Bruker Corporation Stock

Good morning, everyone, and welcome to the Bruker Corporation Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Joe Kostka, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Third Quarter 2026 Earnings Conference Call. My name is Joe Kostka, and I'm the Director of Bruker Investor Relations. Joining me on today's call are our President and CEO, Frank Laukien; and our EVP and CFO, Gerald Herman. In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of Bruker's Investor Relations website. During today's call, we will be highlighting non-GAAP financial information.

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. 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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent acquisitions, geopolitical risks, wars or blockades, market demand, tariffs, currency exchange rates, competitive dynamics or supply chains. 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-K for the period ending December 31, 2025, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and on our outlook as of today, November 4, 2026. 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 fourth quarter and full year 2026 financial results expected in February 2027.

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 for the third quarter of 2026 in more detail and comment on our full year 2026 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's third quarter '26 earnings call. Bruker continues to drive significant advances in post-genomic disease biology solutions and drug discovery from proteoforms to glycobiology and from functional protein interactions to spatial biology. These foundational advances in disease biology, together with strong growth drivers in specialty infectious disease diagnostics and in our deep tech and semiconductor metrology franchise are expected to lead to significant revenue growth acceleration and further margin expansion.

Bruker's positive bookings trends continued in the fifth consecutive quarter of Bruker Scientific Instruments or BSI book-to-bill greater than 1 as we see increasing strength in most of our end markets, and I will highlight 3 areas in particular. First, U.S. Acad/Gov. In the third quarter, our BSI organic bookings in the U.S. Acad/Gov market grew in the double-digit percentage year-over-year. This was the first quarter with year-over-year bookings growth in U.S. Acad/Gov since the NIH funding disruption in 2025.

The prior year comparison was a weak one, but this is nonetheless encouraging. And by the way, we also expect year-over-year organic bookings growth in U.S. Acad/Gov in the fourth quarter. One could speculate that last night's blue wave in the midterms could also bode well for U.S. Acad/Gov funding in fiscal '27 and beyond. Second, China. BSI organic bookings in China were up over 20%, both in the third quarter and year-to-date. This consists of broad-based demand strength as almost all of our BSI end market orders in China grew nicely.

Third, year-to-date, we've seen greater than 30% organic bookings growth in BSI semicon metrology markets in the quarter. This robust order growth is being fueled by the AI megatrend, which requires our metrology solutions for logic chip foundries, high-bandwidth memory and advanced packaging. While the lead times on these orders are longer than most of our life science tools, we expect to see these semi orders convert into revenue mostly in fiscal year '27 and some in fiscal year '28.

Speaking of AI, artificial intelligence, in August, we started a strategic collaboration with and we did a minority investment in Atinary Technologies, a pioneer of self-driving labs and Agentic AI-driven chemistry R&D. Atinary integrates our Chemspeed lab automation and Bruker analytical measurement instruments into its Agentic AI workflows. The Atinary lab in Boston includes Chemspeed robotics and Bruker benchtop NMR for small molecule synthesis and catalysis in pharmaceutical R&D and process development. All right. Let's dive into the numbers.

Let's turn to Slide 4 now for the P&L performance in the third quarter, where we achieved significant margin expansion and non-GAAP EPS growth driven by our focus on cost discipline and execution. Our third quarter '26 reported revenues of $874 million increased 1.6% year-over-year with organic growth of 0.7%. Our third quarter '26 non-GAAP gross and operating margins were 51.3% and 16.3%, respectively, both up significantly year-over-year. Our Q3 '26 diluted non-GAAP EPS was $0.56, up 24.4% from Q3 '25. Moving to Slide 5. Our year-to-date 9 months Q3 '26 revenues increased by 3.1% to $2.54 billion with organic revenue essentially flat.

Our year-to-date non-GAAP gross margin, operating margin and EPS were all up nicely year-over-year, and their year-to-date performance is summarized on Slide 5. As Gerald will explain in more detail shortly, in Q3 and year-to-date, our free cash flow also has improved considerably, and we have made excellent progress with deleveraging. Please turn to Slides 6 and 7 now, where we highlight the year-to-date third quarter performance of our now reorganized 3 Scientific Instruments groups and of our BEST segment, all on a constant currency or CER, and year-over-year basis. Year-to-date, the BioSystems Group revenue was $1.2 billion, up low single-digit percentage year-over-year in CER.

Strength in biopharma and translational research was partially offset by weakness in Acad/Gov. BioSystems saw strong CER growth in IR and Raman spectroscopy and in mass spectrometry, driven in part by the TOFWERK acquisition, which was partially offset by softness in NMR. Year-to-date 2026, our newly elevated Microbiology and Infection Diagnostics group had revenues of $396 million, which increased in the low single-digit percentage, driven primarily by robust molecular diagnostics revenue growth. Turning to Slide 7. Year-to-date, Bruker Nano revenue was $770 million with a low single-digit percentage CER decline.

Robust year-to-date growth in semi metrology and biopharma was offset by weakness in Acad/Gov and industrial. Semi revenues were down double digits in the third quarter, primarily driven by our previously communicated pushouts of semi metrology instruments from the third quarter. We have been very explicit about that in our Q2 earnings call when Gerald gave Q4 color that we expected the $20 million pushout from Q3 in semicon metrology. Finally, year-to-date BEST revenues were up 8.3% in CER, net of intercompany eliminations with strong growth in research instruments or RI and solid growth also in superconductors.

Right. Moving to Slide 8. We highlight our recent acquisition of MIMETAS, a leading humanized Organ-on-a-Chip or NAM, platform. NAM stands for new approach methodology. It's a commonly used term in the industry and also by the FDA. I'll let you read some of the background on MIMETAS. I think it's a reading slide rather than me going to every bullet. But I think it is very important to get the higher-level perspective that in addition to multiomics and spatial, and structural biology, and AI augmented drug discovery, one of the pain points and one of the reasons for the failure rates of so many drugs.

When they get translated from mouse models or animal models to humans, are toxicities, our off-target toxicities that are unique to humanized models and human physiology. And MIMETAS with its humanized organs on a chip, which can be nicely automated, which have many disease models and are poised for very significant double-digit growth with high gross margins, we think are probably the best type of systems of this type on the market, which is why after extensive research on that market, we acquired a majority in MIMETAS. We're very excited, and we think this will complement our multiomics, spatial biology, structural biology in drug discovery, in particular, drug discovery and development in a very important way.

It's a high priority for just about every biopharma company. Right. On Slide 9, we touch on a few recent advances in functional proteomics with novel workflows for drug discovery and disease biology launched at the recent International HUPO Conference in Singapore. Again, I will not read every bullet, but we had very significant further advances in this MultiDIA method on our timsTOF for bottom-up proteomics, for plasma proteomics, single-cell proteomics, where we see in net-net, more peptides and protein groups and also more isoforms, sequence variants and all the other things that traditional MS-based methods or the affinity method simply cannot see, but they're functionally very important for better AI frontier models or better drug discovery.

On the right-hand side, our timsOmni continues to be a very successful system in the market with significant orders. And here are new workflows that are really very, very important, one in glycobiology, where with our unique trapped electron-based fragmentation. I won't go into technical details, but it's really crucial to do this at scale, at speed and in very sensitive manners. And glycobiology is tremendously important, but has been traditionally very difficult to study.

Moreover, oligonucleotides and native RNA analysis is another important area, whether mRNA is a drug target or a potential RNA drug and the instrument can perform outstanding workflows now in this area as well. We think this bodes well for further rapid adoption in academic medical centers, which have good funding as well as in pharma companies and biotech companies. All right. That about does it for me. In summary, the third quarter, we achieved significant margin expansion and non-GAAP EPS growth and our positive booking trends continued.

Our BSI organic bookings and BSI backlog are both up mid-single-digit percentage year-to-date. This helps derisk our fourth quarter and sets us up for meaningful further performance improvements and growth acceleration in fiscal year '27 and beyond. Let me turn the call over to our CFO, Gerald.

Thank you, Frank, and thanks, everyone, for joining us today. I'm pleased to provide more detail on Bruker's third quarter 2026 financial performance, starting on Slide 11. In the third quarter of '26, our results were roughly in line with our expectations on the top line, but meaningfully ahead of our expectations on margins and EPS, largely confirming the benefit of our cost-saving actions together with a positive mix in the quarter. In the third quarter of 2026, Bruker's reported revenue increased 1.6% to $874 million, with organic revenue growth of 0.7%.

Acquisitions added 1.7% to our top line, while foreign exchange was a 0.6% headwind, resulting in constant exchange rate revenue growth of 2.4% year-over-year. BSI organic revenue declined 0.4% in the third quarter '26 with BSI instrument revenue down mid-single digits and BSI aftermarket revenue up high single digits organically year-over-year. The organic decline in the third quarter '26 instruments revenue was primarily driven by the previously communicated pushouts of semi metrology instruments from the third quarter. Geographically, on a year-over-year organic basis, in the third quarter of 2026, European revenue was up low single digits percentage.

Americas revenue was roughly flat, while Asia Pacific revenue declined in the mid-single-digit percentage. BSI revenues in China were up in the low double-digit percentage in the third quarter of 2026. And for our EMEA region, revenue was up over 30%. Our BSI segment order book performance was up organically in the low single-digit percentage year-over-year, driven by strong growth in semi and double-digit growth in U.S. academic government research and China academic government research, partially offset by declines in European and Japanese Acad/Gov and biopharma in the third quarter, mostly due to quarterly fluctuations.

Third quarter 2026 non-GAAP gross margin increased 120 basis points to 51.3%. Non-GAAP operating margin was 16.3%, up 400 basis points, driven by our cost-saving actions and favorable mix. We are on track to achieve our $140 million annualized run rate cost-out target. On a non-GAAP basis, third quarter 2026 diluted EPS was $0.56, up 24.4% from the $0.45 we posted in the third quarter of '25. Our non-GAAP effective tax rate was 28.4% compared to 24.4% in the third quarter of '25 due to unfavorable jurisdictional mix in the third quarter of '26.

On a GAAP basis, we reported a diluted loss per share of $0.81 compared to a GAAP diluted loss per share of $0.41 in the third quarter of '25. Our third quarter '26 GAAP results include a noncash goodwill impairment charge of approximately $175 million related to Bruker Spatial Biology, where U.S. academic and government research market conditions have been weak. Weighted average diluted shares outstanding in the third quarter of 2026 were 153.2 million, an increase of 1.2 million shares from the third quarter of '25. Slide 12 shows Bruker's performance for the year-to-date 2026, which are similar drivers to the third quarter. Turning to Slide 13.

In the third quarter of 2026, free cash flow improved $151 million year-over-year, driven mainly by higher net income, excluding the noncash goodwill impairment and improved working capital. We continued our debt deleveraging in the quarter, paying down an additional $58 million in debt. Our net leverage ratio was 2.4x as of September 30, 2026, and now is below our previously communicated leverage target. Turning now to Slide 15. We're updating our fiscal year '26 financial outlook for currency and reconfirming our prior fiscal year '26 organic revenue growth and non-GAAP EPS guidance.

We now expect reported revenue of $3.52 billion to $3.56 billion, representing reported growth of 2.5% to 3.5% compared to fiscal year '25. We continue to expect organic revenue growth of 1% to 2% and contribution from acquisitions of approximately 1.5%. We now expect currency to be approximately neutral to reported revenue for fiscal year '26 after the recent strengthening of the U.S. dollar. We continue to expect non-GAAP operating margin expansion of 250 to 300 basis points year-over-year, largely driven by our cost-saving actions. On the bottom line, we continue to expect non-GAAP EPS for fiscal year '26 in a range of $2.10 to $2.15, up 15% to 17% compared to fiscal year '25.

Other guidance assumptions are listed on the slide. Our fiscal year '26 ranges have been updated for foreign currency rates as of September 30, 2026. Now some color on the fourth quarter of 2026. We expect fourth quarter organic revenue to grow in the lower mid-single-digits percentage year-over-year. We expect meaningful sequential and year-over-year increases in operating margin and EPS due to higher volume and favorable mix in the fourth quarter as well as due to the compounding effects from our cost-saving actions.

To wrap up, third quarter 2026 was a solid quarter for Bruker, giving us improved confidence in the market recovery in many key market segments and geographies. Our cost-saving actions are well on track, positioning us for significant margin and profitability improvements in fiscal year '26, and we're driving towards further margin improvement and double-digit EPS growth in 2027. With that, I'd like to turn the call back over to Joe. Thank you very much.

Thanks, Gerald. We will now begin the Q&A portion of the call. [Operator Instructions]. Operator?

[Operator Instructions] Our first question today comes from Puneet Souda from Leerink Partners.

First one on margin improvement, margin expansion this quarter. Great to see that. But just wondering in terms of factors that give you confidence on the step-up in the fourth quarter, it is still sizable 500 bps sequential. So just wondering in terms of cost savings that you're seeing and recognizing in the fourth quarter, any gigahertz magnets that are landing in the fourth quarter, Acad/Gov and other AI and the order -- $20 million order shift that you talked about as well. What are some of the drivers that give you confidence on that step-up in margin?

Puneet, thank you for your questions. I think -- I mean, I think we've significantly derisked the fourth quarter. By my math, we do no longer need a 500 bps sequential step-up. That was, I think, previously correct. But now we need to step up from where we were at 16.3%. And I think we need to step up to the high teens, and that seems much more achievable given that it's likely to be about $1 billion in revenue quarter. And in the recent U.S. order pickup probably mostly will benefit us in '27. China Acad/Gov orders have picked up earlier, and they would begin to help us in Q4.

The semi shift, some of that goes into Q4, some of that may go into early '27, but that's all good. So I think the margin and the revenue margin, EPS ramp into Q4, I mean, it's never without risk, but we think what we're saying about the color there is prudent at this point in time. And -- but I think we -- this is much significantly derisked with another strong Q3 and then obviously, the margin performance and EPS performance in particular makes this much more achievable.

And then on AI, Frank, obviously, an important theme for Bruker. You levered to it in multiple ways, uniquely on the semi side. And obviously, the AI biodiscovery as that starts to take shape as companies are investing more in discovery and platforms there. Can you maybe -- is there a way to sort of quantify the contribution today from AI? And then how are you thinking about 2027 here for AI overall across the enterprise?

Yes, two pieces to that. As you pointed out, the semiconductor metrology and within our BEST segment at RI, also some contribution to the ASML supply chain ultimately, although that's still smaller because that goes into the latest and greatest tools that they are beginning to now get more adopted. That has been quantified. I think we've -- you've written notes on that. Others have been written notes on that, so I won't jump into that. And that continues to, I believe, the year-to-date order growth in that area has been 30% or higher year-to-date. And again, it also was really strong in Q3 in order performance. So that's just humming along and obviously, one of the very strong growth drivers in our deep tech -- broader deep tech area, but particularly in the semi metrology and a little bit in the lithography supply chain.

BioDiscovery, our bio and chemistry discovery and materials discovery benefits our Chemspeed automation orders, benefits our SciY software. And more and more, I think it will also benefit those deep biology 2.0 tools, whatever you want to call it, that from bottom-up proteomics, of course, to isoforms to incomplete proteoforms, top-down glycobiology, spatial biology and structural biology, I think, are all going -- there's an excellent article in the Wall Street Journal today where, yes, taking more shots on goal, meaning on drug targets is helping a little bit, but it may not lead to the expected breakthroughs of curing all diseases anytime soon, which is optimistic anyway.

But I think the deeper -- unless you feed these frontier models with much, much deeper insights into disease biology and drug targets and mechanisms of action, we're not going to make all that much progress. So there, I think, maybe not uniquely, but I mean, more than any other company, I think we're positioned for really providing these deep disease biology tools.

We think that will -- that's still not moving the needle so far, but I think that's quite promising for '27, and I think we could be seeing a very significant ramp-up in the next few years where people begin to move from scratching the surface at higher with more shots on goal, which is after sort of the initial approach, which is fine to, I think, the much more impactful, deeper biology for which you need our tools. That was a long answer, I apologize.

Our next question comes from Tycho Peterson from Jefferies.

Frank, obviously, a lot of improvement here in end markets. I'm wondering if you could just kind of give us a state of the various end markets. You've obviously talked a lot about academic picking up. How much of what you're seeing here and now you think is durable? And then what's going on in pharma? It seems like pharma orders were down both in the EU and I don't know in the U.S. as well, but maybe touch on that as well.

Yes. Glad to, Tycho. Thank you. So Acad/Gov, nice to see a little bit of order growth in the U.S. Importantly, also in China that's been going on throughout year-to-date, so for several quarters. A little bit -- Japan is relatively weak. It's a small part of the total demand now, but it is weak. And Europe was quite very strong in Q3 of last year, '25 and was a bit weaker in Acad/Gov than in Q3 of '26. And so that's how -- it's not all -- we're not firing on all cylinders, but more and more. And year-to-date, I think are the better trends. Any given quarter, these things can fluctuate and they do. But year-to-date, I think the overall, as we said, mid-single-digit BSI backlog and bookings, I think that kind of is a good predictor of where we might end up in revenue growth -- organic revenue growth next year.

Pharma, biopharma also has some fluctuations. We -- I think we had an excellent Q4. Q2, Q3, a bit weaker. Q1 was actually not that strong. But overall, the pharma, biopharma trends are good. They're not as strong as those who are more in the regulated space of pharma. They see stronger growth as we've seen yesterday, for instance. But I'm encouraged that in the more CapEx-heavy drug discovery front end, the trends are good, although there's some quarterly fluctuations also for automation and software tools.

Okay. That's helpful. And then what's your latest framing on '27, given mid-single-digit bookings growth here, BSI book-to-bill above 1. Obviously, the incremental cost savings look like they'll continue to flow through here. So can you just provide any updated thoughts on '27 at this point?

Well, not really beyond what we've said already. I mean, as you know, when we report probably in early February, report Q4, we'll give guidance. But I mean, having -- we put our neck out and feel pretty comfortable and are very committed to double-digit EPS growth. But refining that further, it's too early right now. We are seeking more than 100 bps of further operating margin expansion, hopefully, more than just 100, not 300 or 250, like 300 this year, but another meaningful step.

And from this year, still relatively flattish because we for us, it's always that orders kick in 6 to 9 months before the revenue growth kicks in, as you've seen. And then we have this very strong deep tech orders, which have even longer conversion times, but come in at very good margins and with very good order trends. So anticipating that we will accelerate in organic bookings growth -- sorry, in organic revenue growth from this year is easy because it's going to be an easy comparison. But nonetheless, that should bring us to the -- at least to the lower mid-single digits.

Okay. And then just quickly on margins before I hop off. Mix contributed 90 bps this quarter. Can you just unpack what -- where you're seeing the biggest mix benefits?

Yes. Tycho, it's Gerald. I'd say we saw some significant mix improvement, both in our NMR business as well as in our optical microscopy business in the quarter, and that's better than what we actually anticipated. Clearly, we still have good solid performance in a number of other areas, but I'd highlight those 2.

Our next question comes from Luke Sergott from Barclays.

Just wanted to follow up on the margin side. So big margin step up here and came in well above what anybody was looking for. And so you talked about derisking that 4Q. So I just wanted to know like, is there a pull forward on any of the cost outs? Or is this just -- you talked about on Tycho's question, the 90 bps mix. Just anything there from a conservatism or what's embedded in 4Q because your revenue dollar didn't change. So just trying to figure out like what the difference is there versus your prior expectations for a big 4Q step-up.

Yes. Again, Luke, it's Gerald. I would just say with respect to the margin performance for the third quarter, I mentioned we had 2 more favorable elements on the mix side. On the cost savings side, recall that actually most of our cost-saving actions didn't kick in really until the fourth quarter of 2025 historically. So we have quite a big step-up in cost saving improvements in the third quarter of 2026. And that's part of the more significant element here. But I would say mix was clearly better than we had expected to see even back in Q2.

Okay. And then I guess on the BEST beat that you guys had, continued strength here all year long. Can you talk a little bit more about what is driving this? Is like some of the newer energy technologies like fusion and -- or is this -- just trying to think about how much is like just pricing given the supply chain constraints, et cetera.

Yes. Good question. So I should observe that BEST was pretty weak last year. So it also sometimes a weaker comparison helps. But nonetheless, we're very pleased with the BEST order trends, which are even stronger, and we don't break those out because some of our MRI superconducting wire orders, they come sort of every 5 years and big framework agreements. But very, very strong order growth in the research instrument side, and that is driven to your question, by ITER and fusion orders that ultimately will go towards fusion energy, certainly fusion energy range research.

There are other high-energy physics and advanced light sources and free-electron lasers and similar projects around the world where we just have pretty unique capabilities and unique technology that really play a role and where the order growth also has been very, very strong. As I said, they're also plugged in a little bit into this ASML lithography supply chain in a small way, but being designed in is a good thing. It's where you want to be into the newest tools.

So we're just delighted with that segment. And it also has seen nice margin improvement. So it's not just the growth. And -- but the bookings growth is even higher there, even though the revenue growth is really quite nice. So it's an exciting part of our normally less appreciated deep tech in addition to the deep tech semiconductor metrology that we've quantified and that you have had -- we've all had more interest and insights in this year.

Our next question comes from Subbu Nambi from Guggenheim.

As you think about 2027 framing, given all the events that have happened in the last 2 years, how are you approaching the philosophy when rolling all the end markets up? Should we expect a bit more conservatism next year given the jump-off point? Or is it full steam ahead with some of the higher-growth businesses like semis? Just any color on a prudent start point would be helpful.

Super good questions. Obviously, guidance coming then in early February. I'm afraid I might repeat a little bit what I said to Tycho earlier. Yes, there is upside, but I think it's also -- we've all been burned by unexpected events in '25 in particular, right? And still things are -- there's still a lot of areas are very dynamic and timing is hard to call. But I think looking for double-digit EPS growth, of course, you'll want to know how much double digit. We're not prepared to say that yet and greater than 100 bps margin expansion.

And I think this lower mid-single-digit organic growth range seems reasonable to us and not overly conservative. So I think we're really going to -- I think we get to the more typical Bruker 200, 300 bps above market. That's more of a '28 or '29 thing, hopefully, '28. '27, I think, will still be a transition year, but with very significant organic growth improvement compared to this year.

A follow-up. Last quarter, you indicated 2/3 of the fourth quarter revenue was covered by backlog. Are you almost fully derisked at this point?

I'd say pretty much at this stage. We have pretty clear visibility into the backlog for the fourth quarter, and we're -- we still have execution-related issues. But other than that, I would say pretty much.

Yes. I mean you have about 60% instruments revenue, 40% consumables. Obviously, on consumables and services, you have limited backlog. And on the instruments, you tend to have the backlog and then it depends on sometimes issues with suppliers that -- and then also more typically customer site readiness, which, I mean, at any given quarter, this is not a fourth quarter thing at any given quarter, it could be -- you kind of -- even if you execute perfectly just from the customers, it's sort of a plus/minus $20 million uncertainty that you have because you don't know exactly when they'll be ready to take shipments.

But again, all in, I think we feel, obviously, it was not excessive, but there was more risk in our Q4 ramp previously. And now it's not a shoe in. It never is. It's a big quarter, but it seems achievable.

Our next question comes from Lu Li from Bank of America.

Maybe on the first one on the margin. I guess like for 4Q, do you still expect to see kind of favorable mix impact? And then maybe can you comment on kind of the cost inflation that you've seen in the quarter and then for 4Q as well?

Yes. It's Gerald. With respect to the fourth quarter, we're pretty comfortable now where we stand. As I said earlier, we have already put in place cost-saving actions that will impact the fourth quarter, and I think that's going to be favorable. And when we look at the rest of our mix, we are expecting an ultra-high field system into the mix, that will also help our overall picture.

We do have a stronger performance also in the semi space, which also will help our mix. So I think fundamentally, the fourth quarter pieces look pretty solid, I think, for us at this stage. And as I said earlier, cost-saving actions are already in place. So more about execution on the revenue piece at this stage.

Cost saving actions are accumulating throughout the year. It's kind of a compounding effect and should be even more also visible in Q4 and certainly was very visible in Q3.

Got it. And then second question, probably on China. So definitely year-to-date has been pretty strong performance. It seems like the money has like falling into kind of the orders. I'm wondering kind of like looking forward in 2027, do you still expect kind of a pretty like durable bookings growth? And maybe just like what do you hear from the customer on the market?

China is really revenue earlier in the year was still going down because of weak orders in '25. I think that has reversed in Q3 with some broad revenue growth. And then year-to-date in China, that's exactly -- you're exactly right, our order growth in China for BSI it has been really quite good. And we don't expect that -- we expect that to continue in Q4. It's hard to read China beyond a few quarters. China, sometimes we say, well, you've got to finish the quarter to know. I think we have reasonable confidence that Q4, the strength will continue. Hopefully, that can be extrapolated into '27.

We have no reason to believe otherwise, but it's just also more difficult to read China over 1- or 2-year periods. But we're encouraged this year, the trends have been -- order trends have been very good, expected to be continued in Q4. And by the way, also in China, Acad/Gov, it was not only U.S. Acad/Gov that was weak, but also China Acad/Gov and that has really turned in orders already earlier this year and continued in Q3.

Our next question comes from Doug Schenkel from UBS.

I have one on BSI, and then I'm going to ask another 2027 question. So BSI book-to-bill has now exceeded 1 for 5 consecutive quarters, yet BSI organic revenue remains under pressure. I think you were down 1% year-to-date. With U.S. academic bookings now double-digit positive, China above 20% and semiconductor metrology above 30% year-to-date, why aren't we seeing a more meaningful revenue inflection? And what gives you confidence that the bookings you've been talking about are going to start to convert in 2027? So that's my -- the first topic.

And then more broadly on 2027, given the momentum you've described based on trends over the last few quarters, in a scenario where you're growing, call it, 4% to 5% next year, which I think is consistent with your commentary, it seems if momentum continues that BSI would grow something like 3% to 4% and BEST closer to 10%. Again, not asking you to guide, but I just want to make sure there's nothing in my logic that is off.

Our logic and math are impeccable as always, Doug. So I'm trying to get through all the pieces of your -- to all the parts of your question. The BSI book-to-bill, why has it not shown yet in Q3? The biggest part is that semi pushout that we had highlighted in our -- when Gerald gave Q3 color on Q3 during our Q2 earnings call, because otherwise, semi bookings have been just very strong year-to-date, greater than 30%. The other part is that -- and the other part that also has longer conversion times is NMR and sometimes related MRI, preclinical MRI. And that certainly felt the impact of 2025 Acad/Gov weakness in the U.S. and in China.

So the NMR part until that grows again also takes a little bit longer. So NMR and semi pushout are why you haven't seen it as much yet. You will see, as we're predicting, this all implies organic BSI organic revenue growth in Q4. I'm not saying that the Q4 rate will then, therefore, be indicative as an exit rate for '27, but it will probably be closer. And other than that, how -- yes. I think other than that, I think your logic isn't something that I would object to or detect the flaw. This is 1 of the scenarios that you've just outlined with numbers. I'm not confirming that, but I'm also not contradicting it. It's 1 of the scenarios of how it could play out. It's reasonable.

Our next question comes from Jack Meehan from Operon Research.

I wanted to ask about the new MID segment. So it looks like it grew low singles in the quarter. Can you just talk about like what you think is the right ongoing growth rate for this business in the medium term? And any moving parts you would call out? I'm not sure if there's any respiratory exposure with ELITech or anything like that. Just helping us frame that segment would be great.

Yes. Great. Good question, Jack. Yes. So no, we don't have very much respiratory not since COVID. That's de minimis for us. It's also 1 of the specialty diagnostics business that doesn't have that China headwind that you've seen with some others. So it's clean in that sense. It's infectious disease diagnostics tools have seen lower growth recently in MALDI clinical microbiology and continued very nice growth in primarily ELITech-derived sample-to-answer molecular diagnostics. There, just like last year, placements of these Genius platforms, that's the name, product name has been well ahead of business plan, and that then bodes well for consumables acceleration in next year and beyond.

And they're also developing some very, very cool new capabilities. We hope to launch -- we hope to get FDA clearance maybe before the end of the year, maybe in Q1 for the WAVE product, which is the antibiotic susceptibility testing for the U.S. There, we're going to go for the U.S. market first, and that will further strengthen our microbiology sepsis testing. And by the way, because of faster time to result can potentially save quite a few lives and/or shorten ICU times and longer-term health effect. So it has an important societal function. Wrapping up, I think that while right now, it's a little bit slower, I think this is a high single-digit growth area long term, and it has very, very nice margins.

Great. Gerald, one below-the-line follow-up for you. So in the guide, you raised the tax rate assumption from 26.5% to 27.5%. I was just wondering as a 2027 question, as we look forward, like what you think is the right ongoing tax rate for the business? And if there are any moving parts that have changed that we should be thinking about?

I mean I think generally, our position on taxes has been relatively consistent here. We're tracking somewhere in that 27.5% range, and we have been for a period of time. We have a number of tax planning initiatives, which we won't discuss here. But just fundamentally, we've got a number of initiatives underway that are expected to benefit the tax rate going forward, particularly in '27 and '28. We can talk more about that another time. But just fundamentally, I would just say that the goal for us is to continue to drive that rate down at least 50 basis points on a year-over-year basis in 2027, and then consistently thereafter. That is our target.

Our next question comes from Kyle Boucher from TD Cowen.

I wanted to go back and build off of maybe a couple that were asked just around U.S. Acad/Gov, the order book improvement. I guess, how much of the improvement that you're seeing is really easier comparisons from the back half of 2025 versus more tangible improvement in sentiment amongst those customers?

It's both, Kyle. Certainly, the comparison was easier, right? We all know that. And I think the U.S. Acad/Gov sector still suffers from lack of conviction. As you know, in the last federal fiscal year, a lot of the funding and budget flush came late. It wasn't linearly spent even though the budget overall wasn't bad. So -- and now people will begin to look at this change with a different Congress same President, different Congress, who knows. But I'm not saying that U.S. Acad/Gov is bouncing back, snapping back, but it is getting better, weaker comparisons help. And people are back to, okay, well, we need these new tools.

We really need them to understand disease biology and you really do. You're just not going to get there with more of the same of what you have already. That's foundational what you have already, sequencing, et cetera, but you need much deeper insights to understand. And you all really need it. It's really shown the people that do have the money, which is in biotech and biotech pharma, they get these latest and greatest tools. And I think that's kind of the -- and also overseas people when they do have the budgets in Acad/Gov, they're going for these tools, fully appreciating that they need to understand targets and mechanism of action, biology and off-target effects, all these complexities much, much better if they want to have a better drug discovery and fundamental disease translational approaches.

So yes, I think this inevitably also then strengthens. There still is a lot of state and philanthropic and other funding. And these days, it's not so much traditionally the Department of Chemistry needing more NMRs or mass specs. Now it's the cancer or neurodegeneration or autoimmunity or cardiovascular disease, academic medical centers, and they have other sources of funding. So that part is really getting stronger.

Got it. Maybe just one more sort of conceptual question, but you mentioned during the call that you're below your target leverage range. I guess can you just talk a little bit about how you're thinking about M&A going forward now that you're under your leverage target?

Well, we did some M&A this year. MIMETAS was an important 1, and it gets us into a new area in addition to our preclinical imaging, the preclinical humanized organs on a chip model that are, in some ways, closer to human physiology than animal models are tremendously important. It wasn't very, very large M&A. You're right. We didn't do any of that this year. And we did some other -- a couple of smaller acquisitions that were really very important for the BMID for diagnostic -- infectious disease diagnostic sequencing, including sequencing the metagenome, which also can help sometimes in extreme cases in detecting infections directly from blood without a blood culture and then some enrichment technology.

So we did some smaller bolt-ons that were technically very, very important for our BMID group and which I think also have -- in addition to good market demand, I think -- and to Jack's question earlier, I think in terms of new solutions that you'll see launched in '27 and '28 in that group, microbiology and molecular diagnostics, we -- I think they'll also outgrow their markets perhaps quite significantly. So we've done some M&A. We have now, again, some more capacity for M&A, but we also like EPS accretion. So we'll be very disciplined.

Our next question comes from Dan Arias from Stifel.

Frank, on the $20 million in pushed off revenues, can you just refresh the view on confidence and timing there? And then more broadly, I guess, just how are you finding the conversation on timing associated with semi product acceptance revenue recognition? Obviously, you're seeing pushback on like data center build-outs. It seems like it could build based on last night's results. But then if you read about permits and construction activity, that still seems pretty good. So I guess what would you say about the error bars around timing? Are they getting wider, narrower or kind of just staying the same?

It's a good question, Dan. I'd say it's kind of staying the same. I mean these big fab projects are within a fab adding additional lines is remarkably on time. I mean that's 1 industry that runs is extremely well managed, but that doesn't mean you cannot have a 1 quarter shift or sometimes a 2-quarter shift. But -- so that all continues as before, actually with -- usually, you can really plan very well. Things don't get delayed by a year in that industry.

Rev rec is not problematic there when they -- when we ship and install these systems work. I mean these are very robust, high-volume manufacturing metrology systems.

These are not finicky scientific. I mean they are extremely -- extreme nanoscience, but they're very, very robust and high throughput systems. Yes, data center build-out in the U.S., but I mean, we'll have to realize the U.S. is only a small is only a fraction, not a small fraction. It's an increasing, but still a small-ish fraction compared to what's going on in Japan and in APAC, a little bit in Europe. But it's mostly in China itself where we can only deliver lower-end systems, that's booming. And then the rest of APAC and big build-out in Japan and of course, Taiwan and Korea and Singapore are all investing very heavily. So that build-out is, if anything, it's accelerating.

Yes. Okay. Okay. Helpful. And then just, Gerald, maybe a bookings clarification. Were BSI bookings up during the quarter, you had said mid-singles year-to-date, but the first 2 quarters of the year were double digits. So just trying to square away the 3Q number in order to get to the 9-month range here.

Yes. I think the bookings performance is low single digit in the third quarter.

Third quarter last year was very, very strong. So actually, I think that's Q3 of '25 and bookings were very strong. So yes, it is up sequentially. Well, sorry, it is up year-over-year, low single digits, and it is up sequentially in the mid to high single digits compared to Q2 of 2026. It is all good.

Yes, it's all moving. The momentum is there, I'd say, yes.

Our next question comes from Albert Hu from Citi.

Maybe on the previous question on semis, you guys called out nothing's really changed here. So are you guys still expecting that business to be around, call it, $300 million to end the year on mid- to high single-digit growth, 30% EBIT margins? And does that translate to -- just given the bookings to maybe like a mid-teens grower, call it, $400 million business next year? I appreciate the color. And I have a follow-up.

Good question. You may have summed up slightly. I think we're not prepared to discuss that. We're not -- we don't give '27 guidance. We're certainly not giving granularity yet. But directionally, I can't reproduce all the math that you have in your head right now, but I think the direction is correct. And yes, that business if anything would accelerate in revenue growth next year compared to this year, that is also correct. And its order growth has already been very good. And we hope that -- we think that will continue into '27 and then beyond '27, we follow what the industry thinks and the industry hasn't really taken a position on '28, '29 yet, but they're pretty sure that '27 things will continue to hum along with very fast growth rates.

Got it. Okay. And then I think you previously called out some potential NIH budget flush in September. Is that what you guys saw that drove the double-digit A&G bookings this quarter? And I guess, do you expect that to flow through given the 6 to 9-month conversion time for A&G to grow next year? Or how should we kind of juggle just the strong double-digit bookings in the forward thinking? Appreciate it.

Yes, right, Albert. I think the double-digit bookings in Q3 had a lot to do with the weak Q3 of last year and maybe some incremental orders that came, but there was a budget flush at NIH for sure. That's well documented. Most of that, we think, will help us with Q4 orders and perhaps some of that will still take a little bit of time and go into Q1 orders. So the budget flush that was not significantly responsible for improved bookings in Q3. I think it's just there's a lot of pent-up demand. People need the newer tools.

At some point, they just do whatever it takes within their university or academic medical center or research hospital to get the new tools, and they're getting used to this slightly less predictable federal funding and they're just dealing with this new -- and they're settling into that and are now kind of back to where they're placing orders for what they really need. And then the budget flush that did take place probably for us, primarily helped -- will help Q4 and Q1 bookings.

And with that, ladies and gentlemen, we will be ending today's question-and-answer session. I would like to turn the floor back over to Joe Kostka for closing comments.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the fourth quarter. Feel free to reach out to me to arrange any follow-ups. Have a good day.

This concludes today's conference. Thank you for participating. You may now disconnect.

Good morning, everyone. Welcome to the day 1 of Bank of America Healthcare Conference in London. My name is [ Louie ]. I'm from the U.S. Life Science Tools team. We are very fortunate to have Gerald Herman, CFO of Bruker; and then Joe Kostka, Investor Relations, joining us today. Gerald, welcome.

Thank you. Delighted to be here. Thanks for the invitation.

So, maybe just to quickly start on some of the quick 2Q recap. Results came in a little bit weaker than expected, just same as with the 3Q guide, but the bookings has been great. So, can you just maybe talk about the puts and takes for the quarter? And how should we think about the 4Q ramp? I think that's what people come by focusing on.

Yes. So, I'd say with respect to the second quarter performance, we clearly outperformed on the organic order bookings performance as well as on the EPS line. We came in light, I'd say, on the revenue performance, which is a little lighter than we had expected. We have a couple of elements that contributed to that. I think one of the key areas I think we need to focus on is, talk a little bit about, is the highlights of some of the order book performance. Generally speaking, we saw strength in China for the first time. Actually, in multiple quarters, we've seen significant strength there, greater than 20% order growth.

Biopharma space for us was actually quite strong across the globe, including in the U.S. The other area that I think maybe wasn't such a surprise to most investors that was our semi-metrology business. Parts of that business have really got remarkable growth going on right now, driven mostly by AI demand, advanced packaging and just generally some other favorable tailwinds in that space. So order performance, quite good across most of the geographies with the exception, I'd say, of the U.S., particularly the aca/gov side. And that's sort of somewhat continued through the third quarter. We can talk a little bit more about that, if you like, on the NIH funding environment. But in general, weaker funding environment in the U.S. aca/gov side in the second quarter and some of that also -- seeing some of that also in [indiscernible].

With respect to the other elements of the business, I think, generally speaking, we did well in some of our pharmaceutical product portfolio. We did quite well, I think, in some of the academic and government research markets, particularly for our proteomics products outside the U.S. And I think, just generally our diagnostics business performance in the quarter, we saw high single-digit growth in that space and expecting to continue to see that. So a mix -- a bit of a mixed story, mostly industrial weakness and some aca/gov U.S. weakness, but otherwise, a pretty good story for us from the profitability side in the second quarter.

Now to your comments on the third and the fourth ramp. On the third quarter, we did communicate for some color related to the third quarter of '26 as we expect to see some pushouts, particularly in the semi space. And that's just fortunately adding to the size of the ramp for the fourth quarter. When we look at that, I think just generally, we're pretty comfortable with what that looks like right now. It's over $1 billion worth of revenue, but we have delivered close to that in Q4 of '24. So when you layer on, for example, the gigahertz-class NMR system into the fourth quarter of '26 and you add some of the pushouts coming from the third quarter, it feels from a revenue perspective it's npretty achievable.

And what that does for just generally, it's going to provide a better mix story for us compared to the prior year quarter, up from the fourth quarter. It's going to give us some very good volume leverage on the operating margin level. And we also have some cost saving actions that kick in, in the fourth quarter. So, from an operating margin and EPS perspective, feels, again, pretty achievable for us assuming the revenue volume performance that we are expecting to see. So, I think that's kind of feels good for us. I think on the fourth quarter, it's going to be an important quarter for us from an execution perspective, that feels quite achievable.

Great. So, let's start with the academic market. So, now we are approaching in the U.S., the fiscal year-end of the government. Have you started to see maybe more funding being released to your customers, maybe that you're starting to see a pickup in quarters, potentially we can see some benefit in 4Q?

Well, so, to answer the first part of your question, we are beginning to see some signs of improvement in the funding environment in the high-end research tools market space in the U.S. on the academic and government research sector. It's taken us quite some time to get to this place. It is a bit disappointing that there was a funding and there's congressional approval to go forward, but we have now some sort of a large bolus of amounts that appear to be released at the end of September. We started to see some signs of some orders as well. But I would say most of those orders, we would expect to see the funding occur in the third quarter, we expect to see those orders in the fourth quarter.

So, unfortunately, I don't think that's going to translate into any upside at all for the fourth quarter just because of the turnaround in that process. I would expect we will, however, see an improvement in '27 revenue performance coming out of it. And actually, this is very similar to what we saw in fiscal year '25 with U.S. funding all occurred at the end of the fiscal year and it certainly helped the '26 performance, but it didn't help that particular year. So, I wouldn't expect to see much improvement in '26 fiscal year as a result of that. But it would give us some good momentum. And certainly, we do know from our own connection points into grant applications to the NIH and NSF that our products are being selected as a part of those grant applications. So, those clearly will become orders over time. It's just a question of how quickly academic institutions translate those into real purchase opportunities.

Great. There was no shortage of NIH news. I think there was a recent one last Friday about potentially additional panel review on the grant. Wondering, given that academic is a big market for you guys about like 40% of the total revenue globally, U.S. can be -- maybe we're going to see like multiyear weakness that's intentional, China can be volatile. So, wondering like whether you have seen any behavior changes in your customer base? And what could be the potential offset if we're going to see the weaknesses?

Yes. So, our -- just to reframe this a little bit. So, the U.S. aca/gov portion of Bruker's revenue is about 8% of total revenue. So I'm not understating it's still an important market for us, but it clearly doesn't carry the weight that it used to years back. And secondly, I would say what we've seen generally is an uptick in the order performance in the academic and government research sector for our products outside the U.S. And here, I'm talking about Europe, China, Korea, Japan.

In those markets, it's pretty clear that we've got the products, the right products in the portfolio to really address the research market requirements. So, I think the real question for us is going to be, is there going to be more challenges within the U.S. aca/gov side and actually, at this point, we haven't seen that. We've actually seen, especially with the recent bolus of these funds, it's largely going to the institutions where we have pretty deep collaboration arrangements and working arrangements with those institutions.

