertz in the first half of twenty twenty two. We now expect 2 or 3 gigahertz class NMRs in revenue in the second half of 2023 with some gigahertz revenue shifts into early 2024.

Speaker 2

In the first half of twenty twenty three, BioSpin saw strong growth across academic government, industrial research and applied markets as well as in its New Integrated Data Solutions division with its novel SciWise Scientific and Lab Software platform, which we explained in a recent press For the first half of twenty twenty three, CALID Group had revenue of 464,000,000 An increase in the low 20s percentage with strong growth in life science mass spectrometry driven by the timestop platform and aftermarket Business as well as the optics, IR, near IR and Raman business. Our timsTOF platform saw robust demand for applications In Q2, at ASMS, we launched the timsTOF Ultra, which provides market leading sensitivity and throughput with expanded peptide coverage and more accurate quantitation in unbiased 4 d single cell, cell line and tissue proteomics. Microbiology and infectious disease revenue was up Slightly as solid demand for MALDI BIOZYBER consumables was offset by a final drop of our modest COVID-nineteen Molecular Diagnostics revenue now to near 0. Please turn to Slide 7 now. The first half twenty twenty three Bruker Nano revenues.

Speaker 2

Revenue was $435,000,000 and grew in the low 20s percentage with strong revenue growth across its end markets, including academic and government, industrial and semiconductor metrology. Revenues for our advanced X-ray and nanosurface Tools all delivered strong revenue growth in the first half. Life Science Fluorescence Microscopy Revenue was up on product innovation and research demand and now also includes a strong contribution from our recent acquisition of the Inscopix Finally, first half twenty twenty three best revenues grew in the mid teens percentage, Net of intercompany eliminations driven by share gains and strong superconductor demand by MRI OEM customers as well as from growth in advanced technology revenues for Big Science, Fusion Research and Extreme UV Semiconductor Moving to Slides 89. On Slide 8, we wanted to highlight something that you don't usually look at so closely Probably namely our rather unique metrology tools and how they serve leading artificial intelligence, AI, Chip R and D and Production. I will let you read this slide.

Speaker 2

There's obviously many insertion points where our Bruker plays a Key role in chip development and manufacturing, CPU chips, GPU chips, this tends to be the NVIDIA or similar, High bandwidth memory systems on a JIP FPGAs, something that some of you are familiar with, The take home overall message is that approximately $75,000,000 of our estimated 2023 revenue is driven by AI trends, and we This will keep increasing. Of course, there's other trends from cloud to more Pervasive computing that make the fundamentals in the semiconductor metrology space very, very strong, especially for us as we're not only as we're much less exposed to memory and much more exposed To the or have much more opportunity, I should say, from the in the novel techniques and the latest generation chips. This is highlighted here. Switching over to Life Science and Proteomics, of course, on Slide 9. You may have already heard about the really Formative, we believe best in class sensitivity for 4 d proteomics of our new timsTOF Ultra Let me launch that ASMS-twenty 3 and which raises the bar further for sensitivity in unbiased proteomics with new technologies, next generation ion source and next generation SIMS technology.

Speaker 2

More importantly, this brings Significant performance advantages for low sample amounts, including single cell proteomics and single cell lipidomics, Immunoceptidomics, phosphoproteomics, all types of post translational modification analysis, which is so important in Cancer and other diseases as well as in protein protein interactions, all cutting edge drug discovery and In summary, Grupo continues to experience solid demand for our differentiated instruments and solutions across our portfolio. We continue to make investments in R and on our commercial infrastructure in compelling Project Accelerated Sudhakar opportunity areas, while also staying agile and disciplined with our cost. Our technology and biological applications leadership in many areas combined with world class execution and our unique Bruker Management process, cultural disciplined entrepreneurialism provide us well for continued outperformance. Let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 financial performance and fiscal year 2023 outlook in more detail.

Speaker 3

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide more detail on Bruker's second quarter and first half twenty twenty three financial performance starting on Slide 11. In the Q2 of 2023, Bruker's reported revenue increased 15.9% to approximately $682,000,000 which reflects an organic revenue increase of 13.5% year over year. We reported GAAP EPS of $0.39 per share compared to $0.33 in the Q2 of 2022. On a non GAAP basis, Q2 2023 EPS was $0.50 per share, an increase of 11.1% from the $0.45 we posted in the Q2 of 2022.

