Bruker Corporation (BRKR) Earnings Call Transcript & Summary

Well, welcome, everybody, and thank you for joining us today on Bruker's May 17, 2024 Investor Webinar. We have an exciting agenda for everyone here today. And really, without further ado, I'll send it over to Bruker's CEO. Frank Laukien.

All right. Thank you. I'd like to draw your attention to our forward-looking statements, please. If you could go to the next slide. Point to the agenda and we'll start with the agenda. Okay, I'll start with the agenda. All right. Yes. Thank you very much. I'm joined by several colleagues here today, obviously, during this investor webinar so soon after our May 2 earnings call is triggered by the number of exciting acquisitions that we have done lately. And we had committed to you that we would have and hold an investor event shortly after the closing of the NanoString acquisition and here we are today. So you'll meet the leaders of Chemspeed of the new -- of ELITech. And of course, you all know Mark Munch, who acquired NanoString and is running the Bruker Spatial Biology business as well as the NanoString Group. Of course, we will give you an updated financial outlook -- medium-term financial outlook for 2027. It's an additional year. We'll comment, of course, on guidance and on other items. So I'll kick things off with an overview and update on our strategy and opportunities. And if you could go briefly to the forward-looking statements, I'd like to draw your attention to that. And I think you're familiar with that. And so any expectations are, of course, as of today and should not be relied on at subsequent states. So let me start my kickoff presentation here. For those of you who have not met me before, I'm Frank Laukien, I'm the President and CEO of the company. I'd like to give you an update of the acquisitions and some of the other acquisitions we've done and then really also focus on our further evolution of our strategy as an emerging leader of the post-genomic era. Next slide, please. So again, this is more for those of you who might be some new investors or potential investors who are doing work on Bruker. This is Bruker Corporation at a glance, sort of as of 2023 at nearly $3 billion in revenue. very significant R&D investment because of the sizable opportunities we have in our portfolio transformation, in our Project Accelerate initiatives and particularly in proteomics and spatial biology. We are a leading provider of high-value life science tools and solutions as well as of diagnostic solutions. In many of the areas where we are or have been active, we tend to have #1 or #2 market positions we're very often the innovation and performance and perhaps technology leader. We really have deep expertise not only in physics, engineering, chemistry, our roots, but we've become very much a biology company with a particular focus on this post-genomic biology and its implications of many areas of disease biology, and I will explain that later. We have transformed ourselves into a fast growth company with fast organic growth, continued rapid innovation and profound innovation and another one of the perhaps differentiating features of our disciplined entrepreneurial model is that we are also aiming for high return on invested capital. We think that's a sign of health of a company and of course, that your capital is deployed well. We have -- we're proud to report. We're coming out of 3 years of consecutive double-digit organic revenue growth, including over 14% organic revenue growth last year in '23 which we think was industry leading, at least for larger peer companies. And even this year, obviously under more -- under tougher markets, we continue to forecast and Gerald will speak to that organic growth of 5% to 7%, which is well above the typical market. I won't really go through our markets, but 90% of our revenues are in our scientific instruments and solutions markets, so-called BSI. We are very much plugged into academic and government and academic medical school research. We think that's one of the big innovation and growth drivers of our ecosystem, but we're also all the way in biopharma, applied microbiology. We have a significant exposure to rapidly growing AI markets via our -- the green semiconductor metrology and our industrial, which is primarily industrial research area also has a very nice exposure, to very good secular trends in Green Tech. We're not going to talk about those elements very much today, but we have repositioned our company for strong secular growth trends for very healthy markets, and we have also diversified our market risks by not having a concentration. Project Accelerate, which in its initial form, started in 2017 over recent years has become tremendously successful, accelerating our growth, accelerating margin expansion. Today, it is already over 50% of our revenue. And then in recent years, we've also achieved pretty nice geographical balance with about 1/3 of our revenues coming out of the 3 major geographies of the world that you can see here. Next slide, please. Right. So our dual strategy has been the same, essentially, at least for the last 7 years, and I'm very happy to report, it's really working. We have transformed our portfolio. We have continuously expanded our margins organically. We have accelerated our growth. And we are now very much exposed to some of the very large TAMs that we wanted to grow in or expand into in proteomics and other multiomics types. But also now, especially within NanoString acquisition very much in a significant way in spatial biology. Spatial context is very important in the post-genomic era. Both areas are in a way, central to the post-genomic era along with interaction and structural biology. And I'll talk about that later. With that, I think we have among the