So, I think, generally speaking, we're expecting the U.S. aca/gov markets to be more stable, notwithstanding multiyear funding, additional reviews and so on. I think just generally, the tools that we're providing into that space are the right tools at the right time. I would also say that I think generally speaking, we have a number of other cylinders that are firing. I can use that analogy, in the business that weren't there in 2025. I mentioned biopharma. China can be volatile, but fundamentally for our tools, the experience that we had, especially at the high-end research end has been very stable and pretty predictable, I guess, more broadly.

And the great thing about China is that they don't appear to have the same funding challenges that the U.S. has once the Chinese to align on a particular sector, and they can fund it very, very quickly and have actually. I think what we're seeing right now in the China market, including in the academic and government research side, is just the ability to pivot to the right sectors that they want to fund and to be able to fund those quickly, get high-end research tools that they need. I think generally, that's the way I would frame this.

We've got biopharma performing better, China performing better. I would hope that we start to see certainly outside of our deep tech products, the orders are quite strong, starting to see strength again in industrial steps forward. So I think we've got plenty of other places that can offset any delays in U.S. aca/gov research funding. What I'm hoping is that it's not actually going to be as delayed as it was in '25 and '26. I'm hoping that the administration will have slightly different view on how to fund this going forward.

Great. That's great. I think moving to semi. I think lots of the investors' questions were on, are you expecting another delay or maybe like new orders being pushed out again to 2027? So, wondering if you have like any thoughts on that. I think the question is really on, like, you have visibility into the order, but it seems like the visibility in terms of the delivery time, that can vary. Do you guys have any, like, internal process that can improve the visibility that can help investor as well?

Look, I think to step back a few notches here, I mean, the semi metrology business for Bruker makes up about 9% of our total revenue. So, it's a sizable sector for us. I mean, we saw remarkable growth and here I'm talking about greater than 15% order growth in the second quarter. I can tell you that the growth profile for the third quarter so far looks very good as well sector. So, I think the overall market dynamics and market demand for that -- for semi products, in particular the products that we offer is really quite strong.

Now, as to the volatility or the question around visibility, I would say, generally speaking, first of all, we are very blessed to have significant order activity, and it looks like that's continued. It looks like that's going to be at least sustainable through several more quarters into 2027. Maybe some question about what happens in 2028 and '29. But at the moment, the '27 picture looks pretty good from an order perspective. Then, the conversion of that -- of those orders into revenue has been a little choppier, and that's not really driven by Bruker's actions, but really driven by its customers.

Customers typically put orders into the slot, they identify, and then from time to time, they move appropriately for them depending on when their fabs open or whether they're -- when they're bringing these instruments on -- or want to bring these instruments online. So those are really not elements that we can control yet necessarily really good. We have deep working relationships with these customers and I think many of you may know, these are some of the largest semiconductor companies in the world, and they have significant control and management of when they want those instruments to be delivered. We don't get to decide on those.

And we get visibility usually in 3, 6 months in advance, but sometimes they push those out further. So, I don't think there's much more we can do internally to get better visibility into when the revenue itself will be recognized other than to be clear about what our expectations, what their expectations are in terms of time line on the delivery times. I think, just generally, just it looks like the bolus of order activity being as strong as it is, is going to mean a much smoother new revenue curve going forward. We have quite a bit of backlog at the moment. So, I mean, maybe that smoother curve doesn't occur until sometime in 2027. But I think investors shouldn't worry about whether those orders are going to be dropped or changed. They might change the timing of them, but historically, we haven't seen installations or any other moving off of an existing order.

Moving into another quarter, I think, is normal in this business and the scale of what we're talking about, I think, is pretty reasonable in order for us to do that. But we will have better visibility into that as we march into 2027, and we will give the Street more clarity around how that looks, especially that part of the business.

That's helpful. I think circling back to one of your points where you think '27 picture is good, beyond that depends, but think about the portfolio that you sold into the semi, like, any specific product that you think have a little bit more durable growth into like outer years, where you see like pretty healthy demand, just in general?

Yes. Just generally, I mean, of course, we have some really hot demand products going on in the semi space. I, think as we just said, that's likely to be durable for multiple years. I think the other area that we've been talking quite a bit about with investors is the timsOmni product. This is a product that we introduced in 2020, I guess, 2025 and have really taken a lot of order activity not only in the academic government research side, but also in the pharmaceutical side. This is a product that focuses on proteomics and the identification of proteoforms and the functioning of those proteoforms.

So, this is a product that's sort of what we call part of the Proteomics 2.0 concept that we've been communicating into the Street. And that product has shown to be really exciting, I think, in the marketplace. There isn't really any other products similar to it. It's being used extensively already in the pharma space for the identification and functionality of proteins. So, it's -- I think that is one for sure that would be also pretty hot going forward. I think the other one that we talked a little bit about is the timsMetabo. This is a product that's focused mostly on metabolites. And I think that's another area that's going to be very important moving forward. I think the take-up on that particular product has been quite good. It operates at the high end of the market. And I think we've seen a pretty significant performance there.

But we do have a pretty broad portfolio. I think, as some of you may know, we introduce new products, like, every year. I mean, with our R&D spend activity, we have a lot of new products that are introduced annually, and we try to be at the #1 or the #2 market position in all those products. And if we're not, we're reinventing or reinnovating or we're moving out of that market space. So, we have a range of products that I would say other than the 3 that I've talked about, I think there's a whole range of other products that are doing extremely well in microscopy, in the Raman microscopy in our optical or X-ray technology products as well.

We've got some really interesting products coming up. I would say we're starting to move also into more advanced products in energy fusion and security detection area where we're seeing really good take-up in our instruments. So, there's a bunch of products, I'd say, that are going to propel us forward at a more rapid rate than I think general market conditions in '27 and beyond.

Great. Maybe slightly also related to that, I think everyone is talking about AI, but I think my focus will be a little bit outside of the semi, but more on the traditional research tools, right? How are you, kind of, like, size your percentage of the portfolio that are more like high-resolution tools that can be used in AI drug discovery, like maybe you already start to seeing some benefit from that? Like, maybe can you talk a little bit about that?

Sure. It's an interesting question. I think fundamentally, we do think that we're in the early stages of the AI, say, we think that AI is going to be a tailwind, particularly to selected life science tools companies, and we think we will be one of the primary beneficiaries of that. And the reason for that is primarily because we offer really deep sort of resolution capabilities and data generation capabilities from our instruments in a way that most of the others in the tools industry don't. So, there will be other companies that will benefit, but I think we'll be one of the primary beneficiaries.

And I think, just generally, what we're starting to see at the moment is early stage -- the development of early-stage foundational models in the AI side. And those are essentially designed to beta test some workflows. So, you take a particular problem and you start to design the flow and then test with an instrument and then do some analysis with artificial intelligence. And fundamentally, I mean, we are going to be part of that testing process, we think. And we've seen some evidence, in particular, in Boston area, but in other markets where some companies are starting to develop these foundational models in a fairly elemental way with some fairly straightforward, likely simpler tools. But one would expect as these models evolve, they will need deeper data analysis and deeper data solutions.

And that's where I think our instruments come in. Having a deeper understanding of disease biology through the, kind of, data that our tools generate is really kind of where we think this is going to go. So, in Stages 2 and 3 and 4, as these models develop, we think they'll need more advanced deep high-resolution tools, and that's where we play really well in the space. So here, I'm talking about tools like the proteomics tools, the omni -- timsOmni, AIP, high throughput tools, some of our Metabo instruments around metabolites. I think the other area would be spatial biology, which we haven't spent too much time talking about. But certainly, the amount of data that gets generated through spatial dimensioning of cells and molecules is going to be a big part of that. So, I think the CosMx product and related products associated with that would be more significant.

So, I think those are the areas that we see as essentially developing a tailwind going forward. I think the early-stage development activities are just occurring here in 2026. But I mentioned to some investors earlier today that there is a really interesting company that we made a minority investment in a company called Atinary, which basically does clinical chemistry and essentially takes clinical compounds and puts them together to look at toxicity and reaction. And they've got a foundational model that they're beginning to develop. This is in the Boston area. Essentially, they're trying to look at reaction capabilities between these chemistries. And they're using a Fourier 80 Bruker and benchtop NMR to look at those chemical reactions and structurally provide data with respect to those.

So, the way I think about this is that's a very small contained sort of chemical reaction, but using artificial intelligence, they're doing these chemical reactions over and over again. And eventually, when they move to stage, these are being applied for pharmaceutical and drug toxicity tests, for example. When you apply this on a much larger scale, they're going to need larger NMR systems, which will be much larger than Fourier 80 that they're using today. And this is a thesis that we have that going forward, maybe in the early stages, you use a relatively straightforward tool, but then as you march towards more advanced models, you need the heavy guns have to come out and you need deep resolution capabilities and a lot of data. And then that gets fed into these models. That is how we think this is going to play out with much -- many more shots at a particular target, and fundamentally, probably different targets will be identified in a way that we have never seen before.

So, that's the sort of the big picture around what we think is going to be a pretty significant tailwind, at least starting in '27 and beyond on the AI side for selected tools companies.

Great. I think you touched on spatial a little bit and then maybe just, like, talk about competition dynamic in some of your areas, right? So one is spatial. One of your competitors launching a newer higher throughput machine. Anything on your pipelines going after the similar market? Another one will be more like a microbiology, another your competitor, kind of, like, turning around the story. So, I'm wondering how do you kind of like comment the competition dynamic?

Yes. I mean, the key thing is that when you're playing at the #1 or the #2 position in most of these markets, you have to be innovating continuously. And that's one of the things that I think Bruker does better than most companies. Our innovation cycle is world-class. And I think, fundamentally, we generate new products more quickly. And those are typically products that have innovation with impact. They're not just a slight upgrade. These are usually products that take science to generally a higher level. And I would say that if you think about the spatial biology area, I would say the CosMx product, which we acquired as part of our NanoString acquisition, we really upgraded and really strengthened the capabilities of that tool.

I mean, to a point where essentially the Atera, which is the 10x product that's competing with that is making a lot of claims yet to actually deliver a product and we had most of those capabilities, whether it's the human transcriptome or the mouse transcriptome or microRNA capabilities or additional protein capabilities. We had all that a year ago, and those products are continuing to sell and especially in markets outside the U.S , where the funding dynamics are slightly different.

But -- so, I think the short answer is whether it's microbiology, whether it's our spatial biology business or proteomics business, we just continue to innovate at a faster rate and with higher impact than many of our peers, and that's going to keep us hopefully driving our growth rates at rates above market. That's really the strategy. We're investing roughly 11-plus percent of our overall revenue into R&D on an annualized basis, and that seems to be paying off nicely in our expected growth rates going forward. And a few headwinds in '25 and a little in '26. But I think with funding environments improving in most of the sectors that we play and improving, we should -- we expect to see stronger revenue.

I think you mentioned a couple of drivers in 2027 and beyond. So, I guess as we kind of look ahead, what will be kind of the moving pieces for '27?

Yes. So, I think for sure, semi will be -- it looks like it's going to continue at a fairly rapid growth rate. I would say our proteomics business fundamentally started to see a pretty significant pickup, especially from these new products. I mentioned Omni and Trevo. But beyond that, our core proteomics business continues to grow at a good rate. I would say in the biopharma space, if you compare where we were in '25/'26 as a transition year, it feels as if the biopharma markets are really starting to pick back up. We have really good products that focus on drug discovery research. So, I think that particular space looks pretty encouraging.

And then finally, China. I just think as I said earlier, China has the ability to pivot and fund really quickly, and they are clearly doing that in the biopharma space, but also in the semi space and just fundamental academic research markets in China seems to be turning more favorably. So, I think those would be more of the growth drivers in that space. I'm still hoping for a stronger recovery in the industrial parts of our business, which continue to be a little lighter than I would like to see. But assuming that, that also starts to strengthen in the industrial and applied markets, we could see further acceleration of growth in 2027.

Great. I guess maybe turning to the margin on 2027. I think, Frank kind of mentioned you guys are expecting at least 100 basis points margin expansion. I guess like how much is that coming from like the cost saving program that you have this year and then versus like maybe you're expecting organic revenue to drop through and then have some bottom leverage?

Yes. So there's a few factors. So first of all, we are -- we have talked about, sort of, returning to growth in 2026. We did that pivot in Q2 of 2026. The expectation is we would hopefully begin to accelerate that through 2027. We'll see once we've wrapped up the fourth quarter, which is a significant quarter for us, what that spells for 2027 in terms of organic revenue growth. But certainly, on the operating margin expansion, we expect to put up 250-plus basis points of operating margin expansion in 2026. And I think as Frank pointed out, we expect to be somewhere greater than 100 basis points.

I think a good portion of that, I would say, if you look at something like 100 basis points, a good portion of that is going to be made up from just the cost saving actions that Bruker has already taken. We have roughly $140 million -- north of $140 million of savings going on in the business in 2026. On an annualized basis, we expect that to be better pickup in 2027, plus some of you may know, we did a reorganization of our NMR business, essentially with our Mass Spec and Optics businesses to create a Biosystems group. And that group, we expect to be able to drive roughly $20 million of annualized savings as a result of that reorganization. That wasn't why we did it. We did it more for market dynamics and our competitive position in servicing our customer base. But fundamentally, we will generate some savings out of that as well.

So I think between the cost savings actions, combine that with what I describe as the volume impact of a higher volume even if it's modest, dropping down to the bottom line. Add to that some mix benefits, we do have -- we do expect to see some more academic government research funding activities, not only in the U.S., but outside that with some of our core products will be more favorable from a mix perspective. We continue to think we will have better mix performance in the semi business just by virtue of the scale of that business that now goes into 2027.

And then I think the other piece from an operating margin perspective is it does appear as if the headwinds that came from foreign exchange in '25 and to a certain extent, in '26 will be somewhat abated. If you look at the long-term or the medium-term forecast for the U.S. dollar against the major currencies that we operate in, which is euro and Swiss franc and yen. It looks like there will be some favorable -- even if it's not as strong a headwind that will be favorable to us on the operating margin line for the benefit of those that don't fully follow this, most of our operations and factory operations are in Europe. So we generate a lot of costs in euro and Swiss franc.

And so, those have been a headwind in 2025 and '26, and we expect that to be more stable as the U.S. dollar appears to be stabilizing and somewhat strengthening, at least what we can see. But Bank of America is the expert on foreign exchange, not Bruker. But I would say, generally speaking, we're thinking that, that will also contribute to better operating in margin in '27.

I know you guys have been doing a lot like by continuous like cost-saving programs. In 2027 and beyond, have you started to look into like other areas whether like you can squeeze further? Maybe we can have more than $140 million?

Yes. I mean to back up a little bit, I mean, we're north of $140 million, maybe getting to $160 million of annualized cost savings for a company our size and our scale, that's a significant cost reduction program. And the goal, of course, for us would be to hold those costs, generally speaking, some variable costs that we have to play through. But generally, to hold those -- the cost structure even when we start to see an escalation and acceleration of growth will really be the area that we're targeting, right? The goal for us would be to continue to drive operating margin expansion up, get us closer to this 20% target that Frank and I have been talking about for a year or so in the future years, that would be the primary target to keep driving EPS growth at this kind of double-digit mid-teens growth level, which I think will be exceptional in our space going forward.

So yes, there are other areas. We clearly are looking at some other areas. But I would say, just generally, we really want to make sure we prioritize and fund our R&D with patience to drive the kind of growth curve that we are expecting going forward. So while there are and there will be some other cost-saving actions we'll take, they probably won't be at the scale we've been talking about here, they maybe [indiscernible] more on the edge and not so much at the core level. And certainly, it's one of the things that I look at fairly carefully going forward on a regular basis. But I wouldn't expect, especially with the deep cuts that we put in place, I wouldn't expect something similar for the future years. But it doesn't mean we aren't looking at cost-saving actions because we do that routinely as a part of our management program.

That makes sense. I think another part of the margin is the mix. I'm referring more to the aftermarket services part. How is that going? Any kind of like what percentage of attach rate, whatever metrics that you guys are using that kind of like in the longer-term target and will help you to achieve that 20%?

Yes. It's a very good question. I think strategically, the company has really focused a lot of attention in areas where we can generate what we describe as stickier revenue. So particularly in the diagnostics area, specialty diagnostics are some of the things that we really do well. But if you think about what's in our aftermarket revenue base for Bruker today, it makes up about 40% of our total revenue. And fundamentally, when I go back to -- I joined the company about 9 years ago, we were closer to 25% aftermarket revenue. So we've really taken a fairly significant step up over the last, let's say, 5-plus years.

And I think strategically, we'd like to see more of that. We'd like to see more revenue that's recurring, or revenue that has more predictability and visibility, as you mentioned earlier, fundamentally, we're interested in that. So we may have to look at -- we may look at some elements that are more inorganic in order to achieve that to get us closer to what we're sort of targeting a 50% aftermarket, so 50% instruments and 50% aftermarket. Just to be clear, aftermarket for us includes service. It includes software, spare parts, assays associated with our diagnostics business. And so those businesses, including the service area are growing actually at a higher rate than our instruments levels have been historically.

And we put a lot of resources and management time into the development of those resources, including even in the software space. I think our focus initially had been on the development of broader software capabilities to support -- to be inside our instruments. And now we're looking at more software elements that are more around managing the data that comes out of our instruments, providing insights to our customers on the understanding of that data. So you don't need to have a postdoc actually interpreting spectra or development of this stuff, but you just -- you hit the green button and it tells you what the outcome is. That's really what we're doing. Hopefully, we'll continue to do that organically and inorganically as we march forward.

Great. Last minute, what do you think the Bruker story has been kind of underappreciated by investors?

Well, I think just generally, I would have said our semi business initially, but now that seems to have been [indiscernible] more fully understood. And I would say we started to expose the other parts of DeepTech, our security detection and the other sort of energy-related business elements inside Bruker. I still think the story for us is, I think, a little underappreciated is the scale of our innovation and the kinds of innovative tools we produce across the spectrum. It's not just in proteomics. It's even though it gets a lot of attention. It's not just in the semi space. It's really our measurement and imaging capabilities across the portfolio that are pretty exceptional. I don't think everybody understands the scale of it or the application of it, which is what I think we're starting to demonstrate now in some of these other areas.

Great. Awesome. Well, thank you so much for joining, and that wraps up our section.

Thank you very much.

Thank you.

All right. Thank you, everyone, for being here. It's my pleasure to welcome the Bruker team to the Morgan Stanley Healthcare Conference. My name is Michael Podoll. I lead Morgan Stanley's life science tools and diagnostics practice in the health care investment banking side. And so I joined here by Frank Laukien, Chairman and CEO; as well as Gerald Herman, the Chief Financial Officer. So Frank, Gerald, welcome.

Thank you for having us.

So maybe just to start off, Frank, your father founded this company back in 1960 around NMR when the ultimate kind of potential was far from clear and I'm curious, within Bruker's portfolio today, where do you see kind of similarities or where there's maybe a gap between what you view the is having a really strong scientific potential versus what's well understood today.

Okay. Interesting question, yes. I think we're in that inflection point where people are trying to understand biology much more deeply. Disease biology, drug discovery, biomarkers that may play a role in diagnostics or MRD or whatever it may be. And the biological questions, I think, more so than the technological questions, what magnet, what laser, what mirror, what mass spec do I need?

There's fast evolution there as well, but I think we're at that inflection point where people talk to -- call it sometimes biology or disease biology 2.0. We've used or coined the term the post-genomic era of drug discovery and disease biology. I think that's where the biggest inflection point is right now where people aren't quite sure yet where that will go and where there is a debate. Well, we almost understand everything because we have the genes. I know we understand 20% of disease biology and the complexity.

So I think it's more on the biology side. And than necessarily the technology side. Yes, we have better timsTOFs and magnets and whatnot coming out all the time. We're a technology powerhouse, but I think it's more important and we've transitioned the company really be also deep in disease biology and biomarkers and the biology 2.0 though that's behind that.

Maybe for an investor that's newer to the Bruker story, double-clicking into what you just said about kind of post genomics. What exactly do you mean by that? How do you want an investor to understand about how Bruker fits into that ecosystem and where you're going?

Yes. So genomics and sequencing are foundational. But the only -- in some diseases, they make the big difference in many other diseases. They've scratched a little bit more than the surface, but I think that maybe we understand 25% of biology and disease biology is sort of -- maybe that's almost a consensus, there's a range, obviously. So clearly, proteomics clearly bottomed gene expression at the transcriptomic and proteomic level.

But beyond that, even every protein, so-called protein is a protein group which is an average of 30 different molecules, they call proteoforms, and that's where the function or pathology as the case maybe occurs, understanding that with much higher differentiation, resolution, doing that at scale and with sensitivity is one of the key new important areas where function binding of drug targets or protein, protein interactions function occurs than primarily at the proteomic level and also multiomics at the metabolomic, lipidomic small molecule levels.

In addition, that's often embedded in a spatial context. So spatial biology has become very, very important. In addition, because it does get more complex, and we might as well deal with it. It's a big market opportunity and ignoring it has led to atrocious rates of translating discoveries into new drugs, right? They're still very, very poor.

In addition, we need to understand binding and interaction and protein dynamics, good old NMR is a crucial technology for that, that plays well with mass spectrometry, but also with other vendors, cryo-EM or AlphaFold. So bringing together multiomics, spatial interactions, binding dynamics. I know you want me to stop probably, oh my God, it's a long list. But unless we really tackle the hard problems. And for that, AI is a foundational tool, it's an enabling tool.

You can't do that anymore with human expertise only. And so it's -- the confluence of these factors is really crucial. I take that too bad for drug discovery and then for diagnostics development, so many failures, so expensive so long. But of course, wow, if you could get the insights from 25% to 50% or to 75% because you're not afraid of the complexity and the depth that's needed. And that's the hypothesis we're pursuing, providing the tools to deal with that is an incredible opportunity. That's the biggest S-curve and inflection point for Bruker over the next 5 to 10 years. Yes, we do deep tech. Yes, we do diagnostics, but that's the really, really big opportunity. And we are pursuing not all, but multiple, multiple aspects usually with the deepest and best tools.

That's great. And where are you seeing the most demand or whether that's from what your customers are talking about or what's actually kind of pulling through on the one hand and what's taking longer than you may have otherwise anticipated?

Yes. So from very, very fast growth phase for Bruker from post-COVID to about '24, where we're very significantly outgrowing the market and most of the larger peers in the industry, and then some very significant headwinds in '25 from currency to tariffs to academic spending from which we're still in part recovering in '26.

It's now -- well, sometimes it's absence of headwinds, that's in U.S. academia and in many areas, we're seeing more and more and accelerating tailwinds. This year, something we normally haven't talked much about, non-life science, deep tech, which is if you include defense and energy, maybe $700 million of our revenue. So it's -- that's the fastest growing and by the way, typically very high margin, high incremental margin business.

But the life science indicators of academic spending outside of the United States growing strongly from us -- for us. China growing on the order side for us. And now we actually do believe that there is a budget flush for NIH and NSF that's going on, and they'll put a lot of money into the system before the end of September. And yes, that should bode well then also for Q4 and maybe Q1 orders for us for some of these high-end research tools that people are ready to adopt, and I didn't mention all of them because it's complex enough, but there is additional things for spatial 3D genomics and so on or academic funding will really, really be welcome because I think some of these things are the early phases yet.

Some of them are getting readily adopted by biopharma like the timsOmni others like 3D structural genome, what's that? Does that really matter. It's not just a sequence -- something we can sequence. No, it interacts. It has topologies. It has proximities for that, we need academic funding and there, the U.S. tends to lead. It's doing well in China. It's doing well in Europe, but the U.S. is now hopefully coming along as well. Not sure that answered all of your questions, but --

I think it's a good start.

Parts of it, at least. Yes.

I mean you mentioned deep tech, I think one tendency that investors sometimes have is to try to bucket or categorize. What do you think gets lost about the Bruker story and what you all are doing if an investor tries to categorize you purely as kind of life science tools?

Yes, maybe as little as 6 months ago, I would have said, well, people don't understand that part at all, but I have to say that life science tools analysts and in the last 6 months, have done quite an excellent job in taking a deeper dive into things like semiconductor metrology and even into EUV, lithography and the latest ASML tools and how we're in a small way, still plugged into that.

But as that's transitioning from the 3,000 to the 5,000 series, what medium-term effect could that have on Bruker? They've actually done a pretty good job, and my colleague, Mark Munch, has done a good job in a number of opportunities to educate everybody. So yes, it's not only 1 semiconductor metrology, $500 million bucket. There's sort of a $200 million bucket that kind of goes with a KPI of WFE so you can track that.

Other things have to do more with the technology trends towards smaller and smaller feature sizes towards more and more stacks, towards more and more layering of materials. And then, of course, the advanced packaging, which is key for artificial intelligence, high-performance computing, and it's absolutely key for the high bandwidth memory that this year has really taken off.

And of course, if your Micron and other companies have benefited from that. And we are benefiting from that demand. So it's become explained much better. And even at life science, health care conferences, we now get some very educated questions from our investors on that part of the business.

Great. And maybe conversely, for a life sciences investor that may not necessarily be as familiar with the semiconductor world. How should they understand where in the ecosystem Bruker sits with your metrology business?

Yes. So our deep tech may be around $700 million. So that's a very important part of the business, right? Diagnostics is $550 million, growing to $600 million. In addition to the systems biology 2.0, these are 2 other or pillars of the business. where we're just delighted that the core technologies, which are measurement technologies, right, and some automation and software, but ultimately, measurement technologies when they really, really mature and find killer apps, they find something like the MALDI Biotyper for clinical microbiology or they go into semiconductor, high-volume manufacturing metrology as our semiconductor metrology example has shown.

And this trajectory of taking technologies to applications like proteomics, spatial biology, proteoforms, glycoforms and then eventually transitioning that also into LDTs and into regulated diagnostics is such an important and fundamental driver in our industry that, of course, it's a key and key for Bruker strategy and a part that's important.

But that we and a few other companies, Rigaku, Thermo have some of that, most other life science companies don't have that, also have this big deep tech core part that has outstanding margins. It has some of the best incremental margins. It's a sizable piece. It's not all semiconductor but including defense, including fusion energy and things like that. It's around a $700 million business. it's a key pillar that we absolutely like and it's based on many of the same technology.

So it's not a separable business because sometimes we get that question. No, it has the same technology base, some of it goes into deep tech in fusion and semiconductor. Some of it goes into diagnostics, much of it goes into drug discovery. It's a beautiful continuum of what we can derive from these original technology leadership that then more and more becomes applications and market leadership in these segments.

Great. Maybe shifting gears. AI has certainly been a popular theme this week. How should investors think about where Bruker sits in terms of that ecosystem as there's more and more AI happening around drug discovery, development, the clinical process, and what are you seeing today versus what you think is more aspirational and what do you hope to see longer term?

Yes. So starting with -- in a nutshell conclusion, last week, I was misquoted and we took a bit of a hit, but let me clarify. So the nutshell conclusion is that for the tools for selected deep high resolution tools that provide you with deeper insights where we're the best example in the industry, but there are some other companies in spatial or proteomics that also play a significant role there or structural biology, cryo, right?

But not all companies, I think it's going to be a very significant structural demand driver, and that's a terminology created by someone else. But there's an AI structural demand element that I think will emerge very strongly '27, '28 and beyond. As people have done the basic AI infrastructure investments or maybe it's a partnership with a new tech bio company that has hundreds of millions of funding that does -- that investment in automation and agentic AI and self-driving people dream of lights out labs well, the lights stay on.

There's a few people still around, but very much automated and accelerated and intelligently AI -- intelligently accelerated agentic AI accelerated, drug discovery or improvement of new superconductors or materials or battery research, it goes in many more directions. So a very big growth driver for selected the highest performance tools.

If you take all the data that's out there that's scratching the surface and you're throwing a bunch of AI, you'll get some incremental insights. But I think unless you really take the most discerning tools and use them for building your frontier models and then for validating them in this DMTA loop of design, make, test, that's us analyze, that's human and artificial intelligence and then intelligently figure out how to keep going in that loop.

So it's sort of directed and not just boiling oceans is a huge driver. I did observe next last week that with a lot of that investments and fixed -- mostly fixed biopharma and other industrial R&D budgets on the R&D or drug discovery side that I thought part of as a retrospective comment why did the industry and including Bruker, grow more slowly than we might have expected at that other conference in January or in Q1.

I think part of that is because, of course, that became such an urgent requirement because you're -- for many that it did in part crowd out some CapEx earlier in the year. And that all got abbreviated into a soundbite that I thought I was a headwind. I think it's an enormous tailwind for selected deep high resolution tools that provide you impactful insights and we're the poster child of that.

Maybe a related question, but for Gerald. Does any of this -- or what's happening with this AI thematic change, how you think about capital allocation?

I don't think our capital allocation decisions have really changed. I mean most of our capital is being deployed for innovation in the R&D field. After that, it becomes maybe more around our capacity constraints, particularly as it relates to some of the semi pieces that we've been talking about, where we've made pretty significant CapEx investments to build capacity.

And then after that, we began to look at opportunities on the M&A side and certainly part of our dividend and kind of return capital to shareholders thereafter. But I don't think our priorities have really changed. I think we're hopefully getting back to a place where we've got the kind of -- we're building enough capital and cash flow to be able to get back to it to play the game at a higher level.

Since we did some sizable acquisitions in 2024, with the smaller acquisitions we've done since then tended to often strengthen our infectious disease and microbiology diagnostics business with NGS reflex testing with an additional capability to do fast AST to metagenomic software, again, an NGS application. We don't make sequencers.

We know where to buy them. And then we get particular new capabilities on liquid array and direct from blood and on reflex testing and microbiology. We like, of course, at Bruker to also build out the aftermarket and consumables component. Years ago when we're a pure instrument or nearly pure instruments still meant 20%, 25% aftermarket service upgrades, et cetera.

Now at least it's at 40%. It's probably going to go -- it's clearly going towards 50-50 as diagnostics, but also spatial biology have a lot more consumables and razor blade pull-through. So that remains an important area where we are interested. And then one area that we haven't mentioned yet is our recent MIMETAS acquisition in the Netherlands, in Leiden. We actually acquired 90% of the company because we wanted the founders and management to keep driving this.

And every time you go to a -- this is about drug discovery and development and preclinical work. People want to complement their animal models, which there's not so much for ethical and economic reasons, maybe those as well, but primarily because often they just don't work that well, certainly don't work well in neurodegeneration. The track record in going from mouse to men in cancer drugs is horrible 95% of drugs do not tail probably because the immune systems are so different for humans. So they want humanized microphysiological systems or sometimes it's called NAMs for new approach and we looked at all the smallish companies in that space. There are quite a few that started up. It had a bit of a hype and then it had a dissolution phase.

And we thought we picked the one that has the best content, the best organs on a chip -- humanized physiological relevance but also the best automation that's scalable because they use microtiter plates. And we're actually quite delighted with that. It's only about a $10 million business, but that could move to $50 million or $100 million over the years, plus it will pull in a lot of spatial and metabolomics proteomic tools sort of the tip of the spear.

It is a very -- that AI and multiomics and spatial is actually a very, very high priority for drug companies. And as I went to some of these drug discovery meetings and I look at AstraZeneca and Novartis. I mean picking names in random, they all somewhere on their circle of things to do that are strategically important is organs on a chip, organoids, but you want to go beyond that because you want to have multi-organ capabilities. You want to have a little bit of an immune system that's simulated. So this makes us smaller acquisition is, I think, strategically another very, very important addition for next-generation drug discovery and development.

And maybe following on that point, are there particular therapeutic categories or disease areas that you're seeing particular interest in within the portfolio? Or is it more these kind of different approaches, looking at organ on a chip and trying to understand more of biology from a different perspective? What's the right way to think about that?

So they tend to be different companies in that space don't only have different technologies, but sometimes different content, and they have these different disease, disease area specializations there, cardiovascular metabolic, cardiovascular disease, vascular problems, of course, cancer play a significant role.

For our other tools, I think it's -- a lot of it is oncology-driven spatial biology eventually merging with tissue diagnostics or complementing tissue diagnostics that tends to be not only, but primarily for oncology, tissue pathology. And autoimmunity and neurodegeneration are runners up, I would say, but I think oncology is the most important one.

Got it. And when you evaluate whether it's a company or even a new instrument or technology that you think about developing more organically, where is it today that you're kind of most focused and what kind of separates -- or how do you think about the ultimate commercial potential versus what's critically important from a scientific perspective, even if it may be more niche. How do you balance those?

Well, we still sometimes find niche or technological opportunities where we can innovate because we can technologically leapfrog or do something very, very differentiated but we more and more look at the overall disease biology actually and say, okay, well, if metabolomics and small molecules are an important part or I could pick something else come maybe I'll take a second example in a moment. Well, what's really required. Not only do we have a hammer and do we have a screwdriver and what can I do with those 2 tools?

But what's the toolkit that's required, what's generally available tends to be sequencing in our case because we think there's plenty of options there. And so what's really required to get a deeper understanding to make drug discovery more successful, ultimately, maybe faster and cheaper and/or to make biomarker and diagnostics discovery for cancer and other applications more successful, more differentiated and with a shorter value of death or whatever they call that.

And so we then didn't build the timsOmni because we could, because we said, "Hey, we have a wrench that nobody else has, what do we do with that?" We said, okay, proteomics or bottom-up proteomics, which is proteomic 1.0. We really need to understand these functional or pathological molecules we need to understand intact proteoform.

That is so hard, but why don't we take a big step forward in that. And now we can characterize antibodies and now we can have better tools for immunopeptidomics. They also help us in targeted protein degraders. These are not things we all figured out upfront, but these are things, as you learn, oh, my God, we have new applications. It's fantastic fundamental we thought we've got to get from gene expression at an average protein group level to proteoforms because that's where the pathology occurs.

That's where drug targets can be very different depending on whether they're glycosylated or where they're glycosylated. Hope -- it used to be hopelessly complex, and there was no lamp post. So people said, well, then I won't go there because I can't see anything. But now there is a flashlight and it gets stronger every day. And now people say, yes, absolutely, that's what we need.

That's why very unusual for the timsOmni technology and proteoforms that pharma invests so early in the new technology. Normally, they leave that in academia for a few years. Right now, they're half or more of our business because they know how much they're missing and how it might benefit them to have a much deeper understanding of their disease biology and of their targets and mechanism of action, not just shooting more bullets at their target, what if it's not the right target or what if the target is really a mix of targets and you need to understand that in a better way.

So it's -- the short answer is much more driven by customer needs and overall NMR, mass spec, other vendors, cryo-EM or alpha fold integration to get the best information on multiomics structural and dynamics binding interactions in function is sort of how do we get functional deeper functional information.

And then, okay, that range or that hammer over there, we could make that better and more sensitive or higher throughput or whatever it may be. And that I think has also led to higher margin products for us because we don't compete. We still compete on technology, but very often, we have very unique solutions that got nobody else can answer these high-impact questions.

Right. Perhaps shifting gears to diagnostics, you all recently established microbiology and infection diagnostics as a stand-alone group. What does that structure allow you to do differently? And how are you -- how would you like investors to think about what you're doing in diagnostics more broadly?

Great. Yes. So yes, that's north of $500 million or $550 million business that's grown so rapidly. It also has -- it had in organic growth with the addition of the ELTEC molecular diagnostics business, that's a delight. Again, this year, they're placing their Genius, Ingenius, MyGenius PRO, systems ahead of business plan. They're growing very high single digits, sometimes above double -- just into the double digits. Just like the S curve is highly nonlinear for a while, they were steadily improving their margins in the mid to upper teens and now all of a sudden, they're jumping well into the 20s. So it's a beautiful business.

Overall, microbiology, infectious disease, including some other product lines, we think there's a lot of opportunity for innovation. That's been somewhat of an area that was not very innovative in recent years. And innovation with impact, not so faster the syndromic panel market and others, bioMérieux, have shown how important that market is, but it's still expensive.

Can we bring that into the mainstream? Can we do sepsis detection better? Can we, in some cases, by NGS or other means do it direct from blood, things that shave off a day or 2, which may be critical and life-saving or shortening the ICU time for a patient and also improving the long-term outlook and recovery. Are there things that have a big medical impact and unmet medical need? And we just found by focusing on that area.

And yes, we're not in MRD, that's a wonderful field, but we're really, really good at this, and we have a unique and pretty broad set now of tools, including some of the new NGS applications on other people's sequencers that are really coming together here in terms of -- I think we're the innovation leader in much of that field. And we've been enough of a niche strategy that we're not directly colliding with Roche or Abbott or Hologic and that's good. Sometimes they need our more specific MDx tools as part of their big tender for a big university hospital because we take care of some of the long esoteric tail.

But esoteric tail sounds a little underwhelming, but it's actually a nice market and had some very nice right to exist and nice margins plus some of these new capabilities. So it's very exciting. Allow me one more comment. Longer term, having that diagnostics business that right now is microbiology and infectious disease, but so many of our protein proteomics, lipidomics as well and then spatial biology tools kind of -- when they grow up, some of them will be in LDTs and in regulated IVDR and FDA diagnostics and therefore, having a diagnostics business with the experience, the regulatory apparatus that you need in Europe, in the U.S. and other countries is really very, very important.

So that we don't all of a sudden have to hand that over to someone else when maybe the margins and the sustainability of some of these today are RUO proteomics or spatial biologies transition, at least in part towards the regulated higher barriers to entry higher-margin worlds, which were -- which we think will inevitably happen, and we want to drive that and not get stuck in the RUO world.

Right. Maybe a question for Gerald. Given where we sit today, how are you -- what are you seeing in terms of growth for the rest of the year in terms of the markets and some of the different end markets that Frank mentioned across the tool side of the business versus diagnostics? What's most important to understand?

I think the first point is that for us, fiscal year '26 is still reflected a relatively gradual recovery in the overall market. We are seeing really solid signals that many of the elements of our market are starting to really improve. I'd say probably the #1 piece is biopharma for us. we saw really strong order growth in the second quarter even on a first half perspective, it was quite solid for us.

I'd say in the other end markets, we've talked a little bit about semi, mostly being driven by the AI demand field, but that's staggering order growth levels for us actually in the first quarter and the second quarter. So continue to feel quite solid and optimistic and encouraged about that.

I think the other areas outside of the U.S. for academic and government research end markets were quite strong for us. Here, we're talking about at least in the second quarter, greater than 20% order growth for us outside the U.S. and AcGov. And then I think the other piece that's quite important for us because we had not seen this in a more sustained way really was China.

We saw strong order growth greater again than 20% order growth in the second quarter. And we're continuing to see solid order performance in China across a broad spectrum of categories, whether it's semi, which we can still sell a limited number of products into the semi field in China, but that's quite solid. I think biopharma quite strong. And encouragingly for us on the academic and government research side in China also performing quite well, not only in the second quarter, but what we've seen so far thus far into the third.

So China seems to be -- I mean this is a major headwind for us, especially in 2025 with a couple of quarters of good solid China order growth that will help propel. This will not drive most of our '26 performance, but certainly help our '27 performance dramatically. So solid on those sides.

Great. Maybe just to close it out, Frank, what's one thing that you wish more investors have understood about your business?

The one thing, I think I'm actually delighted that deep tech and semiconductor people now understand that better, the fusion world, the defense world, that's smaller, but it's also coming along. I think the I think the transition of our mass spec NMR and of our spatial biology tools in how impactful that will be to have a deeper understanding of disease biology 2.0 drug discovery and diagnostics biomarker development, how compelling and differentiated that is, I think isn't that visible yet because initially, some of the more late-stage biopharma and bioprocessing have been the better growing areas.

And they were underrepresented. And so other companies have done remarkably well with -- and resumed growth earlier. I think as we come back to growth, we may well get back to the 200 to 300 bps long-term algorithm, above-market algorithm for growth that we've had maybe by '28, but we may also get into a hyper is strong, but a very strong growth phase as we had in '21, '24. We're setting ourselves up for that. And if that doesn't succeed getting to do 300 bps above market, is a very probable scenario, but I think there's a very significant upside to that.

Okay. Great. Thank you very much for joining us.

Thank you. Thank you. Thanks for having us.

Good morning, everyone. Welcome to day 2 of the Wells Fargo Healthcare Conference. We're happy to have Bruker here and late surprise guest, CEO, Frank Laukien; and Gerald Herman, CFO. Frank is just returning from Europe, and I think he wanted to start off with a couple of comments about his experience there and things that he learned.

Thank you so much, Evan, for having us. Good morning, everybody. Sorry to almost fall flat on my face, but only -- so yes, a few things that I'd like to maybe take out -- set out there as an opening remark, and they relate to international conferences and events that happen to be in Europe. It's not about the European markets.

One was a big NMR and structural biology conference in Davos of all places, unrelated to the World Economic Forum. And as you know, we have reorganized as of July 1 and created the Bruker Biosystems Group that combines a number of technologies and applications and most importantly, NMR with mass spectrometry. And that's very timely or maybe we should have done it more before, but the opportunities there are really quite unique and important, particularly in drug discovery, but also to our theme of having the best tools and the most informative data even for foundation model training and all of that with deep data that goes beyond the genome. Genome is important. It's foundational, but then what really happens at the phenome level.

And I'm delighted to say that NMR by itself, it's a complementary technique. It's not -- that's how you do structural biology, but you combine it with other vendors, cryo-EM or crystallography, which we do ourselves. So you do it at beam lines and with NMR and more and more also with mass spec, so-called cross-linking mass spectrometry, which is taking a big step up, and we have the right systems for that. And the combination gives you structural enhancements. It also very importantly gives you binding and dynamics, which is really crucial, even if you have structured so-called globular proteins, they're not a rigid lock and you're looking for just the right key or the degrader. So there is dynamics. When you stick the key into the lock, the lock closes around, it's called an induced fit.

For all of these things, NMR beautifully complements AlphaFold, not our product, right, cryo-EMs and other technologies. And more and more also even for structural biology, and the important protein interactions, mass spectrometry, our TIMS platform and derivatives thereof. So combining that and finding more niches also for mRNA drugs, whether RNA is a drug target or a therapeutic modality itself, NMR rules, kind of, it's the technology, the others can't do it. It's very important. And another field, the TIDES, which is often the larger peptides, small, small proteins or oligonucleotides. Again, NMR has a very, very unique role often in combination with mass spectrometry. And we're really now under Juergen Srega's leader -- in that Biosystems group under Juergen Srega's leadership can combine those in pretty unique metabolomics, even glyco and workflow solutions for drug discovery or for training AI models with really deep and insightful data as opposed to just a lot of surface data.

