Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message| ()  

Executives

Stacey Desrochers – Treasurer and Director of Investor Relations

Analysts

Kristen Stewart – Deutsche Bank

Bruker Corporation (BRKR) Deutsche Bank AG Health Care Conference Call May 7, 2012 8:40 AM ET

Kristen Stewart – Deutsche Bank

Okay, perfect. Thanks everyone for joining us for the first session of the healthcare conference. I am Kristen Stewart, Medical Device analyst. Here we are seeing a lot of new today just kind of (indiscernible) sessions.

So, with me today, I am really happy to have Stacey from Bruker. She is going to give a brief presentation and then we are going to go into a Q&A session. Something that's new this year that we are trying is a new app called the ARMs. You should have instruction cards right in front of you. There is a website, you just log on, you can submit Q&A, or questions for the Q&A session. It comes up anonymous. I can read it on my iPad up here, so I can ask any questions that you may have. Of course, don’t be shy, just raise your hand and we'll have a mike come over to you as well. So, with that, I'll turn over to Stacey.

Stacey Desrochers

Thank you. Good morning everyone. Following our Safe Harbor statement, any statements contained in this presentation that do not describe historical facts may constitute forward-looking statements, any forward-looking statements contain risks please reference our filings with the Securities and Exchange Commission for those risk factors.

Bruker Corporation is a high-performance scientific instruments company. We have premier brands with leading market share in key markets. We are a proven innovator with extensive IP and product portfolio and we have expanding global distribution and service infrastructure.

The following slide is a depiction of where we are in the world. The green circles are manufacturing and R&D sites, primarily in North America and in Europe. In Europe, we are in Germany, Switzerland, and France. The yellow circles are sales and service offices. We serve – some of the key markets which we serve are the life sciences, pharma, biotech, food, environmental forensics, defense, security, industrial research, metals, mining. We have benefited and continue to benefit from various secular mega trends, some of those are post-genomics, 450-millimeter FAB lines, shrinking technologies, supercon tools and devices, microbial identification, just to name a few.

The following slide is our revenue for 2011 for our BSI group by product, customer, and geography. 80% of our revenue comes from our product sales or system sales, while 20% comes from service and consumables and software. Our revenue by customer 54% in 2011 came from academic medical schools, non-profit; 30% from industrial and applied customers; 8% bio-pharma, IVD, Medtech, and then another 8% from government. Our revenue by geography 41% came from Europe in 2011 while 30% came from Asia-Pacific, that includes Australia, New Zealand, Japan and 23% came from the Americas and 6% from EMEA, India, Middle East, and Africa.

Our company is made up of two segments. There is the BEST segment, which I will talk about a little bit later and then the Scientific Instruments segment, which is the majority of the company. Within the Scientific Instruments segment, there are four divisions. The BSI group serves about 8 billion of addressable market space. Our Bruker BioSpin group which is our oldest Bruker entity, that's the NMR, EPR, and MRI for research that serves approximately 1 billion in addressable markets. Our Bruker Daltonics group, that's our mass spec for life science and chemical and applied markets, that also includes our microbiology group and our detection and they serve about approximately 4 billion in addressable markets. Our Bruker MAT or Materials group includes x-ray diffraction and x-ray fluorescence, atomic force microscopy, spark OES, stylus and optical metrology, and that group serves approximately 2 billion in markets. And then our Bruker Optics group sells FT-IR, Raman, and near-infrared products and serves approximately 1 billion in addressable markets.

In 2012 is what you just say our first quarter results were really good. We had revenue growth of 14% for the entire corporation from $406 million in the first quarter 2012 as compared to $357 million in 2011. We had GAAP net income of $15.1 million versus $11.3 million, which is a 34% growth rate. We had adjusted operating income for our BSI group of $43.7 million as compared to $37.7 million or 16%, which (indiscernible) to approximately 11.6% adjusted operating margin for BSI. Our BEST segment's backlog continued to grow in the first quarter of 2012 as compared to a year ago. It was a $219 million, which was a 27% increase year-over-year.

Just as a quick reminder, our 2011 financial results. For 2011, we had $1.652 billion in revenue, a 27% or 21% FX adjusted growth rate for the year. We also had adjusted EPS of our BSI group of $0.91 as compared to $0.81, which is a 12% increase and our BEST group had an adjusted operating income of $0.1 million as compared to $1.9 million loss in 2010.

Our financial goals for 2012, I'll just talk about a few of them. Our currency adjusted revenue growth of 7% to 10%, which we'll get to $1.76 billion to $1.81 billion. BSI adjusted operating margin improvement of 120 to 140 basis points, BSI adjusted EPS of $0.94 to $0.98, and our BEST group, which we can now talk about, because we withdrew the S1 of it in March, adjusted EPS loss of approximately $0.04. From medium term out to 2014, we expect Bruker revenues to be greater than $2 billion and to have BSI adjusted operating margin of greater than 18%, excluding our CAM group.

