Q2 2016 Earnings Presentation - Bruker Corporation

Bruker Corporation (NASDAQ: BRKR)

Q2 2016 Earnings Presentation Frank Laukien, President & CEO

Anthony Mattacchione, SVP & CFO Stacey Desrochers, Treasurer & Director of

Investor Relations August 2, 2016

Innovation with Integrity

BRUKER CORPORATION

Safe Harbor & Reg. G Statement

Any statements contained in this presentation that do not describe historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Any forward-looking statements contained herein are based on current expectations, but are subject to risks and uncertainties that could cause actual results to differ materially from those projected, including, but not limited to, risks and uncertainties relating to adverse changes in conditions in the global economy and volatility in the capital markets, the integration of businesses we have acquired or may acquire in the future, our ability to successfully implement restructuring initiatives, changing technologies, product development and market acceptance of our products, the cost and pricing of our products, manufacturing, competition, dependence on collaborative partners and key suppliers, capital spending and government funding policies, changes in governmental regulations, realization of anticipated benefits from economic stimulus programs, intellectual property rights, litigation, and exposure to foreign currency fluctuations and other risk factors discussed from time to time in our filings with the Securities and Exchange Commission. These and other factors are identified and described in more detail in our filings with the SEC, including, without limitation, our annual report on Form 10-K for the year ended December 31, 2015 and subsequently filed Quarterly reports on Form 10-Q. We will also be referencing non-GAAP financial measures in this presentation. A reconciliation of non-GAAP to GAAP results is available in our earnings press release and in this presentation.

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Business Update Q2 2016 & H1 2016

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Q2-2016 Performance

Revenue decline of -$24M, or -6.1% y-o-y − Jordan Valley acquisition adds +3.1% y-o-y

Organic revenue decline of -9.2% y-o-y, driven primarily by delays in European academic funding and weaker industrial markets

Non-GAAP gross profit margin expands +250 basis points y-o-y to 47.6%

Non-GAAP operating margin of 10.8%, flat y-o-y

Non-GAAP EPS grows by +5% y-o-y

Q2 Financials

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Revenues [$ m]

396 372

Q2-15 Q2-16

Non-GAAP EPS

Despite revenue decline in Q2, we expanded gross profit margin and grew EPS

-6%

+5%

$0.19

$0.20

Q2-15

Q2-16

H1-2016 Performance

Revenue decline of -$2M, essentially flat y-o-y − FX lowers revenue by -0.4% y-o-y − Jordan Valley acquisition adds +2.3% y-o-y

Organic revenue decline of -2.2% y-o-y, driven primarily by delays in European academic funding and weaker industrial markets, but also by weaker MALDI Biotyper business in the US and China

Non-GAAP gross profit margin expands by +110 basis points to 47.2%

Non-GAAP operating margin expands by +120 basis points y-o-y to 11.7%

GAAP EPS grows by +35% y-o-y to $0.23

Non-GAAP EPS grows by +28% y-o-y to $0.41

H1 Financials

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Revenues [$ m]

749 747

H1 2015 H1 2016

Non-GAAP EPS

Operational improvements and acquisition result in gross and operating margin expansion >100 bps on flat H1-16 revenue, EPS grows >25% y-o-y;

0%

+28%

H1 2015

H1 2016

$0.32

$0.41

Bruker BIOSPIN Group Achieved mid-single-digit (MSD) revenue growth and continued margin

expansion

NMR benefits from volume, pricing, mix, and 2015 restructuring

Good applied markets demand for NMR FoodScreeners™ and for NMR metabolic research systems in international Phenome Centers

Good after-market revenue and margin growth with LabScape™

Low-single-digit (LSD) revenue decline, cost actions underway

Daltonics revenue declined due to delays in European academic funding and lower MALDI Biotyper sales in China and the US

Exciting new Daltonics products MALDI PharmaPulse, timsTOF and rapifleX TOF/TOF are expected to be profitable growth drivers in FY17

Optics business grew revenue with meaningful margin expansion

GROUP OVERVIEW:

H1 2016 Performance

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Bruker CALID Group

Bruker NANO Group LSD revenue decline due to European academic funding delays and

very weak industrial markets

Semiconductor metrology revenue more than doubles with Jordan Valley acquisition and rapid adoption of X-ray tools by major customers