most -- the strongest or perhaps the strongest secular market tailwinds from the post-genomic era that I expect in the next 20 years. And so the company is now really, really well positioned. If you look at that Hexagon, the yellow part, the spatial biology and single-cell biology, that has been -- we have been involved there, but it was partially aspirational and with the PhenomeX acquisition in the Q4 and now the NanoString acquisition that marked in Q2, that has now become not only aspirational, but really a major part of our strategy. Again, I'll come back to that as well as to molecular diagnostics. Our Bruker management process is really very good at integrating acquisitions. We have many successful acquisitions, the acquisition workload that some of you have asked us about. It's nicely distributed over our different divisions and different groups. And we're just very, very pleased that at this point in time, with disciplined valuations, we've been able to do such very strategic acquisitions, some of them filling gaps, some of them getting us into adjacent markets. All of them repositioning our portfolio for fast growth and more margin potential. With that, again, if you could go to the next slide. As I mentioned earlier, while there are larger companies out there, we, in our markets and in our fields very often are not only the technology, but often the market leader or a market leader, very often in all of the fields that you're seeing here, we are either the #1 or perhaps the #2 company in our space. Certainly more than with the right to exist, but also with very good pricing power and margin potential. And it's quite diverse. Of course, it is proteomic spatial biology. It's magnetic resonance, NMR, a lot of that goes into structural biology, also metabolism research but also feels like atomic force microscopy optical IR, Near IR, Raman spectroscopy and microscopy x-ray diffraction probably feels that many of you are not that familiar with. We have a very healthy core. Our core, which we're strengthening is as competitive as any. It has set very good growth rates last year as well. It is certainly very different from the legacy course that some other companies then have. So we have exciting Project Accelerate initiative and a very healthy core that we advance in terms of margins, in terms of market potential, in terms of market share via our operational excellence initiatives. And yes, we do actually have opportunities in cleantech and in AI that are unusual for a pure life science company, but our technology portfolio has also very nicely been deployed to some of these other interesting growth markets. Next slide, please. Right. Here is the proof in the pudding. What have we done for you so far? We've certainly been delivering very good organic revenue CAGR from '18 to '23 with COVID somewhere a slight dip in the middle. And then as I said, 3 years of double-digit organic growth. The overall CAGR over that period for revenue was 8%. That's the organic CAGR. We have accelerated our EPS CAGR in recent years over the same time period to 13%. And as you will see, as a result of the acquisitions we're doing right now and the faster organic growth will even further accelerate our EPS CAGR, but that's forward-looking, and Gerald will explain that. And last but not least, we think it's important. We've all done it with excellent ROIC. That is important to us. Now I'll give you a little bit of a teaser of what Gerald will talk about when he gives the 2027 forecast. We are on our path to -- we expect to exceed revenue of $4 billion and non-GAAP EPS of $4 by fiscal year 2027. But of course, that's really the wrap-up by Gerald, who will then give you greater details. So our dual strategy has been delivering and we expect it to continue to deliver. Next slide, please. Right. This is what I mentioned earlier. Our M&A out there has been quite a bit of it recently is strategic. It's very focused. We're not a core consolidator. I really don't like that term, at least not for Bruker. It may be good for others. We're very strategic and focused and we are disciplined. I call it disciplined you may have sometimes call it opportunistic. Disciplined is when you do acquisitions at attractive valuations that allow you to have a good return on invested capital over time. Sometimes we play, pay for value as we did with ELITech, in others, we've been extremely unfortunate, and I'm really very proud of the acquisitions that we've been able to do for PhenomeX, which we got an excellent valuation and in an accounting sense, it's even a bargain prices. So in other words, we -- we got it for free in some ways, NanoString, we pay in a certain amount, but we certainly didn't pay $3 billion for it. So we got -- we paid it for about EUR 400 million in something that will again lead to excellent ROIC as Mark fixes up that business. And Chemspeed, we paid a decent valuation to add much more vendor-agnostic automation to our aftermarket assays and software business. So we're expanding in the post-genomic era. We're entering adjacent growth markets. And importantly, we have entered now some very large TAMs in diagnostics, in post genomics, proteomics and spatial biology. Next slide, please. Here, I won't spend time very much time on that. We are also strengthening the core. These recent smaller businesses or technology bolt-ons all seem very scalable under our ownership. They are distributed over various groups from biopharma process analytical technology to very advanced high-end stem and Raman microscopy instrumentation, to cleantech markets as in the case of MIRO or preclinical imaging as in the case of spectral instruments, it is unusual and don't expect that we will continue at this pace -- many of these discussions we've literally had for years, we've known