One more remark, if I may, because we also visited and that happens to be in the Netherlands, in Leiden in Europe, of course. We had our kickoff meetings of our MIMETAS acquisition or majority investment. We own about 90% of that business now. Why is Bruker doing something new? Don't you have your plate full? Yes. But this is really, really important. Every drug discovery conference I go to, they're talking about multiomics and spatial and biology 2.0 or post-genomic biology, whatever you want to call it, but they're also all very keen in addition to animal models, which won't go away and in preclinical work to have these humanized microphysiological systems. Sometimes they're called NAMs, which stands for new approaches. NAMs are humanized microphysiological systems.

And we have been looking at that market of smaller companies for the last more than a year, very fairly systematically. And we have noticed that MIMETAS, we think that we acquired now has the best automation, laboratory standard automation microtiter plates. They also have the most physiological value, we think and they think because it is membrane-free and does organs on a chip without having a membrane that distorts it again. So it's an incredibly important technique. It's only about a $10 million business right now, but that could be a future $50 million to $100 million business, will take some years. Also, it's very synergistic. It will pull in metabolomics and proteomics tools and some of our microscopy and maybe even spatial biology tools. It will often be at the lead because that's what biopharma looks at.

By the way, it's essentially all consumables and aftermarket business. So we like that in our business mix. In biopharma drug discovery and development and often we'll pull in additional Bruker and sometimes other vendor systems to get the most meaningful information out of these new approaches, NAMs or humanized, not mouse, humanized microphysiological systems.

I'll leave it there at that. There's other stuff, but that's -- those are 2 things that I thought would be worth sharing.

Yes. No, great. Thanks so much. That was really interesting stuff.

So maybe, I guess, for me, the best place to start, maybe just on the recap of 2Q. Just kind of -- I mean, I think EPS beat by a pretty wide margin, but organic growth was a little bit below expectations. So can you walk us through kind of the puts and takes from the quarter?

Sure. I'll take this. I'd say, generally speaking, the highlight of the quarter really was our EPS performance. We outperformed both the consensus and our own expectations. We got a little bit of a boost from some tariff recovery elements, but nonetheless, overall performance at the EPS line was quite good. This is part of our broader program to increase our EPS performance and strengthen our operating margin. We seem to be doing very well, at least through the first 2 quarters, particularly driven by some of our cost-saving actions that kicked in, in the second quarter in particular.

But beyond that, I think the other highlight really was our book-to-bill, which is over 1x again. This is the fourth quarter in a row in which we've seen really good order bookings performance. And I'd say orders organically were above 10% growth on a year-over-year basis. And there were a few other highlights in those orders. I think most investors are interested to hear that we really did see a bit of pivot in China. Our order performance in China was up over 20% in the second quarter. We saw some really good signals for another quarter related to biopharma. These were also really encouraging signs for us.

I know a number of our peers are also performing well in these areas. But we had struggled, I would say, after a relatively weak 2025 performance in China to see sort of double-digit order growth. It's really encouraging. And this was -- especially for China, this was really broadly based across biopharma, across the academic side and even in the semi space, where we have a pretty good market position there. So I think China looked good. Biopharma, quite strong as well, mostly in large pharma in the second quarter.

And then we had a better performance, excluding the U.S., in the academic and government research markets. That also showed greater than 20% order growth in those markets. So I think that -- what that shows generally at our level is that we have the right products, the right solutions for the right markets. It's taking a little longer perhaps on the revenue performance to be reflected, but that's coming. That's good.

Got you. No, that's great. In terms of the outlook for the rest of the year, you did talk about a push out of, I think, $20 million of semi orders. You also have ultra-high field, I believe, in the fourth quarter.

We do, yes.

And so I think organic -- based on those 2 dynamics, I mean, you have a pretty big step-up into the 4Q implied guide, I think it goes to about 5%. What are kind of some of the underlying drivers that give you confidence in hitting that?

Well, I think personally, we've really gone through a lot of scrubbing after the pushout commentary that we provided in the second quarter. We got pretty good visibility to what our expectations are and the execution capabilities of our teams. And we've done, I think, an excellent job on the execution side historically, especially for some very large fourth quarters in the past.

With respect to the ultra-high field system, I think that seems pretty much locked in at this stage. So we have pretty good visibility to that. I mean I think the same is likely true for most of our semi activity for the fourth quarter. As some of you may know, the fourth quarter for Bruker isn't usually a quarter. It's more like 1/3 of our total revenue performance. So we do have some seasonality built in there, and that generally has played itself out pretty well. That's kind of the big picture for us. It feels like while it might seem to some investors as a large or larger quarter on an organic revenue basis, it's not a lot of growth built in there.

I mean you did comment on this. You said that's taking -- the orders are there, but it's taking longer to convert to revenue relative to other companies, but also seems like relative to your own expectations. So why do you think that is the case?

I think part of it is the mix. I mean when you think about semi orders, for example, can take anywhere between 9 and 18 months, both in terms of production. I also think it's the timing of some of these orders. We have some orders that are multiyear -- have multiyear elements to them. So they stretch out over multiple years and have to be delivered over those years. But just generally, I mean, we have complex instruments that we're building and producing. Most of those have to get moved into customer sites. Some of those sites have to have the right conditions in order for them to be accepted. And...

But there is a bit of a structural element. As our deep tech this year is -- and we think next year and the following year is so strong. Semiconductor metrology gets the most attention, but the orders that we get for fusion demonstrators via the BEST segment or some of our defense or airport aviation security more general. A lot of these orders inherently in semiconductor metrology normally get orders 9 to 18 months before they want delivery for their new fab or their new research site.

And some of these other contracts tend to be indeed 2 or 3 years orders. So there's a bit of a structural element as opposed to just expectations in that being the strongest almost in terms of orders, those don't all -- most of that does not go into this year, right? It will help us in '27, some even in '28. So that's a bit of a new -- not a new element. But of course, deep tech being so strong for us is an upside in orders compared to our expectations on January 1. We're delighted and we -- but it's really working out extremely well. And yes, these structurally have -- tend to have longer delivery times and sometimes are multiyear contracts.

Okay. I mean maybe we'll stick to deep tech. I mean that was a big part of the 2Q call. I don't know if I've ever kind of seen you phrase it that way. Maybe I'm just forgetting. But can you talk about what parts of your portfolio are part of this deep tech business? How big it is? And maybe some of like how fast that's been growing in recent years and kind of what the outlook is?

Yes. I haven't used that terminology. It's now more investors who know your non-life science stuff, Frank, what shall we call it? And so deep tech is a fine term. It obviously has a meaning elsewhere in the industry. And these are -- it absolutely qualifies as very difficult, high barriers to entry. But when you're there and if you happen to have the right market dynamics, welcoming you, then there's other deep tech technologies where that makes sense.

So semiconductor metrology is -- you either can look at it as a $300 million or $500 million business. The semiconductor metrology more specifically is a $300 million business, but it's part of a $500 million business, the metrology and surface solutions part of the Bruker Nano group that sometimes also they do compound semiconductor and research things, other applications of atomic force microscopy or white light interferometry. They're not directly in high-volume manufacturing, which is semiconductor metrology, but they're adjacent.

The capacity part of that, that people are most excited, my God, isn't that going through the roof, that may be about $200 million. So giving you 3 answers, right? $200 million is the part that -- only $200 million is the part that people think why don't you triple, but it's growing very fast, but the $300 million and $500 million buckets in the concentric circles are also growing very fast.

Defense and aviation security, we secure a lot of the cargo coming in and the passengers that sit a level above it often, right, of very major U.S. airlines that you all fly all the time and heard of, but they like -- they don't like to use us to use their names, with explosives trace detection systems deployed at all their -- at many of their -- or essentially all of their international cargo hubs as they fly stuff internationally or back to the U.S. We're also securing more and more European airports for some time. We've been in Geneva, some French airports. Frankfurt, the very big installation. I think we have something like 150 systems explosives trace detection.

But it's competitive, but our systems are better, more reliable, more -- less false positives, which is really annoying. So we're now getting into -- we got into the Zurich Airport, Brussels, Norwegian airports, Korean Incheon Airport, Saudi Arabia, it's actually growing very nicely. In addition, because of the instability, particularly in -- well, the war in Ukraine, right? We're not selling into Ukraine, but we're selling to a lot of countries not far from those front lines, and they're beefing up amongst other things, also their chemical detection capabilities, and those have been very profitable orders. It's very deep tech because it's pretty unique stuff. Used to be maybe 1% of our revenue. It's now closer to 2% of our revenue and looks fairly sustainable, that probably will be a $100 million business in the not-so-distant future.

And then, yes, energy -- high energy physics and all of a sudden, all these enormous funding going into fusion energy. In addition to the ITER project, which is this international project, been around for a while, we, via our BEST research instruments have about $200 million in orders, some delivered, some coming this, some coming next year, some into '28. But I don't know whether people have -- if people who follow fusion energy, there's probably a $10 billion, $20 billion project in China. Of course, most of that will be Chinese only. But some of that, we actually -- they need superconductors also from the West.

Germany over a multiyear period is spending about EUR 9 billion on fusion research. And the U.S., of course, it's driven primarily by the capital markets, the U.S. I think the total funding that's gone into various magnetic confinement, tokamaks, stellarator, then we benefit lasers, then we don't benefit. There's been $10 billion or more. I think it's approaching $14 billion of venture capital that's gone into these companies, and they all need tools and gadgets and cryo pumps and diverters. I won't even try to explain what that all means, but they need a lot of deep tech stuff. Some of that we're just very, very good at because we've practiced with ITER.

So that's a delight, and that had the, percentage-wise, very highest growth rates. So -- but again, delivery times are somewhat longer. Margins will be very satisfactory.

Got you. And how big is that energy research business?

That's about EUR 100 million, yes, a little over $100 million. And almost all of their businesses are booming. There's some research-y stuff, the European light source I won't go into that, but it's been a very big profitable business where they build accelerators or advanced physics research capabilities, not all energy related, but booming.

Yes. I mean, since you ended there, I did -- you guys did put out a press release, I think, I guess, last week with Atinary. And so it actually made me just do a little bit of research. And to your point, I was shocked by how much fusion research is going on in the world and how much money is being spent on it. And so I was just curious, I mean, when -- I mean, I think most people think of fusion actually using -- having a useful application of fusion, not just research, but actually being able to create electricity and create more energy is -- seems I don't know, like an unlikely thing to happen in most people's minds. But I was just curious since you ended there, and where are we in that journey? Like what is going on in fusion research? Is there -- I mean, where do you see that business going for you?

Still very early innings, if you like. There's nobody who's generating fusion power today, and there won't be for another decade. But there's so much money going into developing these technologies. Pilots, those tend to be a little bit more research-oriented. We focus more on the industrial demonstrators that want to show net energy gain. It's not a power plant yet, but it does net energy gain.

And then fusion has one of these idiosyncrasies, -- you've got to breed your own fuel, the tritium. And to do that, you need -- the most difficult technology is the tritium breeding blanket and most companies kick that down the road. We, via RI, we're very much involved in a modular solid-state breeding blanket technology that will be also essential. So in addition to supporting power plants that eventually will show up at the end of the 30s, there's just so much investment and so many tools that go into that in parallel to the many countries now reentering the nuclear fission world, right? The U.S., does it big time, France, other countries, Switzerland will have a popular referendum on it. Italy just said they'll go back into that.

So that nuclear industry, that was a word that you never ever use, right, and nor defense, right? Now all of a sudden, nuclear, the nearer term being the fission, which we're not very involved in, but the fusion coming to supplement that because you need both with the voracious demand for energy that we'll have. And of course, fusion eventually is the inexhaustible, should last 100 million years. There is no shortage of water or deuterium. And it's also the inherently safe technology. You can never build a dirty bomb with it or use it for -- the bad guys cannot use it for proliferation in any realistic scenario.

Got you. Maybe moving to AI, and we've touched on this a little bit.

That's Atinary. That's actually the self-driving AI lab, yes.

Yes. All right. Did I -- maybe I missed...

Atinary is not Fusion. Atinary is back here, a Boston lab...

Yes, you're right. Okay. Maybe I mixed it up.

There's a lot of new stuff from Bruker, which is why we're here.

Yes. So okay. So AI, outside of semi metrology, like how should we think about your exposure there, automation, digitization, et cetera? And also, I did see -- you did write down the Chemspeed acquisition, I think, last quarter, which was, I guess, a little surprising just given how on trend it was. So...

Some moving pieces.

Just kind of -- how should we think about your exposure to AI and...

And Chemspeed and Atinary are closely related, and I'll explain. So Chemspeed -- Yes, Chemspeed, we took a GAAP write-off there because of some legacy contracts that were inherently we kind of put them in a bad bank eventually and said, look, we want to negotiate and get out of those because they're holding us back from pursuing the lab in the loop, automated software-driven digitized AI labs, self-driving labs with the help of Atinary and others who do it themselves. So we kind of accepted that some of the contracts that we actually acquired long term, some of them we just are -- some of them are we're renegotiating, some of them we're canceling, and that's why we took a write-off.

Chemspeed, however, is strategically very important and well timed for us. And we want to kind of liberate ourselves to focus on the good stuff, which is automated labs, digitized labs, a lot of our SciY software goes in that. And then we're looking -- we're working with partners that sometimes do it in-house, like Lila here in Cambridge, absolutely amazing. There's other West Coast and other firms that have -- some of them have very big, deep tech, Bezos-type funding, et cetera.

And then we did make one investment. It's a minority investment that's pretty strategic in Atinary or Atinary. They're focused on medicinal chemistry optimization with a self-driving lab. Their agentic AI capabilities are much broader. We're already discussing proteomics and metabolomics and other stuff with them. But initially, they started with the key traditional Suzuki and Hartwig-Buchwald type of medicinal chemistry actions that even though they've been around for a while, there are like an infinite number of possibilities and using agentic AI to basically do now in a week, to do what a grad student used to do in 5 years for optimization uses Chemspeed automation, uses an in-line little NMR from us. They also use some other automation, some Agilent mass spec and so on.

So it's not all Bruker, but it's a lot of Bruker. And they have the self-driving lab, agentic AI leadership, which would -- if we wrote it, we just don't have -- nobody has the time. You've got to be fast, right? So working with them, and that's why we took a strategic minority in them so we can also roll out that concept for some of our other workflow solutions for pharma and industry where we think agentic AI with a discerning lab in the loop, mostly equipped by Bruker measurement equipment and a lot of automation and software makes complete sense. So this is quite important.

But no, we didn't buy the whole company or something like that because there's also many others that are similarly or better funded sometimes that want to do it themselves and say, yes, we like Bruker, but we don't want agentic -- we don't want Atinary, we want our own agentic AI self-driving lab capabilities. So it's obviously a burgeoning area, as you can imagine. I think it puts actually a bit of a -- so many things going into AI investment, I think, has put a little bit of a damper in investments in our industry in tools. So people say, is AI good for tools or not good for tools. I think it will be fantastic for tools once some of these basic AI frameworks are set up. And there's a lot of investment that I think net-net, distracts a little bit from the investment in tools this year at the margin.

But I think as they then are ready and have their infrastructures, they need the best and deepest and highest resolution tools, and that's where we're so well positioned. But that's another big driver. I think 10x and some other companies have highlighted that similarly, where we're actually very optimistic that, that demand and industrial and biopharma will really pick up for the tools that you need to create or validate your foundation models.

So Atinary, another trajectory, much close to our core business and completely tied in with Chemspeed. We opened at Chemspeed, a second European lab for them in Basel. That's where Chemspeed is located, and that's where a lot of the biopharma industry is located.

Great. Yes. Luvata was the other one. That was the fusion company.

What's that?

Luvata.

Exactly. They're a Finnish company and a partner company. We often compete with them in the MRI industry. But as we look at the sheer volume of what will be needed by fusion, magnetic confinement fusion, that may dwarf what's used by the MRI industry in superconducting materials. And then we're actually engaging with our friends, hey, in that case, our unique RRP technology, it's a conductor that's being used at CERN in our own NMRs. It's a higher current technical conductor. It's very crucial. We have it at the right time. Nobody outside of China has it. We have it patented, but we may need it to enable normal competitors to really just provide the total bandwidth and capacity for the world's fusion plans if they all come through.

Got you. I mean you just made a comment in the previous -- answer to the previous question that you think that at least in the near term, you think that some of these budgets, I guess, are being reallocated from life science tools, traditional life science tools stuff to AI?

I think this year, that is some of that. So much AI investment is happening in industry and biopharma. So this year, I think -- I don't have data to prove that. That's a little bit more of a color and conversational feel where people say, yes, this year, we're investing in all that, whatever agentic AI or some infrastructure and I'm buying 1 NMR from you, but then next year, I need a lot of tools to do something with that infrastructure and validate my models or actually inform them because right now, there's a lot of data for training, but it's a lot of what I call surface data, and they really want to deep into proteoforms or into -- into what really is important in biology. It goes to all these deeper and higher resolution tools we're doing.

And I think that's what they'll want to train and train their models on because if you only train your models on just genes, excuse me, or just protein groups, then maybe you're catching 20%, 30% of biology, but then you'll miss a lot. And so they'll want to go deeper, which I think really bodes very well for our strategy of measurement instruments.

But yes, I think this year, that slows down the recovery a little bit. But I think it will turn into a big net positive in hopefully as early as next year and into the future because you really need to validate these models. You can't just skim the surface and with 20% to 30% of the insights.

Okay. Maybe moving to proteomics. It sounds like you think that, that will also benefit from this -- from AI.

Very much so.

People understanding structures of protein. Maybe talk about -- I mean, I think maybe -- I think you were being very competitive in proteomics with timsTOF. And I think maybe after some competitors brought some new products, maybe there was a little bit of share shift there maybe last year, but you've also come out with new products, which I think have been pretty strong. Can you just talk about maybe some of the dynamics within proteomics? I think Waters is also coming out with a new product at the lower end. So just maybe what you're seeing in that business.

Yes, perfect. Great way to then probably end. Let me peel that onion a little bit, Evan. Proteomics is now becoming more multifaceted. The traditional proteomics where you get a protein group, which is like an average of a protein group, maybe 30 different functional proteoforms that physiologically or sometimes in disease biology may have a very different role. And this so-called bottom-up proteomics and also often inherently the affinity based like an Olink or what SomaLogic, now part of Illumina are doing or Alamar.

These are the affinity-based non-mass spec proteomics tools. They look at proteins and protein groups in solution. They can differentiate the proteoforms. They cannot generally see glycosylation, certainly not at depth and scale. And that's growing nicely, right, especially as it goes into large plasma, biobank, first LDT diagnostic applications is going well. We had a bit of a market share setback there when the Astral came out, beautiful instrument. We have in part recovered that with further improvements and also leveraging our bottom-up proteomics tools into immunopeptidomics, very important immuno-oncology, chemical proteomics for targeted protein degrader chemistry and others. So we're back, but we took a -- we had a dip there.

Then really important, and there is an unnamed -- someone unnamed in this industry started coverage on Nautilus, which is a non-mass spec technology, smaller company that is very much focused on proteoforms. And I love proteoforms. I -- our timsOmni goes exactly into that proteoform seeing the 10 to 100 on average, 30 different proteoforms. That's where the rubber meets the road. That's where you have physiology or pathology or disease. And being able to do that at depth and scale, the timsOmni is very, very successful, 1.5 million instrument gets great uptake, half of that right away into biopharma.

There were some market estimates that actually sounded reasonable. There's some really big numbers, $75 billion for proteins. I disregard that. I don't know how people can add that up. But for us, the proteomics market may be eventually being an $11 billion opportunity and the biggest opportunity of all that we have, I think that's about the right order of magnitude and that the proteoform, which is still in its early days that, that may be an additional $3 billion opportunity. I think those numbers feel about right. And we are absolutely leading and way ahead.

And with a blue ocean -- there's just nothing very competitive in that right now. We're so far ahead in performance and people are adopting that because it's really important. And ultimately, that's what you want to train your AI on because now you maybe understand 65% of biology instead of 35%. It's still complex, but that's 10x up. That's why proteomics look at the different layers and the new one we're leading in the other one, the traditional one, we've very nicely recovered and have very competitive instruments.

All right. Thank you so much. Our time's up. Appreciate it.

Thank you.

Thank you very much.

Good day, and welcome to the Bruker Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to hand the call over to Joe Kostka, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Second Quarter 2026 Earnings Conference Call. My name is Joe Kostka, and I am the Director of Bruker Investor Relations. Joining me on today's call are our President and CEO, Frank Laukien; and our EVP and CFO, Gerald Herman.

In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events and Presentations section of Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. 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.

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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties including those related to our recent acquisitions, geopolitical risks, wars or blockades, market demands, tariffs, currency exchange rates, competitive dynamics or supply chains.

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-K for the period ending December 31, 2025, as updated in our other SEC filings, which are available on our website and on the SEC's website.

Also, please note that the following information is based on current business conditions and on our outlook as of today, August 4, 2026. 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 third quarter 2026 financial results expected in early November 2026. 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 for the second quarter of 2026 in more detail and comment on our full year 2026 financial outlook.

Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thanks, Joe. Good morning, everyone, and thank you for joining us on today's Second Quarter 2026 Earnings Call. We are pleased that Bruker has returned to organic revenue growth in the second quarter and that our focus on cost reductions and profitability improvements resulted in solid margin expansion and non-GAAP EPS growth. .

Demand for our differentiated products and solutions improved further as our Scientific Instruments segment achieved 10% organic bookings growth year-over-year, a fourth consecutive quarter with a scientific instruments book-to-bill ratio above 1.0. Organic bookings in biopharma grew more than 20% in the second quarter driven by demand for our NMR X-ray and mass spectrometry solutions.

In our academic and medical research business, bookings in Europe and China were up strongly. However, U.S. academic orders still remained weak in Q2. We saw notable Q2 order strength in our deep tech semiconductor tools and energy research technologies with both at over 50% organic order growth year-over-year.

In semicon metrology, we sell robust and innovative metrology equipment for chip manufacturers with significant demand increases for high bandwidth memory and advanced packaging driven by AI scaling. In energy research, we provide unique tools and modules for fusion energy development and high-energy physics research.

These proprietary deep tech capabilities, which also include our security detection systems are valuable to have in the portfolio as life science research demand recovers gradually. These deep tech tools tend to have longer delivery times in some cases of 9 to 24 months, determined by facility readiness for example, for a new logic or memory chip, wafer fabs or for large-scale fusion development projects.

As a result, some of our strong deep tech bookings will benefit our Q4 and then 2027 and even the outer years. We are continuing to take costs out to drive margin expansion and double-digit EPS growth this year and also again in 2027. We have made good progress in the second quarter, realizing more cumulative cost reductions, and we are well on track for our stated goal of delivering $140 million of annualized cost savings in 2026.

I would like to thank our teams for their very important efforts in this area. Effective as of July 1 of this year, Bruker has adopted a new operating structure that combines our BioSpin, Daltonics and Optics division into a new Bruker Biosystems group, led by Group President, Juergen Srega. The newly merged Biosystems group addresses the growing need for scientific integration in the post-genomic era which combines complementary life science research workflows into more comprehensive disease biology insights.

Across post-genomic drug discovery, multiomics and applied markets our customers connect structural, molecular and cellular information to understand complex systems biology or advanced materials research. The Biosystems group brings together NMR, mass spectrometry, FTIR, Raman, preclinical automation software and applications expertise in any of these areas for connected workflows from research to quality control.

Examples include metabolomics, RNA characterization or protein analysis where NMR and mass spectrometry provide important complementary insights or as another example, in battery research development and battery life cycle QC where NMR and FTIR characterized electrolytes, electrodes and chemistry.

In addition, Bruker microbiology and infection diagnostics, which we sometimes abbreviate as BMAT, previously a division within the CALID Group has now been established as a group under the leadership of Dr. Rosa Push. This BMAT Group has a fast-growing microbiology and infection diagnostics portfolio from microbial identification, molecular diagnostics, hospital hygiene to emerging antimicrobial resistance testing and next-generation sequencing for sepsis and reflex testing.

This modified group structure aligns Bruker more closely with markets and our customers. By organizing around connected workflows, we strengthened group level agility and our ability to prioritize investments that deliver innovation with the most impact. Following these changes, Bruken operates in 4 groups: Bruker Biosystems, Bruker Nano, BMAT microbiology and infection diagnostics and Bruker Energy and Supercon Technologies or BEST.

This new structure is expected to drive an additional $20 million of cost reductions in fiscal year '27. All right. On to the quarter. Let's turn to Slide 4 now for the P&L performance of the second quarter. Our Q2 '26 reported revenues of $839 million increased 5.2% year-over-year with organic growth of 2.8% or 3.4% organic growth, excluding tariff refunds in the second quarter.

The revenue contribution from M&A was 1.5% and Constant Exchange Rate or CER growth was 4.3% and the 0.9% FX revenue tailwind and was actually 50 bps lower than originally expected. BSI segment revenues were up 2.3% organically, while BEST achieved organic revenue growth of 8.9% net of intercompany eliminations.

Our second quarter '26 non-GAAP gross and operating margins were 52.1% and 14.1%, respectively, both up significantly year-over-year, albeit in comparison to a weak second quarter '25 and including a net U.S. tariff refund benefit that Gerald will describe in a moment. Our second quarter '26 diluted non-GAAP EPS was $0.49, up 53% from $0.32 in the second quarter of '25.

Moving to Slide 5. H1 '26 revenues increased by 3.9% to EUR 1.66 billion, First half organic revenue was still a decline of 0.8%, consisting of a 1.4% organic decline in scientific instruments and 6.1% organic growth at best net of intercompany eliminations.

Our first half '26 non-GAAP gross margin, operating margin and EPS were all up year-over-year and their performance is summarized on Slide 5. Gerald will go into more detail on the drivers shortly.

Please turn to Slide 6 and 7, where we highlight the first half, '26 performance of our 3 scientific instruments group and of BEST, all in constant currency and year-over-year basis. In the first half of '26, the BioSpin Group grew revenue was $393 million down mid-single digits percentage year-over-year.

BioSpin saw strong revenue growth in hospital clinical and biopharma offset by weakness in China aka Gav, food testing and automation. NMR preclinical and preclinical imaging had robust order growth, both up double digits in the first half year-over-year. For the first half of '26, CALID Group revenue of $627 million increased in the mid-single-digit percentage driven by mass spectrometry, including the Tofwork acquisition.

CALID saw strength in biopharma, security detection and European ACAG, partially offset by weaker revenues in the U.S. First half revenue growth in Molecular Diagnostics was solid, while microbiology was roughly flat. Please turn to Slide 7. First half 2026 Bruker Nano revenue was $507 million with a low single-digit percentage decline.

Nano saw weakness in ACA/GOV industrial markets, while weakness in U.S. ACA/GOV funding continued to impact spatial biology. This was largely offset by robust strength in semiconductor metrology due to AI-driven orders from memory and advanced packaging metrology tools. Finally, the first half of '26 best revenues were up 6%, net of intercompany eliminations, with strong growth in the superconductor business and solid revenue growth at Research Instruments or RRI.

In the first half, RRI secured very strong multiyear orders for Fusion Energy and high-energy physics to technologies, and I'll come back to that in a moment. So moving to Slide 8 and 9. On Slide 8, we highlight our semiconductor metrology nano tools, which are now clearly moving the needle for Bruker.

I won't go through the technical details, but I invite you to read those at your convenience. The first half '26 organic order growth was greater than 30% and the first half '26 organic revenue growth was greater than 15%, obviously, somewhat lagging behind order growth. And this business is very profitable. It has about a 30% EBIT margin. Longer lead times in this business which can be 9 to 24 months, can result in revenue lagging order growth by several quarters.

If you go to Slide 9, we touch on our other deep tech areas, our security detection on the left and energy research on the right. And those 2 businesses also seeing considerable strength. The first half detection orders and revenue were both upgraded -- were both up approximately 20% year-over-year, whereas, as I just mentioned, our first half research instruments, or energy research, our orders were up well over 100% year-over-year.

In general, for perspective, keep in mind that Bruker in our orders tend to lag our revenues tend to lag the order trends by a couple of quarters. And for the deep tech areas that I just mentioned, many of them will begin to help our revenue and P&L in Q4 of this year and then very much into '27 and into the outer years.

So in summary, in the second quarter, we achieved solid orders in many life science end markets, and we achieved very strong order growth in our so-called deep tech tools. We made further meaningful progress on our cost actions, setting us up for continued margin expansion and EPS growth in fiscal year '26, and we are proactively taking additional cost out steps that are expected to add additional P&L benefits next year.

So with that, let me turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 and fiscal year '26 outlook in more detail. Gerald?

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 2026 financial performance, starting on Slide 11.

In the second quarter of 2026, our results came in at the low end of our expectations on the top line, but meaningfully ahead of expectations on margins and EPS. Our top line results in the second quarter of '26 were unfavorably impacted by U.S. tariff refunds and a stronger U.S. dollar, which translated into less tailwind on revenue in total, approximately 110 basis points.

U.S. tariff refunds reduced our organic revenue growth from 3.4% to 2.8%, but strengthened our profitability in the quarter, adding around 200 basis points to the second quarter operating margins year-over-year. Net U.S. tariffs contributed about $0.06 to EPS in the second quarter. Most importantly, we also saw the accumulating impact of our cost-saving actions accelerate in the quarter, together with favorable mix and volume.

In the second quarter of '26, Bruker's reported revenue increased 5.2% to $838.5 million, reflecting a pivot to organic growth in the quarter of 2.8% or 3.4% year-over-year, excluding U.S. tariff refunds. Acquisitions contributed 1.5% to our top line, while foreign exchange was a 0.9% tailwind, resulting in constant exchange rate revenue growth of 4.3% year-over-year. Geographically and on a year-over-year organic basis in the second quarter of '26 our Americas and European revenues both grew approximately 10%, while Asia Pacific revenue declined in the low double digits percentage, including a low double-digit decline of revenue in China.

For our EMEA region, revenue was down low single-digit percentage. BSI organic revenue grew 2.3% in the second quarter of '26 with low single-digit organic growth in CALID and Bruker Nano, partially offset by flat revenue performance in BioSpin.

PSI systems revenue was roughly flat and BSI aftermarket revenues were up mid-single digits organically year-over-year. Our BSI segment order book performance was up organically a solid 10% year-over-year driven by greater than 50% growth in semi and greater than 20% growth in biopharma, partially offset by declines in U.S. ACA/GOV and food safety.

Second quarter '26 non-GAAP gross margin increased 350 basis points to 52.1% non-GAAP operating margin was 14.1%, up 510 basis points, driven by our cost saving actions, positive net U.S. tariff impact and favorable volume mix partially offset by foreign currency headwinds as shown on the slide.

On a non-GAAP basis, second quarter 26 diluted EPS was $0.49, and up 53% rather from the $0.32 in the second quarter '25. Our non-GAAP effective tax rate was 25% compared to 23.6% in the second quarter of '25. On a GAAP basis, we reported a diluted loss per share of $0.41 compared to GAAP EPS of $0.05 in the second quarter of '25.

Our second quarter 2016 GAAP results include a noncash goodwill impairment charges of $135 million related to our automation and spatial biology businesses which continued to experience operating losses. Weighted average diluted shares outstanding in the second quarter of 2026 were $152.8 million, an increase of 1.1 million shares from the second quarter of 2025.

Slide 12 shows Bruker's performance for the first half of 2026, which has similar drivers to the second quarter. Turning to Slide 13. In the second quarter of 2026, our operating cash flow improved $50 million year-over-year driven by improved profitability and the timing of tax and vendor payments in the quarter. Free cash flow improved approximately $43 million on a year-over-year basis. On stronger EBITDA in the second quarter of 2026, our net leverage ratio is now 2.8x as of June 30, 2026.

Turning now to Slide 15. Our fiscal year 2026 financial update -- outlook rather, has been updated for foreign currency and effective tax rates only. We now expect the foreign exchange tailwind to revenues of 0.5% rather than 1.5% previously, resulting in reported revenue of $3.54 billion to $3.57 billion, and representing reported growth of 3% to 4% compared to fiscal year '25.

Organic revenue growth of 1% to 2% year-over-year, which is unchanged and acquisitions are expected to contribute 1.5% to growth also unchanged. We continue to expect non-GAAP operating margin expansion of 250 to 300 basis points year-over-year, largely driven by our cost saving actions.

On the bottom line, we continue to expect non-GAAP EPS for fiscal year '26 in a range of $2.10 to $2.15 in or non-GAAP EPS growth of 15% to 17% compared to fiscal year '25, all unchanged as lower headwinds from foreign exchange are broadly offset by our higher effective tax rate.

Other guidance assumptions are listed on the slide, our fiscal year 2026 ranges have been updated for foreign currency rates as of June 30, 2026. Now some color on the third quarter of '26 we expect approximately $20 million of previously planned third quarter revenue to shift into the fourth quarter, driven by semiconductor customer delivery requirements.

This results in Q3 organic revenue to be roughly flat to up slightly year-over-year. On operating margins and EPS in the third quarter, we now expect a slight sequential decrease due to the $20 million semi revenue shift from the third to the fourth quarter, and the $0.06 net U.S. tariff EPS benefit previously expected to come into the third quarter being pulled into the second quarter.

On a positive note, for the fourth quarter of 2026, we now expect meaningful sequential and year-over-year increases in organic revenue growth, operating margin and EPS due to significantly higher volume and favorable mix in the fourth quarter.

To wrap up, Q2 '26 was another solid bookings quarter for Bruker, giving us further confidence in the gradual market recovery in several key markets and geographies. Our cost-saving actions are well on track positioning us well for significant margin and profitability improvement in fiscal year '26 and we're driving towards further significant margin improvement and double-digit EPS growth also in 2027. With that, I'd like to turn the call over back to Joe. Thank you very much.

Thanks, Gerald. We will now begin the Q&A portion of the call. As a reminder, to allow everyone time for questions, we ask that you limit yourself to 1 question and 1 follow-up. Operator?

[Operator Instructions] Our first question will come from Puneet Souda of Leerink Partners.

Frank, First 1 is on the tariff refund treatment. Some of the peers are calling it as a pass-through with no net impact as these refunds are passed on to the customers. So I just wanted to clarify on the treatment -- and what is embedded in the tariff refund in the second half and for the full year guide because you're reiterating it -- but it does appear that if we account for the refund that it is a step down. So if you could just clarify those points.

Puneet, it's Gerald. So on -- with respect to the first question, with respect to the tariff refunds, as you can guess, right, some of those tariff elements were charge to individual customers, and that resulted in a contra revenue element, which is considered in our press release and the materials we provided -- with respect to EPS, we've also indicated that, that generated roughly 200 basis points of margin expansion in the quarter for the second quarter. .

As far as the second half goes, we've already factored that or baked that into our earlier guide numbers. We had just actually assumed that it would be more likely recovered in the third and the fourth quarter is not in the second quarter. So we had a slightly earlier pull forward of that into the second quarter. But overall, that's already been baked into our original guidance model.

Okay. And then -- Yes, that's helpful. I'll follow up later. But just maybe 1 quick 1 on semi -- you're pointing to 50% order growth there, correct me if I'm wrong, -- but in terms of -- I mean, the visibility into this and the timing of delivery. Maybe, Frank, could you double click, Obviously, this is an end market that is fairly actionable right now, just given the AI demand what sort of sustainability that you're hearing from the customer and because obviously, these are somewhat separated from the leading AI companies that are driving that demand. So maybe just could you elaborate a bit on the timing of the installs and conversion into revenue?

Yes. No, this is -- the orders are remarkable for the first half and even more so in Q2. Of course, there will be some fluctuations. But if anything, it seems to be accelerating as 1 would expect probably. We think -- and from what we read about others that are more deeply in semiconductor lithography or metrology -- we think this is very sustainable this year and next.

And then I think the debate is whether it's sustainable at that pace in '28 and beyond. People just don't know yet. But I would think that the visibility of the sector for the next 6 quarters plus seems excellent. That's not necessarily our own data. That's the general what we read from the industry. It is correct that many of these orders as wonderful as they are, and they are absolutely fantastic.

They usually have an even longer delivery times than an average NMR or mispec.So that can easily be 3 to sometimes 6 to 8 quarters. Visibility is very good, because those customers are very -- they're like -- almost like block work, right? And they know when they need it for a new waiver fab and so on. So good visibility, but a little bit of a delayed gratification as more of -- some of that comes in, in Q4. As Gerald said, I think we'll have a very strong Q4 and then quite a bit of this goes into next year in terms of revenue and P&L help and even into '28. So great sustainability, great visibility, slightly longer lead times.

The next question comes from Michael Ryskin of Bank of America. .

Great. I want to just go back to 2Q performance briefly. I'm not sure if you want to talk ex tariffs or including tariffs. But overall, organic was still a little bit lighter than we would have expected, especially I think in BSI, we were looking at more something like mid-single digits, especially given the comps -- so you touched on academic and government, some other end markets. Again, a lot of that was expected and known. Is there anything unusual that happened in the quarter? Any pushouts or timing or just sort of how to think about 2Q relative to your prior assumptions? .

Yes, Mike, thank you. So other than about the combined effect of the -- of tariff refunds on revenue, which was, as you can see, was 60 bps, and there is an additional 50 bps effect from the currency tailwind actually being about 50 bps lower than had been expected because currency rates change. That will become more pronounced in Q3 in that currency tailwind is on the revenue line is turning into a currency headwind.

So in Q3, that takes out about -- it's not organic, but it takes out about $15 million in revenue, independent of the revenue shift that Gerald had explained. But back to Q2 to your question, so that combined effect was about 110 bps of growth rate. Still on the life side, on the revenues and on the organic revenues. And the #1 and 2 and 3 reasons in our U.S. ACA/GOV,our U.S. ACA/GOV revenues in Q2 which is the result of weak orders in the second half of last year were down more than $10 million, actually more than $15 million still year-over-year. So as I said earlier, yes, the order -- that just takes a couple of quarters. What you're seeing there right now. That was the biggest weakness in revenue in the second quarter.

Okay. Okay. And if I could squeeze a follow-up. Just, Gerald, maybe for you. The margin ramp through the second half of the year. I mean, obviously, there the margins came in better in 2Q, but a lot of that was tariffs -- if you could just walk us through the margin ramp in 3Q and the rest of the year? I know that's a big second point. So I would have to give some clarity on that. .

Yes. In terms of the -- I mean, I mentioned in my prepared remarks on the third quarter, we are expecting some shift of revenue, particularly related to semi. Frank was just noting, got strong orders in some of the revenue because of customer timing is moving to the fourth quarter. In addition, we -- as I mentioned earlier, we did have a shift of what we expected from a tariff perspective other than third quarter into the second.

So we have slight -- we think from a margin perspective, we think this is likely going to be somewhat down from what we had initially expected. And on the revenue line, we think we're going to be sort of flat to slightly up from an organic perspective in the third quarter. And then, of course, we have a strong expected fourth quarter significant growth there.

There's a bunch of factors related to that. There's the pushout I just described in semi. There's -- we have a much stronger expectation around -- we have an ultra-high field coming into the fourth quarter, we have a number of mix improvements that are much better in that we have a much higher volume. And as I think you know, we get to a much better story in terms of our overall EPS growth in the fourth quarter.

It's shaping up to be a larger fourth quarter than we had expected, likely in around the $1 billion range. We've done this level of revenue growth in the past in the fourth quarter. So I think we just can execute to those levels. And that's our expectation at the moment.

The next question comes from Tycho Peterson of Jefferies.

I'm going to actually pick up right there on margins. So you mentioned mix. I mean, is there some coming from the pricing actions you took last year coming out of backlog? And then how are you thinking about input costs here going forward? Also, are you backing off the 350 -- 300 to 350 basis of core margin expansion, you had that in the deck last quarter. I didn't see you reiterate that. And then the incremental cost actions, how do we think about those flowing through into '27.

Okay. Well, there's a lot there. Let's start in the reverse order. On the cost actions, we're we're well on track. We're north of $140 million. Frank mentioned, the adoption of a new operating structure for Bruker, and that's going to contribute some more additional savings beyond the $140 million we are planning for in 2026. And that will mostly hit in 2027, but still some -- so we're well on track with I would say, a strong cost saving actions even going forward beyond what we've already delivered.

By the way, just from a cost savings perspective, we have delivered about $30 million and cost-saving actions in the second quarter. So we're kind of right on track to where we expect it to be. With respect to the other questions, let's sort of take 1 at a time here. I think our cadence with respect to the third quarter has just now shifted a little bit further into the fourth. As I said earlier, we have a strong set up in the fourth quarter typically, even seasonally for Bruker, and it appears that we're going to have another 1 of those as we march into the fourth quarter '26.

The mix story, we are going to get some and continue to get some pricing benefit from adjustments we made in 2025 into '26, including in the fourth quarter. The biggest piece, I'd say, for the fourth quarter performance is really going to be above volume. With the scale that we will deliver in the fourth quarter, I think the the volume piece is going to be much more important actually than just the mix element. But we do expect better mix with respect to semi or ultrahigh field and some of our other key businesses are going to perform more strongly in the fourth quarter based on what we see at this stage .

I think, Tycho, to your operating margin question, if you even look at our Slide 15. So if we haven't been clear enough, that continues to be based -- our guidance continues to be based on an operating margin of 250 to 300 bps reporters including a 50 bps headwind and some detail a little bit on our Slide 15 on the outlook. So that is unchanged. .

And then on the COGS side, Gerald, just inflationary memory chips, tungsten, et cetera? .

Yes. That seems to be -- I mean from an energy cost perspective, we've already baked that into the guide earlier. We're not seeing, at least at this stage, any significant pressure there at this point. We are having some supply chain challenges around componentry, mostly on the electronics side.

But at this stage, we're pretty comfortable that, that's already been baked in to our current guide.