Following slide is some of our metrics, as you can see our revenue has continued to grow over the last few years and that has translated to the bottom line and the EPS. And we have had increasing operating margin improvements as well. In the first quarter of this year, we purchased SkyScan, which is a Belgium Company. It produces Micro-CT systems for 3D x-ray and imaging. This business we expect to have had $13 million to revenue in the fiscal year and about $0.01 of the EPS. This company fits nicely within our materials research, so that will be our MAT, Bruker MAT group and also within our preclinical imaging or within our BioSpin group. So, it's a very complementary system for both of our areas.

This slide talks about our R&D spend. On average, we spent 10% to 12% of our revenue on R&D and over the last three years that has created into more than 90 new products across our various divisions. This has helped us continue our fast revenue group and we'll continue that into the future as well. Some of the new products this year that we have introduced as a result of that R&D spend, that have been 13 of them. Within our mass spec group, which is our Bruker Daltonics group; the ionBooster, the new product, it enhances sensitivity in small molecule.

Our SCION product line is our new gas chromatography platform and the CompassCDS, which is a new network system that enhances operations. Within Vibrational Spectroscopy or Bruker Optics group, the LUMOS is a completely new standalone FTIR microscope system and our HI90 system is a remote chemical sensing device, that's used in homeland security and industrial applications.

Within our X-Ray Spectroscopy and Microanalysis or BMAT group, we have the new product lines and a new product within the SkyScan group with the Micro-CT, which is a high-resolution micro-computed CT system. The XFlash, which is new silicon drift detectors and then our micro series of Small and Wide Angle X-ray Scattering system. And then the S1 TITAN, which is a handheld device for materials analyzing.

Within our magnetic resonance or BioSpin group, the AVANCE provides a new sensitivity for systems. Our CryoProbe Prodigy line also provides enhanced sensitivity with more portable prices. The new Nitrogen Liquefier allows folks to extend the maintenance of their systems, so they don’t have to fill them up with nitrogen most often and then the CMC-assist is advanced software to help analyze the results.

Now, for our Bruker Energy and Supercon system or BEST group, they are – they produce superconducting wire and devices for the big science, high energy healthcare groups. As I talked about a little bit earlier, there had been an S1 registration and we withdrew that in March of this year. So, as a result, we can talk about their financials, our goals for 2012, which our currency adjusted revenue growth of 15% and to be near break-even adjusted operating income and have adjusted EPS loss of $0.04.

Our BEST group plays in many markets. Currently, we are within the two segments of the bottom half of this circle. They currently produced superconducting wire for MRIs, NMRs, and Particle Therapy products, which is a $4 billion market, and then also produced superconducting devices for synchrotrons and x-rays, fusion, and high physics project.

In the top half of this circle, we are focusing on the Fault Current Limiter and the Magnetic Energy Storage sections, which will be a crystal growth magnet for new product developments to try to tap into some of the $20 billion of the marketplace here. Superconducting wires, those can be used in wind turbines and transformers and many other devices.

And just to wrap it up, Bruker Corporation is a premier brand of high-performance life science and analytical instruments. We have had strong growth and we have continued to expand in markets geographically and with our advance products. We will continue to grow the company at approximately 10% CAGR over the next few years and continue to expand our operating margins and EPS and cash flow.

And with that, I’ll take questions.

Question-and-Answer Session

Kristen Stewart – Deutsche Bank

So, we did have a mike (indiscernible), so if anybody wants to ask a question, just raise your hand and mike will be passed over to you. I guess in absence of that, Stacey, can you just talk a little bit about the BEST business and just kind of the fact that you did pulled the filing and just kind of the thoughts around that? Would you ever consider bringing it back to the public markets?

Stacey Desrochers

Sure. So, we have talked about potentially maybe bringing it back to 2014/15 timeframe, but the markets for a small company in this space, in the superconducting devices, clean tech space has not been great over the past year and there is unending good outlook for that going into the future. So, we have decided to pull it to really save on the cost, so keeping the S1 out there, you have to continue to have audited financial statements for that group and then update the S1 on an ongoing basis in order to keep it live. So, those are costs that if you don't really think we are going to take public for the next couple of years, it don’t make sense to continue to bear. The business is continuing to grow extremely well. It’s growing from $60 million three years ago to $113 million last year. We are continuing to grow at a good rate. We are very excited about the products in the pipeline of Crystal Growth Magnet and the Fault Current Limiter products. Those we think have good potential when we bring them to market.

Kristen Stewart – Deutsche Bank

Okay. Maybe you could just talk a little about just what you are seeing in the end markets in Europe?