these companies and by late '23, early '24, a lot of these deals came together in a way that we were pleased and could justify in thinking that we will eventually have -- accelerated our growth potential, accelerate our market potential and do it with a good ROIC. Next slide. And I will now move beyond the acquisitions and on 2 or 3 slides just outline a little bit what we mean by postgenomic era and what it means to be well positioned or perhaps uniquely positioned for that. And that has a lot to do with the complexity in biology, which is now finally being better and better understood. It is not just the -- genome is not the blueprint for life. It's a completely inaccurate metaphor that has actually been quite misleading. Of course, genomics, including epigenetics and transcriptomics have been very, very powerful over the last 20 years. They've taken us in for noninvasive prenatal screening to monogenic diseases to infection disease diagnostics. Many positive things have come out of it. But at the end of the day, it's, in some ways, not the central molecular science that drives life and that really gets close to function and ultimately the phenom of a cell or of a patient or of a human being for that matter. Not only are there very important other omics, proteomics, perhaps the most central, of course, lipidomics, metabolomics, looking at post-translational modifications, I don't want to get too deep into it. But in addition, structure and interactions are very important. Spatial context is very important, studying things at the single cell level. So it becomes a very daunting complexity but quite honestly, that always tends to be additional funding opportunity and business opportunity for Bruker. Next slide, please. This is, in some ways, another graphic that also reminds you that beyond DNA and RNA and gene expression profiling, proteomics and the many proteoforms are far more complex, are very central and inherently are almost always heterogeneous, i.e., you need the spatial tools. Go to the next slide, and I'll wrap things up on the last slide. Actually 2 more slides. Here are some of our key tools, some of them that you know on the left, the timsTOF, which is absolutely central as a platform for proteomics, lipidomics, metabolomics, for more and more post-translational modifications, but also for the interactome protein-protein interactions, protein drug interactions, new synthetic fields like chemical proteomics to target previously undruggable targets using targeted protein degrader proteomics. By the way, these are all mass spec fields. None of this can be done with the SomaLogic or Olink. I mean the plasma proteomic scan, all these other things are inherently things that you have to do with mass spectrometry or with our targeted microscopy and microfluidic solutions on the right. So many, many opportunities, timsTOF very central. We're looking at dynamics, we're looking at structure, for looking at binding for ad interactions, NMR is incredibly powerful our MALDI Biotyper is the first applied proteomics technology with a $300 million business in clinical microbiology using proteomic barcodes, we have been doing crystallography for a long time also for structural biology. And of course, you may have heard from Mark previously that we had in a smaller way, entered the spatial proteomics field with an excellent product called the CellScape that will greatly benefit from the larger commercial footprint of NanoString. The major events on the right are, of course, that we acquired the single-cell biology business of PhenomeX today, Bruker cellular analysis and most recently, the NanoString spatial transcriptomics business. By the way, they also have a very nice gene expression business. They are nCounter which we really also very much like. It gets us into gene expression into transcriptomics without having to be an NGS company. Mark will explain further. And I'll really wrap things up on the last slide -- my last slide. And this, in a way, summarizes things that I've said already. The very vast complexity of the post-genomic biology that is now really began at least we understand the complexity and we begin to understand how little we know and how important, but really only the beginning of understanding a cell or a disease in most cases, the genomic information is. And the punch line, if you take anything away from today, is that creates enormous opportunities for our industry, but probably not more than any other company for Bruker because we are very exposed and we've really just greatly increased our involvement in this with this major investments in single cell and now in spatial biology. I would argue that proteomics is central. I'm getting away from saying it's as important as genomics. I think over time, it is central because it is closer to the function, it is closer to the phenome of a cell or a disease. Spatial context, spatial biology is a must to understate biology. And finally, interactome and function is the holy grail and from SPR to NMR to other mass spec techniques that actually look at interactions or protein-protein interactions. It's still early days, but again, we're extremely well positioned. So with that, thank you very much for the opportunity for an introduction and an update. And it's now my great pleasure to introduce my colleague, Bernd Gleixner. Many of you have -- most of you have not met Bernd before, he is a very accomplished operations executive who joined us a number of years ago as an Executive Vice President of Operations. But he really also in his prior career had a lot of background in Medtech. And would you believe it in automation and also the commercial side of the automation business. So of course, he makes an excellent new Managing Director for Chemspeed. Bernd take it from here, please.