Okay. And then Frank, just in terms of the order book, I appreciate the color on semis. Just can you maybe talk about elsewhere, academic and GOV, maybe where you're feeling a little bit you talked last quarter about some signs of improvement there. .

Yes. It's U.S. still weak, as I said. And then -- so we're seeing the encouraging NIH outlays, but they did not yet translate into significant Q2 orders. We will observe what's happening in Q3 and, of course, the Q3 budget flush, which seems to be underway, could, for us, also mean decent Q4 U.S. ACA/GOV bookings but will be -- in Q2 already, the ACA/GOV orders outside of the U.S. and particularly in the EU was up more than 10%. And -- and in China, the orders were up more than 20% for ACA/GOV in Q2.

So remember, China was down on revenue. But then on orders, it was up more than 20% in coal -- so that's that 6 months delay that you usually see at Bruker. So yes, ACA/GOV, which I think that really supports the strength of our ASMS mass spec introduction, so the new things we can do with our NMRs and of course, our even our other spatial biology and other tools or so, the portfolio and I think it's spot on.

I think the innovation will have major impact if we only had a little bit more U.S. funding, but maybe that's coming and where we have funding, it really -- it has a big impact. So that bodes well for ACA/GOV competitiveness and market share gains except it's starting right now in Europe and in APAC and China, in particular.

Next question comes from Subbu Nambi of Guggenheim.

This will be at least the second year in a row where there is a timing dynamic challenge at the top line and seemingly a push out to Q4 or maybe even 2027. First, can you explain steps you're taking to improve visibility -- and second as Doug Bator in May, you indicated that 4% was a good starting point for 2027 revenue growth expectation. Given the timing dynamics, if this revenue gets pushed out to would that be on top of that 4%? .

Subbu, those are very good questions. Yes, I mean, what are we doing to increase visibility, strong orders, right? We've had improving orders with better book-to-bill above 1 and pretty good order growth in the Scientific Instruments segment, again in Q2 and then now 4 orders in a row that is helping us with visibility the visibility sometimes, however, is and especially in these deep tech orders for Q4 and for next year. .

So yes, Q4 will -- should have a nice mid-single-digit organic growth rate. So it's a little bit of a roller coaster with Q2 growth and Q4 organic growth and Q1 and Q3. Q1 was down, Q3 will be flat to slightly up. But for the year, it's what we're what we've been aiming for and what we've -- what's in our guidance, namely the organic revenue growth of 1% to 2%, which is a transition year admittedly because it comes from a year where we were declining organically for all the factors that you know.

Whether Q4 -- the Q4 growth rate is then what indicative of our 27% growth rate is too early to say. So give us another -- give us a bit more time to see how bookings are obviously in Q3 and yes, also in Q4, and then we'll be able to comment on that. We generally believe, of course, in a further growth acceleration in organic growth acceleration in '27 compared to '26, but we cannot quantify that at this time.

And generally, I know you kind of explained this on the call on margins. You previously indicated that even with flat top line growth, you would be able to meet margin targets in Q3. You pointed to progress, including facility rationalization, timing and support -- some of it was just structural. What changed? Is it just this product mix? Or -- and do you get this back at some point over the subsequent 1 or 2 quarters? .

I don't think anything changed Gerald was just talking about sequential. What happened is that the -- we had assumed that we would get the tariff refunds maybe ratably over Q3, Q4 -- and remarkably, they came in rather quickly, mostly in June.

So that's why our margins, that's why we pointed it out in Q2, our operating margins and our EPS at greater benefit than we had expected from the tariff refunds coming in faster. We'll still have some in Q3, Q4, but to a lesser extent, so Q3 is still okay also on the margin side, but sequentially, Q2 in a good way, we overshot a little bit because some -- primarily because of these margins, these tariff free funds that really came in the last half of June. Quite honestly, faster than we had expected. We thought the government would slow water. They did not.

The next question comes from Luke Sergott of Barclays. .

Just a quick 1 on the bookings. Just to clear up. So the bookings, were they down quarter-over-quarter? I'm just trying to get a level set of the overall dollar size that you guys had. .

So you mean sequentially .

Sequentially. Yes. Were they done sequentially. .

No. No. They were up sequentially. We're scrambling for the numbers, but they were up.

Okay. Great. And then as you think about the 4Q step-up here, and in light of the strong bookings that you guys have had, how much of that 4Q step up the $1 billion, roughly about that number is already covered in your backlog?

So it's obviously going to be more than $1 billion, right? You do the math $1.02 billion to $1.4 million or something like that. And percentage of that -- a lot of that is in our backlog now. But of course, we also get some -- we get some ongoing orders I don't have a number right now more than 50% for sure, but I don't have an exact number. Probably 2/3, but again, sorry, I do not have a -- you've stopped us twice. We do not have exact numbers for both of your questions. Well, we will, however, when we call you back because we don't have it at our fingertips. .

All right. That's a bucket list to stump you twice, Frank. So I appreciate it. .

Yes. Wow. Look, you're on a roll. More questions. Luke, do you have any other question? I'm sorry to do this .

Yes. So on the -- and just sticking on the guide here, as you guys think about the pickup and in the business, but like from a demand perspective, what needs to get better? Is it all in the academic side? Are you seeing continued momentum on the pharma, -- anything there from a geography or end market that needs to actually improve for you to .

To realize that back on the 4Q guide . Well, quite honestly, almost everything is pretty good now. applied markets of food to food and analysis is a little weak, but that's small for us anyway. -- and U.S. ACA/GOV, clearly, is the 1 outlier even with U.S. ACA/GOV, even if it stayed weak, we'll take a growth step up next year. .

And if U.S. ACA/GOV came back at least in a modest way, then obviously, we take a bigger growth step up next year. So more and more areas, biopharma has been great in the last 2 or 3 quarters. And again, in Q2. So pharma, biopharma, the tools that we sell into that, is omni, TimSoft Systems, NMRs, spatial biology X-ray.

It's really all quite good. plus then what you -- what people sometimes call these adiocratics growth drivers because they're not what we call them deep tech now because they're not all, life science, but they're absolutely terrific. However, with this delayed gratification of them typically having 9, sometimes longer, 9 months or longer delivery times. And that's driven by the customers, not by our capacity.

Just on your other question around bookings growth sequentially, it is up, but I'd say it's low single digits up organically from the previous quarter. .

Sequentially Yes. Okay. .

And my next question comes from Casey Woodring of JPMorgan. .

Yes, just to follow up on the deep tech piece. I appreciate the comments on semi, but you also flagged strong security detection and energy research orders in the first half of the year. I guess is the strength that you're seeing there and the outperformance, was that something you had expected to begin the year? Or -- and was that contemplated in the guide? Or is this kind of incrementally better than expected?

And then how do you view the sustainability of both of those businesses in terms of demand as we look into 2027, especially on the security side?

On the security side, that was better than expected, but not hugely better. We expected strong security detection orders, but probably not greater than 20%. So it was incrementally better than what we had expected. It seems very -- we have a very good product line there and differentiated products, plus security and defense concerns are not abating. So that looks very sustainable.

I think that business for as far as I can see or anybody can see we would expect good, good growth trends there and with good margins in security detection that started whatever, a couple of years ago, and it's just been getting stronger. So it's incrementally stronger than expected, but partly baked in.

A lot of these orders are 4 things that you deliver to an airport sometime middle of next year. So it doesn't all go into Q2, Q3, Q4. and energy research that greatly exceeded in terms of timing and amount that greatly exceeded what we had expected. It's well over 100%.

At that level, at that high growth rate, it's not sustainable, but that business is very sustainable because a lot of -- some of these orders are literally for '27, '28 and some going to '29. So they all have very good continuing revenue growth in the foreseeable future.

But they've been betting -- I don't know, they've been batting 800 or something instead of the usual betting 400 to use baseball terminology. They've just done really, really well and their order and order success rate and win rate has been ahead of their own expectations, and we're delighted. .

Got it. That's helpful. And then maybe just a quick follow-up. Europe grew 10%. Maybe just walk through what you're seeing across the businesses in that region. .

And what region was that? I didn't catch it Europe .

Yes, it grew 10%, so just maybe unpack that performance. .

I believe it was healthy on NMR on other BioSpin tools as well, EPR and preclinical imaging. It was healthy on the mass spec offerings. I don't have it for all the other divisions. It was very healthy also on -- sorry, on Molecular Diagnostics, our LC business is just doing great and they just keep growing and placing instruments ahead of business plan last year. They thought that might settle a little bit. It hasn't first half booking -- sorry, first half placements in Molecular Diagnostics, the Elitech business was ahead, well ahead of business plan. And then bodes very well as the consumables pull-through then builds on that larger installed base. Those were some of the highlights. .

And I'd just add, biopharma was solid as well in that -- in the quarter in Europe.

Right.

The next question comes from Dan Arias of Stifel. .

Frank, just a follow-up on your comments around revenue recognition timing tied to the metrology business. What portion of the portfolio falls into that bucket of 6-plus quarters when it comes to acceptance and just hitting the P&L? Just trying to get my hands around on pie charts, et cetera, within that business .

Okay. Dan, thank you for a moment. So the deeptech portfolio is maybe altogether is around 15% of our portfolio. Now I cannot break out how much of that would have 3 or 4 quarters delivery time versus 6 and longer that I can't break out readily. But the detection portfolio with a longer delivery signs of, let's say, 3 quarters is about 15% of our portfolio. .

And that does not include in this case, we have not 15% -- we have not included Supercon Technologies. I guess you could also call that deeptech, but I didn't put that into that bucket. Here, I would look at instruments and systems and modules rather than superconducting wires. So if you. Yes. So 15% -- deeptech semiconductor metrology, security detection, energy research -- but in this case, I did not bundle the Supercon solutions into that, that, of course, they have -- they get these 5- or 7-year framework contracts that has a very different rhythm. About 15%, I think, is the question that you're -- 15% is probably what you're looking for. .

And then just maybe on input costs, which you guys referenced before, the market for Helium is pretty tight again. How much is that a factor for your Magnus business at this point? I mean, it's been material in the past, but I know that you guys have worked to have those machines be less Helium intent than they used to be. So just kind of trying to check in on whether that's something to think about. .

Yes, it's something we think about. And of course, there is even blockade and all, right? So it's manageable because we've taken so many proactive steps in recent years. First of all, in our factories and final test sites that use a lot of helium, they really all have helium liquefication liquefaction -- sorry, is the terminology. So we capture all of it and liquefy all of it. And I think we're at 80%, 90% that we liquefy. In addition, many of our newer magnets for the customers and also for our deliveries and installations have considerably lower helium consumption, and we've offered now for some years, we and also some other third-party vendors, helium gas captures and recompression repurification, liquefication, liquefaction solution.

So more and more of the larger labs are equipped with that. So I'm not saying it's pain free, but it's been greatly mitigated. And I'd say at the overall financial level, it's not something we need to highlight. It's manageable.

The next question will come from Jack Meehan of Nephron Research. .

Good morning, everyone. -- wanted to dig a little bit more in the CALID first. The microbiology business flat year-to-date. Can you just give us an update on what you're seeing in CALID. Historically, that's been a pretty steady double-digit grower. Are there any regional or competitive dynamics you would call out? .

Jack. So -- no, I don't think so. I think there's just also some quarterly fluctuations they ended up getting some very large deals that they'll expect to deliver in Q3 and Q4, for instance, in Latin America and some other places. .

So I think that's more of a fluctuation. Generally, that instruments business tends to be maybe now or mid, sometimes high single-digit grower, but the aftermarket for that business tends to be in the double-digit grower. So and that's also our expectation for the year. .

Great. Okay. And then I appreciate all the color in terms of the cost savings program, cadence. I was wondering if you could humor us and just talk about like how you feel about the trajectory on margins in the 2027. How much of that we can assume just kind of builds into the next year versus areas you might be looking to reinvest .

Well, we're not ready for '27 color or guidance -- but yes, we very much intend to, again, grow our margins well above 100 bps next year as well from our '26 basis. And of course, we're looking for double-digit hopefully, mid-teens EPS, non-GAAP EPS growth next year as well. As we had said, and that, that won't end with '27, we're really on a -- our goal is to drive back towards a 20% EBIT operating margin as quickly as possible and then more gradually move up to the low 20s in EBIT and mid-20s in EBITDA.

One more question. Okay. Yes, operator, we can do 1 more question. .

Our next question will come from Brendan Dion of Citi. .

This is Albert Hu on for Brendan. I just want to circle back on the 4Q growth I kind of want to exactly understand what is baked in. We got the $20 million push out from 3Q, the ultra-high field that was originally supposed to be in 2Q, got pushed Am I missing anything here? And can you remind us what -- why exactly they got pushed out in the first place? And then what's the confidence level that it won't get pushed out again? .

Okay. So -- the third item is, of course, that currency has turned this year with Q3 being the switchover point where a revenue currency tailwind turns into a revenue currency headwind. So for the year, as you've seen, that's the FX part that we adjusted in our overall guidance.

It's now 0.5% tailwind, and it used to be 1.5% tailwind and the biggest effect of that is in Q3 and in Q4. So that's not organic. So maybe it's not -- it shouldn't be a concern. But just saying, Q4 growth, yes, mostly the $20 million in deliveries we -- that I think are shifting from the general side are shifting from Q3 to Q4. It's almost all semi. -- that's simply when the sites are ready, when the customers are ready. And of course, it's a little different in the mix from what we had expected at the beginning of the year.

We're a little bit more semi-heavy and faster turning ACA/GOV in the U.S. still weaker than we had expected because monies are coming out later. And the ultra-high field that we are expecting in Q4 revenue I mean, these things are never guaranteed because we have to install them.

But I think our success ratio of delivery and success on installations is greater than 80%, but I don't get hung up on that either. The NMR business always has the ability to make it up if 1 slides out, they'll try to pull and something else. So we're pretty comfortable with our strong Q4 guidance at this -- or implied guidance for Q4 at this point. I think that's that's simply what happens every year. We try to smooth it out a little bit. And then during the year, some customer delays or sometimes technical delays come in. So I think we'll be cooling Q4 and Q4 should be a good quarter and Q3 should be okay, but sequentially not as strong as what we had expected.

And this concludes our question-and-answer session. I would like to turn the call back over to Joe Kostka for any closing remarks.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the third quarter. Feel free to reach out to me to arrange a follow-up. Have a good day.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.

We're going to kick it off. I'm Tycho Peterson from the Healthcare Group -- it's my pleasure to introduce Bruker. We've got Gerald with us. Welcome.

Thank you very much.

Let's maybe just kick off with a quick 1Q recap. Results solid, bookings increased across the portfolio, reiterated guide, incrementally derisked the top line. Just give us an overview of the quarter and some of the momentum coming out of it.

Yes. I think the highlight of the quarter was our order performance. We had good strong order performance in the first quarter coming off a fairly good performance on orders in Q4. So I think actually, at a high level, we are sort of moving into the third quarter, if we look at the second growth -- second quarter growth performance this quarter as well, it looks like we're going to have 3 quarters in a row of book-to-bill over 1.0.

So we've seen some pretty good strength in a number of areas, semi metrology, which is getting a lot of attention at the moment, strong bookings performance. Our ACA/GOV performance outside of the U.S. was also quite strong in the first quarter. We've seen that continue as well into the second quarter. Pharmaceuticals, just in the biotech pharma area was a little weaker for us in the first quarter, but that comes off of a fairly strong Q4 and looks like we're sort of rebounding again in the biopharma space in the second quarter of this year. So industrial and applied businesses were okay, more stronger order performance growth in some of our Asia and European markets that we saw here in the U.S., but still overall pretty good overall industrial and applied market performance in orders. We -- I think we, generally speaking, had a -- from an organic revenue perspective, we had a decline in the first quarter that was expected.

We had a very strong Q1 of '25. And comparatively speaking, we still saw some overall revenue performance challenges, particularly in China and in ACA/GOV U.S. specifically. So our revenue is expected to turn into an organic growth story starting in the second quarter. So far, again, order performance looks good. So execution is going to be the key for us in the second quarter. And I think, generally speaking, we overperformed on the EPS line versus our own expectations and certainly against the Street expectations.

So we feel like we're kind of moving to pivoting to another period of growth for Bruker. We had several years of that sort of pre-'24. And the expectation now is it looks like we're moving into that direction again as we start to go through the rest of '26. So it's kind of a big picture view of Q1.

And maybe just jumping into some of the end market share. I mean you're still calling for academic and government down low single-digit on the year. Just talk a little bit about what you're seeing there. I mean it sounds like orders could start to pick up. Do you think it's big ticket NMR type orders? Or is it kind of mid-level instruments?

Yes. I think with respect to the U.S. ACA/GOV condition, it's still very challenging, I would say. I mean, as I mentioned earlier, outside the U.S., ACA/GOV performance was quite solid, especially in Europe and China and Japan. But in the U.S., we're still seeing sort of the funding, I call it, hangover. We are very clearly seeing grant approvals through NIH and NSF. I mean many of our larger scale instruments are included in those grant applications. And those have actually been awarded by many of the agencies.

But at this stage, we just haven't seen significant funding with respect to those instruments or those projects more broadly. This is, I guess, the second quarter in a row in which we were having -- we had high expectations that funding would occur in Q1 relative to the U.S ACA/GOV market. That followed, of course, by the congressional approval of more modest funding, but certainly way above what the U.S. administration was proposing. So overall, our expectation for Q1 was that we would see some funding. And certainly, here we are sitting in June, and we're still not seeing a lot of movement in funding from an ACA/GOV perspective.

So it's not about whether the grants got approved by NIH. It's not about whether or not the NSF has looked at these particular projects, and they have actually been approved in general. We know our instruments included in some of those applications we just haven't been able to see the funding side. So we are currently expecting to see something similar to what we saw in fiscal year '25, where we had funding delays that pushed through the second quarter into the third quarter. Suddenly, there was a large flush of money that occurred at the end of the government fiscal year, which is September.

We saw a flurry of order activity in September and in October of '25, and it feels like this is sort of shaping up to be something similar. For us, this is meaningful or important because if we don't get these orders placed until some point in Q3, it's pretty unlikely that those would have any impact on our 2026 fiscal year performance. Those would fall because of our execution and our production activities, those would mostly fall into fiscal year '27. So that's kind of the big picture for us on the U.S. on ACA/GOV side.

I do think that most of the instruments that we have been involved with in terms of the grant applications to these agencies in the U.S. are still high ticket instrument values. It's not a lot of consumable products. It's mostly high-end instruments, either in our Life Science Mass Spec area or in our NMR space or in some x-ray and microscopy-related products. But I would say these are generally big ticket items, which is why it would be wonderful if those would hit in from a funding perspective into Q2 or in early Q3 that we could try to translate those into real revenue in '26. But likely, that will be a more '27 story, at least for U.S. ACO/GOV at this stage.

And then I guess relative to '25, obviously, there's multiyear grants that are increasingly part of the mix and then the midterms. I mean, how do you think about those as factors to a recovery in AMG?

Yes. I think it's still a journey is the way I would think about it. It's not going to be quite a snapback as some of us would have liked. I think it's just going to stretch some of the challenges out a little bit further. I still think that when you look at the academic government markets in the United States, I still think this is one of the most important research markets in the world.

We have instruments and technology that's at the top end of those. Our instruments are largely used in high-end research discovery. So I still have a lot of faith and belief that it's going to improve. We just haven't seen it so far through the early part of '26.

And then just rounding it out, I guess, Europe, A&G, you said it was strong. Can you quantify what you saw in 1Q in Europe and A&G specifically? And then how durable are the trends and how widespread is it?

Yes. I mean our overall order performance from an A&G outside of the U.S., including Europe was quite strong. I mean we had greater than 20% order growth in A&G in the European and the Asian markets. And so it feels pretty durable for us at the moment. I don't expect that we would continue a trend of orders at that level. But nonetheless, I think it just suggests a pretty healthy conditions, especially in Europe.

But we also saw a bit of a rebound in ACA/GOV spending in Japan. And certainly, China, and one of the advantages of the Chinese markets are that once the 5-year plans are set out and you define individual sectors or technologies that support that sector, the Chinese fund it fairly quickly, and we start to see impact there more broadly. So yes, I'd say the European markets were quite healthy, stronger than we might have expected, but -- and I wouldn't expect that to continue sort of every quarter, but certainly, I think mid-single-digit growth from an ACA/GOV perspective in Europe is what we would normally expect.

And then how about biopharma Obviously, biotech funding has been better. We've heard from some of your peers, April, May was better for pharma. Just talk a little bit about the biopharma end markets.

Yes. So the biopharma markets for us just generally have been a bit mixed. I think fundamentally, we had a solid fourth quarter of '25, and our Q1 performance was a little down on the pharma side. We don't have as much exposure to the biotech side as some of our peers. I'd say, kind of broadly speaking, the biotech piece for the U.S. is probably about 4% of our total revenue picture. So it's not that significant or that material in the bigger scheme of things.

The biopharma condition, I would say, more broadly, including in Europe and Asia, has seemed quite a bit stronger for us than we saw in the U.S. There's been a some strength, specifically in large pharma in Europe. And then I would say also in Japan. And the biotech business in China, in particular, and even the pharmaceutical side was quite solid for us in the first quarter. And our expectation for the second quarter is something similar to that in China and in Europe.

Again, I know that the IPO markets in the biotech side here in the U.S. seem to be improving. But generally speaking, for a lot of our instruments, biotech got to have enough funding to be able to secure instruments that are at the price points for many of our technology elements. So it's not been a big part of our total story with respect to the biotech piece here in the U.S. But I mean, very encouraged to see what we see in Europe and in particular, in China on the biotech side.

And then I guess, in China specifically, you talked about improving order trends off easier comps. How much of this is just true end market demand recovery versus normalization off a weak 2025 base?

Yes, it's a fair question, Tycho. I mean I think we are -- generally speaking, we're coming off some very weak years of China demand. I do believe I have a slightly more bullish view, I think, on China than some of our peers. We continue to see growth in a number of the markets in China for us. I mean industrial, applied, the semi space, those products we can sell into China for semi are quite robust.

Biotech pharma seems to be pretty good from our side. So I mean, I do think GDP performance in China is likely going to outperform most of the other economies. And we have a good strong commercial operation in China. So expectations are pretty positive for -- again, coming off of a low base, but I think will we get back to the levels of the 2021s and '23s, probably not. But we can still see significant growth coming out of China, I think, in '26 and in '27 for sure on the base of multiple technologies that fit neatly into the kind of broader 5-year plan that the Chinese government has laid out and starting to fund.

Can you maybe just quantify what you think the structural growth rate is in China in the next couple of years?

Yes. I mean I think we're pretty flat on our growth expectations with respect to '26, but I think that could have some upside. I think looking at low single-digit, mid-single-digit growth structurally for that business, I think, is pretty reasonable for us going forward. I said we have a really good footprint in terms of our commercial activities there. And we are also looking at some other opportunities potentially to have more assembly and production activities in China to meet some of the local competitive demand there that we might be -- we're missing at the moment.

So there's still quite a bit of opportunity for us in Japan -- I'm sorry, in China. And China makes up around 13-plus percent of our overall revenue today and at one point was much larger. So it's an important market for us, and we're still very focused on it.

And competitively, I mean, high-end instruments generally more protected, but I mean, what are you seeing on local competition there?

Well, I think our diagnostics business, particularly in the MALDI franchise, I think, was impacted by some local competitive environment. We have some of our microscopy business that we see also being challenged in that area. The higher-end instruments, particularly in the Life Science Mass Spec space or the NMR space, we're just one of the few players that have those instruments. And I would note that proteomics, multiomics continue to be a very significant focus of attention for the Chinese markets, including the Chinese government.

So the Chinese -- while the U.S. is struggling a little bit from a funding perspective, the Chinese are moving very dramatically into those areas and have done some remarkable -- some incredible proteomics research. So I expect the high-end instruments still to perform well in that space, at least for the next few years for sure.

Made it this far without asking about semiconductors, but I got to go there. So -- let's start, I guess, with what you saw in the quarter, you had the $40 million pushout. How much was recaptured in the first quarter?

Yes. We captured about, I'd say, between $10 million to $15 million in Q1. We expect a similar amount in Q2 and Q3. Just to clarify, most for our semi business, we're dealing with large-scale customer base there.

They determine when those -- that revenue is actually going to be recognized when they want the products delivered and shipped. We don't drive that timing. So we did have some push out of Q4 '25 into what's now going to be Q1, Q2 and Q3. So I think those are relatively modest in the bigger scheme of the overall picture. But still that's the way it plays out in that particular business.

And then the overall guide there seems to have kind of migrated up, I'd say, from low single digit to maybe mid-single. Just can you clarify what the messaging is on that?

No. Look, I mean, I think we started just to give a little bit of background here. In the semi space, we had relatively lumpy order performance in 2025. We had a Q1 that was quite strong and Q2 and Q3 were weaker and Q4 was quite strong. Q4 was quite strong. So we got into a position, I think, where when we set the guide early on, we were mostly concerned about making sure that we could meet or exceed that. And fundamentally, we didn't see strong enough order growth to justify something other than low single-digit growth.

Now where we are today, I'd say, looking at the order growth performance we had in the first quarter, which was quite strong. And again, what we've seen so far in the second quarter also looks quite strong. I think fundamentally, we're more optimistic about that business for the rest of fiscal year '26 and beyond.

I think we are -- just with everything else, there's some puts and takes in our business around the guide. We have some parts of the business that are overperforming, some parts that are underperforming our expectations relative to the guide. And so just as we normally do each quarter, we'll look at our guide situation to determine whether we need to make adjustments accordingly as a result.

And another question we've got, you're obviously adding capacity, potentially being able to double the business. But over what time frame do you think you could double it?

Yes. I mean I think we're adding capacity capabilities in that business in the first quarter and the second quarter this year. Most of these orders that we've seen in the first and second quarters will not be delivered until either the end of the year or into 2027 just because of our kind of backlog and production queue. So it seems to me that we would be able to at least double the scale of our capacity in that business by the end of 2026, which I think should meet the demand that we have currently or expect to see. I would say just more broadly, if the numbers, particularly in the QA/QC elements of semi were to go way beyond that, we'd have to expand our capacity in a number of areas.

For those of you that aren't that familiar with it, we have basically 3 technologies that we are applying into the semi space. We have an X-ray technology business and auto AFM business and a white light interferometry business. Each of those elements are produced in different places around the globe. And -- but fundamentally, we think we have enough capacity to be able to double the size of the business in short order from all elements of those 3 technologies going forward.

And I guess from the outside for things investors should be paying attention to, is it new wafer starts? I mean, what's most important for you?

Yes. I mean I think the way to understand our business a little bit is that we have a heavier lean. There are 2 elements in our business areas. We have a heavier lean into production and in QA/QC, a lighter lean into R&D, which is really based on sort of lower node research activities. I would say that's something like 2/3 of our overall business, which is somewhere in the range of $300 million for our semi metrology business, 2/3 of that is really associated with QA/QC. And that business, I think, could be more directly connected to wafer activity.

I think the other parts of the business, which is about another $100 million of that $300 million, that $100 million is connected directly to R&D activities, about half of it. And the rest of it is really around mask repair. As most of you may know, these large semi businesses are using masks for sort of lithography elements. And of course, over time, these masks get damaged and have to be ultimately repaired. So we have, let's say, roughly $50 million kind of business in that category. So when you're calibrating this business relatively speaking, I would say that the R&D and the mask repair businesses should not be calibrated specifically to wafer production or activity because that's a bit of an overstatement.

These are still strong growth levels, better than average Bruker average growth levels in these other 2 parts of the business. But I think the one that seems to be hot at the moment for sure is in the QA/QC production area. And there, I think it's a question of this is being driven largely by AI demand and the scale of that seems to be still evolving, let's say it that way.

There's a lot of demand across the industry. I would also point out that a lot of our own order demand is coming from multiple customers. We have large customers that carry a lot of weight in the industry. And these customers specifically are all starting to place orders related to mostly in this production QA/QC area. That's being driven mostly by AI demand and the level of fab production that's going -- or new fab production that's going on.

Some of you may know, Japan, for example, has 9 new fab facilities that are being built on one coast. Of course, Europe has a number of fab facilities that are being built. And here in the United States, there's at least Ohio and Arizona that I'm familiar with. So a number of these semiconductor companies are building their own capacity up with more fab activity.

And our tools that play into that specifically are in the production QA/QC area. And fundamentally, it's kind of a copy-paste if you're in Taiwan and you're building another facility in Japan, you're likely to kind of take the tools of record that you're using in Taiwan and apply those into the new fab facilities that are active in -- or about to be active in Japan or other countries. So I think tagging that $200 million range of semi metrology in our business to more wafer production makes sense. I think the other $100 million probably is -- should not be calibrated to wafer production activity because those are more random-based elements.

Another business that's gotten more attention that could also double is just defense. Curious how much of that is airport screening versus military? How much of this is budget expansion versus short-cycle procurement?

Yes. These are good questions. I mean we have a relatively sort of low level of activity for many, many years in our Security and Detection business. And suddenly, it's getting -- it's growing dramatically. This business was somewhere under the $30 million range. And now I think we're looking at something north of $60 million to $70 million. So it's got good growth. I think in general, it's coming from both European and U.S. mostly security and detection-related items. The fastest-growing element to that really is explosive trace detection.

These are either handheld devices that are used in airport security screening or in air cargo security screening elements. And I think we've seen significant growth in those markets, not only in the United States, but also in the European markets. It's a -- it feels like a pretty durable experience at the moment. Maybe the growth rates may moderate a little bit from where we are just now. But certainly in Europe, it doesn't appear as if the number of wars or activities that are going on in the Middle East and Europe is tempering at the moment. And here in the U.S., there seems to be a shift at least within this current administration towards a more significant kind of security detection element across particularly air cargo, but also even in airport security. So feels like it's a pretty durable business for us.

It's being -- we're deploying a lot of the technologies that we have from other elements of our business into it. And the growth has been good. It carries a pretty good margin profile as well, I would say. So we've relocated some of the elements of the business out of the U.S. into Europe and took a lot of costs out of that business. So I think overall, pleased with how that growth is going, and that should help our mix ultimately in future years as well as the growth continues.

Maybe bringing back to health care. Just looking at CALID, mid-single-digit growth. Set aside U.S. academic and government, we kind of talked about that, but where are you feeling better on the CALID business overall?

Yes. Well, CALID is an interesting mixture of a number of things. We saw some very good business in our molecular spectroscopy business, which is part -- I mean these are essentially high-end microscopes. That business continues to do well, again, maybe outside the U.S. in U.S. at ACA/GOV, but fundamentally a good strong business there. I think our LSMS business, our Life Science Mass Spec business has had some challenges, particularly with -- from a competitive perspective, I would say, in '25, we're starting to see some pretty strong order performance in '26, especially in Q1 on the Life Science Mass Spec Side.

So that part of the business performing, I would say, quite well. We have in the audience here, Wolfgang Pusch, who is the leader of our microbiology and diagnostics business. That business is performing quite well. This includes our MALDI Biotyper franchise as well as our newly acquired -- it's a couple of years now, but newly acquired ELITech business. And that particular part of the business has performed really well.

I mean we've seen growth both in the MALDI Biotyper instruments level as well as sort of double-digit growth in the consumables side of that franchise. But then in the ELITech side, we've seen quite strong instrument placements in the E-Tech business, which is fueling more consumables activity over time. And so I would say we're well ahead of our original acquisition model with the ELITech deal, which was one of the largest acquisition transactions we did in our history.

I'm very pleased with the growth there. Just to remind folks, the ELITech business is a sample-to-answer PCR-based Tools, it focuses largely on midsized hospitals, mostly European focused at the moment, but we do think there's some significant growth opportunities even within Europe, but even beyond that into the U.S. and potentially into the APAC and LatAm region. So it's a really -- that part of the business continues to fuel quite good growth. I think overall, feel pretty good about that whole CALID organization and how it's being set up at the moment.

And microbio and molecular are both tracking well above plan. I mean, I think you were 40% ahead in the first quarter. How much of this is new growth vectors emerging versus maybe competitive wins?

Well, I think the -- there's been clearly some improvement in taking market share in that space. I do think a lot of it is just the sort of standard fare of what we do.

I mean our instruments are generally more differentiated in the marketplace. The MALDI system, in particular, the MALDI Biotyper has been kind of the leading microbial infectious disease tool out there. It's been -- it's broadly applied across most large labs across the globe. We're doing hundreds of millions of identifications on that system.

So I think it's the differentiation in the tools. We've added quite a lot of capabilities in terms of software, so easy or easier use of for our customer base to be able to access that. And the same is true for the MyGenius, InGenius product portfolio in the ELITech space. So really good -- that business feels very strong to us at this stage.

I want to make sure we hit on margins in the closing minute or 2 here. I guess, long-term goal, obviously, mid-20s operating margins. How much of the kind of near-term improvement that you're baking in is structural versus dependent on revenue recovery?

Yes. The bulk of the '26 story is really based on our cost-saving actions. We've taken north of $140 million of cost savings out of Bruker. That's a lot of cost savings for a company our size. So I think, generally speaking, the operating margin movement that we expect to see in 2026 is largely going to be driven by the cost-saving actions.

As we look forward into '27, '28, I think there's going to be some elements of mix. We've talked a little bit about where we're seeing some improved mix story going forward. I would also add that the volume picture for Bruker is much better as we continue to ramp to more organic revenue growth going forward compared to where we were certainly in '25, the volume impact, the volume leverage impact is quite significant for us.

When our factories get moving at a higher volume level, we drop a lot more down to the operating margin and the EPS lines. So between volume mix and what costs we've already taken out, I think we are setting ourselves up for a pretty significant step-up in operating margin performance, both in '26 and I would say, in '27. We are expecting sort of I'd say, double-digit growth on the EPS side in -- for multiple years.

Now we've stepped that up pretty significantly through cost actions, but I do think that having improved market conditions across the globe, maybe with the exception of our ACA/GOV story here in the United States, I think gives us a better step up along the way. And actually, Frank and I spoke to some investors a week or so ago, and we did communicate a step-up in 2027 and expected operating margins to between 150 and 200 basis points in the '27 period.

So we're taking a big step up, almost 300 basis points in 2026. We expect to take another big step forward. The goal, as you correctly point out, our target is to get back to 20% operating margins in the next few years. So we have to take some big steps in both '26 and '27 in order to be able to hit those targets. And that's our expectation.

Great. We're out of time. We'll leave it at that.

Good day, and welcome to the Bruker Corporation First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Joe Kostka, Director of Bruker's Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's First Quarter 2026 Earnings Conference Call. My name is Joe Kostka, and I'm the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our EVP 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 can be downloaded from the Events and Presentations section of Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our GAAP to non-GAAP financial measures are included in our earnings release and are posted on our website at ir.bruker.com. 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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties, including those related to our recent acquisitions, geopolitical risks, wars or blockades, market demand, tariffs, currency exchange rates, competitive dynamics or supply chains.

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-K for the period ending December 31, 2025, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business conditions and our outlook as of today, May 6, 2026. 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 second quarter 2026 financial results expected in early August 2026.

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 for the first quarter of 2026 in more detail and comments on our reconfirmed full year 2026 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Joe. Good morning, everyone. Thank you for joining us on today's first quarter '26 earnings call. While U.S. academic demand, tariff and currency headwinds have continued to pressure our year-over-year results, we are pleased that our first quarter '26 financial performance came in well ahead of expectations. We are also encouraged that in the first quarter, our Bruker Scientific Instruments segment or BSI bookings grew organically in the high single digits. We saw strength in industrial research orders and encouraging double-digit bookings growth year-over-year in academic orders from outside the United States. This demonstrates, we think, that our novel and performance-leading post-genomic disease biology research solutions are truly enabling and that we can expect momentum in U.S. [indiscernible] demand once the NIH funding environment improves. In the first quarter, we benefited from strong demand in a few areas more unique to Bruker as our AI-driven semiconductor metrology business and our similarly AI-driven SciY scientific software and lab digitization businesses as well as our European Middle East security detection business all saw organic bookings growth of greater than 20% in the quarter.

Let me give you a little bit more color. Order strength in semi metrology, which is now a greater than $300 million annual revenue business for Bruker was driven by AI demand for memory chips and for advanced packaging, particularly in the U.S. and in APAC. Many of the world's top semiconductor manufacturers rely on Bruker metrology tools for front-end and back-end applications, including development for their next-generation products. The rapidly increasing need for computing power and emerging applications for artificial intelligence provides strong secular tailwinds in semi metrology. Another area that may have been less visible to you so far, another area of our portfolio benefiting from the AI megatrend is SciY, which is now about a $50 million revenue business. SciY offers lab digitization and scientific software going from research through development all the way to manufacturing and enabling integration, automation and digital transformation.

These SciY solutions facilitate the capture, ingestion and standardization of data so that it is AI-ready, alleviating bottlenecks in the digital transformation that is revolutionizing scientific research and paves the path to so-called self-driving labs, or SPL, which can accelerate R&D, quality control and also chemical and biomolecular manufacturing. In another area, our security detection business, we are seeing significant demand for our explosive trace detection systems from airports in Europe and the Middle East as well as for CBRN detection solutions. Our security detection business has grown from a niche business a few years ago to about $70 million in revenue expected this year. Finally, we are delighted in the turnaround in our BEST segment, where we have obtained in the first quarter about $80 million of multiyear orders for our research instrument subsidiary, Fusion Technologies, Fusion Energy, and in the last 5 months, December through April, about $600 million of multiyear orders for our high-performance superconductors from major MRI customers.

So all good at best. So strong academic demand for our post-genomic solutions outside of the U.S. and these mentioned areas of idiosyncratic strength were contributors to our BSI book-to-bill ratio, which in Q1 was again comfortably above 1.0, now the third consecutive quarter. This encouraging momentum is expected to carry us back to organic revenue growth in the second quarter and for the remainder of the year. Very importantly, Bruker's innovation engine has been quite impressive, we think, this year already, and we have introduced very impactful new products and solutions at recent scientific and medical conferences. These launches further strengthen our leadership position in NMR. I think we are clearly leading the way in [indiscernible], high fidelity and high-plex spatial biology. And we're also bringing major innovations to clinical microbiology and molecular diagnostics. So let's dig in. Let's turn to Slide 4 now for the P&L performance of the business. Our Q1 reported revenues of $823 million increased 2.7% year-over-year, an FX tailwind of 4.5% and a growth contribution from M&A of 2.6% more than offset an organic decline of 4.4%. BSI segment revenues were down 5% organically, while BEST saw organic revenue growth of 3% net of intercompany eliminations.

Our first quarter '26 non-GAAP gross and operating margins were 50% and 10.2%, respectively, both down year-over-year and both inclusive of significant headwinds from foreign currency trends year-over-year but also both ahead of expectations. Our Q1 '26 diluted non-GAAP EPS was $0.31, down from $0.47 in the first quarter of '25, but meaningfully ahead of our prior expectations. Please turn to Slides 5 and 6, where we highlight the first quarter constant exchange rate, or CER, revenue and bookings performance of our 3 Scientific Instruments groups and our BEST segment year-over-year. In the first quarter, BioSpin Group revenue was $198 million with a CER decline in the high single-digits percentage. Revenue growth in preclinical imaging systems, Sywise software and our services business were more than offset by weakness in NMR systems due to soft ACO performance in China and Europe.

In the first quarter, BioSpin installed the world's highest field preclinical MRI system, an 18 Tesla preclinical system at the [indiscernible] Institute in Lisbon, Portugal. However, BioSpin saw a headwind to revenue growth from the 1.2 gigahertz NMR installed in the first quarter of '25 as there were no gigahertz class systems in Q1 of '26. Right. In Q1, our CALID Group had revenues of $316 million with mid-single-digit percentage CER growth. SAI growth was led by molecular spectroscopy, which also saw strength in security detection orders. Microbiology and infection diagnostics had solid revenue growth. And in life science mass spectrometry, contributions from our recent M&A more than offset revenue software in U.S. [indiscernible].

Encouragingly, life science mass spec orders growth in the U.S. [indiscernible] was positive in Q1 year-over-year. So perhaps it is stabilizing. Of course, we'd like it to come back and rebound, but maybe that will happen in the next couple of quarters. Turning to Slide 6 now. In Q1, [indiscernible] revenue was $246 million, with CER revenue declining mid-single digits percentage. Strong revenue growth in semi metrology was more than offset by weakness in [indiscernible] and industrial markets.

Nano had strong orders across the group, including tools for X-ray industrial research, spatial biology, high-bandwidth memory and advanced packaging metrology, all driven by AI. Finally, first quarter BEST CER revenues grew 3%, net of intercompany eliminations, driven by our superconducting wire business. Research instruments, RI, that business saw very strong orders in Q1, as I said earlier, from Fusion and BEST received very large multiyear superconductor orders in the last 5 months from all 3 major MRI OEM customers.

Moving on to Slide 7. The next 3 slides, I will not read everything, but I'll give you a highlight. We had a pretty significant NMR innovations at the Experimental NMR Conference in [indiscernible] in 2026 for research and pharma markets. A lot of it is software, a lot of it is AI-driven, making protein NMR really much easier. In the past, I think protein NMR had a disadvantage compared to [indiscernible] or X-ray crystallography and that it required more expertise, but that's really changing pretty rapidly. And AI with its unique abilities to get dynamic and binding information is becoming much, much more accessible. There are some other innovations from extreme new sensitivities and enable new fields shown on the right to just a good old next-generation NMR console, the [indiscernible], which we think will unlock a replacement cycle.

Moving to Slide 8. At [indiscernible] and then following AACR, I really think Bruker is clearly leading the way in spatial biology for capturing complexity of disease biology and integrating it from, well, even 3D genomics with a very unique Painscape system that we launched to the CosMx system, which is upgradable for our customers and which, of course, were already a year ago. We showed multi-omic whole human transcriptome. We've added now a whole mouse transcriptome. We're doing T cell receptors, microRNA. And most importantly or very importantly, I would say, we have added high-plex proteomics, that combination of whole transcriptome and high-plex proteomics is really very, very powerful and readily adopted by comprehensive pathways for better LLM, so just for better disease biology. we think that continues to be very unique.