Speaker 3

Our Q2 2023 non GAAP operating income increased 6.6% And our non GAAP operating margin decreased 130 basis points year over year to 15.3%, Down as a result of lower gross margins and continued Project Accelerate 2.0 investments as well as partially transitory headwinds from foreign currency and acquisitions as we've communicated earlier in the year. Gross margin performance in the Q2 20 We finished the Q2 with cash, cash equivalents and short term investments of approximately $575,000,000 During the quarter, we used cash to fund We generated $13,000,000 of operating cash flow in the Q2 of 2023. Our capital expenditure investments were $23,500,000 resulting in free cash outflow of $10,500,000 in the Q2 of 23. This compares with operating cash outflow of $44,400,000 and a free cash outflow of $62,300,000 in the Q2 of 2022. Bruker's 2nd quarter cash flow Seasonally tends to have the lowest cash flow of our 4 quarters.

Speaker 3

Slide 12 shows the revenue bridge for the Q2 of 2023, as Frank has reviewed earlier. Compared to the Q2 of 2022, BioSpin's Q2 2023 organic revenue was essentially flat, Due in part to a 1.2 gigahertz system in our prior Q2 2022 revenue, while a gigahertz cloud system originally planned for the Q2 of 2023 has shifted into the second half of twenty twenty three. Nano organic revenue grew in the low 20% range, driven by strength in Manno's Industrial Research and Academic Businesses. CALID organic growth grew mid teens percentage with strong Performance from proteomics and molecular spectroscopy. We delivered solid growth in the Q2 of 2023 in BSI segment while European revenue had high single digit percentage growth all year over year.

Speaker 3

For our EMEA region, which is small as we categorize it, Q2 2023 revenue was up over 30% year over year. Slide 13 shows our Q2 2023 P and Now performance on a non GAAP basis. Non GAAP gross margin of 50.9% decreased 9 basis points from the 51.8% we posted in the Q2 of 2022 due to unfavorable product mix and foreign currency and inflation headwinds. 2nd quarter 2023 non GAAP operating margin of 15.3% was 130 Basis points lower than the 16.6 percent margin we put up in the Q2 2022 As we were impacted by lower gross margin product mix in this quarter, continuing investments in select Project Accelerate 2.0 initiatives and our recent acquisitions and a strong foreign exchange headwind. For the Q2 of 2023, our non GAAP effective tax rate 25.2% compared to 28.2% in the Q2 of 2022, driven mostly by favorable jurisdictional mix.

Speaker 3

Weighted average diluted shares outstanding in the Q2 of 2023 were 147,700,000, a reduction of approximately 2,100,000 shares or 1.4% from the Q2 of 2022 resulting from our share repurchases over the past 12 months. And finally, for the Q2, 2023 non GAAP EPS came in at $0.50 which was up 11.1% compared to the Q2 of 2022. Slide 14 shows the year over year revenue bridge for the first half of twenty twenty three. Revenue was up $184,000,000 or 15.5 percent, including organic revenue growth of 15.6%. Acquisitions added 2% to our top line, while foreign exchange was a 2.1% headwind.

Speaker 3

Frank has already covered the drivers for the first half of twenty twenty three. Non GAAP P and L results for the first half of twenty twenty three are summarized On Slide 15, with the drivers largely similar to the Q2 of 2023 and as explained on slide. Turning to Slide 16. In the first half of twenty twenty three, we generated $100,500,000 of operating cash flow, up $67,000,000 over the first half of twenty twenty two from higher profitability and favorable other items. We generated $52,000,000 of free cash flow in the first half of twenty twenty three, up about $56,000,000 over the first half of twenty twenty two, including higher capital expenditures for capacity expansion and productivity optimization.

Speaker 3

Turning now to Slide 17, given the strength in revenue in the first half of twenty twenty three, we're again increasing our revenue guidance for the year. Our updated outlook for fiscal year 2023 includes a raise of our revenue guidance to a range of $2,850,000,000 to $2,900,000,000 This includes organic revenue growth of 9.5% to 11.5 percent year over year, an increase of 0.5 percentage point from prior guidance. We continue to expect foreign currency tailwind of about 1% and an acquisition contribution of about 2% to our revenue growth. This leads to reported revenue growth in a range of 12.5% to 14.5%, an increase of 0.5% from our prior guidance. In 2023, We continue to expect about 50 basis points of organic operating margin expansion, excluding the effects of our recent acquisitions and foreign currency.