Yes. Thank you, Frank. And next slide, please. Hello from my side, and I'll start with a short overview. So the closing was on the 7th of March this year. So what is Chemspeed? It was a privately held Swiss company. So what is behind that? 25 years of R&D lab automation. So there is a modular robotic automation solution that will help or that is already helping in terms of automating complex workflows in R&D environments. That means, for example, in chemical research, pharma drug formulation or discovery, material science, cleantech and more. On the financial side, we expect for quarter 2 to quarter 4 for this year at around $30 million with breakeven profitability and going forward, a nice growth rate and margin expansion. So as mentioned by Frank, that's kind of an adjacent market, enter a new TAM that when you add the hardware and the software, where we end up about $7 billion for lab automation and lab software market. So on the right side, you see it's about automation, digitalization. We have a mix of standardized systems and multiple interfaces to connect to third party and so on. And for sure, everything is driven by software. And on the next slide, we dive a little bit deeper into the modular assembly system. So next slide, please. Yes. Here we are. So we start in the upper left corner, Dimension 1, so as you see in the middle, these are standardized format. So the mentioned one is the deck set up. So kind of the base plate, so to speak, as you see there, with various pictures. You can add that, say, various racks, vials, plates and so on and do a kind of a LEGO System and build your baseplate. When we move clockwise, we come to Dimension 2. So next to the baseplate, we always have various robots included, and we have a variety of exchangeable robotic tools. So over the last 25 years, we ended up with more than 70 proprietary robotic tools like, for example, overhead gravimetric dispensing unit, which makes certain chemical workflows or enables certain chemical workflows. Then we move further to Dimension 3, third-party modularity. So it can speed to a certain extent, is also an integrator. So that means we have more than 150 third-party instruments already integrated, established interfaces. And that means that we are always able to provide best-in-class technologies from third-party manufacturers as a complete solution to the customers. We will forward to Dimension 4. That's a software solution. So there's one software part that is focusing on the chemical workflows. So there's a lot of experience in there to have that very easy -- to make it very easy to set up chemical workflows for the systems. And then for the more complex systems, we have workflow management on top that the connection between different workstations can also be handled. And that leads us to Dimension 5. That means modular combination of the various workflow platforms to create unique solutions depending on the customer needs and scientific questions. To the next slide, please. So you see here, from the left to the right, raising complexity. So we start on the left with standardized solid dispensing units for 1 example, Benchtop Systems and then we move on to the right to 1 meter by 1 meter. We call them workstations. And then you see in the middle, say, the bigger versions of that, as you can imagine, that means more functionality on the base plates, more robotic tools, bigger and more workflows, and we end up on the right side and very complex systems where up to 50 of these work cells can be combined. And I think what is very important is we are talking about R&D labs. So you see there some rail system. So there are also gates for Loop-X included. So it's not just going from A to B, but we can also go back and forth depending on the workflow requirements of the customer. And then, we have a few augmentations about why do you need automation next to the megatrends like demographics or the overall trend of digitalization. We see things like, for example, solvent-free paint in the topic of sustainability. We have batteries and photovoltaic research often with the regionalization, it's also a discussion about substitute materials, for example, lithium and also compliance driven, the workflows, for example, things like PFAS and so on. So there are a lot of reasons and a lot of these megatrends play in our hands. That lab automation will increase in the future, and we can play a very nice role into that. So next slide, please. And here, we see that next to Chemspeed, this -- focusing on the hardware. We already have our lab software solutions, our platform called SciY. And we are talking about enabling the digital lab of the future or self-driving labs. So as I've spoken beforehand, on the Chemspeed side, you have the automation. You have the ability to build real-world workflows to have a certain modularity to be able to build up these complex multi workflows in the academic research environment. And then on the right-hand side, we have our software platform. So that's also vendor-agnostic solutions for accessing analytical data. It's a universal fewer for scientific and lab data. It's compliant solutions, which, for example, in the pharma market for sure, is absolutely necessary. That's also connected with a search platform for IP and regulatory affairs. So also there, focused on pharma and other compliant markets. And then single AI-ready lab data platform because that's often what we see as a challenge from our customers. So everyone has tons of data, but they have to be ready to go forward and play around with AI. And then that's also R&D lab to production, QC/PAT environment and leads to a lab digitalization platform. And when you have the software abilities, clean data, ready-to-use data and you have the other hand side the hardware, then you can support closed loop high-throughput experimentation. So the design of experiments that can be run with AI and ML algorithms, and move forward there. And with all the big questions around in this world, I think there are tons of scientific questions to be answered. And we are happy to support our customers there on their journey to their self-driving labs. And with that, thank you very much, and we can jump to the next slide, and I have the pleasure to introduce you to Christoph. So Christoph is Head of our new Bruker Molecular Diagnostics business. He's the CEO of ELITech Group. And beforehand, he worked in different positions with Siemens Healthcare. He also worked with Olympus Life Science Europe, was the CEO and Founder of Advalytix and Head of Strategy at Infineon Technologies. He has a PhD in physics from Munich. And with that, I hand it over to Christoph, and thank you very much for your attention.