AXS with weaker margins on lower revenues, right-sizing underway

Nano Surfaces revenue declines with margin improvements due to cost actions; order growth in multi-photon and super-resolution microscopy

BEST Segment MSD revenue decline and lower margins after phase out of ITER and

DESY projects in 2015

Good revenue growth for superconducting wire as a result of strong backlog and long-term contracts

High-temperature superconducting (HTS) tapes make good progress, commercial deliveries accelerated to Q4-16

GROUP OVERVIEW:

H1 2016 Performance

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Innovation with Integrity

ANALYTICA & ASMS CONFERENCE ANNOUNCEMENTS IN MAY AND JUNE 2016:

Exciting new products for life-science research, applied and bio-/pharma markets

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Raman Microscope used in laboratories for forensics, pharmaceutical, materials and life-science research

Intact protein analysis for biopharma

Revolutionary MALDI PharmaPulse™ label-free UHTS for drug discovery

Breakthrough novel Trapped Ion Mobility separation on ESI-QTOF mass spec for separation of unresolved compounds

SENTERRA™ II rapifleX™ TOF/TOF timsTOF™

2016 Key Priorities

Continue Margin Expansion as we transition from our three-year Transformation phase to our next phase of Operational & Commercial Excellence

Strengthen systems and management insights by harmonizing business processes and ERP platforms

Accelerate profitable growth in four strategic growth markets

Reemphasize strong focus on customers, as well as on product and business innovation

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Financial Update Q2 2016 & H1 2016

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NON-GAAP FINANCIAL PERFORMANCE:

Q2-2016 Overview

[$ m, except EPS] Q2-2016 Q2-2015 Δ

Revenues 371.7 396.0 -6%

Operating Income 40.0 42.9 -7% Margin (%) 10.8% 10.8%

Non-GAAP EPS $0.20 $0.19 +5%

Free Cash Flow 8.9 -9.2 +18M

[$ m] Jun 30, 2016 Jun 30, 2015 Δ

Net Cash 77.4 129.0 -40%

Working capital (WC)* 589.9 642.2 -8%

WC-to-revenue ratio 0.36 0.38 -0.02

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COMMENTS

Flat operating margin despite MSD revenue decline. EPS increased due to share buyback.

Positive free cash flow of $9M

Share buyback and dividend result in lower net cash

Working capital ratio improvement due to good inventory and receivables management

* WC = (Accounts Receivable + Inventory - Accounts Payable)

Q2 2015 Organic Currency Portfolio Q2 2016

$396.0M $371.7M

Q2 2016 revenue bridge

Organic Currency Portfolio Total

-9.2% 0.0% +3.1% -6.1%

Organic revenue decline of -9.2% driven by academic funding delays in Europe and Japan, weakening industrial markets, and lower MALDI Biotyper sales in China and the US

Jordan Valley acquisition and accelerating adoption of X-ray semicon metrology tools adds to revenue growth

No effect on revenue growth from foreign currency translation

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Q2 2016 DRIVERS

Q2-2016 Revenue Bridge [$ m]

-$36.3 $0.0 +$12.0

Q2 2016 Revenue for Bruker Corp.

Q2 2016 Non-GAAP Results

[$ m, except EPS] Q2 2016 Q2 2015 Δ Total Revenues 371.7 396.0 -6%

Gross Profit 176.9 178.4 -1% Margin (% of revenues) 47.6% 45.1%

SG&A -100.1 -98.0 2% (% of revenues) 26.9%

24.7%

R&D -36.8 -37.5 -2% (% of revenues) 9.9% 9.5%

Operating Income 40.0 42.9 -7% (% of revenues) 10.8% 10.8%

Tax Rate 12.0% 10.3% +170 bps

Net Income* 32.6 31.9 +2%

EPS $0.20 $0.19 +5%

Shares Outstanding 162.4 169.7 -4%

Gross profit margin expansion driven by NMR revenue growth, price increases, favorable mix, 2015 BBIO restructuring, plus strong semicon metrology business

Academic and industrial revenue declines lowered NANO and CALID Group gross profits and margins