Stacey Desrochers

Sure. Europe continues to be strong for us. There are continued to be big profits of strength all over the world and I know that this is not one of those things that everyone talks about, but we have continued to see that for long time now. We probably have a larger distribution network or at least a more in-depth distribution network than some of our competitors in many of the markets in which we play in. We have been in Europe for 15 odd years. That’s really Bruker's backyard. That's where we were started. So, we really feel like we have a good feel for those markets and have good penetration and no when various types of funding is coming available and our depth competing for it.

Kristen Stewart – Deutsche Bank

And I guess you had mentioned on R&D, I guess, 10% to 12% which is we think a lot more than your peers. Can we just walk through on I guess that's one thing that differentiates you, but also just kind of on the product side, you listed a whole bunch of new products, which ones you are most excited about and should we expect to see that kind of R&D spending going forward as well?

Stacey Desrochers

Sure. Yeah, we traditionally stand between 10% and 12% of our revenue on R&D to produce new and innovative products and that's really what we have been known for is the product pipeline. We do expect this to continue that's how we have had our above average industry revenue growth that we have seen on the last two years. The upside and the downside of the way, Bruker is designed is that I have talked about 13 new products that we had this year and 94 new products in the last three years. There are so many products that there is not a single one that's the revenue driver or not one that I would point to and say what business is going to be the product. We are traded about a lot of them, because they open up new market for us or new areas within existing markets for us. So, we are continuing to push in all directions in the markets in which we play.

Kristen Stewart – Deutsche Bank

And then just kind of looking back on the last quarter it's pretty strong. Is there anything make that you guys are looking at that are more explains on things that maybe just give you a little bit more concern in your ability to kind of meet your guidance for the full year which is kind of end markets maybe why…

Stacey Desrochers

I know, I think the U.S. is the only place, where that’s the big question I think for everybody for academic spending that will continue to be grow or not as robust as the rest of the world somewhat we have seen so far. But that's not that big of a percent of our revenue, it's significant but we have other leverage to pull and the new products, a lot of the new products and new markets in which we are pushing our products into are away from our traditional academic and government spending more into industrial and applied markets. So, that helps offset potential things that might be issues with U.S. academics, going forward.

Kristen Stewart – Deutsche Bank

Got you. I guess can you maybe just go in, are there – if you look at Europe, you said (indiscernible), but are there any particular regions where things give you a little bit more concerns?

Stacey Desrochers

Well, we have never been very – have a lot of revenue from any of the Spain, I am sorry, Spain and Italy are the only objectives that we have revenue from. It's probably about $20 million each. So, it's a chunk by the time a significant chunk and those continue to be very strong. We actually know about some Euro budgets that are required to be spent in early this year for research that we should benefit from. Greece and Ireland and Portugal have never really been big markets for us. So, they are not concerned. We continue to see good growth in places like Turkey and in Russia, some of the very non-traditional places within Europe. Germany continues to be a good market as well for us.

Kristen Stewart – Deutsche Bank

Any questions from the audience? There is a little bit of (indiscernible) from question than you got from the quarter.

Stacey Desrochers

It's probably the end markets around the academic in Europe. The same questions we continue to hear over and over again. And we have just talked about. So, I think that's probably the most common concern that people have about Bruker. And when we talked about earlier, 41% of our revenue comes from Europe, but that's down from 52% in 2008. So, it's not that Europe has started growing it's growing slower for us than Asia-Pacific, which is up to 30%. And that's where a lot of the growth rates are higher and where we are seeing some good market uptick from our products as well.

Kristen Stewart – Deutsche Bank

Have you seen any changes at all just in terms of the end markets within emerging markets just kind of Asia?

Stacey Desrochers

No significant changes in end markets, no. They continue to be strong industrial and applied markets, continued to be very good in Asia. So, that's probably the big growth place, but they also have academic research centers as they are continuing to fund that are continuing to grow as well, so this group in all areas within Asia.

Kristen Stewart – Deutsche Bank

Okay. And then can you maybe just comment on what you are seeing in the current landscape on NMR, just kind of competitor wise?

Stacey Desrochers

Sure. We continue to see Agilent and (indiscernible) out there as competitors in the market space at the recent E&C Conference middle of April. We were surprised that Agilent didn't come out with any new products I'm not sure what that means, if that means anything at all. But we came with three new products that we are very excited about, the Prodigy CryoProbe are really new and innovative and they enhance the sensitivity of lower NMRs to get few higher end at very reasonable cost. So, the competitors are still out there and still in every deal that we go to and we went some, they went some, and continues to be how that works.

Kristen Stewart – Deutsche Bank

Okay. Well, last chance for questions? Alright, if you have any questions, we can obviously take them offline. Thank you, Stacey.

Stacey Desrochers

Thank you.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!

Source: Bruker Corporation's Management Hosts Deutsche Bank AG Health Care Conference (Transcript)
This Transcript
All Transcripts