Speaker 3

For non GAAP operating margins, we expect a decline from the prior year due to partially transitory operating margin headwinds from recent acquisitions And foreign currency, with this headwind now estimated at approximately 150 basis points for the full year of 2023, primarily due to a steeper than expected decline in the U. S. Dollar against the euro and the Swiss francs in the last few quarters. As a reminder, last year, our Q3 of 2022 was exceptionally strong and we expect a more typical Quarterly cadence in fiscal year 2023. Accordingly, for the Q3 of 2023, We anticipate mid to high single digit organic revenue growth and non GAAP EPS down slightly year over year and then A reacceleration of EPS growth in the 4th quarter.

Speaker 3

While we do expect solid organic revenue growth in the second half 2023 in the mid to high single digit percentage range, we will also proactively manage our costs given the changing macro environment. On the bottom line, we're maintaining our non GAAP EPS estimated range of $2.55 to 2.60 Note that this now includes an estimated 5% or approximately $0.10 year over year foreign exchange headwind to non GAAP EPS. Other guidance assumptions are listed on the slide. Our fiscal year 2023 ranges have been updated for foreign currency rates as of June 30, 2023. To wrap up, Bruker delivered excellent organic revenue growth and strong EPS growth in the first half With that, I'd like to turn the call over to Justin to start the Q and A session.

Speaker 3

Thank you very much.

Speaker 1

Thank you, Gerald. I'd now like to turn the call over to Operator?

Operator

We will now begin the question and answer At this time, we will take our first question, which will come from Puneet Souda with Leerink Partners. Please go ahead.

Speaker 4

Hey, thanks, Frank. Thanks for taking the questions here. First one, financial and a follow-up on AI. First one, maybe For Gerald, obviously, great to see the strength and obviously congrats on the quarter. The top line guide raised as well, but Gross margin, obviously, stepped down meaningfully in the quarter.

Speaker 4

You have 3 gigahertz magnets coming in the second half. Could you talk a little bit about Sort of the cadence for that and how that impact the gross margin lift, I know you talked about 3Q EPS being lower versus 4Q, but Maybe just talk to us about the cadence for gross and op margins in 3Q and 4Q, just given how you think these orders will land?

Speaker 2

Yes, I'll take that. Hi, Puneet. Indeed, the gross margin, when we said product mix in QT2 being a little weaker, That has to do with some of the ultra high field or gigahertz magnet shifting to the second half of the year. And we're now saying it's going to be 2 to 3 for the 2nd half, possibly 1 in Q3 and 1 or 2 perhaps in Q4, But also, there might be some of that maybe shifting into 2024. I think overall, you see that these things are These are important big field big ticket items, but they just don't dominate a quarter.

Speaker 2

And so we don't really We manage other things around them. So it's while they're pretty visible and they're kind of fun like our Formula 1 car, but they don't we can

Speaker 4

Got it. Super. And then I'm tempted to ask about Two major themes that are important for you in the near term, obviously, you talked about AI being 1 and on that. Could you talk a little bit about that growth rate of that $75,000,000 so far and sort of how do you expect that growth rate to trend? I mean there are some wild estimates out there for GPU chips expansion, so I just want to get that.

Speaker 4

And then on the clinical MRI and PET imaging, Alzheimer's drugs are reaching the market, and there is a significant demand for PET. GE has talked about that. So could you take a minute and talk about how Bruker is positioned with respect to Pet Imaging as well. Thank you.

Speaker 2

Right. So starting with AI, I actually don't have Growth data that I can give to you, we all have this feeling that it's going to be big and big growth numbers. But I think you're better off looking at other industry data because we're obviously a small part of that. We also have not had not previously Pulled together our generally AI related revenues previously that had to do a little bit there was, of course, Bitcoin Farm And similar computationally intensive needs that has cooled off, obviously. And we've only now kind of established a baseline for our What we think is our AI related revenue.

Speaker 2

So with apologies, but we don't have Bruker internal data yet. We just Realize that it's a meaningful amount of revenue and just take this as a baseline perhaps for future measurements of how this affects Bruker's growth rate. It is, while I cannot give you a quantitative answer, obviously one of our exciting growth drivers, and it also tends to carry good margins. To your second question on neurodegenerative and Alzheimer's disease, in particular, indeed, clinical MRI PET We'll become more important. We as you know, we're the world leader in supplying superconducting materials to the World's various leading clinical MRI providers and MRI will be important as well as well as PET MR and of course, PET MR as implied has an MR associated with it.