Flat operating margin

Q216 tax rate impacted by settlement of audits, valuation allowance reversal

EPS increase due to lower share count

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COMMENTS

* Attributable to Bruker Sum of items may not total due to rounding

H1 2015 Organic Currency Portfolio H1 2016

$749.5M $747.1M

H1 2016 revenue bridge

Organic Currency Portfolio Total

-2.2% -0.4% +2.3% -0.3%

Revenue essentially flat y-o-y with the acquired Jordan Valley revenue

Organic revenue decline of -2.2% driven by same dynamics affecting Q2 results

Immaterial foreign currency impact

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H1 2016 DRIVERS

H1-2016 Revenue Bridge [$ m]

-16.5 -$3.1 +$17.2

H1 2016 Revenue for Bruker Corp.

H1 2016 Non-GAAP Results

[$ m, except EPS] H1 2016 H1 2015 Δ Total Revenues 747.1 749.5 0%

Gross Profit 352.3 345.5 +2% Margin (% of revenues) 47.2% 46.1%

SG&A -192.1 -192.1 0% (% of revenues) 25.7%

25.6%

R&D -72.9 -74.7 -2% (% of revenues) 9.8% 10.0%

Operating Income 87.3 78.7 +11% (% of revenues) 11.7% 10.5%

Tax Rate 15.0% 18.2% -320 bps

Net Income* 66.9 55.0 +22%

EPS $0.41 $0.32 +28%


Gross profit margin expansion driven by same dynamics as in Q2

Operating expenses slightly lower on flat revenue

Operating margin increases +120 bps

Audit settlements, valuation allowance reversal, jurisdictional mix lower tax rate

Share buybacks add 2 cents to EPS increase

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COMMENTS


H1 2016 Cash Flow Statement

[$ m] H1 2016 H1 2015 Δ

Net Income 38.4 30.0 +8.4

Depreciation & amortization 26.7 26.7 0.0

Changes in working capital* -15.0 14.4 -29.4

Other -46.0 -45.6 -0.4

Operating cash flow 4.1 25.5 -21.4

Capital expenditures -17.2 -13.4 -3.8

Free cash flow -13.1 12.1 -25.2

Y-o-y free cash flow comparison driven by:

– Increased BioSpin, BEST, and Jordan Valley inventory needed for H2

– Higher 2015 bonus payments in Q1-16

– Q1-16 tax payments associated with 2015 cash repatriation

– Higher capex in H1-16 compared to H1-15

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COMMENTS


2016 Outlook

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Revised FY-2016 Guidance

Reported Revenue Growth Approximately flat

Non-GAAP Operating Margin Expansion y-o-y

Approximately 75 - 100 bps

Non-GAAP EPS $0.97 - $1.02

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Lowering Revenue Guidance, Maintaining EPS Guidance

Organic revenue decline: ~ -2%

Acquisition revenue growth: ~ +2%

FY 2016 tax rate: 20% - 23%

Fully diluted share count: 163M shares

Capex: ~ $35 - 40M

Current currency assumptions: Yen/USD: 103 USD/EUR: 1.11 CHF/USD: 0.98

2016 ASSUMPTIONS

Appendix

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Q2 2016 GAAP Results

[$ m, except EPS] Q2 2016 Q2 2015 Δ

Total Revenues 371.7 396.0 -6%

Gross Profit 170.1 169.4 NM Margin (% of sales) 45.8% 42.8%

SG&A -100.9 -98.5 2% (% of revenues) 27.1% 24.9%

R&D -36.8 -37.5 -2% (% of revenues) 9.9% 9.5%

Operating Income 20.4 31.6 -35% (% of revenues) 5.5% 8.0%

Net Income* 14.5 21.9 -34%

EPS $0.09 $0.13 -31%


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Q2 2016 Reconciliation of GAAP and Non-GAAP Results