Enough on that slide, let me talk about clinical microbiology on Slide 9. We had another conference -- crucial conference, the Global ESMID Conference, which stands for Clinical Microbiology and Infectious Disease in Munich. We introduced our new MyGenius Pro higher throughput system, [indiscernible] higher throughput system for all the markets that we drive from Bruker [indiscernible]. And delightfully, this is also the system that Hitachi is introducing in Japan using our molecular diagnostic assay. So it's very an important development. Meanwhile, we have many, many introductions, too many to specify in the [indiscernible] workflow and identification and even hospital acquired using the IR [indiscernible]. I won't go through it. This is more for your reading if you are interested. but significant innovation in microbiology, typically a state area of diagnostics.

Right. So in summary, good execution, disciplined management by our teams drove us to outperform our expectations in the first quarter. Order trends are improving, including in unique areas of our diversified portfolio, and we're optimistic that improved organic growth will follow. Importantly, we are very committed to controlling and reducing costs, which is crucial to improving our margin profile rapidly. Benefits from our cost-out plan, the Bruker management process will be explained by Gerald, but are now clearly evident in our P&L, and we're further expanding these cost-cutting initiatives, as Gerald will discuss shortly, keeping us on track not only for significant margin expansion and strong EPS growth this year, but also into next year and beyond. Given the dynamic macro, shall we say, and geopolitical environment, we believe it is prudent for now to confirm our prior '26 guidance.

The outperformance in Q1 has been encouraging and encouraging start to the year, and it provides us with improved visibility and confidence, and we look to build on that momentum in the second quarter. So with that, let me turn things over to our CFO, Gerald Herman. Go ahead.

Thanks very much, Frank, and thank you, everyone, for joining us today. I'm pleased to provide more detail on Bruker's first quarter 2026 financial performance, starting on Slide 11. Despite significant macro and foreign exchange headwinds in the quarter, we delivered financial performance ahead of expectations we outlined in our earnings call in February.

The first quarter '26 reported revenue increased 2.7% to $823.4 million, which reflects an organic revenue decrease of 4.4% year-over-year, well ahead of our original expectations. Acquisitions added 2.6% to our top line and foreign exchange was 4.5% revenue tailwind. The highlight of the quarter was our strong bookings performance with BSI segment organic bookings up high single digits and bookings growth across all groups. We saw order strength in academic government research, excluding the U.S., in industrial and semi end markets and geographically in Europe and the rest of the APAC region with marked order improvement also seen in China.

Back to revenue for the quarter, geographically and on a year-over-year organic basis, in the first quarter of '26, our Americas and European revenue both declined in the low single digits percentage, while Asia Pacific revenue declined in the low double-digit percentage, driven by a greater 20% decline in revenue performance for China. In our EMEA region, revenue was up low single-digit percentage. From an end market perspective, we saw organic revenue growth in semi, biopharma and hospital clinical markets more than offset by double-digit declines in academic government research and industrial markets. Within the BSI segment, systems revenue declined in the low double-digit percentage and aftermarket revenue grew in the high single-digits percentage organically year-over-year.

Q1 2026 non-GAAP gross margin decreased 130 basis points to 50%. Non-GAAP operating margin was 10.2%, a decrease of 250 basis points year-over-year. The decrease reflects headwinds of 350 basis points from lower volume and unfavorable mix, 170 basis points from foreign exchange and 30 basis points from tariffs. These headwinds were partially offset by a 300 basis point benefit from our cost-saving actions taken in fiscal year '25, now helping our performance in fiscal year '26.

On a go-forward basis, we expect the year-over-year foreign exchange and tariff headwinds on margins to ease as we lap the introduction of U.S. tariffs and the significant depreciation of the U.S. dollar, which occurred in the second quarter of 2025. On a non-GAAP basis, Q1 '26 diluted EPS was $0.31, down from $0.47 in Q1 of '25. Our non-GAAP EPS performance includes a foreign exchange headwind of $0.05 and a $0.05 impact from the MCP offering we completed in September 2025, net of interest cost savings.

On a GAAP basis, we reported diluted EPS of $0.02 compared to $0.11 in the first quarter of 2025, with the decline mostly due to lease impairment and restructuring charges related to our cost-saving actions. Beyond the $100 million to $120 million in annualized cost saving targets that we announced last year, we're now tracking around $140 million in expected savings on an annualized basis. We cleared most European labor hurdles in the first quarter and expect to see the majority of savings reflected in our second quarter and second half results in fiscal year '26 and beyond. Weighted average diluted shares outstanding in the first quarter of 2026 were 152.7 million, an increase of 800,000 shares or 0.5% from the first quarter of 2025.

Turning now to Slide 12. We generated $71 million of operating cash flow in the first quarter of '26, up slightly compared to the prior year. Capital expenditure investments were $24 million, resulting in free cash flow of $47 million for the quarter, an improvement of $8 million year-over-year. We finished the quarter with cash and cash equivalents of approximately $133 million. During the quarter, we continued our delevering actions with $180 million debt paydown, eliminating a Swiss franc-based term loan. At the end of the first quarter, our net leverage ratio declined to 2.9x.

Turning now to Slide 14. We are reconfirming our full year '26 outlook using the stronger execution in the first quarter to substantially derisk the second half ramp in growth, margins and EPS. Therefore, we're reconfirming the following guidance: reported revenue of $3.57 billion to $3.60 billion, representing reported growth of 4% to 5% compared to fiscal year '25. Organic revenue growth of 1% to 2% year-over-year with acquisitions contributing 1.5% and an estimated foreign exchange tailwind of also 1.5%. We continue to expect organic non-GAAP operating margin expansion of 300 to 350 basis points, largely driven by our cost-saving actions, offset partially by approximately 50 basis points of foreign exchange headwind and resulting in a non-GAAP operating margin expansion of 250 to 300 basis points compared to the 12.6% operating margin posted in fiscal year '25.

On the bottom line, we continue to expect non-GAAP EPS for fiscal year '26 in a range of $2.10 to $2.15 or non-GAAP EPS growth of 15% to 17% compared to fiscal year '25. We're estimating a foreign exchange headwind of 8% to fiscal year '26 EPS, implying non-GAAP CER EPS growth of 23% to 25% year-over-year. Other guidance assumptions are listed on the slide. Our fiscal year '26 ranges have been updated for foreign currency rates as of March 31, 2026.

Now to add a bit of color to the second quarter of 2026, we've now delivered 3 consecutive quarters with a BSI book-to-bill over 1 and expect to return to organic revenue growth in the second quarter. We estimate second quarter organic revenue growth to be in the low to mid-single digits percentage year-over-year. With the easing of tariffs and foreign exchange headwinds we experienced in the second quarter of '25 in the second quarter of '26, we expect a meaningful year-over-year step-up in non-GAAP operating margin and non-GAAP EPS with continued improvements in both metrics expected in the second half of the year.

To wrap up, Bruker's first quarter '26 results were pressured by macro and market headwinds, but our teams executed very well to deliver results ahead of our expectations. Coupled with continued momentum in our order book, this gives us further confidence in our ability to deliver solid financial improvements for the remainder of the year and beyond. And with that, I'd like to turn the call back to Joe. Thank you very much.

Thanks, Gerald. We'll now begin the Q&A portion of the call. Operator?

[Operator Instructions] The first question is from Puneet Souda with Leerink Partners.

Yes. I'm sorry. I put Michael Ryskin on the podium with Bank of America. Puneet will be next.

Congrats on the quarter, and I appreciate all that commentary. I want to start with some of your comments on demand trends OUS. You talked about A&G being a little bit better, OUS. The U.S. weakness is not surprising. Would love any additional color you can provide on sort of how sustainable that is? You've got good visibility into order trends. Just do you think that could persist going forward and especially your comments on China and Europe?

Mike, thank you. Thanks for your comments. I think the order growth in Q1 outside of the United States in EcoGov was particularly high. That's probably not sustainable, but it's healthy. It's quite healthy and also shows that even with incremental growth in EcoGov budgets outside of the United States that our tools are very much in demand and are a high priority. So people really want the proteomics, metabolomics, multiomics, very differentiated tools, the second-generation proteoform tools, functional proteomics tools with the [indiscernible] is in very much in demand. I think it's ushering a new era in proteomics. And yes, we're leading the way in spatial biology and good old NMR, NMR and related techniques are just very powerful and becoming less domain of just experts becoming via AI, quite honestly, becoming more accessible, namely the results and the insights, not necessarily how to run the spectrometer. So it's good trends. And I think it shows that we're not just going with the macro A&G trends, but I think that we're hopefully have a right to win as it's sometimes called with particularly relevant tools that are truly enabling. So I think it's a good indicator. I wouldn't quite take the OUS Q1 order rate and extrapolate from that because that was -- but I think we can look at high single-digit growth in these types of orders. And I'm more optimistic than NIH funding and funding disbursement will come back now in Q2 and maybe that makes for good Q3 orders, which shall see.

Okay. That's helpful. And then maybe for my follow-up, the other point that I thought was really interesting was some of your commentary on some of these really niche Bruker-specific end markets or applications where you're benefiting from some of the more recent macro disruptions, security, defense, things like that. You called out a couple of those. I was just wondering, any way you could kind of aggregate that sort of what percent of your portfolio in industrial is exposed to some of those end markets where you're seeing that 20% growth now. Like you said, a bunch of those might be $50 million, $70 million of revenue. So on the one-off, if things that can kind of slip under the radar, but you lump them all together, that could be a nice little offset to what's going on in [indiscernible].

Yes, it's well above 10%, right? We haven't done that, but yes, a quick math would show that it's 10%, greater than 12%. And there are some others of these Street loves to call them idiosyncratic growth drivers. Yes, we have them too. And we will do that. So it's clearly quite -- it's moving the needle. It's more than 10%, 12%, but we'll aggregate that at some point. I don't have it at my fingertips.

Next, we have a question from Puneet Souda with Leerink Partners.

So first one, actually, maybe for Gerald. On the margin side, could you elaborate a little bit on the second half ramp? It is -- I mean, first of all, congrats on the quarter, but just it is steep still. Could you maybe talk a little bit about in terms of overall, is it just organic growth recovery? Or are you expecting more from the cost initiatives? Maybe just give us the puts and takes given the ramp here.

Yes. So Puneet, it's Gerald. I think, generally speaking, we are expecting continued improvement in the overall revenue performance sequentially as we march through 2026. Our operating margin performance is very strongly driven by our cost-saving actions, and you've already heard me describe those in my prepared remarks. We're expecting 300 to 350 basis points of organic improvement. That gets better as we move through the year, starting in the second quarter because of some of the headwinds that I mentioned on foreign exchange and tariffs get dissipated in the second quarter. But more fundamentally, as we march through the third and the fourth quarter, we expect to see stronger operating margin performance, mostly driven by improved market conditions, as you just heard about our order performance and, of course, the cost saving actions.

Driver of cost savings this year from [indiscernible]

Got it. So maybe just, Frank, just on spatial and AI, 2 areas I just want to touch on. Maybe on AI, can you provide what level of visibility you have from the customers, your confidence in continuing to grow that here in '26 and then '27? Or is it just something that we should just observe the sort of the AI demand and the broader macro? And on the spatial side, there was an instrumentation launch in the market. Just wondering how you're thinking about potentially freezing of the market this year and then longer-term demand for NanoString products there?

Yes. So the AI trend and that, of course, always included logic and next-generation logic chips and GPU and other -- that's been strong all along. Advanced packaging continues to be very strong. And it's also not only one company anymore. There are now some other companies that are also really benefiting from that. And then really, the big step-up more recently, as you've all read, of course, and we're benefiting from that is in high-bandwidth memory. And of course, again, advanced packaging for including all of that. So that's an additional boost. That looks quite durable. I mean, I don't think that was a lucky quarter or 2 or 3. I think that looks like a very durable trend. And we're built into that supply chain with our semiconductor metrology tools and even our RI tools that are now also north of $25 million a year. They go into the lithography, the Extreme UV via the size ASML supply chain. So there's an additional driver that's now coming becoming significant. So these are strong trends. On the SciY side, the lab digitization and not just for our instruments, for other instruments and just about all the data in the lab and then the scientific software to do something with that, the fair reporting principles, these are very strong drivers, primarily in biopharma, but also in other industries and even some academic customers are benefiting from that, but it's primarily driven by biopharma. Again, a very high priority for all of them. when you sometimes -- the Street worries about, well, are they still buying instruments with all this AI? Yes, they're buying instruments, but boy, are they investing in software and digitalization and projects to get their labs, not only R&D, but QC and QC accompanying the transition to manufacturing and then scale up. These are very strong trends. I think that business will continue to grow very rapidly. Spatial biology, it was remarkable to read that someone invented what we did a year ago, but anyway, not to be too cagey here. I think it's a confirmation of what we've been driving this whole genome, whole human genome now whole mouse genome, transcriptomics. But we're still very much ahead of that with additional transcriptomes with -- we're actually delivering this stuff. This isn't just all promised for later this year. We've been delivering it since last year. And very importantly, we have the high plex or fairly high plex proteins, which really makes pathway analysis so much more powerful. So I feel really good about us leading the way and really benefiting from the new trends in spatial biology. And so yes, we'll leave it at that.

The next question is from Tycho Peterson with Jefferies.

Frank, just to circle back on the semi comments. So you had a push out $40 million last quarter. Did you recapture that in this quarter? And the original guide, I think, for the year in semi was low single digit. Maybe just given what you're seeing in the order book, talk a little bit about how you feel about that as you go through the year.

I don't have all the details at my fingertips. I think we recaptured only some of that in Q1. Some of that has to do also with customer site availability. And as you know, in that industry, you deliver precisely when they want it, not when you have it ready. So I don't think it's completely captured, but some of it went into Q1. So I don't have a really crisp answer for you, but the answer is some, but not all.

And for the full year, just is low single digit still what you're thinking on semi?

On the revenue, I need some help from my team here. I don't have that at my fingertips. We may be able to get back to you on that during the call. Someone is nodding, so the answer seems to be yes.

Awesome. Maybe just U.S. academic, Frank, your comment, you kind of let it slip, you thought it could pick up in 2Q potentially. I'm just curious what you're seeing out there. How have expectations changed since February? What gives you that kind of confidence we'll see it maybe sooner rather than later?

Well, it certainly seems to have bottomed or stabilized. Now we want more than that. And yes, in a few weeks ago, we got news that a lot of -- a number of our applicants, especially from NIH got e-mails, not only did they have a good score, but that they would probably get funded the checks did not come immediately or the money transfers, but now I read in some of the industry reports, right, from you and others that also disbursements are not going up sequentially at least. And we know what the budget is. We know how little has been spent so far in a way. We're doing the math that everybody else is doing. And when you go to conferences, it's -- people aren't bullish, but U.S. academic conferences, but they expect this to stabilize somewhat and maybe also -- there's still political uncertainty for sure. And it's not -- I expect it will pick up from, obviously, and I think we've bottomed in I'm somewhat optimistic that there will be a fair amount of funding between now and the end of the government fiscal year at the end of September and perhaps that will relate to good Q2 or Q3 orders. And some of that will go into Q4 orders. If money is released in Q3, calendar Q3, some of that will go into Q4 orders. So we're far from -- we're not bullish on that, but we think it's stabilizing and poised to pick up a little bit. And we have many other areas of strength. So for this year, we're not banking on that. Most of that will then go into next year's revenue for us anyway, but we're expecting a gradual -- an improvement and perhaps good orders from U.S. academia, wouldn't that be nice in the second half of this year. But we're not building that into our guidance. So we can deliver, we think, our guidance with or without that. If it comes, it's going to be actually upside.

Okay. That's helpful. And then just quickly for Gerald, can you give us the 2Q margin target? I don't think we got that. And should we assume B2B holds above 1 for 2Q?

To answer your last question, yes. And on your earlier question, we mentioned in my script, the low to mid-single digits organic revenue growth color for the second quarter of '26.

And a significant margin pickup -- but we didn't give any numbers. We didn't give any ranges.

The next question is from Brandon Couillard with Wells Fargo.

It'd be great to get some color on China. I think you mentioned revenues were down over 20%, but Gerald kind of alluded to a market improvement in orders. Just unpack what you're seeing across the end markets there and whether that's maybe starting to pick up a bit.

Brandon, it's Gerald. I'll just take that one quickly. Yes, we did have a significant drop in overall revenue in the first quarter, but that's largely driven by weaker order demand in the prior year. So we think that's just played out. With respect to the first quarter order performance in China, it was solid, I guess, I'd say. Now again, we're coming off of relatively softer comps, but still very encouraging in China to see some improvement on an order basis in the first quarter.

Okay. And Frank, you care to touch on the BioSkin leadership given [indiscernible] departure recently. He's been there a long time and leadership in DSIs been immutable over the past decade. Just curious if you have any more color.

Yes. That's right. By the way, on China, I wanted to add because of some news yesterday, some of the diagnostic businesses of other companies are under pressure, reimbursement or competitive or otherwise in China. Most of our diagnostics businesses, we have very, very little exposure there, which is primarily focused on Europe, the U.S. and the rest of the world ex China. So we don't have -- that's a headwind we don't have for once. BioSkin leadership, yes, we -- Falko, indeed, has effectively left, but I think he has several months with that he's still phenomenally with us. But we're stepped with other people into the leadership, and I'm taking the opportunity to reorganize that a little bit, including the group structures and we'll probably give you a better idea of the new group structures by middle of July. But that's -- I think it's on a very good path. And I think you'll actually have a team with even more closeness to customers and impact -- very impactful, not just innovation for innovation's sake, but very impactful innovation, very, very customer-driven, cost effective, but also, I think, very accountable. So I'm actually pretty pleased in what we're doing at BioSpin, but more in July.

The next question is from Doug Schenkel with Wolfe Research.

I want to follow up on one of Tycho's questions. In Q2, the year-over-year comparison is the most favorable of the year. In previous conversations with you, we got the sense that you were expecting better than low single-digit to mid-single-digit organic growth. So with those 2 observations in mind, was there any pull forward of revenue into Q1 at the expense of Q2? And are you still expecting Q2 to be the highest organic growth quarter of the year?

So very discerning question. I don't think we have a lot of pull forward. I mean maybe there's quarterly fluctuations and some things move back and forth. that's why we didn't call it out. But maybe there was something like $8 million to $10 million in one could argue was pulled forward into Q1, but it's not particularly material, and it also tends to be what's typical between quarters. That's not an unusual number. And to your second point, mathematically, yes, that looks to be correct that we -- as we see it right now, the cadence is indeed that the organic revenue growth in Q2 would probably be the highest of the year. We'll see about that, but that's how it lined up initially, and that side still looks correct. And yes, some of that has to do with a weaker Q2 of '25 as you exactly -- as you pinpointed.

Okay. And then I don't know if this is a Frank or a Gerald's question. I think some of the unfortunate developments in the world and the ongoing uncertainty, I guess the good -- the silver lining is some of that leads to increased demand for Bruker products and services. On the flip side, obviously, there's an increase in freight and input costs. Keeping in mind, you did not change your guidance for the year, the 250 to 300 basis points of margin expansion. Does that suggest that you have fully captured and feel very comfortable that within that range, within that target that you will be able to overcome any freight input or related costs?

Yes, Doug, it's a fair question. The short answer is yes. We think that we have built into the guide the variability associated with related energy costs. And we think moderate increases will be absorbed through our the elements that we've already laid out. So we're comfortable with where we are.

As you've noticed, we have not increased guidance. We have not taken the Q1 beat or part of it to guidance. We just want to have more -- even more confidence in our guidance and maybe you all have more confidence in our guidance. And we are expanding our cost cutting, and it's, of course, intended to make sure that we continue on our significant margin ramp also into '27. But some of that is also, I guess, a cushion in case -- well, in what we now see, there is increasing freight costs, there is increasing helium costs and things like that. So yes, we think we've got it baked in, but that's also why we kept our guidance as is for now.

The next question is from Subbu Nambi with Guggenheim.

Could you walk us through some of the other end market assumptions besides academia for second quarter and how that will step up for 3Q? And any puts and takes there?

With respect to the guide, we don't provide a lot of detail on the end market elements, Subbu. What we can say is we are continuing to expect strength in EcoGov outside the U.S. We're continuing to expect strength in certain industrial markets and in the semi space for sure, those would be some of the core elements.

I would add to that, that I think the clinical microbiology and molecular diagnostics business will do well. Their placements, if you recall, for the Bruker [indiscernible] molecular diagnostics last year were something like more than 30% higher than our business plan, which bodes well for consumables pull through the following year. And Q1, again, has been just excellent with placements something like 40% ahead of plan. That doesn't show up in the P&L, right? Initially, that's a CapEx, if you like, because these are reagent rentals, but it very much then has a buildup of consumables that comes after it. So those are some of the things that you will want to keep an eye on, plus the other things that we discussed.

That's helpful. And my follow-up -- sort of follow-up to Doug's question. from the Middle East conflict, would you expect additional tailwinds to the defense business? And at what point does that become an upside to the current guide based on what your starting assumptions are that you had at the beginning of this year?

Yes. Remember, our stuff doesn't shoot, it measures. So it's -- but nonetheless, detection, of course, is important and people are concerned about things that happen behind the lines and all. So yes, I mean, it's already kind, obviously, because of Ukraine and -- but not only the country of Ukraine, but many other European countries thinking we don't want to become the next Ukraine. So they are investing in detection capabilities. And our detection business over 2 or 3 years has essentially doubled to where it's now meaningful. And yes, that has help the order trends, and I expect that to continue. I don't think it will affect guidance this year. It's just one of the good guys on our list of things that are helping us meet and perhaps exceed guidance. I don't think it's going to make a -- if there are bigger orders, they tend to be long term. If you get another big order at some point this year, it's going to go into '27 and sometimes '27, '28 revenue. These things are not turning quickly. Hopefully, that helps.

The next person in the queue is Casey Woodring with JPMorgan.

I wanted to follow up on some of the margin ramp questions and just ask about mix dynamics. Curious to hear what mix impact was on the 1Q margin? And then how much of a mix tailwind do you need to see to hit that second half margin step-up and your visibility into that? And then just a follow-up to that piece, I wanted to just clarify on the cost outs, is the $140 million in expected annualized savings, is that expected to hit by year-end this year?

Okay. I'll start in the reverse order. On the $140 million of annualized savings, what you're going to see is those pieces will be fed into the quarters as we move forward. So you will not see the full $140 million for sure in the P&L by the end of the year. But as we march into '27, you'll start to see the impact of that for sure. With respect to the mix question, I would say just generally, in Q1, we did have somewhat of unfavorable mix in the quarter, mostly driven by the gigahertz class item that was not in Q1 of '26, but was in Q1 of '25. Our expectation is that the mix situation will actually improve as we march through the rest of 2026. We've had a couple of quarters of more challenging mix issues, and we're expecting to see that improve as we move through the rest of the year. And then I think I said earlier, I think with respect to the operating margin performance of the company, we're doing -- we've taken significant cost saving actions, which are basically going to secure, we think, the operating margin performance of the business, not only in '26, but beyond that. And we expect to see those -- that ramp of operating margin improvement as we step sequentially through the second, third and fourth quarters. Hopefully, that's helpful.

Yes. And then just a quick follow-up. On BEST, you talked about the major orders coming through on the MRI side, up to $600 million now. Can you talk a little bit about how incremental those orders really are? I believe some of those are with existing customers. So I would just be curious to hear any thoughts on that. And I would also be curious to hear what the lead time is for those orders. And if it's safe to assume those would start to contribute maybe in the first half of '27 or if there's any possibility that happens in '26?

So they're not incremental. They're not all incremental, but they -- after maybe a period of uncertainty and some organic decline, moderate organic decline being BEST being a headwind last year. We think this year, it's already going to be a tailwind sorry, some of these orders are kicking in this year. Some of them are 2, some of them are 5- or 7-year orders, so it's pretty long term. It bodes well for continued moderate organic growth in the BEST business, I would say, compared to organic decline last year. And now that a lot of these things, these major orders with the major MRI companies of the world are settled for multiple years, we think what's built in there is a healthy single-digit organic growth. And so it's that stabilizes, that turns it around. But no, it's certainly -- it isn't all incremental. Some of these fusion orders at RI are incremental, some of this and mostly in '27, '28 revenue performance. And some of this stuff here is just reversing the trend and setting up a very stable, healthy trend, we think, for multiple years to invest.

The next question is from Patrick Donnelly with Citi.

Frank, maybe one for you on EcoGov. Certainly, I appreciate the commentary on the U.S. and a little bit on China. Can you talk about what you're seeing in Europe? We've seen some mixed data points from others on that region for EcoGov. Just curious what you guys are seeing and the expectations going forward there.

Yes. I wish I had a better crystal ball, Patrick. I -- one quarter, as you know, some of there's always fluctuations in that. So it was good in Q1, but I expect single digit. I don't even want to specify whether it's low, mid or high. I expect probably mid- to high single-digit organic growth in that also in Europe, given the strength, not so much necessarily all the budgets because there's some defense pull on that as well, right? Now budgets are not only going up in Europe for research, but funding for our equipment for proteomics and now Proteomics 2.0, the age of the [indiscernible], the intact functional proteins and leadership in spatial biology, clear technological leadership and applications leadership in spatial biology and a recovery of NMR, I think this all bodes well for us to grow ahead of the general funding environment. So if I had to put a number on there, I think it's mid- to high single-digit growth opportunity, organic growth opportunity, but there will be quarterly fluctuations.

Understood. And then, Gerald, I was hoping to pin you down a little bit on some of the 2Q moving pieces. I just want to make sure, is there an ultra-high field in the quarter? And then I wanted to follow up on Tycho's margin question. If you could just help us out a little bit on the margins. I think previously, folks are thinking mid-teens for 2Q and then the earnings number, what that might shake out as would be appreciated.

Yes, we can go through some of that in more detail separately. But what I'd say is, first of all, we don't expect a gigahertz class system in Q2 of '26. So I think that will have some impact related to your modeling. I think generally speaking, as I said earlier, we are expecting a step-up in operating margin performance fairly significantly in the second quarter sequentially. Sequentially from Q1, certainly on a year-over-year basis as well. And I think just from an EPS perspective, we expect to do better in the second quarter than we did sequentially on the first quarter of '26. And we can talk about more of the gory details, if you'd like later.

One last question. We probably should wrap it out at about 9:00 because there's another company starting their earnings call, and we want to be respectful of that.

Yes. So this concludes our question-and-answer session. I would like to turn the conference back over to Joe Kostka for any closing remarks.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an event or speaking with you directly during the second quarter. Feel free to reach out to me to arrange any follow-up. Have a good day. Thank you.

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

Good morning, everyone, and welcome to the Bruker Corporation Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] Also note today's event is being recorded. At this time, I'd like to turn the floor over to Joe Kostka, Director of Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Fourth Quarter 2025 Earnings Conference Call. My name is Joe Kostka, and I am the Director of Bruker Investor Relations. Joining me on today's call are Frank Laukien, our President and CEO; and Gerald Herman, our EVP 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 can be downloaded from the Events and Presentations section of Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. Reconciliations of our non-GAAP to GAAP financial measures are included in our earnings release and are posted on our website at ir.udr.com. 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 or may make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties including those related to our recent acquisitions, geopolitical risks, market demands, tariffs, currency exchange rates, competitive dynamics or supply chains.

The company's actual results may differ materially from such statements. Factors that may cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K for the period ending December 31, 2024, as updated by our other SEC filings, which are available on our website and on the SEC's website. Also, please note that the following information is based on current business and to our outlook as of today, February 12, 2026. 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 first quarter 2026 financial results expected in early May 2026.

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 for the fourth quarter and full year of 2025 in more detail and share our full year 2026 financial outlook.

Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's fourth quarter '25 earnings call. At the conclusion of a difficult year 2025 with headwinds from academic funding, tariffs and currencies, we are pleased that in the fourth quarter, we delivered revenues ahead of our expectations. BSI or Bruker Scientific Instruments book-to-bill in the fourth quarter was again over 1.0x, providing more confidence that we are past the trough in demand seen in the middle of 2025.

We also saw a strong free cash flow in Q4 over $200 million after admittedly weaker cash flow earlier in 2025. The year 2025 was the first full year of ownership for the 3 large strategic acquisitions that we completed in the first half of '24. Both ELITech and chem speeds delivered robust mid- to high single-digit percentage organic revenue growth year-over-year. While NanoString was approximately flat due to pressure on U.S. academic funding in fiscal year '25. Encouragingly, spatial biology, including NanoString, orders were up in the double-digit percentages organically in the fourth quarter of 25% year-over-year. Our innovation engine continued to shine in 2025 with outstanding and very competitive product launches at the AGBT AACR and ASMS conferences last year.

Many of these recent launches have seen strong initial demand, which we expect to drive revenue growth in fiscal year '26 and beyond. Looking to 2026, we expect continued improvements in our markets to drive demand for our differentiated post-genomic discovery, translational and diagnostic solutions. We start the year with solid BSI segment backlog of over 7 months of revenue and good bookings momentum resulting from 2 consecutive quarters with BSI book to bill greater than [indiscernible].

We are pleased to see the fiscal year '26 NIH budget passed Congress with an increase in funding year-over-year and barriers to grant overhead cuts and multiyear grant funding. But for now, there is still some lingering uncertainty in the U.S. like a golf market. The second half improvement in '25 in biopharma and industrial research order trends and robust semi-metrology orders in Q4 positioned these end markets for improved revenue performance in 2026.

Finally best, which was a headwind to our overall revenue growth in 2025 should turn into a tailwind in 2026 having booked major multiyear agreements worth more than $0.5 billion over multiple years. Accordingly, we are establishing our fiscal year 2026 guidance for reported revenue growth of 45%, with 1% to 2% organic revenue growth for the full year and an approximate 1.5% revenue growth contribution from M&A. This all implies constant exchange rate revenue growth of 2.5% to 3.5% year-over-year in fiscal year '26. As we explained in our press release, we still expect a mid-single-digit organic revenue decline in Q1 of '26, primarily due to the strong Q1 year-over-year comparison. After our first quarter this year, we now expect to resume organic revenue growth in the second quarter and for the remainder of the year.

We remain very committed to rapid non-GAAP operating profit margin expansion, and we aim for 250 to 300 bps operating profit margin improvement in '26 despite and including a 50 bps currency headwind. This implies in principle 300 to 350 bps of expected organic operating margin expansion driven by our major cost saving initiatives, which we now expect to exceed the upper end of our previously stated range of $100 million to $120 million.

Finally, in fiscal year '26, we expect non-GAAP EPS growth of 15% to 17%, despite and including a strong 8% or approximately [indiscernible] and expected currency headwind, which again implies 23% to 25% constant exchange rate non-GAAP EPS growth compared to $25 million. Turning to current results now on Slide 4. In the fourth quarter of '25, Bruker delivered stronger revenues than expected and above the preliminary range we provided at JPM in early January. Bruker's fourth quarter 25 reported revenues of $977.2 million were approximately flat year-over-year, including a currency tailwind of 4.1% and a growth contribution from M&A of 0.8% and an organic decline of 5.1%.

Organic declines in BSI and at best, net of intercompany eliminations were also both at 5.1% in the quarter. In the fourth quarter, our non-GAAP operating margin was 15.7%, down 240 bps year-over-year as lower revenue volume, additional tariff costs and currency headwinds were only partially mitigated in Q4 by our earlier cost and pricing actions. Fourth quarter '25 non-GAAP diluted EPS was $0.59, down from $0.76 in 4 of '24. Gerald will discuss the drivers for margins and EPS later in more detail.

As I said earlier, fourth quarter BSI book-to-bill was again meaningfully greater than 1.0, and our fourth quarter free cash flow was good at $207 million. Moving on to our 2025 full year performance on Slide 5. Fiscal year '25 reported revenues increased by 2.1% to $3.44 billion. On an organic basis, revenues declined 3.7% year-over-year, consisting of a 3.5% organic decline in scientific instruments and a 5.4% organic decline at best, as always net of intercompany eliminations.

Acquisitions added 3.5% to revenue growth, and there was a 2.3% currency revenue tailwind for the year. Our 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. Margins and EPS were down year-over-year as a result of dilution from our strategic acquisitions that closed in the first half of '24. Volume deleverage and strong currency and tariff headwinds. So please turn to Slide 6 and 7, where we highlight the 2025 constant exchange rate performance of our 3 scientific instruments groups and of our BEST segment year-over-year.

In 2025, BioSpin Group revenue was $879 million and declined in the mid-single-digit percentage. Solid revenue growth in Chem speed lab automation was more than offset by declines in NMR instrumentation. Biopharma revenues were weak, resulting from soft bookings in the first half of '25. In the fourth quarter of '25, we had revenue from a 1.2 gigahertz NMR in the U.K., our second gigahertz class on the mar of 2025 compared to 4 gigahertz NMRs in 2024. The 2 fewer gigahertz systems resulted in a roughly $25 million revenue headwind for to 25 revenues. We're expecting just 1 gigahertz NMR system in revenue in '26, as present gigahertz class NMR funding activity, which is healthy, but would likely not yet come in as revenue in '26, but may well refill our gigahertz pipeline for '27 and beyond.

For 2025, the Group had revenue of $1.2 billion and constant exchange rate growth in the high single-digit percentage with growth in microbiology and infection diagnostics driven by ELITech Molecular Diagnostics as well as by our Optics division, driven by our applied market security detection growth. This was partially offset by softness in mass spectrometry as strong orders for the recently launched TIM OMNI and Tim's Metabo as spectrometers we're expected to start to convert into revenue mostly in 2026.

On Slide 7, Bruker Nano '25 revenues was $1.1 billion and declined to the low single-digit percentage as solid growth in spatialology driven by NanoString and robust biopharma growth was more than offset by declines in Ecagolvin industrial markets. Semi revenue semiconductor metrology revenues were flat for the year with a strong semi order book in Q4 of '25, which is expected to drive stronger semi performance in '26.

Finally, 2025 BEST revenues declined in the mid-single-digit percentage net of intercompany eliminations due to soft superconducting demand for clinical MRI systems. However, we received major multiyear orders at the end of the fourth quarter of '25 and at the very beginning of Q1 of '26 for superconducting wire from large MRI manufacturers totaling more than $500 million. This is over multiple years. Also, our research instruments business, which is part of Best received more than $40 million in orders for enabling technology for the extreme light in structure, something that we had a press release on previously and this will also -- is expected to go into revenue mostly in -- late in 2026.

Moving to Slide 8 now. We highlight our Project Accelerate 3.0 portfolio expansion strategy and we talked about that a little bit at the JPMorgan conference. We remain very focused on our leadership and expanding our leadership in post-genomic disease research and drug discovery tools, primarily proteomics and multiomics and of course, a core focus also on spatial biology. We continue to expand and focus in novel diagnostics, novel and differentiated diagnostics opportunities with novel microbiology and infectious disease molecular diagnostics opportunities. I'll highlight that our ELITech Molecular Diagnostics business had very strong placements in fiscal year '25, which bodes well for fiscal year '26 revenue growth.

In microbiology, we're entering the rapid AST market with the Wave platform hoping to get FDA clearance for the first line in this year in 2026. And in molecular diagnostics, we intend to expand into second-generation affordable syndromic panels on our Genius systems. Finally, a very important trajectory for us is that our proteomic and spatial biology translational research tools increasingly are expected to enter laboratory developed tests or LDT markets here in the U.S. and elsewhere in CLIA laboratories. We're excited about our next-gen automated and digitized self-driving labs, something that we just announced on Monday at the SLAS conference here in Boston. And as I mentioned earlier, our security, defense and airport detection business something that was lingering for a number of years, but where we have differentiated capabilities is growing nicely at this point, particularly in Europe and overseas.

And finally, we continue to benefit from the AI boom indirectly and that our semiconductor metrology tools for new nodes and advanced packaging have seen solid order growth and particularly strong order growth in the fourth quarter. With that, let me conclude soon on Slide 9, where you see where we give you our annual update on our revenue mix for the BSI segment, which, as you know, is 93% of our revenue. We are pleased that step-by-step, our aftermarket component of revenue is increasing a year ago in '24, it was 35%. Now it's at 38%. And in fact, that part was growing organically also in 2025.

Our end market growth is, as you would expect, now more than 60% of our revenue coming from the product accelerate 3.0 focus areas and with particularly good growth that we're expecting also in terms of orders and revenue from biopharma, from diagnostics and from semiconductor metrology. Finally, by geography, as you all know, U.S. biopharma and industrial growth looked stronger certainly in orders in the second half of the year. U.S. AcaGov is still weak and had been here throughout 2020. week throughout 2025, except for the first quarter.

The rest of APAC has been very, very resilient and strong. And China, which used to be 16% to 17% of our revenue has continued to decline, although we saw some nice order growth in Q4 and it's now about 4 -- just under 14% of our revenue. Right. In summary, 2025 was indeed a challenging year for Bruker. We faced multiple unexpected significant headwinds, and we responded by continuing to innovate launching novel and differentiated high-value solutions. We have also focused on cost efficiencies, taking very significant costs out in order to take a large step in '26 towards greater than 20% operating margins in the next few years. In the medium term, beyond 2026, we expect our organic growth profile to return to a CAGR that is 200 to 300 bps above the LS TDX market growth rate. We will continue to focus on continued major margin expansion steps in '27 and '28 as well. while driving continued double-digit non-GAAP EPS growth. We believe that our Transfo portfolio is now poised to achieve EBITDA margins greater than 25% over time.

With that, let me turn the call over to Gerald Herman, our CFO.

Thank you, Frank, and thanks, everyone, for joining us today. Before I get into the details of our financial performance, I wanted to provide a high-level view of how the fourth quarter played out versus our expectations at the time of our last earnings call. We're pleased that revenue for the quarter came in about $20 million above our guide expectations. However, despite the top line outperformance our non-GAAP operating margin of 15.7% came in below our expectations by about 100 basis points. This was driven by headwinds of approximately 50 basis points from unfavorable mix, 30 basis points from delayed tariff offsets and about 20% bps -- sorry, 20 basis points from a stronger foreign exchange headwind relative to our prior guidance. .

Our guide for fiscal year '26 reflects an improved mix profile as well as pricing and supply chain actions more fully mitigating the tariff impact going forward. Now some further details on Bruker fourth quarter and full year 2025 financial performance starting on Slide 11. In the fourth quarter '25, Bruker's reported revenue decreased 0.2% to $977.2 million, which reflects an organic revenue decline of 5.1% year-over-year. Acquisitions contributed 0.8% to our top line, while foreign exchange was a 4.1% tailwind.

Both our BSI and BEST segments had organic revenue decline of 5.1% and in the fourth quarter of 25%, with organic revenue declines across all groups. BSI, fourth quarter '25 instruments revenue declined in the mid- to high single digits while aftermarket revenue saw growth in the low single-digit range year-over-year. As Frank mentioned, for the full year of 2025 aftermarket revenue now represents 38% of BSI revenues, up from 35% in 2024.

Geographically and on an organic basis in the fourth quarter of '25, our Americas revenue declined in the low teens percentage. European revenue declined in the high single-digit percentage and Asia Pacific revenue grew in the high single digits percentage, including double-digit growth in China all year-over-year. For our EMEA region, Q4 2025 revenue was up high single digits percentage year-over-year. Non-GAAP gross margin decreased 310 basis points in the fourth quarter of 25% to 49.4%.

Factors impacting our gross margin in the fourth quarter of '25 are essentially similar to those impacting the operating margin in the quarter. In the fourth quarter of '25, we posted a non-GAAP operating margin of 15.7% down 240 basis points compared to the fourth quarter of '24. This decline was driven by a combined 490 basis points decline from lower volume, unfavorable mix tariffs and strong currency headwinds. These headwinds, which are described in more detail on the slide, were partially offset by a 250 basis point benefit from our fiscal year '25 cost-saving initiatives as we realized approximately $25 million of cost savings in the quarter.

On a non-GAAP basis, fourth quarter diluted EPS was $0.59, down 22.4% from $0.76 in the fourth quarter of '24. Our non-GAAP effective tax rate was 29.9% compared to 32.5% in the fourth quarter of '24, with the decrease driven primarily by discrete items in the fourth quarter of '25. On a GAAP basis, we reported diluted EPS of $0.10 versus $0.09 in the fourth quarter of '24. Weighted average diluted shares outstanding in the fourth quarter of '25 were $171.7 million, an increase of 19.7 million shares or 13% and compared to the fourth quarter of '24, reflecting the accounting for the mandatory convertible preferred stock offering we completed in September of 2025.

Turning now to Slide 12, we had an excellent cash generation quarter in the fourth quarter of '25 with approximately $230 million of operating cash flow generated in the quarter, actually the highest in our history. We delivered over $100 million in improved working capital performance in the fourth quarter of '25 and with CapEx investments at $22.6 million drove free cash flow of $207.3 million in the fourth quarter of '25 up about $54 million over the fourth quarter of '24. We finished the fourth quarter of 2025 with cash, cash equivalents and short-term investments of approximately $300 million.

During the fourth quarter, we used cash to fund selected Project Accelerate 3.0 investments capital expenditures and continued our delevering actions with a debt repayment of approximately $145 million in the quarter. We ended fiscal year '25 with a leverage ratio of approximately 3.1%. Slide 13 shows our non-GAAP P&L results for the full year of 2025. Revenue was up 2.1% to $3.44 billion, including an organic revenue decline of 3.7%. Acquisitions added 3.5% to our top line, resulting in constant exchange rate revenue to be roughly flat year-over-year. Foreign exchange was a 2.3% tailwind to revenue growth in fiscal year '25.

Fiscal year '25 non-GAAP operating margin was 12.6%, down 280 basis points year-over-year. This decrease reflects net headwinds from M&A of approximately 65 basis points, tariffs of approximately 65 basis points. Foreign exchange, 70 basis points as well as the impact from lower estimated volume impact of approximately 80 basis points, which includes the partial benefits from our pricing and cost reductions. The remainder of the non-GAAP P&L results for the full year of 2025 are summarized on Slide 13 with the drivers, as explained earlier and on the slide.