Speaker 2

Very rarely do people use PET only because you need the MRI for the high resolution colocalization. The same is true for what we do with our products directly, which is the Preclinical PETCT or PET MRI products, and we offer both of them, and I believe we're market leaders in both of them. So indeed, as they are to the extent they are animal models, whether they're rodents or non human primates or NHB, we are very well positioned. And we while we cannot quite segregate it out, we believe that some of our healthy growth in our preclinical PETCT, PET MRI PET MR, but also just MRI preclinical MRI only without the PET element, that growth has been good. And that is probably there's, of course, oncology and muscle and skeleton Research and many, many other research areas, but certainly neurodegenerative seems to be at an inflection point where perhaps after years of, But honestly, drug discovery failures, it is not poised towards some modest successes and perhaps more in the pipeline.

Speaker 2

So that bodes well for our preclinical Sorry about the long answer, but you asked some longer questions That couldn't be answered with yes or no.

Speaker 4

No, I appreciate the context. Thank you, Frank.

Operator

And Our next question will come from Derik De Bruin with Bank of America. Please go ahead.

Speaker 5

Great. Thanks for taking the question. This is Mike Ryskin on for Derik. I want to ask a little bit about 1Q, 2Q pacing on orders. I believe last time you said Bookings were stronger than revenue in a couple of years in the Q1.

Speaker 5

And I mean today, you talked about Book to bill for the first half being greater than 1.0. So could you just sort of put them on a little bit of an apples to apples basis for 1Q, 2Q? Are bookings still coming in stronger than revenue? Did it normalize a little bit? And any color you could provide in terms of which End markets or customer classes maybe did a little bit better on that on the order front

Speaker 2

in the Q3? Yes. Q1 indeed book to bill was still greater than 1 in Q2 for BSI, which is the only thing that makes sense because BEST has these long term 5 year orders. So we look at our 90% of our business, Scientific Instruments segment and their Q2 book to bill was roughly at 1. So still quite healthy, Not quite as strong as the many years where we many quarters, I apologize, where we had book to bill above 1 and sometimes above 1.1, but still quite healthy with Growth in from China, certainly, geographically being the strongest, Also growth in academic government, academic medical centers.

Speaker 2

There's a lot of funding in academic Medical centers not only in discovery research, but also in translational and clinical research, and And many of our tools participate there. Still good, very good bookings growth in biopharma. I guess our tools that are more unused we're not so much used in The drug discovery and development side, and I think many of our tools are just indispensable. When you need them, you need them. It's not something that you can save on when you cut down budgets.

Speaker 2

So it partially shields us from some of the choppier environment, And I hope that answers your question, Mike. No, let me for completeness, semiconductor metrology orders and applied markets Orders in industrial orders were a little softer. So these are not unexpected. These are more of the slightly cyclical markets. Not bad, but certainly a little bit softer, which is why we're now getting into book to bill that's closer to 1 As in Q2, which is healthy because we need to bring down our still very long backlog that has barely budged.

Speaker 2

We need to bring that down to more typical delivery times over the next couple of years.

Speaker 5

That's great. Appreciate all that color. Thanks. And then for the follow-up, I want to touch a little bit on CALID and mass spec. You touched on strong demand led by Tim Stoth, and obviously you guys showcased some new products at ASMS, talk about them at the Analyst Day.

Speaker 5

Just curious if you could dive into mass spec performance a little bit more. So any early feedback or learnings on the Ultra launch? And just broadly, what are you seeing in mass spec land? Thanks.

Speaker 2

Yes. We don't comment on other companies' mass specs or their claims. We read them. Our timsTOF product line is not only timsTOF is a platform. So the new ultra eyes is getting a lot of interest.

Speaker 2

It It is particularly for the ultra high sensitivity markets. But remember, for the more routine high throughput Market, we have the timsTOF HT. We do a lot of mass spec imaging for multiomics, including targeted proteomics, But also metabolomics lipidomics with the timsTOF Flex, and there are some other specialty products that are derived of the timsop platform. So it's really that entire platform is doing really quite well. And I think, of We have an exciting new product at AFMS introduced recently.

Speaker 2

We're just people are Very, very impressed with its performance and what it can do. So that's the news from CALID and the timsTOF platform, it has been growing very nicely throughout the first half of the year, and we expect that to continue.

Speaker 5

Great. Thanks.