Thank you so much for the introduction Bernd. Yes, I've been in the life sciences and particularly in vitro diagnostics and molecular diagnostics for a little bit more than 20 years. And let me just take you through the latest acquisitions -- the latest acquisition of Bruker. I joined Bruker as of May 1. So let's just look at what we do at ELITech. So that next slide was actually the right one, very good. So in the end, when you think about molecular diagnostics, it's a razor-razorblade business. And right now, we have 2 razors on the market. One is called InGenius. The other one is called BeGenius. They are mid-throughput fully automated sample-to-answer on molecular systems and to be launched in '25, we have the larger brother of the two, which is going to be way higher in throughput and way more automated than the current systems on the market. The installed base, as you can see, is pretty significant about 1,300 systems in total. Just as a reference, the market leaders is about 3,000 in the high throughput segment like Roche or Hologic. Okay. So what is special, what's the segment that we are addressing. That's what you will learn on the next slide. One way to address and segment the market is by throughput. Fortunately, because of COVID, everybody now knows about molecular diagnostics, knows about PCR. So if you went, let's say, during the pandemic through an airport, and you have to get a test done and your result was back within an hour. So then those tests would be run on these low throughput point-of-care systems on the left-hand side. Market leaders are Roche, there is Cepheid, there is Qiagen. But most importantly, there's also BIOFIRE. On the other end of the spectrum, high throughput, you have large systems. They do probably 100,000 tests per year, sometimes even more. Very fewer players, the big ones are Roche, Abbott, Qiagen and Hologic. And then in the middle, you have systems that are way smaller, Becton Dickinson is there and we are there it as well. So what's the special about this mid-throughput segment? In this mid-throughput segments, you basically deal with parameters or with assays that are too small in volume to be high throughput and are in a certain way too complex to be dealt with in a point-of-care system. They also tend to be not time-critical, again, very much unlike what we would do in point of care. Now when you go to the next slide, you'll sort of see what that means from a lab perspective. There's typically -- depending on how you count, 15 to 20 high-throughput parametersm, sexually transmitted diseases, hepatitis B, hepatitis C, HIV, herpesviruses. And that's really the bulk of the test volume. And that's what the big market leaders are focusing on. On the low end of the tail, you have a large number of what we call esoteric tests. That's a total of about 50 to 150 parameters. To just give you a number, that's about a couple of hundreds to maybe a couple of thousand tests per annum per laboratory. And that's a very, very long list of assays, Bordetella, whooping cough, various herpesviruses, meningitis, things like that. Those assays are not available from the large players, and they are also not available on point of care systems. Yet they need to be done. And that's exactly what we do, and this is exactly the solutions that we provide. If you go to the next one. Now you all see an illustration of what that really means. That's our menu that we have as CE-IVD assays here in Europe. And everything in -- Yes, I would say that's orange or orange brown are assays that are also available by either Roche, Abbott or both. And everything in blue is an assay that only we have. And you can see just by the number, there's about the famous 15 to 20 assays that the market leaders have and then there's a lot of stuff that only we have. So in that respect and in that sense. We don't compete with the market leaders. We are complementary to their offering. There's also another dimension to that problem, which is not assay, not parameter, but sample type, and that's something that I will explain on the next slide. Many of the viruses can be found in blood, but others can be found in spinal fluid. Still others can be found, let's say, in the mouth. And -- as you know it from COVID, there are nasal swabs, there are throat swabs, a little bit of -- that's a little piece of cotton that will basically collect the sample from your nose or throat. But then, of course, there's blood. Everybody knows that, and that can be whole blood, it can be plasma, it can be serum. But then there is sort of more esoteric sample types like spinal fluid, like stool, like sputum, like aspirates deep down from the lung. And again, the same idea here. Everything in light blue or assay is validated by the Roche, Abbott or both and everything in green are assays or matrices validated only by ELITech. And again, that's another differentiator. So it's not only a much, much larger set of parameters that we offer for the assays, but it's also the much, much broader range of sample matrices that we offer. And that basically, again, defines our segment. It is everything that the big guys don't do and the point-of-care systems because of the complexity of the assays and because of the fact that they may be, let's say, quantitative, which is typically something that point-of-care systems don't do. And that's basically our focus Okay. Next one, please? Yes. And that's a little bit of the history. Bruker paid about $870 million for the company. Our molecular focus really is on sample-to-answer systems, again, on esoteric parameters, and I hope you understand what that means. But we also have other products. Again, they are, I would say, well targeted. They address certain, let's say, questions in the clinical setting that are not addressed by the large players like Roche, Abbott or Siemens or Beckman Coulter. So they would be stainers, osmometers, sweat testing. And all these products we have combined in a business unit that we call biomedical systems. Now when you look at the revenue mix, about 55% of what we do, we meaning ELItech, is molecular, about 45% is others and EBS. It's razor-razorblade. So most of what we sell are the razors. So our consumables fraction is 84% versus 16 for the instruments. And right now, it's heavily focused on Europe. That's about 60% of the revenue to do with the regulatory landscape. But with the changes in the U.S. that are coming up, we believe that there's also an opportunity for us potentially going forward. Okay. That was ELITech in a nutshell. With that, I would like to turn to Mark Munch. I think most of you know him, and he will take you from PCR over expression profiling to spatial biology.