Turning now to Slide 15. We entered the year with a healthy backlog of approximately 7 months and solid order momentum after 2 consecutive quarters of BSI book-to-bill above 1.0. We are initiating guidance for fiscal year '26 as follows: Reported revenue of $3.57 billion to $1.60 billion, representing reported growth of 4% to 5%. And compared to fiscal year 2025. Organic revenue growth of 1% to 2% year-over-year plus acquisitions contributing 1.5% plus an estimated currency tailwind of 1.5% and all contributing to reported revenue growth.

For operating margins in fiscal year '26 we expect organic non-GAAP operating margin expansion of 300 to 350 basis points in the year, offset by approximately 50 basis points of currency headwind resulting in a net non-GAAP operating margin expansion of 250 to 300 basis points compared to the 12.6% posted in fiscal year '25. We expect to take a major step up in operating margin performance in fiscal year '26. with much of this margin improvement driven by our previously announced 120 million cost actions taken in fiscal year '25, which we now expect to exceed.

With markets signaling further recovery, and our new products and solutions gaining traction, we expect to take another meaningful step up in operating margins in fiscal year '27 and beyond. On the bottom line, we're guiding to non-GAAP EPS for fiscal year '26 in a range of $2.10 to $2.15 or non-GAAP EPS growth of 15% to 17% compared to fiscal year '25. Using current foreign exchange rates, we're estimating a currency headwind of approximately 8% to fiscal year '26 EPS, implying non-GAAP EPS growth of 23% to 25% year-over-year. Other guidance assumptions are listed on the slide. Our fiscal year 2026 ranges have been updated for foreign currency rates as of December 31, 2025.

Finally, a bit of color on Q1 of '26. We have a strong year-over-year comparison as we delivered mid-single-digit BSI organic revenue growth in the first quarter of 2025 and margins in EPS in Q1 of '25 were not yet impacted by U.S. import tariffs or Agogo funding disruptions. Therefore, we anticipate first quarter organic revenue to be down in the mid-single digits percentage and operating margin and EPS to be down meaningfully compared to the first quarter of 2025.

We then expect operating margins and EPS stepping up each quarter thereafter throughout the rest of 2026. To wrap up, we're encouraged by the order momentum we now see in many of our end markets. This, combined with some stability in the U.S. academic funding environment gives us confidence that we're positioned to return to organic revenue growth in the second quarter of 2026 and and we plan robust operating margin expansion and non-GAAP EPS growth in fiscal year '26 and beyond.

And with that, I'd like to turn the call over to Joe. Thank you very much.

Thank you, Gerald. We'll now begin the Q&A portion of the call. As a reminder, to allow everyone time for questions, we ask that you limit yourself to 1 question and 1 follow-up. Operator?

[Operator Instructions] Our first question today comes from Puneet Souda with Leerink Partners.

Frank, the margin question has been a frequent 1 and obviously, a focus in the quarter. Could you talk about just given the 4Q margins, you came in below you were expecting a number of cost initiatives to push margins higher in '26. Maybe just tell us where are those cost initiatives focused how much reduction, how should we think about that beyond that $120 million that you've talked about? And also for Gerald, if you could talk about the off margin cadence just given the significant ramp you have throughout the year? And anything you can provide on your comment around the meaningful 1Q of margin impact.

Okay. Puneet, I'll start -- so as Gerald had explained of the 100 bps lower margin than what we had expected in Q4 of '25. The way we look at it is that the 50 bps from unfavorable mix is not likely to repeat itself. Those were idiosyncratic factors in Q4, 30 bps tariffs offset, I think, will offset that successfully in 2026 and the 20 bps of stronger currency headwind is here to stay for now, right? And in fact, as you will see -- as you will have seen from our guidance by now, Both on the operating margin expansion in '26 as well as on the EPS growth, we have acknowledged a significant headwinds from currency.

Accordingly, and that leads to the second part of your questions, we have gone even stronger or even further on the cost initiatives. We now expect these to yield on an annualized basis between closer to $140 million or even higher than that. That will not all -- these additional cost reductions will not all be at active or effective, excuse me, in Q1 or Q2. But certainly by Q3, that should be all effective and then become annualized. So we've been pushing that, if you like, by an additional 10% to 15%.

And that's about the right amount. We don't want to underinvest in our opportunities. But we also, of course, are very committed to this 250 to 300 bps of operating margin expansion and the double digit in this case, reported a 15% to 17% reported EPS growth, which is all in, including currency headwinds, which are strong and including obviously, also some of the dilution we have from the mandatory convert -- so that's -- hopefully, that addressed your questions. I think you had something for Gerald on Cadence .

Yes Puneet, it's Gerald. I'll just comment just generally, as I mentioned in my prepared remarks, we had a quite strong Q1 of '25. You may recall, while we sort of hit the mid-single digits range of total Bruker organic growth at the VSI level, it was actually mid-single digits and quite substantial. We don't expect to hit that in the first quarter, especially on our organic performance. So we are expecting a softer Q1, and we expect to pick up the pace pretty dramatically starting in Q2, Q3 and stronger, again, finish again in the fourth quarter. The step-up in operating margin growth is quite significant, largely due to what Frank was just describing. Some of -- we do have in the fourth quarter of '25, about $25 million of cost savings that are reflected mostly in the OpEx category. You'll see that again in the other quarters as we move forward. .

But some of our European-based cost actions will take effect more in the first quarter and in the second. So you'll start to see a more significant ramp starting in Q2 and thereafter, Q3 and Q4. And can talk more about the details, but fundamentally, that's that direction.

Just a quick follow-up on Frank, the new and competitive renewal awards are coming in lower. Maybe it's due to the NIH mainly and maybe it's due to the political challenges that we have and getting those grants out and whatnot, but NIH is supposed to be 1% better this year versus last year. So just any feedback on the Agogo customers in your interactions in the -- and so far in the first quarter, I would appreciate any context there.

Yes. I mean the -- nobody is talking about a strong tailwind yet, but the absence of the strong headwind from last year. Feels a little bit better for U.S. orders in Q4 were still quite weak. But I think that -- so that's bottoming out later than the trough in biopharma and industrial research demand where we probably saw a trough midyear of last year. So there's still -- that's why everybody, including us, in particular, are still cautious on growth rates this year, right, 1% to 2% organic growth rate isn't a snap back to our typical growth rates. So we're still cautious on that.

But I am obviously compared to a really tough year '25, I'm encouraged that things are likely going to get better. But I think until academia gets more confidence and that I think it will maybe a couple of quarters, even if an NIH budget that's flat or up plus 1% and with probations against overhead cuts and multiyear grants or at least limitations on those. If this will pass, and I think there's a reasonable trend for that similarly also encouraging on NSF and other science budgets by the way, at you name it. So I'm encouraged with that, but I think it may not help us with orders all that much until the second half.

Our next question comes from Michael Ryskin from Bank of America.

I want to dig into the margin a little bit. In terms of the 2026 versus 4Q, I think you talked about 4Q coming in a little bit lighter and you shift to some of those. I guess asking it qualitatively, just you pointed to the higher end of the range. What gives you confidence in your ability to take that given that you weren't able to execute on all the margin crossed out in the fourth quarter? Just sort of just confidence on ability to execute that. And then I've got a follow-up.

Well, we've taken out the high end of the $100 million to $120 million in cost already, and we are in the process of taking out additional cost which will, let's say, that becomes fully effective by midyear. So that's why we have a lot of confidence in that. And then some of the other margin idiosyncrasy. Some of that has to do with pricing, supply chain, these things when we increase pricing and until we then get an order and until that order turns into revenue can, in many cases, be 3 or 4 quarters. So the effect of all these things is good steps that we they take and have taken or continue to take on the supply chain, have a longer lead time, and we noticed that in Q4, but they really are happening and they have happened so that gives us a lot of confidence in next year. And as I said, we had some -- we really did have some unfavorable mix in Q4. So we don't think that will repeat itself.

And then for the follow-up, I want to talk about your comments you made about revenue pacing through the year. I think you pointed to down mid-single in the first quarter, but you expect revenues to be positive starting in 2Q clarify how much of that is the comps from prior year? I know there were 1Q '25 was surprisingly good. I think we didn't see the hit from the end market slowdown from the concept later in the year. So how much of that is the prior year comps versus underlying assumptions on an end market improvement this year? Or just sort of how your order book visibility factors into that? Just the confidence between that 1Q jumping.

Yes, you're right, it's both. I mean the -- there's -- I cannot really disentangle that quantitatively, but qualitatively both -- your question already implies they both play a role. So yes, the comps get easier and in some cases, a lot easier by Q2, right? Q2 was -- Q2 '25 was not good for us. So the comps do get easier and even through the remainder of the year. So with easier comps and we're picking up with improving -- gradually improving order momentum in many of the segments even if not all of them, even China bookings were better in Q4, applied semi was very strong.

Biopharma was very solid in bookings in Q3 and Q4 of last year, industrial research which came to a -- was very, very slow the orders in Q2 as everybody was trying to figure out what's the new geopolitical and tariff landscape as that has now become solidified or stabilized for the time being. I think these markets have all picked up. Really the -- a little bit the outlier is still U.S., but at least even there from what I see reading more than tealeaves, reading NIH budgets I think it may begin to benefit us in the second half in bookings that, however, may then mean that it could be a Q4 or mostly 27% effect in revenue, which is why we think, longer term, we return to our 200 to 300 bps above market, revenue organic CAGR, but not yet this year.

But even this year, you do the math pretty easily with a mid-single-digit decline in Q1. Obviously, the organic growth rates for the remainder of the year, the remaining 3 quarters are better than the full year growth rate, obviously, that's the easy math for you and for us. And -- but it's -- but even at that level, they're not fully back at our long-term growth rates we hope to achieve those in '27 and beyond. I hope that helps.

Our next question comes from Tycho Peterson with Jefferies.

Frank, maybe just -- can we do a quick walk on the assumptions for some of the other end markets? I appreciate you've hit on academic already. But what are you assuming for biopharma this year? What are you assuming for semi -- anything in microbiology that could be a headwind we've heard about that from some of your peers. So maybe just give us a walk on some of the end markets.

Gerald. I'll just talk just generally about the end markets assumed in the guide. For biopharma, we're not assuming a significant snapback. We're assuming low single digits organic growth. Our semi business, which was relatively flat on a revenue level for 2025. We're expecting to be in the low single digits in growth. Clinical a little bit stronger for us from our microbiology based business. And academic and government research largely driven by continued softness for the first quarter or so. We are expecting to be sort of flat or low single digits down, industrial flat and applied about the same. So generally speaking, we are not expecting a significant snap back in any of our end markets, we think strength coming from biopharma and certainly semi in 2026.

I would add one fine points at the molecular diagnostics, which is, of course, part of infectious disease diagnostics, we're expecting very good growth there this year because we had nearly nearly 30%, now about 30% more placements of these Genius platforms last year in '25 than what we had anticipated or what we had planned. So that was excellent. So that tends to then bring in the pull-through in the following year. So I think diagnostics and biopharma and semi will be the highlights for the year '26 and others are recovering and stabilizing and U.S. Agogo perhaps turning in our revenues and P&L, not really much of a corner until Q4 or perhaps even into next year. But with improving trends and headwinds.

And then Gerald, I know you had a number of questions on margins. Can you just comment on gross margins for this year? Are you expecting gross margin expansion? .

Yes, we are. I mean, as you already heard specifically on the fourth quarter, we were somewhat below our expectations on the gross margin level, and that was partly being driven by the mix issues and the tariff and of course, the foreign exchange pieces I highlighted earlier. So yes, we're not going to be able to do too much further on the foreign exchange piece. But on the mix, our view is that this is going to improve. -- for us and certainly from the tariff side, as you heard from Frank, we're expecting to recover that and mitigate any tariffs going forward.

I think it's fair to say that of our operating profit margin expansion about half of it comes from gross margin expansion.

Yes. And of course, our OpEx, right? .

Right. But it's about half -- this year, '26 and probably and beyond that as well. .

Okay. And then, Frank, on the M&A contribution, you flagged [indiscernible] entering LDT and CLIA. Can you maybe just elaborate a little bit more on how you think about that opportunity?

Sorry, those were not M&A contributions. Those were...

I don't know -- it was related to NanoString or Okay. Can you just comment on what?

No, no. Those were -- this is just our higher growth and higher margin opportunities, which we bundle under the now further evolved projects accelerate. Much of that -- or some of that was M&A, but it was prior M&A that we've now owned for 1 or 2 years in these areas. .

Our next question comes from Subbu Nambi with Guggenheim.

What are your expectations this year for book-to-bill and backlog to over it? Will it be noisy with some end market rebound? Just how should we be thinking about the trend of customer spending interest in 2026?

Yes, we expect continued gradual improvement. So while we don't specifically forecast backlog or book-to-bill, we hope that we believe actually that the book-to-bill trends over the last 2 quarters, which in BS were above 1.0 will continue into this year also aided, of course, by easier comps, at least again in Q2 through Q4. And we may need -- we may use a little bit of our still high backlog this year, but we're not modeling anything that becomes all normalized to perhaps the 5.5x or 5x level. 5-month level that we think it would be a normalized level for the way BSI is configured now. .

And then you mentioned some new products in microbiology and diagnostics, Exiting 2026, what do these businesses look like, like from a product road map perspective and a revenue growth perspective?

Okay '26, okay. Yes, so in microbiology, I assume that we'll have the first rapid AST gram-negative, positive blood culture claim approved by the FDA this year, 2026, hopefully before midyear and that we will be in clinical trials for additional claims on that rapid AST platform, so that will be a nice buildup over the next couple of years as more and more content is becoming available on that Wave platform. Of course, there's a lot of content coming out on our existing Genius platforms, both in Europe and then we're also doing a first assay going into clinical trials. For entering the U.S. market with these genius platforms. Again, that won't move the needle in '26. So it includes still some investment, obviously, in OpEx investments in '26, but that will begin to mostly help us then for further growth in '27, '28 and beyond. . And what was the second part of your question on what did that address your question? .

The Diagnostics business.

Well, the Genius is the Diagnostics business, right? Syndromic panels will begin to roll out and get through regulatory approvals in urine in late '26, '27 -- so they'll begin to affect our larger installed base in Europe first, Europe and Latin America and a few other countries actually and then there will be a series of syndromic affordable and drawing panels coming out through -- and making it through the regulatory processes, IVDR, in this case, in '27, '28. So these are -- that's the flywheel, you add something every year. It doesn't make a big difference in 1 year, but the cumulative effect over time is just very, very nice. As we've seen with molecular diagnostics even in '25, that was a very nice growth market, mid- to high single-digit growth market for us. .

Our next question comes from Doug Schenkel from Wolfe Research.

So regarding first quarter organic revenue growth guidance, your description of the difficult comparison is accurate. However, there's 2 or 3 discrete items that seem like those should render the number a bit better. What I'm thinking about are, first, the recovery of at least part of the $40 million in semiconductor-related revenue that you previously told us it slipped out of Q4, and you expected to recapture largely in Q1, but over the course of the first half. The second is the impact of pricing, which you started to get more aggressive with last May, and it takes time for that to come through quarter-by-quarter, but it seems like at this point that should be more meaningful. And then I guess the third I would point to is you did talk about an NMR placement slipping out of Q4 and maybe that gets recaptured in Q1. So when I think about those things, that doesn't seem consistent with mid-single-digit organic declines in Q1 even with the comp. Can you help us out?

Yes. Doug, it's Gerald. With respect to the Q1 story, I think it's important to understand that some of our organic performance in Q1 of '25 was pretty significant in terms of mix and the actual operating profit performance. So we had strong order performance in semi, in particular, in in the first quarter of 2025 and very strong bookings performance in that quarter. So we think that the timing of our existing orders are principally driven by what happened in H1 really of 2025 will not significantly improve our ability to execute on orders in the first quarter. So that becomes a headwind in its own right, it's just timing of our orders and the lead time required in order for those to execute into revenue.

I would say secondly, with respect to the semi orders that got pushed out, I mean, I think our commentary has been pretty consistent about hitting the first half of 2026. Not all of that is going to impact in the -- in Q1. So I think we are expecting to see some improvement in Q2 from those, but not all of it hits in the in Q1 of '26. And then on the NMR side, I mean, we don't have any specific NMR pushouts. I mean, we had some challenges in BioSpin for sure, from a mix perspective, we saw some of that in the fourth quarter, but we don't really...

The 1.2 gigahertz did not get delayed. It was in Q4, the U.K. 1.2 gigahertz. Maybe, Doug, I mean, you're you know us really well. You know a lot of the moving pieces. Obviously, as we've said, a mid-single digits, that's obviously quite a range, right? -- of outcomes for Q1. But we just wanted to highlight that we'll still be our revenue, almost certainly will still be down. And I think mid-single digits, which is a bit of a range, we realize that is not just prudent and conservative. I think that's the right number. It puts a little bit into perspective, obviously greater optimism that we have in resuming organic growth and not only at the 1% to 2% level, but more meaningfully in the subsequent 3 quarters of this year. .

Next question comes from Luke Sergott from Barclays.

This is Jake on Polo. Thanks for the question. I wanted a big morning on China in that double-digit growth. Your mix there has historically leaned towards industrials, but with your build-out on the pharma portfolio and this part of the market picking up there, what is your end market mix in China look like now? And how should we think about it going forward?

Yes, after a bit of a lull there when the CRO business went away and then there was indeed -- we had very little on that. Now China has recovered on the CRO side and China is becoming -- it's a drug discovery and development pharma POWERHOUSE in its own right. So that's beginning to become noticeable. And academic spending, there was -- I mean, we don't talk about it much anymore, but there was decent academic spending and bookings in Q4 better than the year before, whether some of that was stimulus or not, it's now not so clear people can't really just -- this is stimulus, this is other academic funding. It's become more nebulous and diffused.

But anyway, it was healthier. So we we didn't know what expectations to have for China in Q4, but it ended up being 1 of the better performers in terms of bookings. And also at the end of the year, we had some decent revenues there. Hard to read any trend into that. Clearly, the biopharma piece in China is growing no questions about that. Of course, there's also -- some of that is growing also in India. And also the rest of APAC from Korea, Taiwan, Japan, they all have improving biopharma trends for our particular tools. So -- and of course, there's a lot of semiconductor metrology in APAC outside of China, obviously, Taiwan. We have also in Japan. So we're benefiting from that mostly on the order side, which should bode well for gradual step-ups in '26.

I would just add that our guide for 2026 related to China is not strong. I mean we are assuming that the basic revenue performance is largely flat, which is not a good -- and it's certainly not a snap back from where it was several years ago. So we're not assuming some growth in China in our current guide position.

Our next question comes from Dan Brennan from TD Cowen.

So maybe the first 1 would just be on U.S. academic and government, Frank. And Gerald, I know you made some comments already. Just did you guys say what the instrument growth or trend was for you from that customer base in '25 and what's assumed in '26. And I think, Frank, you mentioned multiyear funding was cap. I'm just wondering, like, is that multiyear funding no longer a headwind? Or just how do we think about that for '26 .

Yes, good question. On the multiyear funding, quite honestly, I'm not so sure I'm a little confused by that as well. I know that all plays itself out. even if it's multiyear funding, it is more funding into the system and some of that funding is a little bit fungible in some of these big economic research or disease research centers. If they get more funding in 1 area, it alleviates pressures elsewhere to transfer budget. So it makes more money available. So even the multiyear grants aren't bad for us, even if they don't always immediately and directly fund another NMR or mass spec or microscope. Before the -- to your first part of your question, bookings in Acea in the U.S. for the year were down in the high teens. So not the worst outcome, but not a great outcome, right? So that's clearly a significant headwind. -- we also felt it in revenues, but bookings down significantly in high teens for the year. Right. You guys didn't -- it means in some quarters, it was down more than 20%. .

And I think you said earlier, Frank, it was flat -- the outlook is expected flat in '26. Is that right? .

This is for all of our Yes. Yes, yes. So this is not -- this was not a U.S.-specific comment. But as you know, China and Japan and Europe, the AG and almost everywhere else was much more -- much better than in the U.S., right? Some were strong, some were just solid and good. So that was a comment for all of EcaGolf, not a U.S. specific comment.

I don't know that we broke that out. Therefore, you'd still expect U.S. AGA GOV to be down organically in revenue for the year '26.

And if I can just sneak 1 more just on semis. Just -- so the guide is flat for semis. I know that business has been growing double digits, you were very positive on kind of the AI connection. Can you just elaborate a little bit on .

To be sure that Yes. Just to be clear. So with respect to full year '25 in revenue performance, semi was flat. For full year 26 in our guide, we are expecting actually to be up in the low single digits range. And that's what we're currently thinking. By the way, just to your -- just to clarify, even on the AcaGov side, we're not expecting a significant growth level in ago either in the U.S. or globally in our guide. -- our last question comes from Brandon Collard from Wells Fargo. .

Frank, just directionally, which of the 3 BSI segments do you expect to lead in terms of revenue growth this year? And just 1 clarification on the ultra-high field Inmar systems. I think you said 1 install expected in '26. You used to carry a pretty large backlog there -- do you expect to go back to, say, 3 or 4 installations in '27? Is there just a timing thing or something dynamic .

Right. So thank you, Brandon. You were asking about the groups, right? Yes. So we think the weakest growth in the group this year and '26 will be in BioSpin whereas Banano and Called and Best are expected to grow organically, comparable. -- they'll all 3 grow, but BioSpin because of the longer turn Kings and also because of, for instance, no I'll try field or maybe only 1 in in revenue in '26, BioSpin is going to be the laggards this year in revenue growth. and not normalized to 27%. Indeed, to your second part of your question, Brandon, there is some good activity, but trying to find funding, building consortia, et cetera, -- so I don't know that we'll go back to 4 a year, but I think we'll be -- hopefully, be able to go back to 2 or 3 a year in revenue by '26 -- sorry, '27 and beyond. -- that's sort of our expectations. So '26 will be a bit of a long, which goes hand in hand, but it's not the only reason that BioSpin will be the growth laggard in '26 for us. .

And then Gerald, what do you have penciled in for net interest and other expense for '26 And -- the cash flow was a bright spot in the fourth quarter. How do we think about pets conversion this year?

Yes. I mean we're -- just on the last point, we're quite pleased with how the fourth quarter came in as far as working capital conversion and our actual cash flow for the quarter came in about $207 million on the free cash flow -- $27 million on the free cash flow number. So quite pleased about that. As you already know, we've had a lot of effort related to inventory actions and happy to see that it has resulted in something positive. I mean we could talk further more about that. When you look at just interest expense line, we're thinking somewhere around this a $35 million to $40 million range for interest expense. And then we have some offsets on that other income line, we can talk about more of this off-line, but there's some nets that get you to, I think, a better performance on the other income line, net interest, other income line for us in '26.

And with that, ladies and gentlemen, we'll be ending today's question-and-answer session. I'd like to turn the floor back over to Joe Kostka for closing comments.

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you at an investor event or speaking with you directly during the first quarter. Feel free to reach out to me to arrange any follow-up. Have a good day.

Ladies and gentlemen, with that, we'll conclude today's conference call and presentation. We do thank you for joining.

Life Sciences and Diagnostics team. Pleased to be joined by the management team of Bruker. This is a standard 40-minute session. We'll do a corporate presentation and then Q&A afterwards. Frank, take it away.

Good morning, everybody. Thank you, Casey. Well, good to see many familiar faces. Welcome once again back to San Francisco and the JPMorgan conference. I'll give you an incremental evolutionary presentation today and an update on the key themes for Bruker in 2026. There will be some new insights and some new opportunities, but I don't think there'll be any rabbits out of the hat, so to speak. So what are the themes for Bruker in 2026, let's jump right into it. After a very significant 70% revenue jump between 2020 and 2024 with '25 admittedly being a rough year. Our focus is for the -- not only this year, but for the next 3 to 5 years is very much on profitability on a transformative margin and EPS jump. Basically, we think we hope we can take our margins from the mid-teens to the low- to mid-20s and deliver double-digit EPS growth over that period.

We are continuing, of course, to invest in our key strategic opportunities. Our leadership particularly in post-genomic discovery tools for both disease biology, clinical research but also very much for drug discovery and development.

Finally, we're evolving, if you like, an expanding Project Accelerate into Project Accelerate 3.0. You've been -- those of us who've been investing or following Bruker for a while. We'll be familiar with this. And here, we're particularly looking at aftermarket and sticky revenues, in particular, we think we have some very compelling and unique and novel opportunities in clinical microbiology and in molecular diagnostics and also in something and that will be a new theme for many of you because so far, it's been a little bit under the radar, but now that it reaches about $100 million in revenue per year, it's beginning to be needle moving for us as well is this opportunity in automated AI lab tools providers, both automation, digitization, data management, software, et cetera. I'll talk more about that.

So let's cut -- let me make sure I handle the slides properly. I'd like to draw your attention to our safe harbor statement. We do have an 8-K this morning with this presentation. It should have come out literally minutes ago in time for this presentation as I will be giving some forward-looking statements and sort of as we tend to do a bit of flavor for Q4 revenue and bookings with full earnings coming in early to mid-February.

Right. Bruker Corporation at a glance, nothing incredibly new here, and some of this is 2024 data because we don't have full '25 data. I won't go through all the bullets and many of you are quite familiar with us. Major revenue jump was absolutely strategic for us. We were always considered a little bit subscale and that $3.4 billion in revenue after this very significant, primarily organic, but also inorganic jump over the 4-year period, '20 to '24. We have the scale to compete in all the markets we wish to be in. And we've also, very importantly, entered key growth market -- markets with opportunities for higher organic growth rates but also for higher margin profiles. As I said, going forward, we sometimes think in 3- to 5-year phases where you evolve the company differently, the focus very much going be on profitability and margin and EPS improvements.

Right. So we'll not spend much time on this. This slide isn't exactly what it was last year. We evolve, our core evolves, our opportunities, our tools evolve. This is something to study at your leisure, but I won't go through it. The take-home point here is Bruker is -- in the majority of our portfolio, we are the #1 or #2 market -- one of the market leaders. Often, we are the #1, so there are niches, including niches where we have pricing and margin power and all these things that you're looking for to drive a very, very healthy and differentiated business.

Right. '25 was rough and there is no 2 ways about it. It was -- we were -- we found ourselves at the enviable focal point of weak academic demand, also weaker demand, at least in the first half of the year for research tools in general as both industrial research and biopharma research. We're hesitant with these changing tariffs, MFM and other currency and other turbulences that we have experienced in the economy last year. We did take a hit from the tariffs for sure, with 75% of our revenues in the U.S. being imported primarily from Europe, Switzerland, also Malaysia and Israel. Anyway, we've been countering that, but the initial hit was there. And of course, the deterioration of the U.S. dollar also hit us pretty hard. So I don't mean to whine and complain. Our job is to manage through it, but it was a rough year. What did we do about it? Well, we continued with what I think is industry-leading in to reaccelerate growth and enhance market share and also gross margin profile in this post-genomic era and in some of our other markets. I think our introductions of various spatial biology tools, and I'll come back to that. at AGBT and AACR or various mass spec multiomics tools at the ASMS conference, some NMR tools, et cetera were absolutely -- they were drowned out last year, I get it, but they are actually very important, and they're getting really good traction. I think they'll help us in resuming organic growth and hopefully getting back by next year. This is going to be a snapback by next year, hopefully getting back to what we think our portfolio allows us namely to be -- to have organic revenue CAGRs of 200 to 300 bps above market. In '25, we could not deliver on that, I get it.

Cost reduction is very important. We had said we would aim for $100 million to $120 million of cost reductions, both COGS and OpEx, and we are very much we are very much focused on the high end of that. So we're aiming to deliver $120 million of anticipated cost savings in 2026. So that even with limited revenue growth, we can still deliver very significant margin improvement and double-digit EPS growth despite the mandatory convert that if you recall, we did in Q3. So even with that, we still expect to deliver that. Of course, we're only giving color today. We're really giving guidance for '26 then in February when we report our Q4 earnings.

And yes, seizing the opportunities in proteomics and metalomics, in spatial biology, the many subfields of spatial biology that Mark can talk about or we'll talk about today in the one-on-one meetings. Very exciting molecular diagnostics and clinical microbiology opportunities. These are not -- these are not commoditized fields. They can be in some areas, but the areas in which we play, and the areas in which our new platforms and technologies allow us to go into going forward, I think, to make that as compelling fundamentally in terms of our growth margin opportunities as some of the other more research oriented and drug discovery-oriented opportunities. And automated AI lab, defense tech, there are some other good growth drivers that I will mention.

All right. It's 2026, hopefully less turbulent than '25. So this is sort of a longer-term view. This is just kind of in support of what I've been saying. Yes, we had a very significant revenue growth, organic and 8% organic CAGR, very good and 12% constant exchange rate because we also did some very meaningful acquisitions in '23, '24. And then '25 was a tougher year. This is simply the midpoint of guidance. This is not a new indication of where exact -- don't measure the millimeters here. This is just our previous guidance. And same for EPS. Obviously, with the acquisitions, we strategically took some deliberate dilution to change the portfolio. I think it was very important for us strategically. And then, yes, last year, 2025, a tougher year.

The M&A that we did execute in -- primarily in '23 and '24 was absolutely transforming for our portfolio and for the future of this company. in proteomics, metabolomics broadly multiomics. In cellular analysis, a field that we had not been in previously. In spatial biology, where we had a toehold or a couple of toeholds and now we have really the broadest and deepest portfolio in the industry and also in scientific software, data management, digitization. And last, but not least, it's only 3 letters here, but it will be very important, and I'll come back to it in clinical microbiology and the closely overlapping from a customer point of view, field of infectious disease, molecular diagnostics. We're not really in cancer testing. We're doing molecular diagnostics for infectious disease. So continue to expand and drive our leadership in post-genomic era tools, discovery solutions. As I said, for both disease biology research, that's where the academic spending is coming from cancer centers and neurodegeneration and autoimmunity research centers more from -- and still from departments of chemistry, et cetera. But academic medical center funding is actually not so bad. I'm on the Board of a major cancer institute and their funding continues to be pretty good, even in challenged time better than what you would expect from the rest of academia, which is still under pressure as we know. These same post-genomic era tools are also being used in biopharma. I'm pleased to say that the color that I have on Q3 and Q4 is that indeed, biopharma is back to investing, whereas in Q2, they were very reluctant. And so Q3, Q4 looked solid and including here in the U.S. or especially here in the U.S. also in biopharma investment in some of the very high-end tools that would -- that you know us for. So profit focus for the next -- for this year as well as for the next 3 and also for the next 5 to 6 years, the annualized cost savings we've mentioned. This is no new information, but we are -- the color is for flat and margin expansion or flat or low single-digit organic revenue growth. We'll also have a little bit of growth still from currency, and we'll have a little bit of growth also still from acquisitions. So resumption of growth is the -- but moderate growth for '26. It's not a snapback. And then very strong commitment beyond just '26 and taking a big step and a big swing in '26. For '27 through '30 really to deliver continued major margin expansion that may be 150 or 200 bps per year each year, hopefully, and double-digit non-GAAP EPS CAGR, while presumably by '27 returning to what we think our portfolio and should enable us to do, which is to deliver meaningfully above market revenue, organic revenue CAGR.

So Project Accelerate, for those of you familiar with it, we always had Project Accelerate plus operational excellence above-market revenue and margin expansion and profitable CAGR already. Project Accelerate, which we started really in 2017. It's now in its third iteration, but it's a very, very good program. It's around 60% of our revenue already and that will only expand. What's new in Project Accelerate 3.0, and I'll go into details in a moment, but very interesting opportunities in clinical microbiology and closely related in molecular diagnostic as it relates to infectious disease primarily.

Automated, digitized AI-ready labs. That's a big new investment theme in biopharma, but also in material science and specialty chemicals and that -- we can play in that. And even defense detection, which for a very long time, has been lingering at perhaps 1% of our revenue, but that's on its way to 2% and maybe 3% of our revenue. So as that crosses or has crossed the $50 million a year threshold, it will become also more meaningful from something that was just a little niche that you probably didn't pay much attention to and that was fine.

The performance execution, we really have outstanding leadership teams. We have a great Bruker management process. And I think they've done a really good job also in a rather challenging '25. I'm very proud of them. and they're taking all the hard steps that it will take to deliver major margin expansion in '26 and beyond.

So a busy slide, maybe almost more of a reference slide. I'm certainly not going to talk to all of those words on the left. The 3.0 continuing focus on post-genomic era leadership. I won't repeat everything I've said already. The novel molecular diagnostics and clinical microbiology opportunities and the AI lab market opportunities. I'll have a separate slide. I'll have a separate talking points on that. So as we're -- the buzz words are, the highlights are, we think we are can take our sample to answer molecular diagnostics franchise with the Genius platforms into syndromic panels on routine systems. I think that's going to be a very interesting way of doing syndromic panels more in the future in a more affordable way in a way that better fits the routine clinical workflow and should also allow us to enter the U.S. market. And then focused on the U.S. market initially, but eventually we hope to take that -- make that a worldwide opportunity, got entering into the AST field and particularly the emerging rapid AST field, antibiotic susceptibility testing for those who don't deal with microbiology every day. I'll talk more about automated and digitized AI-ready labs. And of course, we continue to expand on our nano tools for AI for the high-performance computing era. And again, I'll give you more details on that. Our core is thriving. This isn't some legacy business. Our ACA/GOV biopharma applied now also industrial, defense tech, defense detection for airport markets, et cetera, are quite differentiated and really have good margins, good pricing power and good market conditions. This isn't -- this is a thriving core. We are a leader in IR, Near IR, Raman, both spectroscopy and microscopy, again, not something that you're probably paying that much attention to. But hey, that's about 10% of our business and has excellent margins and also very solid growth potential and even throughout the rougher year last year, continued to deliver growth. And then, yes, we have opportunities in cleantech, in superconductors, again, I'll come back to that. On the right is some of the preliminary information. That's also why we filed an 8-K this morning. Our Q4 '25 preliminary revenue subject to audit, et cetera, is between $965 million and $970 million, that lines up to be above about $10 million, above consensus at this point. And for the full year '25, that would add up to a preliminary data to about $3.43 billion in revenue in reported revenue up about 2%. Of course, that's down organically, but we also made up for that with inorganic additions. So in constant exchange rate revenue we actually are managed to be flat or up a few million in '25, which in '25 is somewhat of a management and performance fee for us given the many headwinds that we faced.

And importantly, just as in Q3, for our BSI segment, which is 93% of the company, in Q4, it looks like our book-to-bill was again just above 1.0, which is encouraging.

Preliminary outlook. This is not guidance. Guidance will come in February, non-GAAP constant exchange rate, flat to low single-digit organic revenue growth. We hope we can get back to that, but we won't snap back to our traditional growth rates right away. We're aiming for an organic operating profit margin expansion of a bigger step, 250 to 300 bps and we're aiming for double-digit non-GAAP EPS growth for '26. That's the outlook. That's the color. I know you'll write its guidance, but it's not guidance. So guidance comes in early February, and then we can give you more details.

Right. So some of these things you've heard recently, you've seen some of our press releases. The first one was about, wow, NIH and NSFR are still funding big projects, even in a difficult 2025, so were a number of magnetic resonance orders that we've highlighted. Of course, they also highlight mass specs and microscopes, but anyway, this is what we had highlighted here. We then had a press release that you may have also seen already in Q4 about some substantial European magnetic resonance orders, including one of these 1 gigahertz systems was funded in France and some other rather large items that altogether added up to $25 million. And then very recently, and this may surprise you, but there is this little BEST segment of 7%, 8% of our revenue. Both of the 2 large orders towards the bottom of the left-hand side come from the BEST segment, from our research instruments technologies, which we are a majority owner of that physics, high-energy physics, very, very deep tech business. They brought in a $40 million order from the Extreme Light Infrastructure, a European Union project in Romania, with very significant funding, $40 million not all of that will go into '26 revenue, but some of it will. And then just recently, we announced 2 renewals but expansions or very -- 1 very large and 1 sizable multiyear orders for our advanced superconductors for present and next-generation MRI magnets, built by the big health care companies, health medtech companies. So we have some rather differentiated technology there and having that best was a drag on growth last year. And with these new framework orders, which allow us good planning over the next multiyear period, some of them up to 7 years, that's peace of mind and resuming growth there as well. So those were some rather large orders, and we were very pleased because these come up for renewal renegotiation every 5 to 7 years. And I think our innovation, our differentiated capabilities there really allowed us and then it has its own competition, but I think we've done really well with more details in these press releases. It's a -- that's a big deal and removes a drag or a headwind to growth that was meaningful last year and that should reverse in '26 and beyond as well. Sorry, I went the wrong way. I was supposed to not.

Yes. Little bit of defense tech. I said it already. We like it because it's also a lot of sticky business. Sometimes at Bruker, we say we work too hard for all the revenue. We have to deliver so much innovation, and that's great. But last year, people weren't quite as willing to work or to pay for innovation, for research instruments and ACA/GOV. So we're very deliberately emphasizing more sticky, more aftermarket, more consumables business, more service businesses. And actually, this defense detection business with a lot of airport security and air cargo security, plus some defense detection [indiscernible]. One is global, one is primarily in Europe, fits the bill. So as I said, that used to be a $30 million business. It's now $50 million, $60 million, and it may very well become a $100 million business for us in the years to come. And to Bruker someone is now a verb. I've been told by my kids. My son got Brukered when we went through Zurich Airport, they swiped his fingertips. And so if you too in Frankfurt or in Zurich or Geneva or a bunch of other French or Norwegian or Saudi and other airports, you can get Brukered. And that, hopefully, you'll get a little green reassuring light that there's nothing -- there's no traces on fingertips or on your cell phone. Anyway, that's a nice business for us that for all the wrong geopolitical reasons, of course, is rather active defense tech element. And for us, from a sleeper business where we had cool technologies and luckily, they were all validated and ready to go for these larger investment projects. Now we're really doing quite well and growing rapidly. So it's a nice part of the core business that's now growing.

We continue to focus. This is a slide that I showed here in this room or next door last year. Bruker, I won't go through it again, but this curve continues to be an enormous long-term 25-year opportunity. And we really have transformed our portfolio. And biology, disease biology competencies to lead in the post-genomic era clinical disease research and in providing the advanced biopharma discovery tools to deal with this enormous greater complexity of biology, hence, disease biology, mechanisms of action pathways, you name it. and sets up Bruker for long-term leadership and growth in this next 25-year period of how a disease biology and drug discovery will be done, and we're very well positioned for that. So complexity is good. It's more opportunity. And we see that. We see that in some of our new tools being adopted pretty early on by biopharma, the timsOmni for instance or the CosMx with the whole transcriptome panel. Here is a good example. I didn't go through all the instruments. You've seen all the instruments. We launched at AGBT and AACR, so I didn't go into that. But Mark, has shown us this. We've had remarkable growth, very high double-digit growth in the consumables for the CosMx spatial platform. And overall, our even in a rough year, our spatial biology business last year grew and actually grew in the low double digits, but that's pretty good, right? So all this innovation while taking out cost is really paying off and maybe the highlight was this whole transcriptome panel on the CosMx, which is completely unavailable anywhere else. It's really very unique. And for [indiscernible] disease or other biology research in tissues, it's really -- it's the way to go. And so the pull-through is very significant and the excitement in the community is there, even with limited ACA/GOV funding. But even with that, we've seen very, very nice growth in our spatial biology business. And also in other parts of it, but we wanted to highlight this.

Our new multiomics mass spectrometers have been -- that we launched at ASMS, 3 of them. Again, I don't want to talk about every single one of them. But this 1 because it's so game-changing. It is, in a way, proteomics 2.0 when you want to look at functional proteins and proteoforms, you do top-down proteomics. And the team's Omni doing that at scale and speed is very, very unique instrument to the market. These are 1.5 million instruments. We get quite a few orders for them. We think there is a lot in the grant pipeline. We got a lot of biopharma orders from them, from the big names that you would expect even before the end of the year. This wasn't revenue in '25, yet will begin to ship and turn into revenue in '26, but it's -- I think it's really very important. It opens up a new field in a field, we're quite honestly, mass spec rules. I mean, if you really want to add scale, get proteoforms, get post-translational modifications, quantitate them and you want to not do it for one purified protein. But for the many proteins that are functional and perhaps causing disease or whatever they may be or may be a target. This is a very, very important instrument for biopharma and for disease research. It's getting good traction as it is sibling, the timsMetabo where we seriously entered the metabolomics market, lower price point, but we got quite a few orders. That's a great high-end metabolomics instrument that's also quite differentiated. So much on that.

Semiconductor metrology. You need to look at chips in smaller and smaller nodes. You need to look at packaging for high-performance computing. We've been at this for a while. This business -- this was a -- is now meaningful as well. It's about 8% of our revenue, and it has above corporate margin profile. So as that grows, it's incremental margins are good. And that's, of course, a megatrend where we participate in and are enabling quite honestly, what various 4-letter companies around the world are doing that are doing particularly well in this space, and they need us as part of enabling all of this. And it's a good business for us.

As I mentioned, I wanted to just briefly highlight these new trends in automated labs that are not fully digitized, where you have to complete data management under control, not only for the instrument but for the entire lab, and have that ready for AI analysis and improvements. So we're not running those labs. We're the tools provider for those labs but there is a gold rush towards these lights out labs or labs that have very high productivity and can generate in an automated way, very large amounts of very high-quality data. So yes, you need detectors, Bruker plays a key role in the detectors. But what's new is the chem speed automation and the SciY scientific software, data management, lab digitization, et cetera. That's coming together. And I think it's worth mentioning a little bit now altogether, that's about a $100 million business for us. We expect that to grow very fast. And we also think that has a very large TAM, again, as a tools provider, not as running those labs ourselves.