Operator

And our next question will come from Josh Waldman with Cleveland Research. Please go ahead.

Speaker 6

Hey, good morning. Thanks for taking my questions. 2 for you. First, Frank or Gerald, I guess a follow-up on Mike's question. Curious how You're thinking about the contribution from the backlog work down in the coming quarters and maybe how that supports resiliency in the 23 medium term guides.

Speaker 6

I mean, Is there a base case number for organic growth that backlog work down contributes or is that not the way to think about it?

Speaker 3

I'll take that one quickly, Josh. So from my perspective, as you already know, we've got a record backlog. The numbers are High and continue to be held high. We have we estimated over 8 months of backlog and that's a significant level for us. So, our expectation is just by virtue of scale that it will take us multiple years to reduce that backlog.

Speaker 3

That's not going to get pushed through in a particular quarter, but it does obviously give us, as Frank has mentioned, significant resiliency when it comes to forward quarters because we simply need to execute on that backlog as opposed to fundamentally relying on incoming orders to do that. I think the other point is that our backlog seems to be quite strong across most of our business divisions. And we have some that have started to eat slowly into that backlog, but fundamentally the largest divisions continue to have sizable backlogs. So I think it's in bodes well, I think, for our forward view, particularly on the organic side.

Speaker 6

Got it. Then Gerald, I wondered if you could talk through the assumptions underpinning the mid to high single digit organic growth For the second half, I mean, obviously, implies a step down. The comps only modestly more difficult. Curious any additional color you could provide there and then Maybe walk through the puts and takes on the impacts on the 1 gig systems. It sounds like it's a net headwind.

Speaker 6

Is that right?

Speaker 3

I guess, I wouldn't characterize it as a net headwind. I mean, our perspective is, Of course, on the first of all, back up, we posted 15.6% organic revenue growth in the first half. So that's Strong growth. Our overall guide is at the midpoint is 10.5 on organic, which is also very significant, I think, not only for broker, but certainly it appears even in this space. We do have, and I just said, a significant amount of backlog, which we hope to execute on some of In the 3rd Q4, we do have stronger comps in both the 3rd Q4.

Speaker 3

We had an exceptionally strong 3rd quarter in particular, And our expectation is that we'll improve on that as we move forward. So I think it's a color for us is that It's sunny here in Billerica relative to our organic revenue performance And it's continuing to expect to be that way going forward.

Speaker 2

So strong orders in the first half, continued strong backlog, continued demand As far as we can see it, it's getting a little choppier. We acknowledge that. There are some markets that are not growing as fast as they were last year And others that continue to be quite resilient for us. In the mix, we're obviously very resilient here. And You know our long term guidance or medium term guidance, I should say, that we just gave at our Investor Day for the next few years.

Speaker 2

So certainly, our second half expectations are consistent with that even if we don't grow at the toric pace of 15% plus anymore at the first half.

Speaker 6

Got it. Great to hear. Thanks guys.

Speaker 3

Thank you, Josh.

Operator

Our next question will come from Dan Arias with Stifel, please go ahead.

Speaker 7

Hey, good morning, guys. Thank you. Frank, on BioSpin, how do lead times on NMR installations look today? And when you think about just exiting the COVID period over the last 12 months and then bringing up your own new Germany site, Would you say that you've reached sort of a steady state there and that really shouldn't change? Or do you still think there are some things That you can do in terms of production capabilities, etcetera, or just customer acceptance that you think improves the lead times over the next 12 months?

Speaker 7

Yes.

Speaker 2

No, Dan, we should still bring the NMR lead times. They're still exceptionally high, and they should be coming down over the next in future quarters. So this isn't the steady state. And right, we So we had some delays that were not that were by our gigahertz NMRs are leading edge products. So sometimes When they reach fire, a second round of tests or some modifications at the factory, it's easily a quarter's delay.

Speaker 2

That can happen and that did happen. But also some of the other systems, I mean demand has been excellent. Bookings at BioSpin have been very, very good in the first half, And we think they'll continue to be strong. That means we need to ramp our capacity, quite honestly, in everything from factory to test to field installations. So yes, the speed times are they're wonderful.

Speaker 2

It's a high quality problem, But we need to bring them down with capacity growth. And actually, that's true in many areas. And so you've seen our elevated This year and last year, actually in the last few years, we're kind of building for productivity, but also sort of for Capacity that we think we need over the next decade or a decade and a half. And so more work to be done.