Yes. Thank you. We'll go through the overview of NanoString which was an asset purchase for Bruker that we closed on May 6. If you go to the next slide, please. So many of you who follow Bruker also may follow NanoString, some of you may not, in the lower part of the diagram is the product platform basis of NanoString. On the left is the nCounter. That's the gene expression analysis system that is not spatial, but a very valuable, very precise system for targeted gene expression profiling. On the right, the GeoMx and CosMx platform, that's what comprises the spatial piece. Spatial is a very large market, a fast-growing market. I think many of you heard large TAMs over the years. I think rather than quota TAM, to say what they have in common is the market space is large and expected to grow. We're really pleased with the NanoString asset purchase in that we -- it's a company that's had a number of publications, good KOL and reference paper base that will continue to grow and that we can continue to leverage. Also has a very large installed base and customer base. And that's important because there's a large consumable fraction of revenue stream that comes through these product lines. and that's very attractive for us. The next slide, please. So first, before I talk about spatial, I wanted to just highlight the nCounter gene expression business as shown here. The nCounter platform touches a number of applications across oncology, neuroscience, immunology, immuno-oncology. And so it really fits our end markets really well that we are focused on. It does serve the targeted RNA seq -- sequencing type market in the mid low plex area. That's still quite a large TAM. And I wanted to highlight this because we see an opportunity for some renewed growth here. Just before acquisition, NanoString has already formed a dedicated nCounter sales team to bring commercial focus to the platform. But we see opportunity to add kind of new segments to this by adding new applications and new assays. So we're really excited to have this part of the portfolio. The next slide, please. Shifting over to the spatial part. There are 2 platforms within the NanoString portfolio. On the left, you'll see the GeoMx platform. And as NanoString has always described it, it's a great platform for tissue exploration. It operates on the -- kind of tens of Micron's level for exporting tissues where you can move fast over a tissue survey. Survey the whole transcriptome, to over 18,000 genes, but also a very high number of protein profiling 570 proteins. This allows you to really look at tissue structures and do great discovery work. On the right side is that once you kind of figure out where you want to -- what looks interesting in your tissue sample, you can go and look at the cellular communication networks. And this is what's required when you have to be unique -- what's required is to have to go to single cell and sub-cellular to really understand what's happening, say, in the tumor microenvironment and what's happening in a cellular communication level. And that's the CosMx platform which in Q1 of this year, announced the 6,000 plex RNA also have showcased whole transcriptome there as well of over 18,000 genes. And you can also do some protein work on it. So these 2 platforms really go nicely together and was a major strategic rationale for the acquisition. If you go to the next slide. I wanted to talk a little bit about what excites us technically about the platform. On the left, in the white, just talking about the CosMx is we're really bought into and we think it is the stronger approach, which is the hybridization-based approach for doing spatial biology, of which both the GeoMx platforms and CosMx platforms are based on. The merits of hybridization-based approaches is it's very straightforward and robust. Not subject to the nuances of enzymatic based protocols which we have [indiscernible] live experience with and understand those nuances. And because of this and the hybridization-based approach, it makes it very scalable in plex. As you see, NanoString is always lead in flex and is one of the reasons why CosMx is 6,000-plex now, but also showcasing whole transcriptome work. On the right, just some recent work by Professor Dulai. And I'm highlighting this because there were some work that was put out there in Q4 in December and in January that were some uncontrolled studies, nonpeer-reviewed publications of comparing the different platforms in the space of the Xenium platform, the CosMx, the Vizgen MERSCOPE. This study was a controlled study by Dr. Dulai with a high number of replicates. And with very controlled processing of tissue sections, no longer delays between examining those sections or no long variable delays. And each block quality was examined for the quality by H&E stains. And I really encourage you, there's a QR code down at the bottom to watch this webinar. Some of the key findings of this webinar is more transcripts detected and more genes detected. Some of you might attribute that to -- well, yes, it's a higher plex panel. And that's useful as I'll talk about in a second. But when you look at also just the overlapping genes and there are 119 of them, the CosMx showed higher detection efficiency. And