Let me finish up with 2 or 3 slides on clinical microbiology and molecular diagnostics, a key, perhaps the key focal point of the further evolution of Project Accelerate 3.0 or PA3 as we call it here, for sure. As a reminder, in microbiology, with our MALDI Biotyper, we have over -- approaching 8,000 systems installed, 200 million identification. This has come completely mainstream. And we're now very pleased to add to this identification, the AST and not the established AST that's been almost unchanged for decades. Other companies are doing that. That's fine, but the rapid AST that will allow faster adaptation of antibiotic or perhaps antifungal, but in this case, antibiotic treatments. And we haven't -- I'll show you more details on that in a moment. We then became a much bigger play in molecular diagnostics, all for infectious diseases really with the ELITech acquisition in mid to -- in early '24. That now has good news, that has about 1,600 of their Genius platforms, sample to answer Genius platforms installed. Last year, we actually installed more and more than 200 of those, plan was 140, 150, so about 30% more. We are really getting traction in that -- in those niches. So by now, infectious disease molecular biology and molecular diagnostics is about a $500 million business. It has 65 going towards 70%, 75% aftermarket, so more sticky aftermarket consumables revenue and its margins are well above our corporate average. We intend to develop this further, enter the U.S. market eventually and seize unique opportunities in syndromic panels which is really a $2 billion market. A company other than Bruker has done an amazingly good job in that market, and there's a couple of others that are doing a good job as well. So it's -- they've established the market, but it's specialized instruments, thousands of them that are don't fit into the routine workflows or into the standard hospital workflows. And it's also very expensive. So that's why it's mostly adopted in the U.S. and not so much in Europe and elsewhere. We think we can change that. We have taken this LiquidArray high-plex, 15-plex or so quantitative PCR technology that Bruker had was a diamond in the rough, plus the sample-to-answer Genius systems and the proof of concept is now there, that is really works. That wasn't always clear, but that really allows us to think we can launch over the next 2 to 3 years, a significant number of next-generation, more affordable syndromic panels that work on your routine instruments that do other work for you in your hospital or your lab chain. We're very excited about that. I think it's a big growth opportunity. We also think it's going to be a unique differentiator that allows us to enter the U.S. market with that over time. And we're starting first clinical trials for the U.S. market for a certain specialized Candida Auris and some other applications that are a high clinical need already in '26. So that bodes well with a lot with good growth, good execution and future upside from 2 rather important developments, syndromic panels and then taking this to the U.S. market after all.

And I think that's my last slide. Very pleased to be adding the WAVE rapid AST platform that we added as an asset deal that has been developed by another company as a second-generation instrument. It's really -- we think it's the most promising new rapid AST platform. And I won't take you through all the reasons for that, but being able to do this with a very large number of drug combinations, over 150, actually close to 200 on average and 4.5x is our response time for -- initially for positive blood cultures, but eventually also for isolates, which I think is important for urgent isolates. This has a lot of opportunity. Yes, this may be an addressable market, that's not billion, $400 million. But if we can capture a big piece of that, and of course, add this to our strength of our microbiology franchise, this is going to be quite differentiated and an important further strategic step for Bruker, for our clinical microbiology business. So we're very excited about that. I'll let you read the other advantages of the system, but we think it's really quite compelling in terms of workflow, fit, cost, modularity. All of that, I think it hits all. We've been analyzing this market for a very long time, and we think this is this is clearly the best system. And I'm very happy to have that as part of Bruker now. We hope to launch that in the U.S. market in '26 if we get FDA clearance in '26, which we're optimistic that we will.

And with that, I'd like to thank you for your attention and happy to answer some questions.

Great. Thank you for that, Frank. Yes. Maybe to kick it off, you announced preliminary 4Q revenues came in above the Street. Can you just unpack the performance in the quarter by end market and product group and note any areas where maybe you outperformed your expectations? And would also be curious to hear if you saw any sort of budget flush?

Okay. So we'll really do that in early February when we have all the data and can slice and dice it. Maybe just a little bit anecdotal. I would say in the U.S., academia was still challenged. But there was some academic spending, but I wouldn't call it strong yet. And on the other hand, it was notable that biopharma spent quite significantly, including in some very expensive tools that normally they adopt years later. But if they absolutely need it to get to deal with a higher complexity of information that they need to accelerate drug discovery and reduce the failure rates for lack of information, I think that was encouraging. So let me give you these 2 anecdotal points, the real slicing and dicing by market, by geography, we can do when we report earnings. Right now, I don't have all of that information yet.

Okay. And I would assume similar on the order book, book-to-bill came in above 1, just any...

It's above 1, which is good. it is incremental. It's not -- things aren't booming, but things are getting -- clearly getting better.

Okay. Is there any specific pocket? I know to the extent that you can talk, but it seems like European academic trends are getting better. Anything to call out there?

Let me dig deeper when I have all the data, and I have [indiscernible] on all the comparisons. Right now, it would be too anecdotal.

Yes. Fair enough. And maybe on the bottom line, you pointed to solid progress towards that $120 million cost saving target that you have pointing to the Street to 250 to 300 basis points of operating margin expansion next year or this year, I should say. Can you just talk about what are the drivers there of margin expansion? Where do you see the most operating leverage in the business?

Gerald, I'm going to pass this to you if your microphone [indiscernible].

And confidence level that you'll hit that target.

Gerald is our CFO, you may all know him.

Yes. I'd say 1 of the primary drivers is the cost-saving actions that we've taken through 2025. We're targeting, as Frank noted, $120 million of cost savings and that's not just at the OpEx line. This is going to involve both the gross margin and our OpEx categories. We've done that across almost all the business groups, all the infrastructure groups at the corporate levels. So it's very broad, I would say it's the largest cost-saving actions that Bruker has taken in likely a decade. Beyond that, I think we do have some early signs for sure on the mix side of the business that we will do better from a gross margin perspective in a number of our businesses, in particular, I would say, in some of the core elements of the business. So mix will be a factor. And I would say we will not see some of the things we saw in '25, at least our expectation is we now will have neutralized the tariff elements that we had headwinds on in fiscal year '25. I mean we are hoping for a better stability in the U.S. dollar. I mean, I guess we'll see what the current administration thinks about that as we go forward. But that will be helpful, especially in the latter half of '26. So those will be some of the big pieces.

Okay. Maybe as a follow-up to that, Gerald, on the margin piece. So you noted in 2027, you expect to return to a normalized sort of environment on the top line. And continue -- you called for continued major margin expansion through 2030. Do you have an updated target margin that investors can anchor to the end -- by the end of that 2030 time frame and any to call...

Now you're pushing us beyond the earnings call even towards -- I think we'll -- this would be a good question. It's a good question, of course. But that would be more for an Investor Day if we do an Investor Day later this year to look at -- right now, February guidance for '26 at an Investor Day maybe in the summer, maybe in the early fall, more of a multiyear outlook but it gives you a color of where we're driving even if I'm not giving you numbers today.

Understood.

But I think you can do some of the math and plug into your models.

Okay. Maybe touch on some of the new product launches that you talked towards in the presentation. You launched 3 new instruments at ASMS last year, you talked a little bit about timsOmni here. Can you just give some more color on early customer feedback on those 3 new products? Any sort of follow-through you've seen in the order book at this point? And any sort of expectations on spatial biology?

I'll bounce to my colleague, Mark, on spatial biology, and then I'll talk about timsOmni. Do you want to talk?

So Frank referred to a number of things we did in 2025. So we launched in CosMx, the whole transcriptome panel. So it's -- nobody does 18,000 gene coding things. And so that's propelled a lot. So our consumables business is quite up through the year through that. It also drove platform sales, I'd say, where others had -- you just heard, had instruments sales that were down, we weren't down in instrument sales. We actually were flat in some and then up in other, and then consumables were up across the board in spatial biology. So besides whole transcriptome, we launched also CosMx 2.0 which was quite an enhancement in detection efficiency and sensitivity. And then we did a number of things around the CellScape platform that kind of opened up the playbook of markers for that one, for spatial proteomics. So it's quite a good year and it propelled good book-to-bill for us there.

TimsMetabo, we expect to sell 30, 50 of those a year. TimsOmni, might be 15, 20 or so, but these are 1.5 million systems. So each one of these things does add up. Those launches and that we are so early for both of these new launches where we entered slightly new and adjacent markets is actually remarkable. In one, timsOmni, we're doing missionary work, but people thought this was so compelling that they repurposed exiting sizable budgets and said, we've got to have one of those. TimsMetabo, we're entering a somewhat crowded market. Everybody is in the -- everybody in mass spec is in that market. But since it has rather differentiated 4D-Metabolomics capabilities, we're getting some good orders as well at the high end of that market.

Got it. looks like we only have a few seconds left here. You gave a lot of info in the presentation. Maybe what's the most -- what's the one thing you're most excited for, for the upcoming year in 2026?

Which of your -- Sophie's [indiscernible] sorry. I love all of our children here. I love all the opportunities. Maybe the most novel that you haven't heard before are these new diagnostic opportunities because those are truly new. They also will not all be needle moving in '26, but there definitely needle moving in '26, '27, '28 as you know, the time constants in diagnostics are longer. But boy, once you are in a new market or becoming a market leader in a new market, it's just really, really great recurring business.

All right. We'll have to leave it there. Thank you to the Bruker team for joining us today. Thank you for -- everybody for attending the conference. Enjoy.

Thank you very much.

Great. Can everyone hear me? Can everyone hear us? Okay. Fantastic. Welcome, everyone. It's great to have you. Welcome, Gerald Herman, CFO of Bruker. I'm Aisyah Noor, European medtech analyst with Morgan Stanley, and it's my pleasure to host this fireside chat today with Bruker.

As you can see, there's no fire because of budget cuts, but I can promise this can be a warm and engaging session. We have about 30 minutes for Q&A. So let's get right into it.

Maybe some research disclaimers. If any questions, please reach out to your salesperson or [email protected].

So let's start. It's been a turbulent year for the life science end market and we've had some guidance revisions across the sector. Maybe if you can start with giving us a bit of a brief of your third quarter results and your updated guidance following that.

Sure. Hello, everyone. I'm Gerald Herman. Great to be here again in London. Yes, we had a fairly mixed story for the third quarter. Probably the highlight was the order bookings performance for the third quarter of '25. We posted a book-to-bill ratio of over 1 which, given our revenue performance of over $860 million in the quarter, is pretty solid especially under the current market dynamics.

From an order perspective, we are pleased to see significant strength in the academic and government research area in orders excluding the U.S. As some of you may know, the U.S. ACA/GOV market for Bruker is only about 8% of our total revenue. So the remaining elements are global, outside the U.S. So we're quite encouraged to see that the order performance was solid, particularly in the ACA/GOV area ex U.S.

And beyond that, we also saw some strength in the biopharma area, and that was really encouraging for us. We've seen 2 quarters in Q3 and Q4 of '25 -- sorry, of '24, which were really quite encouraging in terms of order performance in biopharma. And then we had 2 quarters of pretty weak biopharma performance, I think, generally related to some of the MFN issues in the pharma space as well as tariffs, I think, put a bit of an overhang in biopharma in those 2 quarters. So in the third quarter, seeing strength in biopharma was really quite encouraging for us. And I would say, just generally, we're continuing to see that momentum, if I may describe it as that, in the fourth quarter in biopharma globally, including the U.S.

In the other areas, our revenue performance was kind of flat on a reported level and down about 4.7% on a revenue perspective. Our EPS was well above expectations. Actually, our operating margin performance at 12.3% of operating margin was beyond what we expected to see. And our EPS performance was up from where we expected from a consensus perspective. But we are still sharply down. Our EPS of $0.45 was down about 25% on a year-over-year basis.

So profitability is still challenged for us, I think, fundamentally being driven by four primary areas: the weakness in ACA/GOV in the U.S., the challenges we continue to see in China stimulus funding. There were delays in that area. We saw a little improvement in the third quarter, but still weak, I'd say, just from a year-over-year perspective. And then tariffs continue to be a drag on our profitability as well as foreign exchange. Some of you may know, our large footprint from a manufacturing and a headcount perspective is mostly European. So we have a pretty significant drag on earnings just related to foreign exchange translation. Actually, I was just discussing this with another investor earlier today, on a year-to-date basis, that drag is about $0.09 on our EPS just on foreign exchange alone.

So I think those elements for the third quarter, sort of a mixed picture, but fundamentally very encouraged by the order performance that we saw.

Okay. Fantastic. Let's unpack some of those comments to begin with. So let's start with biopharma. So how is market growth trending? How exposed are you to this segment? Where are we in the recovery path? And which areas of research are you seeing some green shoots or continued growth in?

Yes. I think I'll start by saying just more broadly, our overall exposure to the biopharma market is between 15% to 20% depending on the quarter of our total revenue base. We're striving to drive more growth into that sector. We continue to feel strongly about the opportunities within biopharma despite some perhaps shakiness in the second and the third quarter in the biopharma revenue side. We continue to think that there's real growth opportunities there.

I think most of our business is in the large pharma space. We do have some healthy biotech-related activities. But I would say that's probably under 20% of our biopharma exposure just generally. So our focus is mostly on large pharma. And they are, generally speaking, a sizable consumer of most of our high-end innovative instruments. Most of you may be familiar with the timsTOF portfolio. That's a product that's widely purchased in the biopharma space. Even our more recent introduction of the timsOmni product has been really well received by biopharma, even at the large pharma level recently, even though we just introduced the product in June of 2025.

I would say just more broadly, we're continuing to target biopharma with many of our instruments and our consumables and other solutions. As I said earlier, we think that this is a really attractive market for us and we are somewhat underexposed relative to our peers in this space.

Trending, I mentioned earlier, we saw a good performance in the fourth quarter of '24, weaker performance throughout much of 2025. It did appear as if CapEx spending in biopharma was being paused during the MFN discussions, I guess, with the Trump administration. Our view at the moment is that it does appear as if most of the pharma overhang has been lifted in the U.S. at least. And we see quite good traction in Japan, in China and in Europe relative to biopharma. This has been really exciting in terms of some of our product introductions, but even our core product performance in those markets has been quite good.

So I won't spend too much more time on this, but I think probably most investors do understand that China is really pushing very hard now on the development of their own biopharma market. That's going to be a growth driver certainly for the entire industry. But we think we're well positioned in the Chinese pharma marketplace for our instruments in particular. There are still import/export challenges from time to time, but fundamentally, high-end instruments are also well recognized in China because there's not a lot of other players that can offer these types of research-related instruments for drug discovery and research elements.

As a follow-up to that comment, is the domestication or the nationalization of research budgets, move of expansion of budget manufacturing R&D sites in the U.S. and/or China, is that a positive for Bruker or a negative for Bruker or a neutral?

I think it's pretty neutral. I mean, we're a global company. So wherever in the world those facilities are operating, whether they're being reshored back onto the U.S. or whether they're being moved to other places like China to develop in those markets, I mean, we're going to be there. Generally speaking, our instruments are, from an innovation perspective, unique. And I think that they'll continue to be required and needed by pharmaceutical companies as they start to develop new drugs. And for sure that's true in China. We certainly see it in Japan. And we've seen it for years in Europe and continue to expect to see that in the U.S.

Let's move on to U.S. academia and government. So again, could you talk through how your portfolio is exposed to this funding? You mentioned, I think, 8% before. Assuming a flat NIH budget and no budget flush into the year-end, what do you think the outlook for this segment could be like heading into 2026?

And there's been a question from the market as to if government shutdowns have been operating for 43 days, could we see 43 days of activity come back in December and January? Or is this just a lost activity and it starts to ramp up from here?

Yes. It's difficult to say. I must say, for us, and for those of you that follow Bruker, most of our order patterns take place in the last month of the quarter and generally in the last 2 weeks of that last month. So it's still a little early for us to call it. What I can tell you, I mean, I do think that at least what we've seen so far in the third quarter is encouraging for us, that we did see a bit of a spike that was perhaps related to funding that's cleared through with respect to the '25 fiscal year for the U.S. government.

And in '26, the jury is still out. I think it's still early for us to call it. What I can say is there's some encouraging signs in U.S. ACA/GOV. I mean, it does appear as if there's a number of funding solutions outside of just the government side. And there's a lot of collaboration going on now in research in the United States between, I think, the traditional academic institutions, research hospitals as well as pharmaceutical companies. So one way or another, I think the research will hopefully sustain itself in the U.S.

I would say just generally, our expectations with respect to '26 are fairly muted in the U.S. We're looking at the other regions of the world to support our academic/government research revenue profile for 2026. We should note that if, in fact, Congress moves forward with funding in a more positive way, even if it was flat or slightly up, we have relatively easy comps against 2025 because this has been quite a weak year for us in terms of academic research revenue performance in '25 for Bruker.

Where do you see the most opportunity outside of the U.S. for academic research spend?

Yes. Interestingly for me, I mean, Europe continues to be fairly strong. I'd say that's a sustainable area. We have a really strong -- I would say, our roots for Bruker are generally rooted in the European academic market. So that's going to be quite solid.

I do think also Japan is now poised to take a different role in academic spending, particularly in chemical and in other physics-related areas. But I would also say some of the pharma markets in Japan are also kind of rebounding in a way that we haven't seen in multiple years. So Japan, just generally as a region, feels better to us than it did a year or so ago.

And then, of course, China. We have really good strength, I think, in China and our overall position with respect to our product portfolio in China, not just related to the timsTOF product. But I mean, I'm talking about molecular spectroscopy, X-ray, semi and certainly our NMR systems, I think, are unique in those markets.

Okay. Fantastic. That's a great segue to my next question which was on China. So I think you saw a sequential improvement in China in the third quarter.

We did.

Just talk about what you're seeing on the ground by the different customer segments, what the net growth is going to be like for Bruker for China in '25 and how this shapes your thinking for 2026.

Sure. So China continues to be a relatively important market for us right now. I'd say it represents about anywhere between 13% to 15% of our total revenue base. We have seen declining revenue performance in China over the last 1.5 years. There's been a lot of talk, if I may say, about China stimulus. We had been expecting to see it. We know a number of our products, our solutions are connected to academic funding environments in China, including stimulus funding. We know specifically which projects they are and we know that they have so far not yet been funded.

So that's been going on for multiple quarters, I might even say 1.5 years. So I think our general position with respect to China is down likely in the low single digits on a year-over-year basis from a revenue perspective. I mean, we do expect orders when we saw a really solid order performance in the third quarter from China. Again, this is off of relatively weak comps now, and I would expect that to continue even into 2026.

In the market segments, as I mentioned earlier, I think the China biopharma segment looks quite solid and likely robust into 2026. Industrial seems to be recovering. I would say the academic and research side, especially in physics, chemistry and some of the other physical sciences, continues to be fairly solid. And I would expect it to improve in 2026. We also have some market dynamics in the semi space in China.

Despite some export or import restrictions into China, we are still performing pretty well in that market, and I would expect that to continue. While there's been a lot of, I would say, disruption and maybe sometimes dysfunction within the U.S. activity, I would say China tends to be more stable and probably essentially after some weaker performance, starting to step it back up in '26. So we're fairly optimistic that we'll show growth in China on a year-over-year basis, but again, off a fairly weak comp.

Great. Let's move on to the mass spec portfolio. So you announced two launches ahead of the ASMS this year: timsOmni, timsMetabo. Could you talk through the growth contribution you expect from this product in the coming year?

Yes. Interesting products. I mean, these are two relatively unique products in the marketplace. For those of you that aren't familiar with it, the timsOmni is a product that focuses on functionality of proteins, not just identification of them. So we think that this is an entirely different sort of market framework, and pretty excited about the ability to introduce a product with that kind of innovation. And then the Metabo product is focused on metabolites and the ability to analyze and understand those. I think that's also a product that has some competition. But fundamentally, we think our innovation elements there are going to be superior.

These products, which were introduced in June of '25, I think, are pretty remarkable. We've now received orders for both of those products actually in '25 already in the third quarter, and we expect to see more in the fourth quarter. it's unusual to see that kind of order activity in an early product launch. So we think both of these products are going to be sort of standout products in the portfolio over time. And most of you know, we have in the main lane, with respect to the timsTOF Ultra AIP system, which competes against the Thermo Fisher product, we continue to expect there to be some competition in that lane. But these other products really play in different lanes, and we expect to see a significant contribution from those.

I would say where we are right now is the fourth quarter order performance, we'll see where that lands in a few weeks. And we'll talk more about this in February. But so far, very encouraged by what we have seen in terms of order performance. The delivery on those products and revenue recognition will likely be at some point in Q2 or Q3 of '26. And I think, generally speaking, the mass spec portfolio has been sort of one of our hot areas in terms of our overall revenue performance going forward. So I don't expect that to change much. I expect these two products in particular will have a significant contribution to that in '26 and beyond. But a very good start. I'd say good traction in the early stages.

Great. Let's move on to your molecular diagnostics acquisition, ELITech. So you bought this in April '24. You talked about $190 million of revenues or so for '25. Very nice installed base. Can you talk about what was the rationale behind the acquisition? What was the urgency for you to be present in that molecular diagnostics segment? And what specifically about that asset kind of attracted you to it?

Yes. I think it's, first of all, a really unique profile. It's largely based in certain countries in midsized hospitals in Europe. No presence in China, no really material presence in the U.S. So fundamentally for us, it fit the profile. We have a large footprint in Europe, and we felt like we really could expand their coverage in Europe materially with our reach. And I think we're starting to prove that we can do that.

I would say the attraction of this particular product, it's a sample-to-answer PCR-based technology, but it's got a very robust platform and there's been multiple iterations on that platform. But we think that it fits really neatly and complementary to some of the products that we were presenting, particularly around multiplex assay structures in this area. It was truly complementary for Bruker because some of you may know, we have a strong footing in our MALDI Biotyper business. We're probably the leading player in microbial identification.

So we had microbial. We had fungal identification capabilities. But we really didn't have viral. And so getting a platform as robust as this, together with the installed base for ELITech, I think, was really meaningful for us. I think, generally speaking, when we look back on this, this is an example of an acquisition where we thought that there would be synergies. We've discovered really that the synergies are greater than what we thought, not only on the operating expense line, but more importantly, just from our ability to build out our molecular diagnostics business into.

This will now be roughly a $500 million business for Bruker. I mean, that's a substantial play on a $3.5 billion revenue company. And I have to say, quite honestly, one of the fundamental reasons for looking at an acquisition like this is Bruker needed more sustainable recurring revenue. We have a lot of exciting instruments. These tend to be high ASPs, sometimes a lumpier type of revenue profile. What you get in molecular diagnostics is an attractive, sustainable level of revenue performance over time. Once you have an installed base, and we have an installed base here of over 1,100 instruments, it's a recurring revenue stream. And certainly, as a CFO, I really like that stream.

And you will see more attention paid by Bruker into the molecular diagnostics field going forward. It helps us from a cash flow perspective and it helps us from a revenue stream perspective. So very much pleased with the performance of that acquisition thus far. It's exceeded our acquisition model at this stage, and we have really some exciting things which we will be announcing in due course around that platform as well.

Okay. I'm going to try and push for some of those announcements, but maybe just touch upon that a little bit more. So it's the BeGenius platform and the InGenius platform that it sells. Where has the -- of the 1,100 or so placements so far, which settings has it resonated the most with reference labs, hospitals?

What's the USP of that product as compared to some of the leading players or incumbents in the market like the BioFire? And are you planning any -- does the achievement of that $500 million in sales require more geographical expansion into the U.S., menu expansions? Just talk through mid-term growth drivers.

Yes, it's a really good question. I mean, fundamentally, the really important sort of selling proposition of this product is the platform itself is easy to use. It's got a very high accuracy rate. The cost elements are quite low. I mean, as you may know, the product initially was developed to focus on esoteric assays. So these are things like hospital-induced viral infections.

These are items that are not typically called for through a Roche or an Abbott kind of framework. So these esoteric assays are really important in the longer scheme. So they're typically additive in the broader scheme. And of course, we have respiratory capabilities as well on this platform. So I think it's attractive because it has some of the out-of-the-box capabilities. But from an accuracy and cost perspective, it's really attractive.

The target specifically for this is really midsized hospitals. It's not targeting high-end, giant, high-volume hospitals, generally speaking. And these smaller, midsized hospitals are really interested in instruments like this. And adding some further assays to it allows them to do their own testing within those hospitals without having to necessarily outsource this testing activity to the larger players. And I think it's a big step. It's a big step especially from a geographic perspective for this particular business to focus on expansion in the European markets.

Lots of midsized hospitals especially in France, Germany and in the Northern European countries. Those are important targets for this market. We've already introduced the product in there. And I think this is one of the reasons why we're starting to see some uptake in the number of installed units. And to your question of other geographic expansion, and for sure, we have capabilities to introduce these systems into the U.S. I do think there's a large number of midsized hospitals in the U.S. that would really benefit from these types of systems.

So it's more of a niche-based product, but I do think it's got really wide ranging capabilities. And we will be adding further assays onto it. And as I said, I think it's a really interesting complement to our MALDI Biotyper system, which is already installed in a number of facilities in Europe and in the U.S. So we already know those customers, those hospitals. And I think it's a really good complementary fit.

All right. So speaking of the Biotyper, so there's been a lot of talk around the Waters-Becton Dickinson merger. How should we think about the potential impact on your Biotyper partnership with BD? And what are some of the drivers of success for you in BD in this long outstanding partnership that you think they would need to get right to succeed?

Yes. Look, first of all, I have to say, we're delighted with the partnership arrangements we have with BD and with Beckman Coulter related to the distribution of MALDI Biotyper. I mean, we have our own direct sales channel and we do sell products through there, but we're very pleased with the indirect channels through these distributors. So I mean, we're not necessarily looking for or planning to disrupt that channel distribution. And to the extent that Waters, subsequent to the final closing of that transaction, if they decide to move away from that, that would be disappointing.

But of course, particularly in the U.S. and in other markets, we have direct channels that we can activate, and we will. Frankly, from a CFO perspective, it's a good thing. And we have higher margins on the direct than we do on the indirect. So I think that's not the end of the world. I wouldn't prefer that, quite frankly because we like the distribution structure we already have and they've been great partners with us historically.

With respect to other instruments coming in, and there's been a lot of talk, I feel there's a couple of questions on this a couple of weeks ago when I was in New York. Look, you don't build a MALDI Biotyper with 100 million microbial identifications annually overnight. I mean, it seems to me that if you want to go down that road, and many have tried, I might say, it's going to take years in order for you to do that and to do it successfully. And then you have to dislodge the existing installed base. So we're not overly concerned about that.

I mean, as I've already said to you in multiple other areas, we're an innovation company. So fundamentally, we're already innovating on the next generation of the MALDI Biotyper. We have over 7,000 installed base globally. So I mean, I would just say, I think it's going to take a bit of time for someone to challenge that base.

Understood, understood. Okay. We've got 2 minutes left. Maybe one on M&A. So you've been quite actively consolidating in the last 2 years, a lot of them bolt-ons. We've seen some high-profile sizable transactions in the diagnostics space in the last month. Do you feel the need to participate? Or what's the capital deployment optionality like for you in the coming year?

Yes. So just publicly I'll restate, we're on a deal diet, at least at the big deal level. Someone was saying yesterday, we still smell the bacon as we come through the area. So we're well aware of it. I do think there are some attractive assets out there, I need to say. And as I said earlier, clearly we are interested in the diagnostics field and we'll continue to look at assets that make economic sense for us.

What I can say is just generally, some of you have already heard this, but from a capital deployment perspective, our focus is principally on R&D and on our CapEx activities inside the company. We're doing some small tuck-ins from an M&A perspective but those are not really -- well, I like them, and they're complementary generally to what we're doing, and we did a couple in the mass spec area recently, these are all good. But we're not talking about anything really giant or material.

And our capital deployment strategy is going to be focusing on R&D and innovation and our capital spending to support that. And then after that, I mean, we have a debt paydown framework which we've been following. We're trying to get down closer to a leverage ratio of 2.7. We're roughly at 3 at the moment. So we still have some work to do with respect to that.

So I would not expect to see significant acquisition, large acquisition activity for some time until we kind of hit those other -- checked all those other boxes. That doesn't say we're not looking and that doesn't mean that we won't be interested in something that is strategically important for us. But I would say, in the short term, that's not our plan.

Fantastic. Thanks, everyone. Thanks, Gerald, for being here with us.

Thank you very much. Pleasure. Thank you.

All right. So I'm Doug from Wolfe Research. It's my pleasure to be joined here by Gerald Herman, Chief Financial Officer of Bruker Corporation. Joe Kostka, Investor Relations, is here as well. Thanks to the 2 of you for being here again. We really appreciate you taking the time.

Happy to be here.

So Gerald, you've been -- I might be messing this up, but is it 7 years? You've been CFO?

7years, yes.

Time flies, while you're having fun.

8 in March.

So the company has undergone a lot of changes since then from a portfolio perspective, from an IR perspective and operationally, a lot has tightened up relative to what we've seen historically with Bruker. I mean Bruker is known for fantastic science, fantastic innovation, operational prowess in the nicest way I can say it possible was not always a strength. And I think it's got a tremendous -- it's improved a tremendous amount under your leadership on your tenure.

So with that said, I want to spend the next half hour really unpacking Q3. That report feels like it was a year ago at this point. I think it was just a couple of weeks. But I want to talk about Q3 and maybe more importantly, what that means for Q4 and momentum heading into 2026. Then I want to talk about '26 itself. And it would be good to go through the building blocks from a top line growth standpoint. But really where I want to try to spend a little more time than we probably normally would is on the margin expansion story.

So I do think there is an argument to be made that the end markets are getting better. I want to talk to you about the momentum you have heading into next year at the top line. But I really want to focus in on the things that you can control and see where there's risk and where we can confidently -- how we can confidently think about the building blocks to you getting to the margin expansion targets for next year. So that's the road map.

So let's start on the state of the company, Q3, Q4. Q3 revenue came in better than expected, even accounting for -- I think it was $6 million of -- it was a bit of unexpected China stimulus. Even if you take that out, it was a really good quarter. Can you talk through how much of that was timing or one-off in nature versus a sign that things are actually tracking a little bit ahead of plan?

Yes. I guess what I'd say is that we had anticipated a relatively weak third quarter following a quite weak second quarter. And I think what we saw is that some strength in a couple of areas that we weren't really anticipating. One was in our Life Science Mass Spec business, particularly for the third quarter. We also saw better revenue performance across a couple of other areas, including our AXS business, in particular, this is one of those businesses that performed a little bit better in the third quarter than we had expected to see. This is sort of a bellwether division for us, one that's typically that together with our Optics Division, typically sort of indicators of macro conditions. So we were quite encouraged to see a little bit better performance in the AXS division itself.

And then just more broadly, we saw strength in the defense area that we had anticipated we'd see a little bit of strength, but certainly, I'd say this is double-digit revenue performance in the third quarter that wasn't really on the radar. This is reflective of the European markets really kind of moving towards more defense and security-related instruments. And we have a relatively small but still growing fast security systems, mostly explosive trace detection systems, but also a number of other security-related systems for airport security and cargo transport as well.

So those areas sort of for the third quarter came in a little bit better than we had expected and still down overall on a year-over-year basis, but relative to expectations and even internally was better than we -- and we also wanted to somewhat derisk our fourth quarter. We didn't see a lot of pull-in from the fourth quarter, just mostly due to order timings, but it was good that we were able to perform a little bit better in the third.

Yes. You just touched on something because it doesn't -- that I think is important. I mean you did effectively bring down fourth quarter relative to prior expectations. But it doesn't sound like -- it sounds like there's an element of prudent acknowledgment of the government shutdown, things like that versus a lot of revenue got pulled forward.

That's right. And I think the other piece for the fourth quarter is that we saw a pushout. We saw a couple of orders in our semi business, almost $40 million pushing out into H1 of '26. So I think fundamentally, we felt like we just needed to bring our overall guide down a bit for the fourth quarter. We have government shutdown elements. You had that push out. We had sort of a weaker a couple of other businesses that we thought were going to be stronger in the fourth quarter. We're just not there.

Okay. Super helpful. Moving down the P&L. Operating margin of 12.3% exceeded Street estimates. I think where most of us were around 9%. How much of that is a function of, again, one-timers versus that we should actually maybe look at this as a sign of progress towards the $100 million to $120 million of cost actions?

Yes. Not a lot related to cost actions in the third quarter. We're going to see roughly $30 million plus of cost actions in the fourth quarter of '25, but we didn't see a lot in the third quarter. I'd say where we had an improvement in the third quarter operating margin performance was mostly mix and we had an improvement overall in our LSMS business from a profitability perspective than we had expected to see.

I also think that just the whole environment, the whole environment internally within Bruker, whether we were now at that point, starting to talk about significant cost-saving programs across the globe, not just on the Street. We were talking about it internally pretty significantly. And I think that also helped to put a little more pressure on cost actions that started to sort of manifest themselves into the third quarter, even though we hadn't actually pulled any actions out.

The book-to-bill, I guess I'm going back up to the top line, but the book-to-bill was above 1 in the third quarter. Any -- again, what's the right way to think about that?

Yes. I think it's -- it was a better demand picture because our overall revenue performance, as you mentioned, in the third quarter, while it was down, it was down about 4.5% organically, it was not really that much of a factor. So we had very good order demand in the third quarter and it was mostly coming from outside the U.S. academic and government research markets and strong biopharma order performance, both in the U.S. as well as outside the U.S. So I think the bigger story for the book-to-bill was stronger academic government research and stronger biopharma demand in the order performance.

Heading into year-end, I mean, I wouldn't say it's a great NIH environment, but it's a lot better than what we were talking about 6 months ago. So that's less bad. You have MFN agreements that, again, I don't know if they're good or great, but they're not as bad as feared. Now that you have some certainty, now that your customers have some certainty is -- are the types of conversations you're having across academic, government and biopharma changing?

I think the sentiment has shifted. I think as I've talked about with a number of investors here today at this conference, which, by the way, has been terrific for us. I would say the sentiment shifted around the industrial side of the market for the U.S. once the tariffs mostly settled. I think the same is true in biopharma here now. I mean it seemed like there were there were brakes being applied earlier in the year in the biopharma space, at least relative to our solutions, and that has been mostly lifted now. We saw quite strong. And here, I'm talking about double digits order growth in the third quarter. And that -- we haven't seen that in many, many quarters. So I don't attribute it necessarily to a catch-up, but just a change in sentiment.

Most biopharma companies, and I'm talking about this globally, and we've spoken to many of them in the U.S. and especially in Europe, just different thinking about when to spend, and they seem to have lifted their foot off the brake for the moment, at least. And we'll see where we are most optimistic is that we hope to continue to see that in the fourth quarter from an order perspective.

As you know, Doug, we can't talk really intelligently about fourth quarter order performance until we get into December. Most of our order activity is occurring in the third month of a quarter. So it's really difficult for us to predict this. But just based on conversations and certainly, pipeline activity, it's encouraging for us, especially on the biopharma side.

And I was going to -- along those lines, I mean, recognizing it can be a back-end loaded quarter. Additionally, given a lot of what Bruker sells is longer lead time, what we're describing, I would think would be more of an order dynamic if there's upside than revenue dynamic.

Yes, I think that's right. And of course, the order dynamic reflects what's going to happen for us from a revenue perspective in '26. In FY '26 because our -- we have long lead times generally for many of our larger instruments, and they take months to produce and ultimately get distributed into our customer base.

Perfect segue to 2026 revenue growth. So as we think about some basic building blocks, I think you've talked about having -- just correct me if I'm messing up anything.

Go ahead.

But probably having 7 months of backlog heading into next year. We talked about the $40 million in semiconductor-related revenue that was expected Q3, Q4, largely Q4 that I think moves to the first half of next year.

That's right.

So I think that's a point of growth, if I'm doing math right.

You are.

Pharma as a percentage of sales, it's only 15%, but that sounds like it could actually be a tailwind at some point. And then academic and government, that's your biggest thing, 40%, 45% of sales, around 10% of that in the U.S. You talked about strength really outside of the U.S. and maybe some stability in the U.S.

Yes. It's hard to exactly understand what's going to happen for the U.S. This has been a very turbulent year for academic government research in the U.S. But the fact that the government is actually now open. And there's a number of -- we did see a little bit of a boost in the third quarter in terms of actual order and revenue performance connected to the U.S. government. If NIH and NSF funding could get back on track from a U.S. perspective, I think we could really see a boost here even as we march through the fourth quarter and into the first quarter.

It's not clear exactly what the continuing resolution through to January will do here. So we need to have a little bit of caution on the U.S. side. But at least we have had evidence in the third quarter about some funding. So it's not just about grant approvals, but actually getting funding to be able to get these instruments out into the markets where they are needed is really what's critical. And then I think on the academic and research -- government research side, outside the U.S., we've seen quite a bit of strength, particularly in Japan. I mean this is a market that was, at some point, a very large buyer of Bruker-related instruments and solutions, specifically around material science and in their academic research markets more broadly.

So if you add Japan, Korea was -- had some strength in the ACA/GOV area in Q3 and our European markets, it seemed to us that the European markets were quite a bit stronger in the third quarter than we had seen almost all year. And that's an important stabilizing factor for us, particularly. We see that continue again in December orders, and it seems as if we're hopeful that we will continue to see that moving in that direction, then we could have essentially good visibility into both H1 and a good part of H2 of '26 from an order perspective translating into revenue.

And that easily could give us the step-up that we need to get to on the '26 line on organic revenue growth somewhere in the flat to low single digits growth in '26. That's really the kind of important takeaway here. There could be some other steps in between there. But fundamentally, we're pretty comfortable that with that, we will show some improved order organic revenue growth.

Does that type of growth factor in -- fully factor in what you've described in terms of your price opportunity?

Well, not fully. I mean what I would say here is -- and some investors that are in the room here have listened to me talk about this today, we've got a number of pricing actions. Some of those actions are directed specifically at essentially neutralizing the tariff impact. So we're not really trying to necessarily bring up the revenue line. We're really just trying to neutralize the impact of tariffs. And I've been pretty public about the fact that we feel pretty strongly that Bruker should not absorb those tariffs, that those tariffs should really be moved back into the marketplace. And we absorbed those tariffs in Q2 and to a certain extent, even in Q3, and we want to try to remove that as we march forward into '26. So pricing actions to neutralize tariffs are one element.

But the second is we're continuing to look very closely at pricing opportunities, especially for our most innovative products where I think we have the most price elasticity, where we are leading. We have leading-edge technology instruments that we're introducing into the market. We're automatically putting in price adjustments to reflect that. And that's ultimately going to improve the overall revenue position and the gross margin performance of the business in '26. And on the gross margin side, it's not just pricing. We have a number of sort of lean actions that we take from an operational excellence position to keep pushing costs down even in inflationary conditions.

Modeling question. Is it one more NMR in the fourth quarter?

Yes.

One, I think, in the first quarter of next year.

That's our expectation, yes.

And then it would be 3 total this year in '25.

2 total.

2 total. So doesn't take much for that to actually be an opportunity.

Yes, exactly. I mean we have to continue to build on the order book, again, in the ultra-high field. This is another area that if we -- if U.S. academic government research funding were to turn in the right direction, there are a number of opportunities that are actually presented to government authorities to get approval. And if those could get approved and then ultimately funded, we could increase that volume going forward into '26. So yes, I mean, our expectation is that will continue to be sort of a supplement to our overall NMR business going forward.

Pricing, I just -- I appreciate everything you just described. But going back to that, I just want to make sure I'm clear in how we should think about this. I mean I think on the -- at one point you talked about you potentially being able to get 2 to 4 points of price, should we say -- but that is inclusive, at least some of that will be pure price, the way we think about it. But at least some of that is margin -- I'm sorry, tariff.

Tariff recovery, right.

But year-over-year, because you've already been taking the hit on tariffs, it does still -- even if it's tariff recovery, it does contribute meaningfully to margin expansion.

Yes, and I would say just generally, we're -- the company as a whole has been looking at pricing actions in, let's say, depending on the products, anywhere between 3% to 6%. It could be lower than that depending on the market dynamics. But fundamentally, that's a pretty significant kind of step-up and some of that will be absorbed in the tariff elements, but there will be other pieces. And we're not talking about just for the U.S. markets. We're talking about more globally, making price adjustments to drive better operating margin performance over time.

Super helpful. And you nicely corrected me because I said 2% to 4%, and you said it could be as much as 3% to 6%. Okay. That's great. All right.

Let's talk about margin expansion. So high level, but I think really important question. Keeping in mind, I think it was Frank who said even in a no-growth environment, the company should be able to expand margins 300 basis points in that environment. How confident are you based on what you control that you could achieve that next year, especially if you can grow a little bit better than that?

Yes. Look, I think we have put the building blocks in place, particularly around the cost saving measures that we've put in place across the globe. We have -- at the high end of the cost saving targets that we set out a few months back, we're expecting to be at $120 million of cost savings. And just to frame that, relative to our OpEx, $120 million of cost savings is almost 10% rather, of the total OpEx for the company on an annualized basis. So that's a meaningful adjustment to our cost base. And the expectation is that we will have that $120 million run rate going through '26.

So with even flat growth, I'm very confident that we can hit that 300 basis points of operating margin improvement. And then if we layer on some other elements that we expect to hopefully be able to realize, pricing is one element. Operational excellence is another. We have also been talking with a number of investors today about the fact that some of our M&A drag that we had a year ago or so will be at a breakeven point from an operating income perspective in 2026. Very proud of that.

I think fundamentally, that will also help to contribute ultimately, especially if in our Bruker Spatial Biology business, we actually start to see growth in that business. This has been a difficult market condition with academic and government research here in the U.S. as well as softened demand in biopharma, we could start to see improvement in the NanoString business, in particular, but that broad division specifically, and we could start to see some improvement in operating income performance in that area as well. So there's a bunch of blocks to build on relative to operating margin expansion in '26.

How much of a drag was M&A, like those deals on margin?

Yes, it was about $0.08 to EPS in 2025, and that will disappear in '26, and we're quite clear about that because we've taken the cost actions that are required. And then if that business improves from a market dynamics and demand perspective, we could see some upside there.

How much of -- and maybe it's just 300 -- no, actually, it wouldn't be. I was just trying to make sure I wasn't going to ask a really stupid question. It still may be stupid, but how much of the margin expansion comes from OpEx versus COGS or gross margin?

Yes. About 60% of it comes from OpEx and the rest of it is in the COGS area. So about 40% is going to be in the COGS area.

Okay. I'm not sure you're going to want to break it down this specifically, but I would love to try to get at like how much of it is price? The semiconductors helps you, right? That's a super high gross margin product. So what are the components of the gross margin improvement?

Yes. I think the gross margin, a lot of it is going to be mix. A good portion of it is going to be price. We are expecting to see some improved volume as well. And as you know, with Bruker, once we start to see significant revenue volume, we drop a lot down into the operating margin line. That's just the scale of our factory capabilities. So those, I would say, would be the most significant elements. Yes, I'd say those would be it for now.