Speaker 7

Okay. So if lead times have improved 12 months from now, chances are it's more to do with your own internal processes rather than anything customer related.

Speaker 2

I think that's a reasonable assumption, yes. Okay.

Speaker 7

Okay. And then just maybe on the guide, Gerald, just to make sure I have it straight. If the NMR orders Hadn't gotten pushed off to 2024, is it fair to say that maybe the outlook would have been up another half a point to a point? And then on academic sorry, Accelerate 2.0 spend,

Speaker 2

I'm kind

Speaker 7

of just curious, When you look in totality at what you plan on investing for that program, and I know it's sort of a continuous thing to an extent, but how much of the investment for 2.0 do you kind of think of it as a 2023 thing versus a 2024 thing?

Speaker 2

Yes. So maybe on the first one on the NMR, I mean, All these ultra high fields, there is a range, depends on whether it's a 1.0, 1.1, 1.2, but very roughly, a system is It's around $10,000,000 right? So yes, I said the 2 of it is so that's like a 25 nips, I suppose, if you like. So it's not unimportant. It's meaningful, but it's not that significant.

Speaker 3

So Yes, I'd say, we have Puts and takes in the guide, there will be some elements that we hope are upside and others that we are we've had concern about downside. And so I think we factored those all into the big that into the guide as we see it at the moment.

Speaker 2

To your second part of the question, if I I understood correctly about Project Accelerate 2.0 Investments. Obviously, we're on a multiyear investment track there. So That's, we're not giving 'twenty four guidance, of course. But as we gave During the medium term guidance at our Investor Day, we said that for that time period till 2026,

Speaker 3

And as you see also we have commercial Investments that are going on in the sales and marketing area to support a number of the faster growing elements of the business as well.

Speaker 2

It's a significant Transformation coming from Project Accelerate is going extremely well. It's and we're investing in that while delivering EPS growth. Are we maximizing EPS growth? No, we're making we're delivering enough EPS growth and focusing on doing the investments for the future in parallel. And this has Worked out nicely and become making us a faster growth company and with excellent growth this year relatively speaking for sure Really very good growth, Elantxa, in an absolute way in the first half and the second half looking along our Mid to high single digit or 6% to 8%, which was more specifically what Gerald gave us our medium term Organic growth guidance for the next few years.

Speaker 2

So we're right. We're the investments are paying off. Super. Thank you. Thank you.

Operator

And our next question will come from Patrick Donnelly with Citi. Please go ahead.

Speaker 8

Thank you for taking the questions. Frank, maybe on the China and biopharma piece, Encouraging to hear you guys kind of shook off a little bit of the industry concerns there. Can you just talk about, I guess, if anything changed In terms of as the quarter went in linearity, even if you're willing to comment on July, obviously, the peer set Had some issues in those two markets, it would be great to just expand a little bit on what you guys saw and how you're feeling on the go forward there?

Speaker 2

Yes. We had if you recall, we had particularly strong order growth in China in Q1 and we highlighted that on our Q1 earnings call. And so we some of that we expected and continue to expect was real additional Demand of things that would not have been purchased otherwise, except for that loanstimulus program that China had And where we benefited disproportionately with our big ticket items, I think. And some of it also we expect It would be pulled forward within the year. However, our 2nd quarter Growth for orders in China was still quite good.

Speaker 2

It wasn't exceptional as it was in Q1, but it was still quite good. So we didn't go from feast to famine, but continue to see good academic and government Academic Medical Center orders from China. So within the quarter, Most of our orders come in the last month of a quarter. That's just when you're more in the instruments business. So looking at trends within a quarter for us doesn't make does not make sense.

Speaker 2

We don't have data that we would even look at that's particularly meaningful. That's more for other companies that have more consumables revenue or so.

Speaker 3

And Patrick, maybe just one other additional comment from my side. So there was really good revenue performance in the second quarter And the backlog levels in China continue to be significant and actually above the corporate average. So we have quite a backlog level there So we're down and we've been somewhat constrained by some export restriction issues, but hopefully we work our way through those and then some of that will We'll phone to revenue.

Speaker 2

By export delays, not building. Yes.

Speaker 3

Delays on our export. Yes. But,

Speaker 8

yes. Understood. And then a quick one, Frank. Just to follow-up on the orders and backlog, there's a lot of focus there. I appreciate the Book to bill commentary, I mean is it safe to assume if BSI book to bill is hovering around 1, I think BSI grew 13 organic in the quarter, so orders there Up double digits.