[$ m, except EPS] Q2 2016 Q2 2015

GAAP Operating Income 20.4 31.6

Restructuring Costs 3.7 5.2

Acquisition-Related Costs 8.1 -2.8

Purchased Intangible Amortization 5.4 5.2

Other Costs 2.4 3.7

TOTAL 19.6 11.3

Non-GAAP Operating Income 40.0 42.9

Non-GAAP Interest & Other Income (Expense), net* -2.6 -6.0

Non GAAP Profit Before Tax 37.4 36.9

Non-GAAP Income Tax Provision -4.5 -3.8

Non-GAAP Tax Rate 12.0% 10.3%

Minority Interest -0.3 -1.2

Non-GAAP Net Income** 32.6 31.9

Non-GAAP EPS $0.20 $0.19

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Sum of items may not total due to rounding * Excludes $0.2 million of net losses for Q2 2015 **Attributable to Bruker

H1 2016 GAAP Results

[$ m, except EPS] H1 2016 H1 2015 Δ

Total Revenues 747.1 749.5 NM

Gross Profit 336.9 329.6 +2% Margin (% of sales) 45.1% 44.0%

SG&A -193.6 -193.1 NM (% of revenues) 25.9% 25.8%

R&D -72.9 -74.7 -2% (% of revenues) 9.8% 10.0%

Operating Income 54.4 46.8 +16% (% of revenues) 7.3% 6.2%

Net Income* 38.1 28.4 +34%

EPS $0.23 $0.17 +35%


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H1 2016 Reconciliation of GAAP and Non-GAAP Results

[$ m, except EPS] H1 2016 H1 2015

GAAP Operating Income 54.4 46.8

Restructuring Costs 7.5 8.5

Acquisition-Related Costs 10.0 -2.6

Purchased Intangible Amortization 10.8 10.4

Other Costs 4.6 15.6

TOTAL 32.9 31.9

Non-GAAP Operating Income 87.3 78.7

Non-GAAP Interest & Other Income (Expense), net* -8.2 -9.5

Non GAAP Profit Before Tax 79.1 69.2

Non-GAAP Income Tax Provision -11.9 -12.6

Non-GAAP Tax Rate 15.0% 18.2%

Minority Interest -0.3 -1.6

Non-GAAP Net Income** 66.9 55.0

Non-GAAP EPS $0.41 $0.32

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Sum of items may not total due to rounding * Excludes $0.2 million of net losses for H1 2015 **Attributable to Bruker

Q2 2016 Cash Flow Statement

[$ m] Q2 2016 Q2 2015 Δ

Net Income 14.8 23.1 -8.3

Depreciation & amortization 13.5 13.2 +0.3

Changes in working capital* -13.7 -16.1 +2.4

Other 3.5 -21.7 +25.2

Operating cash flow 18.1 -1.5 +19.6

Capital expenditures -9.2 -7.7 -1.5

Free cash flow 8.9 -9.2 +18.1

Y-o-Y free cash flow comparison driven by:

– Inventory increases

– Dividend payment

– Large estimated tax payments

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COMMENTS


Balance sheet

[$ m] Jun 30, 2016 Dec 31, 2015 Jun 30, 2015

Cash, Cash Equivalents & Short-term Investments

420.4 468.3 493.6

Financial Debt 343.0 265.8 364.6

Net Cash 77.4 202.5 129.0

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[$ m] Jun 30, 2016 Dec 31, 2015 Jun 30, 2015

Total Assets 1,720.5 1,730.0 1,820.4

Working Capital* 589.9 584.6 642.2

Intangibles, Net & Other Long-Term Assets

268.3 267.4 232.8


Q2-16 GAAP SEGMENT RESULTS:

BSI and BEST GAAP Performance

[$ m] Q2 2016 Q2 2015 Δ

REVENUE

Scientific Instruments (BSI) 345.8 366.2 -6%

Organic Revenue Growth (%) -8.7% 0.6%

Energy & Supercon Technologies (BEST) 28.5 30.8 -7%

Organic Revenue Growth (%) -8.9% -8.1%

Corporate Eliminations -2.6 -1.0

Total Revenue 371.7 396.0 -6%

OPERATING INCOME

Scientific Instruments (BSI) 18.9 28.7 -34%

Energy & Supercon Technologies (BEST) 1.4 2.6 -46%

Corporate Eliminations 0.1 0.3

Total Operating Income 20.4 31.6 -35%

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Sum of items may not total due to rounding