The $40 million in semiconductor-related revenue that's going to come through early next year. I don't know how big semiconductors is as a business or.

Yes, it's about $300 million. So it's a sizable business for us. And these pushouts between quarters happens fairly regularly. This happens to be a little bit larger because we have 2 particular orders that moved. But fundamentally, this isn't that unusual. It's just a larger number.

Is that area growing right now?

Well, the demand environment for semi seems quite solid. I think that's not the issue. What we're seeing at the moment is fairly lumpy order activity. We saw in Q1 of '25, and we expect to see stronger order performance in Q4 of '25, but we had weak Q2 and Q3 on the order side for semi. So a little lumpier than -- and we attribute that mostly to decisions that are being made by our customer base and the timing of when they want their -- these are larger scale instruments typically that are going into their operations, they get to decide when they want those. So it feels like they're timing those instrument deliveries based on their schedule, and that's creating this kind of lumpiness in the orders, which is ultimately going to translate into lumpiness in the revenue side. So I think over time, you'll see continuing growth in semi but some lumpiness in the quarters.

I think my last semiconductor-related question. I think you have said other than NMR as a category, that's your highest -- it's the second highest gross margin category. How much higher? The corporate average is around 50, right? So how much higher is it?

Substantially higher. It's a -- you're going to have some underperformers and some overperformers and it's an overperformer in that category.

All right. So from a confidence standpoint, it sounds like you're pretty confident on the $40 million incremental coming through next year on...

I am.

The price, you're pretty far along in putting those in place.

We are, and we've made multiple pricing adjustments, which are in the order book and will ultimately get executed in '26. So I'm pretty confident about those as well.

And then the rest is really -- like those are the parts that you could control or have high visibility on. The rest is largely does the revenue pick up.

Yes. What's the demand environment look like? And how does it how does it unfold in 2026.

And on the OpEx side, I think your OpEx is tracking to about $1.3 billion this year. So is this as simple as that should be closer to $1.2 billion next year?

Yes, pretty much. I mean I think what we're expecting for '26 is that you'll see a drop from that $120 million worth of savings that gets factored into either OpEx or these other categories. And then as you move into the forward years, you'll see a slight increase relative mostly to merit increases and other items that are normal in the OpEx categories. But I mean, we feel like with the synergies we've taken with our integrations on the acquisitions and the cost control measures we've put in place that we've got a very good handle on OpEx going forward.

And I would say -- I mean, I fielded one of these questions earlier today. I would say we're not expecting to really scale up that OpEx back to the levels that it was post-acquisition activity. We feel like we've got kind of the integration model already established, and we are where we feel we need to be.

Do you have a hand -- like do you know what the new flow-through would be on incremental revenue as you get towards the end of next year and we're kind of in the new operating model for Bruker?

Well, I mean, I think what -- I know you know this, Doug, but we're targeting to continue to march our way forward towards closer to this target of 20% operating that's still intact. And actually, the goal for '26 is to march in large chunks. And one of those large chunks will be that 300 basis points of operating margin improvement for '26, and then we'll do another large chunk in '27 and so on until we march our way up to that 20% target.

Yes. I was going to ask about like there's -- the LRP isn't really the LRP anymore. But I mean, it still sounds like the OpEx targets are definitely on track. And is there still a belief that normalized growth is above the peer group? And is -- I mean, it may be not the right time to ask, but...

Yes, I think it's early for us. But I mean, if we're in a partial recovery in 2026 and we continue that trajectory into '27, I mean, I don't see any reason -- Frank said on the earnings call in November that we should and have an aspire to be at this 200 to 300 basis points above the market growth. If the market demand starts to take off dramatically in '27, I would still -- I think we could get into those mid- to high single-digit growth rates that we've had before and I mean one of the other things that I did want to mention is we have a history, whether it's in the '08, 2008 and 2009 period or whether it's post COVID and kind of coming out of these relatively weak market conditions, we've had a really good bounce, a return to organic revenue growth historically.

And I don't see any reason, especially when you look at the quality of the portfolio that we have built and developed over the last couple of years, I think it's really well positioned to take off if we get the market demand there.

And if I think about walking before running in a way, we've talked about what could demonstrate the beginning of a recovery at the top line. But everything you described suggests to me we should be very confident in your ability as you've talked about growing earnings double digits next year.

Yes. I think certainly, all the elements are there, right? And most of the elements we're controlling from a double-digit EPS growth perspective. And we've been talking about this kind of targeting the mid-teens category. And I think that, that's pretty achievable for us. And that's -- just to be clear, that's post MCP, post mandatory convertible preferred impact. So the dilution related to that is already factored into our EPS target.

Guidance for this year. And that's off of the full year.

That's I think it's impressive for us to be able to say that, but that is, in fact, the reality with the operating margin expansion and the other elements that we have a lower interest cost and even offsetting the preferred dividend structure, we think we're confident we're going to be able to get to that double-digit EPS growth in '26.

All right. This has been fantastic. I really appreciate you taking the time.

Of course. My pleasure. Great to be here. Thank you very much.

Good day, and welcome to the Bruker Corporation Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Joe Kostka, Director of Bruker Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Third Quarter 2025 Earnings Conference Call. My name is Joe Kostka, and I am the Director of Bruker Investor Relations. Joining me on today's call are our President and CEO, Frank Laukien; and our EVP and CFO, Gerald Herman.

In addition to the earnings release we issued earlier today, during today's conference call, we will be referencing a slide presentation that can be downloaded from the Events & Presentations section of Bruker's Investor Relations website.

During today's call, we will be highlighting non-GAAP financial information. 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.

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 make forward-looking statements regarding future events and the financial and operational performance of the company that involve risks and uncertainties including those related to acquisitions, geopolitical risks, tariffs, foreign currency, market demand or supply chains.

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-K for the period ending December 31, 2024, as updated by our other SEC filings, which are available on our website and on the SEC's website.

Also, please note that the following information is based on current business conditions and on our outlook as of today, November 3, 2025. 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 fourth quarter and full year 2025 financial results expected in February 2026.

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 for the third quarter of 2025 in more detail and share our updated full year 2025 financial outlook. Now I'd like to turn the call over to Bruker's CEO, Frank Laukien.

Thank you, Joe. Good morning, everyone, and thank you for joining us on today's third quarter 2025 earnings call. As forecasted, our third quarter revenues and earnings were down year-over-year, primarily due to weaker academic and research instruments demand in the first half of 2025. However, our Q3 '25 performance was quite a bit better than expected and represents a meaningful sequential step-up from our Q2 performance. In this third quarter, we were encouraged by our mid-single-digit percentage organic bookings growth. For the first time this year, we saw strength in bookings in the academic government market segment as well as improving biopharma and applied market orders.

Interestingly, in Q3 of '25, we saw the stark contrast of a double-digit percentage organic revenue decline in the ACA/GOV markets year-over-year compared to a double-digit percentage organic improvement in ACA/GOV bookings year-over-year. In fact, our ACA/GOV orders grew in the high teens percentage in Q3 '25 as very robust order growth outside of the United States more than offset a continued year-over-year softness in the U.S., a lot of moving pieces.

Anyway, notably, our innovative spatial biology, proteomics and multiomic solutions launched at AGBT, AACR and ASMS earlier this year are being very well received by our biopharma and academic customers and enhance our leadership in enabling tools for drug discovery and disease biology research in the post-genomic era. Biopharma & Applied also saw organic bookings growth in Q3 with Biopharma having the strongest organic order growth of all of our end markets, both in Q3 and year-to-date.

Organic scientific instrument orders in China increased by double-digit percentage in the third quarter year-over-year and we saw what may be green shoots of stimulus funding in China beginning to be dispersed. So this stronger Q3 '25 order performance drove our Scientific Instruments segment book-to-bill ratio to greater than 1.0x -- greater than 1.0 for the first time in several quarters.

While 1 quarter of improved orders is too early to call the trend, we are encouraged that our 2 divisions most directly tied to macroeconomic factors, which happens to be Bruker Optics and AXS also saw strong bookings in Q3 of '25, these 2 divisions often serve as a leading indicator within Bruker for changing macro market trends.

However, due to the late timing of Q3 orders and certain customer site delays, we are reducing our organic revenue growth expectations for the fourth quarter and our guidance for the full year. This also derisks our implied fourth quarter forecast to levels that we are very confident we can achieve. Finally, our major costs -- finally on this slide, our major cost savings initiatives announced last quarter are progressing very well towards the high end of our EUR 100 million to EUR 120 million cost down targets for 2026 and they are expected to deliver significant margin expansion and double-digit EPS growth in 2026.

All right. Turning to Slide 4 now. In Q3 '25, continued softness in ACA/GOV revenues led to year-over-year declines throughout the P&L. However, we noted sequential improvements in biopharma, microbiology and diagnostic revenues, which led to both top and bottom line coming in better than our expectations in early August.

Bruker's Q3 25 reported revenues decreased 0.5% to EUR 860.5 million, which included a currency tailwind of 2.9%. On an organic basis, revenues decreased 4.5%, which included a 5.4% organic decline in scientific instruments and 6.9% organic growth at best, net of intercompany eliminations, revenue growth from acquisitions added 1.1%.

Our third quarter 25% non-GAAP operating margin was 12.3%, a decrease of 260 bps year-over-year as lower revenue absorption, additional tariff costs and currency headwinds were only partially mitigated in Q3 by our earlier cost and pricing actions. Our third quarter '25 non-GAAP operating margin of 12.3% represented a meaningful sequential improvement over the 9.0% we reported in the second quarter.

Our third quarter diluted non-GAAP EPS was $0.45, down 25% from $0.60 in Q3 of '24, but up sequentially compared to the $0.32 we reported in the second quarter of '25. Gerald will obviously discuss the drivers for margin and EPS later in more detail. Moving to Slide 5. Our year-to-date Q3 revenue increased by 3.0% to EUR 2.5 billion Organic revenue declined 3.1% with a 2.9% organic decline in scientific instruments and a 5.5% organic decline at BEST, net of intercompany eliminations.

Our first 9 months 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5. So please turn to Slide 6 and 7, where we highlight the year-to-date third quarter performance of our 3 scientific instruments group and of our BEST segment, all on a constant currency and year-over-year basis. Year-to-date 2025 BioSpin Group CR revenue of $612 million was shown -- excuse me, was down mid-single digits percentage. BioSpin saw growth in lab automation and services, offset by a tough comparison with 2 gigahertz class NMR systems in Q3 '24 revenue versus none in Q3 of '25.

BioSpin saw weakness in ACA/GOV and biopharma revenues but improved order growth in both end markets in the third quarter of $25 million. Year-to-date 2025, CALID Group revenue of $879 million increased in the low double-digit percentage driven by microbiology and infection disease diagnostics, with strength in both the MALDI Biotyper and the Eltek Molecular Diagnostics franchises.

Life Science Mass spectrometry is seeing early traction for recently launched products, including the new Tim omni and the new Tims Metabo both from launched at ASMS while our molecular spectroscopy revenues remain stable but with strong applied markets orders in Q3 '25, as was mentioned earlier.

Right, turn to Slide 7 now, please. Year-to-date, 2025 Bruker Nano revenue of $775 million declined in the low single-digit percentage. Revenues from advanced x-ray and Nano Analysis tools were down year-over-year partially offset by growth in spatial biology. Strength in biopharma year-to-date revenues was offset by weakness in ACA/GOV and software industrial research and semi markets. Finally, year-to-date 2025, BEST revenues declined in the mid-single-digit percentage net of intercompany eliminations. The clinical MRI superconducting wire market improved in Q3 and is now flat year-to-date. While our BEST research instruments business has been weaker due to a very strong prior year comparison.

So moving on to Slide 8. You may have seen our press release that we had some recent NIH and NSF-funded orders for advanced NMR instruments. I won't go through all of them, but here are several very unique enabling and breakthrough tools listed on this page with the respective customers that are really very important for our fundamental scientific research and very much so also for drug discovery and disease biology research. The aggregate value of these orders was disclosed previously, it's about $10 million, it's expected, they're all expected to be installed and in revenue next year, not in Q4, and maybe the bigger message here is in that last bullet on Slide 8, that our scientific instrument ACA/GOV orders, as I mentioned earlier, we were pleased we are all up mid-teens percentage organically year-over-year in Q3, and this was despite lingering U.S. weakness. There's been some improvements in the U.S., but primarily there are significant improvements outside of the U.S., Europe, Japan and in China.

Right. Another press release, if you go to Slide 9, that we stressed it recently, there are some new, if you like, applied markets. This is not food testing. This is security and defense and homeland security. And in this case, we have a very, very nice product line that's sort of growing rapidly, 30% year-over-year, and we were highlighting some recent orders from explosive trace detectors that you will find at a lot of European airports and increasing number of those, but also in South Korea and the Middle East. They have particularly performance and usability advantages. This, by the way, isn't just an instrument sale. This is then 5 or 7 years of consumables and service sales. So it's a nice steady business, and we have been gaining market share and are pleased with those orders, and because of tensions and rearming in Europe, we also got some significant defense detection orders from a Central European Ministry of Defense. This was not for Ukraine, but others are worried as well. And obviously, there is a smaller part of Bruker that, if you like, as part of applied markets, that's growing very nicely. We thought we'd highlight that for you because, obviously, ACA/GOV was weaker this year. So to wrap up, our third quarter P&L was still impacted by the various headwinds we've seen across the industry earlier this year. However, the results came in ahead of our expectations. Our improved bookings in Q3 '25 and scientific instruments book-to-bill ratio above 1.0 make us optimistic that we may be past the trough in demand.

We look to build on this performance in Q4, and we are increasingly confident in a fiscal year '26 partial recovery. We expect significant improvements in our organic revenue performance compared to our meaningful decline, organic decline in '25. Importantly, we are taking up to EUR 120 million in cost out of our business in fiscal year '26 in order to drive significant margin expansion and strong double-digit EPS growth.

So in perspective, our transformed Project Accelerate 2.0 portfolio is fundamentally very strong. In post-genomic drug discovery and disease biology research, leveraging both proteomics and multiomics as well as spatial biology. In innovative diagnostic solutions for microbiology, molecular diagnostics and now also therapeutic drug monitoring, and finally, emerging -- really an emerging $100 million area for us is now the fast growth area of automated, digitized or digital labs ready for AI or perhaps even driven by AI, the automated AI labs, if you like. These are 4 major profitable growth opportunities and they are complemented by our healthy diversification in industrial research, to market semiconductor metrology and as you've seen, so applied and security markets.

Combining this outstanding portfolio with operational excellence and strong execution, I am confident that by 2027, we can outgrow our markets again by 200 to 300 bps per year on average, and continue our rapid margin expansion and double-digit EPS growth after overcoming the multiple ACA/GOV demand, new tariffs and strong currency headwinds in 2025 with a partial recovery in 2026. So with all of that, let me turn the call over now to our CFO, Gerald Herman, who will review things in more detail. Gerald?

Thank you, Frank, and thank you, everyone, for joining us today. I'm pleased to provide more detail on Bruker's third quarter and year-to-date 2025 financial performance, starting on Slide 11. In the third quarter of 2025, our results came in above our expectations on both the top and bottom lines. In the third quarter of '25, Bruker's reported revenue decreased 0.5% to $860.5 million, which reflects an organic revenue decrease of 4.5% year-over-year. Acquisitions contributed 1.1% to our top line, while foreign exchange was a 2.9% tailwind. Geographically and on a year-over-year organic basis, in the third quarter of 2015, our Americas revenue declined in the low single-digit percentage. European revenue was roughly flat while Asia Pacific revenue declined in the mid-single-digit percentage, including flat performance in China.

For our EMEA region, revenue declined by over 20%. Scientific Instruments organic revenue segment declined 5.4% in the third quarter of '25 as mid-single-digit organic growth in CALID was more than offset by a double-digit organic decline in BioSpin and a high single-digit organic decline in Burker Nano. BSI Systems revenue declined roughly 10% and while BSI aftermarket revenue increased mid-single-digit percentage organically year-over-year.

As Frank mentioned earlier, our order bookings performance in the BSI segment was up organically in the mid-single-digit percentage year-over-year, and our BSI book-to-bill ratio for the third quarter was above 1.0. Non-GAAP gross margin decreased 110 basis points to 50.1%. Q3 2025 non-GAAP operating margin was 12.3% impacted by tariffs, foreign exchange and the headwind from the prior year comparison of 2 gigahertz class NMRs in our third quarter '24 revenue. On a non-GAAP basis, Q3 '25 diluted EPS was $0.45, down 25% from the $0.60 we posted in the third quarter '24 but improved sequentially and well ahead of our expectations.

Our EPS in the third quarter of '25 includes a $0.01 dilution from the mandatory convertible preferred offering we completed in September and benefited from a lower non-GAAP effective tax rate of 24.4%. On a GAAP basis, we reported diluted loss per share of $0.41 reflecting noncash goodwill and intangibles impairment charges of $119.4 million and restructuring charges in the third quarter of $34.5 million.

Non-GAAP weighted average diluted shares outstanding in the third quarter of 2025 were $152 million, flat compared to the third quarter of 2024. Slide 12 shows Bruker's performance on a year-to-date basis for 2025, which has similar drivers to those in the third quarter.

Turning now to Slide 13. In the first 9 months of 2025, we had operating cash outflow of $95.7 million driven by lower profitability, timing of tax and key vendor payments and restructuring expenses. We expect to see improved cash flow in the fourth quarter, our largest and most profitable quarter of the year and always our strongest cash flow quarter.

Turning now to Slide 15. We are updating our full year 2025 forecast and outlook to reflect Q3 results, order timing and the impact of our September mandatory convertible preferred offering. Our outlook for the full year of 2025 now assumes revenue in the range of $3.41 billion to $3.44 billion, reflecting an organic revenue decline of 4% to 5%.

Late order bookings in the third quarter as well as certain customer site readiness issues are expected to push a portion of revenue we previously expected in the fourth quarter and into fiscal year 2026. Full year '25 revenue growth contribution from acquisitions is expected to be approximately 3.5%, and we expect a foreign currency tailwind of about 2.5%. This leads to updated reported revenue growth guidance of 1% to 2%.

For operating margins in 2025, we now expect approximately 250 basis point decline in operating margins year-over-year. This consists of headwinds of 60 basis points from M&A, 60 basis points from tariffs, 65 basis points from foreign exchange as well as a 65 basis point decline in organic operating margin. On the bottom line, our updated full year 2025 guide now reflects non-GAAP EPS in a range of $1.85 to $1.90. This includes a $0.07 dilution from our mandatory convertible preferred offering we completed in September.

For your modeling, we expect the MCP offering to have a roughly $0.20 dilutive impact on our fiscal year 2026 EPS. Despite this dilution, we continue to expect double-digit non-GAAP EPS growth in fiscal year '26 due to the significant cost savings initiatives we're implementing this year. Other guidance assumptions are listed on the slide.

Our full year 2025 ranges have been updated for foreign currency rates as of September 30, 2025. With respect to the fourth quarter of '25 we still expect relatively soft organic revenue performance with a mid- to high single-digit percentage decline year-over-year due to lingering effects of weaker orders earlier in the year. We expect non-GAAP EPS for the fourth quarter to show significant sequential improvement, but still be down meaningfully year-over-year, as implied by our guidance.

To wrap up, first half 2025 market headwinds adversely impacted our financial performance in the full year 2025. However, we're encouraged by our solid order performance in the third quarter '25 and expect to drive improved P&L performance in full year '26 and beyond. With our cost savings plans well on track, we're fully committed to significant margin expansion and double-digit EPS growth in fiscal year '26. With that, I'd like to turn the call back over to Joe. Thanks very much.

Thanks, Gerald. We will now begin the Q&A portion of the call. [Operator Instructions] Operator? .

[Operator Instructions]

Our first question comes from Puneet Souda with Leerink Partners. .

First one on the book-to-bill. Good to see more than 1 and congrats on the quarter just given the order momentum you're seeing here. But just wondering how has that trended in the fourth quarter? Are you continuing to see the mid-teens organic order growth here? And maybe could you elaborate a bit just a number of moving parts here. How is the international momentum continued? Is it more ACA/GOV versus pharma and maybe tell us a bit more on the academic side of the U.S., are you starting to see some recovery there given the points you mentioned, DMP and a couple of other points you mentioned in the slide. .

Yes. Thank you very much, Puneet. So we really don't have Q4 data yet. It's too early. So I just can't comment on Q4. There's no meaningful data available yet. Moving parts, ACA/GOV, the strength in ACA/GOV orders was primarily outside of the United States. But the United States were less week, right, less soft. Is that a word? anyway. So Q3 was better in the United States for ACA/GOV orders than Q2, and we saw some orders come through.

I gave you some NMR examples. But of course, it was more -- it was broader than that. It also included TIMsoft and microscopes and other stuff. There hard to say what's the trend in the U.S. because they're clearly in the U.S., there was a little bit of catch-up in Q3 compared to Q2 and maybe even Q1 in ACA/GOV orders in Europe and Japan and a little bit in China also. That's why there might be green shoots were quite encouraging, and that's why our ACA/GOV orders year-over-year, we're up considerably in Q3.

Don't think that we're now in a high teens growth trend all of a sudden. That's just a quarter and Q3 '24 was not the strongest. But anyway, it was very encouraging, and we hope that will continue in Q4. But I wouldn't -- and yes, the activity and opportunities are great and are encouraging, but I wouldn't read anything into that yet, just too early to comment on Q4.

We do need Q4 to then give more meaningful growth and margin numbers for 2026. We're not going to do that today. We're not able to do that today until we really see how Q4 comes in, particularly the orders, obviously. To the other moving pieces, Puneet. Yes, biopharma has been reasonable in or case not great, but okay in the first half of the year, much better in the third half of the year in terms of orders, a particular strength there in the U.S. but also outside of the U.S. biopharma, particularly in the U.S.

And the applied market strength, which is a good sign of macroeconomic trends, that was pretty -- that had a pretty broad international distribution. I don't know that I would just highlight any geography there. So that may add some color to the admittedly multiple moving pieces and the effect of Bruker that prior order weakness now shows up in the P&L, whereas the new order improvements and encouragement and maybe this momentum if Q4 goes well, it's more likely to show -- will show up all in 2026. I hope that helps.

Got it. That's very helpful. And anything on the ultra-high frequency gigahertz NMRs. How are you thinking about those? Obviously, the tougher comp in the third quarter, but as you go into '26. How is the momentum there? I know we've been waiting for U.S. to acquire more of those instruments. .

Yes, the U.S. is the enigma there, but obviously, there's also other geographies. And I still can't call the U.S. trends. Obviously, nothing has come through so far. So we'll see. We're expecting at least one order for the gigahertz class in Q4, not in the U.S. And there's a number of cases brewing around the world and including in the U.S. But today, it's too early to do that. So when we gave guidance for '26 presumably in early February '26 we can also comment on what has come in or where we have clear line of sight for ultra-high field or for the gigahertz class. So yes, nothing in revenue in Q3.

We expect hopefully, one order in Q4, sometimes these things get delayed by a quarter. Anyway, it's just not such a big part of our business anymore. I know they're easier to count. And indeed, in Q3, a lot of our organic decline had to do with these 2 gigahertz class systems in Q3 '24 revenue which accounted for more than EUR 25 million of our revenue and comes with nice operating profits and margins. So it did have an effect on Q3 and anyway, that's the color I can give you more to come when we give guidance in early February.

And the next question comes from Michael Ryskin with Bank of America.

This is Vanco on for Mike. Could you give us the impact of the government shutdown that you're seeing in 4Q? And is that baked into the updated outlook?

Well, that's a good question, and it's not formally baked into our outlook. So far, we have assumed that the effect will be relatively minor. But indeed, if this were to continue for a full second month or so, then this may delay some new brands, some orders. It could also delay some installations. So far, we haven't become aware of anything that gets -- we think that our Q4 guidance is now appropriately conservative to absorb some of that and maybe what we've seen so far, but no, if there was a further multi-week or multi-month shutdown, that could have additional impacts that are not presently in our guidance. .

Understood. And then I know that you're not formally guiding on 2026 today, but you called out a meaningful improvement versus the minus 4% to 5% organic in '25. Can -- is it fair to assume that you can grow revenue within 2026? Or are we looking at flat year-over-year? .

We're not making that assumption yet. It's a fair question, of course. We really do want to see our Q4 '25 bookings in order then to give, hopefully, reliable guidance in February of '26 -- so yes, I mean this year, '25, we're coming down organically quite a bit, right? We undoubtedly can do much better than that next year, but we're not presently -- I don't want to state any assumptions because then you will take them as guidance and they're not, but we just want to make sure that with the significant cost cutting that we're doing even without growth, which isn't our assumption. But even without growth, we can expand our operating profit margins very significantly, so now 250 to 300 bps or something like that. .

And yes, we expect -- we continue to expect double-digit EPS growth even after absorbing the roughly $0.20 dilution that Gerald mentioned during his prepared remarks, for the additional dilution from the mandatory convert that we did in September. So we still expect to do double-digit non-GAAP EPS growth next year. And that's without -- that's simply for mathematically that simply we're not -- this is without growth.

Without growth, is not our preliminary guidance, period, but that's what we're looking at right now. We can have preliminary guidance for us right now on growth does not make sense until we've seen our Q4 orders for Bruker that's going to be very important for next year.

And the next question comes from Tycho Peterson with Jefferies.

Rick, I want to pick up on that margin point. So it sounds like you are committing to the 300 basis points of margin expansion even if the top line is flat. I guess given that you're running at the high end of the $100 million to $120 million cost savings target in the near term, should we interpret the upper end of savings is simply kind of increasing confidence in hitting that margin target next year? Or could you think you could potentially do better?

Okay. So nice question, Tycho. I wasn't confirming a number. I know you've mentioned one. I'm not saying take that number out of your model, but I'm not confirming it either. We are -- I think the second part of your question, I think it's fair to say we hope to have increased confidence in getting to very significant margin expansion and double-digit EPS growth all in, including the NCP and that's exactly why we're driving towards the high end of our cost-cutting target. So you're spot on with that one. .

Okay. And then just probing a little bit on your assumptions. We're not talking numbers for 2016, but just ANG, the outlook there, assuming flattish NIH budget, I mean, just talk a little bit about some of the gives and takes around multiyear grants I assume you're not expecting any budget plus here in the near term. But then as we think about next year, do you think ANG orders will grow? And then can you flesh out your comments on China stimulus? How material was that? And how do you think about that for next year? .

Yes, they're all very important questions, right? So there was a little bit of a budget flush for the fiscal year '25 and orders -- sorry, and funding coming out of NIH, you all report that very well, did improve in the third quarter and particularly in September, I'm aware of a cancer center that has fantastic NIH funding and cash coming in the door, to where they even were flat or higher than the previous year. So there was a mini budget largely went into a lot of multiyear grants. It went into things that they could fund readily. It went into a few instruments, too. We sold some NMRs and some Timo and some other stuff. It wasn't very strong yet, which is why the strength in academic bookings in for us in Q3 came from outside the U.S., but the U.S. did improve a little bit sequentially.

It just wasn't a growth driver yet year-over-year. So that was that. NIH budget for '26 and NSF budget while we're at it, we are not necessarily assuming that it's flat. We'd be delighted that it's flat. And if we have to take 10% or 15% down, I think that will not -- that will work for us, too. I just want to be -- it's hard to predict these things, these days. So we're not necessarily baking in an NIH budget flat. Again, delighted if it happens, but we can also work with it being down 10% or 15%.

As you know, it's been actually more important whether the stuff actually gets dispersed regularly or gets held up for the majority of the year, but we are, along with Q4 bookings, we're also looking forward to clarity on NIH and NSF and DOE budgets for research for fiscal year '26. Hopefully, that all comes in, in calendar Q4 to give us more visibility. China, yes, some green shoots, yes. So there were less than $10 million in -- clearly well in orders anyway, but in clearly a seemingly stimulus related orders where customers said, yes, this is a stimulus money being released. So less than $10 million, not -- and again, I think that's a green shoot, and we'll need to again see how that continues in Q4.

But I think in Q2, there was none of that. So it's a little bit better, right? China contributed, but Japan and quite honestly, Europe were really strong in ACA/GOV in Q3. So that's the color around the world. Yes.

Okay. And then lastly, you just mentioned an order push out. Can you quantify how large that was the one you mentioned in your prepared comments?

Yes, there's a few sites that have -- that won't deliver in Q1 rather than in Q4. So that also added to some of the more conservative guidance that we now have for the full year, but really implied for Q4 because that's all that's left.

And I think I mentioned it is true that, I mean it's always true that we get more than half of the orders in the quarter and the third month of every quarter. But yes, a lot of the orders and in the order improvement really became clear in September. So if all of these orders had come in, in July, maybe some of them would have made it into Q4. But now they're -- I mean there's some small stuff will go into Q4 and all this does, but most of the larger orders go into next year, most of the larger orders that came in, in September will be revenue in next year, I should be precise. .

The next question comes from Luke Sergott with Barclays.

I just want to talk on China. I know you're coming in flat here, things kind of improved sequentially. Just talk about what you're seeing there more broadly, pull forward. You talked a little bit about the stimulus, the key questions. But how are you guys thinking about 4Q in the extra and ultimately, are we kind of seeing some type of stabilization here? Or is this just kind of like a one-off?

Well, good questions. I wouldn't read too much into -- starting backwards, Luke, I wouldn't read too much into the Q4 '25 exit rate. That's just Q3 and Q4 are relatively weak on the P&L is pretty much the result of weak orders. And yes, and some current new currency and tariff challenges early in the year, we can work our way through those and offset them and more than offset them by next year, but only partially this year. So I would hesitate to take any given quarter this year as modeling something for next year. .

On China, yes, China was a little bit better, right, sequentially, not only in academics, not only some of the less than $10 million. I think it was closer to $6 million or something like that in stimulus green shoots. China felt a little better in Q3, perhaps all around than in Q2 when they were probably staring down a trade war barrel and maybe now or maybe now this that seems to have even before the meeting that just happened recently that maybe the whole world is getting a little bit more optimistic that, well, we know the new tariffs set up and there are not likely to be major trade wars, but hard to say, right? So China was a little better in Q3 than in Q2.

All right. And then turning to the spatial and the demand that you guys are seeing there, can you talk a little bit about the cadence for the instruments versus the consumables? And then the push here and ability to use your existing scale as this kind of hits the core to push further with academic government customers or deeper into pharma.

Yes, good question. Yes, spatial biology was right, slightly better orders are somewhat better orders in Q3, including international, I believe, as well. That's both consumables and instruments. Remember, some of the new workflows like the whole transcriptome on the Cosmic, of course, also will run on existing systems. They may need some upgrades, but you don't always need a new system for that. But I think there was also strength in COSMIC and self scape orders. Vanscape is still very new. So a lot of that is sort of -- will take a little while and have a number of labs that are going to have placements of the pain scape, do this new spatial genomics and look at dysfunctioning cancer and infectious disease before that turns to the papers before that turns into revenue, that's super interesting, but it's not going to be a big contributor yet, whereas COSMIC and Cellscape are doing well, also including some of the consumables. So yes, spatial biologies is doing better.

Of course, we could use more U.S. academic funding. It was quite dependent, well, 2/3 of that is academic government and 1/3 is biopharma and so that strengthening in biopharma also is good for spatial biology. And as you know that so far in the U.S. that's stronger than the ACA/GOV growth.

And the next comes from Subu Nambi with Guggenheim.

Some of the niche end markets in 2026 like diagnostics and maybe semis, what do those look like next year? Can low double-digit grower in your mind?

Yes. I mean diagnostics is very important for us, right? It's well above $500 million. They both are -- they've done well in '25, both in clinical microbiology and the molecule diagnostics that are both in that infectious disease division. MALDI Biotyper, good growth, very good growth in consumables and software and so on. Now in that business, I think it's 60% aftermarket, which is service, consumables, but also database subscriptions. .

So very healthy there. The diagnostics business, the Altek business primarily is a delight this year. It's growing nicely. It's expanding. It's this year, '25. So it's growing its margins. It's growing, which is nice this year. Yes, I don't know the exact growth rate is growing somewhere in the single digits or maybe even high single digits, which is Levies lovely. Its placements have really outperformed significantly. I know you can't take placements to the bank, but next year, you will be. So they had a lot of placements of their InGenius and Begenous stations, commercial synergies with Bruker are really working, and they're getting into countries and into labs, they previously couldn't get.

So I think their placements are something like 20% or more ahead of their business plan, which isn't revenue this year and when these things systems are placement on the reagent rentals, then it takes 6 months until you really have the revenue ramp, but hopefully, then you have 5 to 7 years of really solid revenue and consumables pull-through. So that's going really well.

Semi is -- you have to look at it on an annual basis. I think we had -- this year, we'll have 2 quarters of fantastic orders and 2 quarters of not so fantastic orders. Over the year, is right. I think it's flattish this year. I don't think there's anything structural there. And revenue wise, it's been a little weaker, and we expect that to improve next year. So semi really has to look at it on an annual level, and it's a very nice margin contributor.

Semi now all is approaching or is around $300 million in annual revenue. So it's also pretty meaningful for us and has very -- along with the diagnostics business has some of the best incremental margins. So those are very core to us. These are not niches for us even though we love the post-genomic era. Both of those are just really important core businesses.

Just a follow-up. Can you unpack where you saw orders incrementally positive from a product perspective? Is it the lower priced equipment -- and then how have consumables being impacted? Any color you could share there?

So it's prime for diagnostics, for molecular diagnostics and the tech. Remember, they're primarily active in Europe in selected countries in Asia, like not in China, for instance, in parts of Africa, parts of Latin America and the strength there has been particularly in Europe. The placement strength that I mentioned.

[indiscernible] business.

Can you repeat the question? What was, I thought you were referring to diagnostics, but as the diagnostics?

Yes, sorry, backing up. in general, the order strength that you saw this quarter, where did you see the strength coming from a product perspective in either diagnostics or outside of diagnostics?

I think,-- it's Gerald . I'd say the orders strength in the third quarter was coming from larger ASP-based instruments. We did have some volume, particularly coming out of our optics in AXS businesses, which tend to have lower ASPs, but I'd say the bulk of the performance in the orders was particularly coming out of the European markets as well, just to clarify that. We saw considerable strength in the European markets, both in the side particularly. .

So I think I can answer it now so I took me a second. The strength in orders in Q3 of '25 had very little to do with diagnostics, is just coming along and it's fine, but the more discrete items were strength in ACA/GOV, outside of the U.S., biopharma and applied. .

That's right. .

And so that does none of those include diagnostics. .

And the next question comes from Casey Woodring with JPMorgan. .

On orders, historically, orders improved sequentially in 4Q in your business, but you've talked here today about some catch-up in academic and government in 3Q. So can you just maybe walk through what the range of outcomes looks like in 4Q from an order exit rate perspective? How safe is it to assume order step up sequentially? Or are there scenarios where in orders could be flat down in 4Q? Then I have a follow-up. .

Case. Okay. So the -- in ACA/GOV, where we observed a little bit of catch-up was in the U.S. I don't think that there wasn't any hold back -- well, actually in the U.S. and in China a little bit. In rest of the world, I think that catch up. I'm not aware of that. But China and the U.S. on ACA/GOV holding back, and that's why Q2 orders, for instance, in both of those geographies were weak. .

So to your second part of your question, Q4 is always strong. So there's -- the question for Q4 will not be -- will it be up sequentially over Q3 and -- that's pretty much a given. But whether -- what the trend will be year-over-year compared to Q4 of last year. .

Got it. That helps. And then. Yes. No, that definitely helps. And then my second one, just quickly on backlog. I think last quarter, you noted you had 6.5 months, and you talked about that going down to 5 months in a normalized environment. Maybe just walk through kind of how you're seeing that play out over the course of '26. .

Well, what I can -- this is Gerald. What I can comment on is that we currently have about 7 months of backlog through the third quarter of 2025, which is actually up now from the 6.5 months we quoted at the end of the second quarter.

I mean, I guess, to a large extent, it really depends on our '26 performance is really going to depend on how we -- now it looks like for the fourth quarter in terms of revenue performance, based on our guide, it looks like we will still carry considerable backlog into the 2026 period.

And the next question comes from Brandon Couillard with Wells Fargo. .

Just a couple of housekeeping items. Can you give us an updated interest expense number for the year. What's the run rate for the fourth quarter? Is that a good figure to assume for '26? And is the impact of the share count from the MCP offering about 13 million shares. .

Yes. I'll answer your last question first, the answer is yes, roughly. And then on the first part, we'll go through, Brandon, a little more modeling on the interest because it gets a little complicated partly because we -- you may know we had some gains, some foreign exchange gains that get covered in that line as well. So somewhere in that range, the quoting on interest is correct, but we'll talk more about that in our modeling discussions. .

And the next question comes from Josh Waldman with Cleveland Research. .

First, I wondered if you could talk a bit more about what you're seeing in Europe. Was it primarily ACA/GOV accounts that improved there? Or did you also see pharma and applied accounts improve as well? And then I guess, at this point, what's your confidence level on the sustainability and strong orders? I mean were there any one-off funding programs or anything like that released in the third quarter that leave you, I guess, nervous about the durability of stronger orders there?

Yes. I guess I'd say, generally speaking, Europe was stronger. We did see strength in both ACA/GOV as well as applied and biopharma. So those are good signs, and I don't think there were specific one-offs related to those trends. So I think we're more confident, but I would say we need to see -- as Frank has repeated a couple of times here, we need to see the fourth quarter order performance in order to confirm that specifically. But all of those markets, in particular, on the ACA/GOV side, European, we're not being driven by one-off improvements or orders. .

Got it. Okay. And then a follow-up. I wondered if you could provide more color on what you're seeing out of pharma. I mean it sounds like you saw a sequential improvement in bookings. I forget if you commented what orders look like year-over-year. And does it seem like accounts are trying to push orders through by year-end? Or does this seem like maybe a change in how they're viewing medium-term investment in research tools? .

Good questions. Josh, this is Frank. I'm not aware of any particular drives to get orders in place in before the end of the calendar year. So I would take this as biopharma having invested less now for -- there was kind of a COVID or post immediate COVID. Well, when there was a hangover, right, this was -- and then some concerns about most favorite nations pricing and how much CapEx did they need to move things in production to the U.S. and many of them have now committed to do that over -- it doesn't happen overnight. .

So maybe that has cleared the decks a little bit to where they are investing in tools that will make drug discovery more efficient and give them better insights and those tools, that's exactly what we provide you yes, you need sequencers, but you need a hell of a lot more than that to really have deeper disease biology and then drug target drug mechanism of action insight.

So that hopefully, the still very poor yield an enormous expense and length of bringing a successful drug to market will improve, and that requires -- they are the biggest integrated fans of this hypothesis or thesis or facts, I would say that we are in the post-genomic era, we need to understand the disease biology and the drug mechanism is a lot better to get better, to get less attrition and when more yield and better drug discovery. So they completely agree with that. They may not use the same terminology, but that's how they're investing. .

Yes. And I would just add that the third quarter performance on revenue was good, okay. And the order performance from biopharma across the globe was strong in the third quarter from an order perspective. .

And the next question comes from Doug Schenkel with Wolf Research.

How do we balance what you've talked about in terms of on the cost savings initiatives? And like you sound as good as ever on those. You've exhibited some confidence about what you can do in 2026 from a margin expansion standpoint, seemingly in any growth environment? I mean at 1 point, I think last quarter, you talked about getting 300 basis points of margin expansion next year, even in a flat growth environment.

On the other hand, I think you increased your assumption for organic operating margin headwinds by 45 basis points for the year, which is pretty material with 1 quarter to go. So I'm just trying to figure out like how do we balance these things? And is there some risk that the benefits that you expect to occur over time are going to take a little bit longer to show up in the P&L just because of maybe the environment we're in and the fact that I think a lot of these changes that you're making are being done outside the U.S. where regulations can work against you. Again, I'm just trying to think about this as we try to set you guys up to succeed with realistic targets for 2026.

Yes. Sure. Nice to hear from you, Doug. So here's what I'd say. First, our cost-saving initiatives will be, and we expect them to be at the high end of the range we quoted this $100 million to $120 million, fourth fiscal year 2026. And we're fully committed to that. And actually, we're well on track with that 95% of the actions that needed to be taken to realize that are already underway or have been fully implemented. So very confident with respect to that. And I think more generally, our expectation around margin expansion of closer to 300 is where we are, even under a relatively weaker revenue conditions for '26. That's the position we've taken, and I think we're holding to that.

I think the issue for us, as you already know, I think, Doug, is some of these activities around cost savings do take a bit of time just because we have to go through a process, particularly in Europe and a lot of our cost saving actions are driven around Europe because of our footprint. So there's going to be a likely delay in some of this as we're going to see more of it hitting in the second quarter of 2026 as opposed to in the first, so that doesn't take us off the target .

And let me also -- I mean -- so we did get -- Europe, there are other economic problems and layoffs by other companies. So we got very good cooperation, for instance, in Germany and France, which can be difficult from our workers' councils and committee Enterprise, they've agreed, they've approved that what we're doing is reasonable and protects the core and all of that.

So a good cooperation. When Gerald said that Q1 will have -- so the $120 million for the year, we're very committed to that. And Q1 will have, I don't know, 90% or 95% of the run rate cost savings implemented, a few things, just the way they're timed will come in, in Q2, but it's not going to be a big modeling difference, Doug, or anybody else. But yes, that's how it flows and the $120 million is not some sort of a Q4 run rate. That's for the full year .

And just to your earlier part of your question, I mean, we did have -- with respect to the fourth quarter of '25, we do have some mix challenges in the fourth quarter for '25 that we didn't see in the previous year as well. So I think you're going to see some -- you did see a change in the overall guide from an organic operating margin impact with respect to the fourth quarter. So that's the explanation for that, Doug. .

This concludes our question-and-answer session. I would like to turn the conference back over to Joe Kostka, for any closing remarks. .

Thank you for joining us today. Bruker's leadership team looks forward to meeting with you in an event or speaking with you directly during the fourth quarter. Feel free to reach out to me to arrange any follow-up. Have a good day. .

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