Speaker 8

Is that fair to say?

Speaker 2

So I'm not sure I caught everything. In Q2, as I mentioned earlier to Mike, Our BSI book to bill was around 1. Now the second part and So your question was fine.

Speaker 8

Given that BSI That grew 13%, is it safe to say orders were up double digits as well,

Speaker 2

back double digit growth? First half was certainly double digit growth. Now I right, 2nd quarter Bookings were growing less than that because of the bookings a year ago, right? The Q2 bookings a year ago.

Speaker 1

Yes. I might add also, Patrick, that given some of the lumpiness in the orders, some of the pull forward we saw As we articulated in China in the Q1, we really think it makes sense to look at the first half of bookings. And again, the bookings in the first half were up double digit organically year over year. So there's just so much lumpiness From quarter to quarter,

Speaker 2

that we think it makes sense to look at the

Speaker 1

first half. But as Frank did state, book to bill in that second quarter was hovering around 1, which We aim to keep it in that area going forward.

Speaker 2

Well, in some quarters, we'll have to come below that to build to work off the backlog. Yes. So Thank you. Still solid, not as strong as in Q1.

Speaker 8

Understood. Thank you.

Operator

Sure. Our next question will come from Dan Brennan with Cowen. Please go ahead.

Speaker 9

Great. Thank you. Thanks, Frank and Gerald for taking the questions. Maybe just one, Speaking with the order dynamics, kind of from kind of what you guys are seeing today, any sense on like trajectory of orders in the second half? And what would be the early lead on 2024 organic growth do you think, Frank?

Speaker 9

Obviously, the backlog is significant, but just trying to get a sense of that trajectory and Kind of what you might be thinking about today?

Speaker 2

Well, we have no specific 24 comments then Other than you saw our multiyear CAGR organic growth that we gave at our Investor Day of 6% to 8%, which would imply mid to high single digits. But that's not a 24% comment. That's really a multiyear Comment that we gave at our Investor Day and it's not even a little bit of 'twenty four guidance. It's just a multiyear comment. So order dynamics in the second half, I mean the pipeline, the opportunities look Strong and that's not something we'll have that's what we may know of.

Speaker 2

That's what we'll know after we report Q3 and Q4. So far, book to bill this year has been greater than 1, greater than 1 in Q1, about 1 in Q2, all the sort of

Speaker 9

And how about Frank, thank you for that. How about just academic Spending broadly at 2Q, it sounded like it was another solid quarter for you. And I think your peers, while they struggled elsewhere, academics seem to be a bright spot this But there are some concerns over tighter budget. So I'm just wondering kind of how you see the global market for kind of academic as we look out to the back half of the year and beyond?

Speaker 2

Yes. Academic, government, again, academic medical centers becoming more and more important. There's a lot more money in Cancer centers or neuroscience research centers than in good old departments of chemistry. So Within academia, our shift towards more pathology or Disease biology research and translational clinical research has been under the hood of what's in the academic bucket, has been very Strong in the last decade and that shows that academic is good, but Academic Medical Center and Government is particularly good for us. Yes, there's some concerns about NIH budgets, of course.

Speaker 2

But then again, there's also things like the various the Science Act, which hasn't trickled down yet in the U. S. Of course, non academic, the CHIPS Act in the U. S. And the equivalent in Europe and even in Germany specifically, academic Spending and investment in China has been strong.

Speaker 2

In Japan, it's been strong. Europe, Some budgets are a little bit delayed till the second half, but it's still been all right. So academic government is I know for a while, people were just enamored with biopharma, but it's a fantastic area. And biopharma for us continues to be strong. So our products and solutions, just think of us as which way does the macro I mean, we're not immune to macro, but we are somewhat resilient and partially shielded due to our rather unique products and the technologies.

Speaker 9

Great. Thanks, Frank. Thanks, Gerald.

Speaker 3

Thank you.

Operator

And our next question will come Rachel Vattenstall with JPMorgan. Please go ahead.

Speaker 10

Great. Thank you for taking the questions and good morning. I wanted to follow-up on Patrick's question earlier about China. So you mentioned that APAC growth was in the high 20s. Can you give us what was the specific China growth in the quarter and then what did orders grow in China?

Speaker 10

And as a follow-up, what are you hearing on additional stimulus tranches being released in the region? We've heard from some of your peers that there could be some stimulus coming in 4Q. So what are your expectations there and how is that contemplated in this year's guidance?

