Bruker Corporation 6.375% Mandatory Convertible Preferred Stock, Series A Q2 FY2025 earnings call

• Life Science research instruments markets face pressure from U.S. academic funding headwinds, China stimulus delays, global tariffs, etc. - Announced an expanded cost savings initiative to reduce annual costs by $100 million to $120 million by fiscal year 2026, affecting all business parts. - Recent innovations at ASMS, like new instruments enhancing competitive position in proteomics and metabolomics. - Anticipates visibility on U.S. NIH and NSF funding in the third quarter, expects improvement in fiscal year 2026 with cost savings, and is confident in innovation-driven growth.

In the second quarter of 2025, Bruker's Scientific Instruments (BSI) segment had an organic revenue decline of 7.2%. The BEST segment saw an organic revenue decline of 4.8%. For the first half of 2025, BSI organic revenue declined 1.4%, while BEST segment organic revenue declined 11.5%. The BioSpin Group had revenue of $403 million in the first half of 2025, roughly flat year-over-year, with weakness in biopharma revenues. The CALID Group had revenue of $566 million in the first half of 2025, increasing in the low teens percentage, driven by microbiology and infection diagnostics. Bruker Nano had revenue of $509 million in the first half of 2025, growing in the low single-digit percentage. The BEST segment's revenues declined in the low teens percentage in the first half of 2025 due to soft clinical MRI market and strong prior year comparison.

• Fiscal year 2025: Revised revenue guidance range $3.43 billion to $3.50 billion, organic revenue decline 2% to 4%, non-GAAP EPS range $1.95 to $2.05, down 15% to 19% year-over-year. - Third quarter 2025: Expected relatively weak organic revenue performance, mid- to high-single-digits percent decline year-over-year. - Fiscal year 2026: Expect significant margin improvements and double-digit EPS growth even in muted revenue growth scenario, with potential tailwinds from growth recovery in advanced life science research and drug discovery tools.

• Geopolitical and Tariffs: Uncertainty around U.S. tariffs, geopolitical risks, and foreign currency fluctuations. - Market Demand: Delayed biopharma and industrial research instrumentation investments due to economic uncertainty and tariffs. - Academic Funding: Delayed U.S. academic funding and China stimulus delays affecting research instrument sales.

Q: Parse out why backlog not helping this year and recovery in fourth quarter?

A: Backlog has come down slightly from 7 months to 6.5 months, leveraging it. Feeling comfortable with Q4 planning, Q3 still weak, no visibility on '26 yet.

Q: Expectations on UHF magnets and MALDI sales?

A: UHF revenue recognition expected in Q4, impact of BD microbiology acquisition not certain yet.

Q: Why cost-outs not initiated sooner and commitment to $100M-$120M?

A: Initial cost savings plan, expanded to $50M+, $30M kicking in FY25, committed to $100M-$120M regardless of market conditions.

Q: Growth expectations in '26 and leverage?

A: Muted growth expected, no clear visibility yet, leverage ratio target around 2.7, satisfied covenants for Q1-Q2 '25.

Q: Free cash flow burn and CapEx in second half?

A: Unusual tax payments in Q2, CapEx scaled down for Q3-Q4, expect normal cash flow, CapEx reduced.

Q: China stimulus and U.S. academic funding impact?

A: China stimulus not released for high-end research instrumentation, optimism but no timeline, U.S. academic funding expected down 20%-25% in FY25, no clear recovery timeline yet.

Q: Second half cadence and 4Q visibility?

A: Fourth quarter typically strong, expecting lift from cost savings, confident in 4Q ramp.

Q: Tariffs impact on competitive position and guide assumptions?

A: No significant competitive shifts, modeling tariffs at lower rates, Switzerland modeled at 15% instead of 39% worst case.