so it's a very important aspect of the study when you have a controlled head-to-head comparison. Also though what comes through is plex matters. I mean you have a higher plex, it gives you more consistent cell typing a better robust cell typing. And then you'll see the robustness of the cell segmentation, and that's a very important advantage of the CosMx. So again, I encourage you to look at this controlled based study, and it shows a very powerful comparison. If you go to the next slide. I want to remind you all -- next slide please. That preexisting to the NanoString acquisition, Bruker, we had developed the CellScape product, which is a great platform for precise spatial proteomics. And this is a platform that has very differentiated quantitative performance that's based on the best-in-class resolution and our proprietary high dynamic range detection. Those things combined to give a best-in-class ability to see the continuum expression and protein profiles and protein expression. And we can handle data very uniquely that others can't because of this. It's also a very straightforward technique. They're very robust. Once you start to do an experiment, you don't have any stops and starts. The techniques just works on a number of tissue samples and it works like a charm every time. And also, we're leveraging off a large ecosystem that comes from IHC and from flow cytometry, so the assays are very flexible. In the video they showed there, we also launched some new things, some new panels and also a new whole-slide imaging chamber, and that's world-class that is the best and the highest field of view imaging in the industry where you basically have unlimited edge-to-edge performance. And this slide now combines them all together and just on some positioning. And so we have the GeoMx, as I mentioned, for regional examination of the tissue level and then going to the cell communication -- cell network communication level of single cell and sub-cellular systems of the GeoMx and the CellScape. These platforms are adjusting different segments and are highly complementary. And I'm going to explain it on the next slide about why this is and why they work well together. Next slide, please. So these platforms are oriented across discovery research and translational research. And they have very distinct need-based positioning across those research segments. One thing to keep in mind, remind you of it's a dominant overarching need across these segments is to use pathology-compatible tissue-slices. So working on pathology slides. And that, in spatial biology, puts you into a 5 to 7-micron world of FFPE, fresh-frozen or TMA, and that's the world of spatial biology. So keep that in mind as we talk about, for example, the GeoMx. So the GeoMx gives you this region of interest or area of interest investigation. And since you are working in a 5 to 7-micron world and cells are typically 10 to 15-micron world, people are so happy to work in spatial because you get so much information, but they know you're slicing through structures and [ fusing ] the cells. So besides the strong point of fast-scanning [indiscernible] engineering, the GeoMx is a great platform. It still has a lot of legs because it gets you this averaging and robustness across the region of interest because you can average in the tens of microns. And so you're not actually throwing away transcript signals or protein signals. So it's a really, really robust technical approach to looking at spatial biology. Like I mentioned before, ability to do the whole transcriptome with over 18,000 genes and also simultaneously do over 570 proteins. And fast scanning type capability. So that's one segment. Now once I've discovered the interesting things I want to look at, then I want to understand what's happening, say, of the tumor microenvironment, what's happening in a cellular communication level. The cell-to-cell communication networks and there you need Fidelity. The Fidelity, those who are gene expression-oriented need fidelity and genomic expression. This is a segment where you're really focused on genomic phenotyping. And that's where the CosMx is our strong platform, a leading platform for that, where, as I mentioned, we already launched 6,000 plex in RNA, but showcased 19,000. And then also, yes, you can do some protein work on it. And it's very robust across all the sample types of FFPE and Fresh Frozen and very accurate cell segmentation. So high fidelity for the gene expression segment were the main buying decision's around gene expression. This fits nicely then with the other segment at the cell communication level, which is where you want fidelity for proteomics expression. And this is where the CellScape shines. The CellScape, as mentioned, is a best-in-class performance in terms of best-of-class resolution and this unique proprietary high dynamic range that allows you to see the continuum of protein expression and also very flexible on assays. So we see all these platforms fitting together nicely and serving the needs for spatial biology. So we're very excited to have now this complete portfolio for spatial. Thank you. That's what I want to talk about with the NanoString overview. And now I'll hand over to Gerald Herman, our CFO.