Speaker 3

Hi, Rachel, it's Gerald. Good morning to you. Just generally on China, robust Order demand and I would say robust revenue performance in China for the first half. I think what we've seen so far is that there is quite a bit of interest in China around this Additional stimulus program, it's not a surprise that with the Chinese GDP falling off somewhat, but there's certainly interest in doing that at the At the government level. What we've heard on The Street is just very positive about that.

Speaker 3

When, we're not clear. But certainly, we're hearing some of the same information.

Speaker 2

Yes. I mean, there's a lot of speculation about things that may happen in the second half. But I think From even just reading across the industry, a lot of that is, at this point, is speculative rather than based on our data. So I think what we our second half full year guidance And the color we've given you for the second half is not based on hope.

Speaker 3

Yes. I mentioned earlier, Rachel, that we have significant backlog in China. We just have to execute That would be that's what we baked in.

Speaker 2

So yes, we're looking at all of this with great interest, but we don't have anything to hang our Add on yet and then when we do, we'll report it.

Speaker 10

Great. And then Just one more for me. On BEST, you previously talked about growing throughout the year and that supply chain was really the limiting factor there rolling off. So Can you talk about 18% growth this quarter was obviously pretty impressive. How is that supply chain factor kind of driving through those numbers?

Speaker 10

And then how should we think about that segment sequentially throughout the back half of the year? Thank you.

Speaker 2

Supply Chain and Logistics is gradually getting better. It is not completely normalized in some areas like superconducting materials. It is still even multiyear constrained. And that's why we're gaining market share, I think, because we've made the long term multiyear investments ahead of the curve, whereas others I cannot react fast enough. But supply chain and logistics are gradually improving, but it is Still it still requires very strong execution, and I think we have that.

Speaker 2

I think we've shown that over and over again.

Speaker 8

It

Speaker 2

is still partly a drag On growth, which is when you which is the same saying it in a different way, but that also While our higher backlog isn't coming down in a quarter or 2, but over a couple of years. So it's getting better, but it's still a topic. It's just not a headline topic anymore.

Speaker 1

And operator, maybe we have time for

Operator

Our last question here will come from Jack Meehan with Nephron Research. Please go ahead.

Speaker 8

Thank you. Good morning. I wanted to ask about timsTOF instrument pricing. Curious How that is trending? Just early dialogue with customers around Ultra, do you think there is potential to pull up The blended instrument pricing for the timsTOF family with some of these new launches?

Speaker 2

Yes. I mean, it's been Trending up for some time right after the quarter, we see the timsTOF SCP that came out a couple of years ago for single cell proteomics And also the timsTOFLEX with the additional mass spec imaging capability for targeted multiomics Carry higher selling prices sort of in the $1,000,000 and above range, and the ultra is also In that $1,000,000 plus range. So indeed, average pricing for the timsTOF Platform has been going up for some time and that given some Competitive trends that are also launching high end That seems to be a market trend for right now. It's not enough. So on the ASP on the timestar family has come up and may continue to go up.

Speaker 2

Great. And Gerald, you talked about That's simply the mix of models. It's not per instrument, but it's the mix of models within

Speaker 8

Great. Gerald, you talked about proactively managing costs. Can you just Talk about where you're focused with that and is it possible to quantify how much you're targeting? Thanks.

Speaker 3

Look, I mean, I will say that Bruker's philosophy is disciplined entrepreneurism. So we're Pretty disciplined on costs all the time. Our focus now will just be to look at discretionary spending in areas where we think we can Tightened slightly, this is a deep surgery by any stretch. Our organization is very focused on this from the very beginning and continue to be so. I'm not going to provide any color on numbers, but we think we're going to continue to be disciplined in our cost management.

Speaker 3

That's what we do.

Speaker 2

It's tweaking. It's not restructuring. It's we're aiming for meaningful savings because obviously, it's a We cannot ignore what's going on around us. And you can always sometimes you defer hiring. Sometimes you have discretionary spending that you can reduce.

Speaker 2

Those are the levers that we're working on right now and that we've implemented already. All right.

Operator

And this concludes our question and answer session. I'd like to turn the conference back over to Justin Ward for any closing remarks.

Speaker 1

Well, we want to thank everybody for joining us today. Bruker's leadership team looks forward to meeting you with you at an event or speaking with you directly during the Q3.

Operator

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

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