Thank you very much, Mark, and glad to be here. Thanks for joining us today. I'm going to provide an overview of our 2024 guidance and a new medium-term outlook. So let's jump right in. If you change the slide, please. I'd like to start today with a review of the fiscal year 2024 base business guidance, which is unchanged from the guidance we provided on May 2 in our Q1 2024 earnings call. As you may recall, at the time of that call, we had already closed the Chemspeed and ELITech acquisitions and included them in our fiscal year 2024 guidance, which is reflected here on the left of the slide. Just to recall, it's revenue range of $3.29 billion to $3.35 billion for the year or organic revenue growth of 5% to 7% year-over-year, with constant exchange rate revenue growth for 2024 in a range of 12% to 14%. And Non-GAAP EPS of $2.79 to $2.84 or 8% to 10% year-over-year growth. For Q2 color, for the 2024 period. Now looking further into this quarter, we see strength in several of our divisions and now expect organic revenue growth in the high single digits for the second quarter of 2024 on a year-over-year basis. We continue to expect sequential improvement in non-GAAP operating margin performance in our base business in the second quarter of 2024, with significant improvement in the second half of '24. Now you've already heard from Frank and Mark about the exciting opportunities associated with our strategic acquisition of NanoString. As you also know, NanoString recently emerged from Chapter 11 reorganization and faces ongoing litigation. As a result, we're unable to predict their future performance in 2024 with the same degree of precision as our established businesses. Under this uncertainty, we're unable to give guidance for NanoString for fiscal year 2024, but we do offer some estimates of the likely ramp in revenue, a new cost base following its reorganization and cost estimates associated with ongoing legal matters. These initial modeling suggestions suggest revenue greater than $80 million and non-GAAP EPS dilution of $0.15 to $0.20 over the 8-month period from May to December of 2024. You see the implied fiscal year 2024 Bruker non-GAAP EPS range with these modeling suggestions, which inherently is relatively broad. Even with our initially dilutive and strategic single cell and spatial biology acquisitions of PhenomeX in the fourth quarter of '23 and NanoString earlier this month, we still expect about 2% non-GAAP EPS growth in fiscal year 2024 compared to our fiscal year '23 EPS of $2.58. Until we have further confidence in the predictability of this business, likely not throughout 2024, we will not include NanoString into our formal guidance. We hope to add NanoString towards fiscal year 2025 guidance, which we'll communicate in early February of '25 with just some outlook implications for 2025 today. Now on to our expectations for the medium term. Next slide, please. Before jumping into the updated medium-term outlook for Bruker, I want to remind you about the fiscal year '26 financial targets we presented at our Investor Day on June 15, 2023. And those are revenue in the range of $3.4 billion to $3.6 billion, operating margin of 21% to 22% and non-GAAP EPS of $3.40 to $3.70. Since that time, our business teams executed extremely well, finishing fiscal year '23 with 14.5% organic revenue growth as Frank noted, the third consecutive year of double-digit organic revenue growth, which far outpaces the market and our peers. We completed a number of bolt-on technology acquisitions to strengthen our core business, and closed on the 4 strategic acquisitions, namely PhenomeX, Chemspeed, ELITech and now NanoString. These acquisitions in fast-growing new end markets position us well for strong revenue and fast EPS growth in the '25 through '27 new medium-term outlook time frame. Next slide, please. Turning now to our growth outlook for the next few years to fiscal year 2027, we expect to drive strong Bruker revenue growth in the '25 through '27 period. With fiscal year 2025, still including about $100 million in inorganic growth from our acquisitions that closed in the March to May period of '24. You heard today from our leadership on the momentum we're building in lab automation and software, esoteric molecular diagnostics, proteomics, single-cell biology and spatial biology. We also expect to see healthy organic revenue growth of a well-managed core business. For our updated medium-term outlook, we expect Bruker organic revenue growth to outgrow the life science tools market which we estimated 4% to 6% growth by 200 to 300 basis points annually. Accordingly, we're projecting that we will generate $4.2 billion to $4.4 billion of revenue in fiscal year 2027. Given that fiscal year '24 has projected revenue of about $3.4 billion. This implies a 3-year organic revenue CAGR of 6% to 8% over the 2025 to 2027 outlook period. At the midpoint, we expect to add about $900 million in revenue between fiscal year '24 and '27 million. Moreover, with applying our successful and proven Bruker management process to the newly acquired businesses, improving operating leverage, increasing Project Accelerate 2.0 mix and our continuous operational excellence drive, we expect to deliver rapid operating margin expansion, even after continuing a 10% R&D investment annually over the outlook period. Our model implies a total of 280 basis points of operating margin expansion over the 3-year period, and that's after the recent single cell and spatial biology acquisitions initially diluted our operating margins by about 300 basis points. On non-GAAP EPS, we forecast double-digit EPS CAGR in the mid-teens range as reflected on the right side of this chart, to a level of $4 to $4.30 per share in 2027. This level of approximately $1.50 EPS growth over the 3-year period is impressive after our initially dilutive single-cell biology and spatial biology acquisitions achieved near breakeven and then turn accretive to EPS by fiscal year '27. Our forecast also projects EBITDA approaching $1 billion in fiscal year 2027. And given that we closed the PhenomeX and NanoString acquisitions at very attractive valuations, we also expect a continuation of Bruker's strong ROIC performance over this period. Keep in mind that the PhenomeX acquisition, we recorded a bargain purchase accounting gain and paid about $400 million for the strategic NanoString Spatial Biology business, a company with about $168 million in revenue in fiscal year '23. We think this compares very favorable to another presently pending $3 billion proteomics acquisition in the life science tools space for a target with nearly the same amount of revenue. Next slide, please. With that overview of fiscal year 2027 outlook, I wanted to walk you through some interesting trending data for revenue and non-GAAP EPS. These charts reflect our 3-year revenue and non-GAAP EPS trends in the '21 through '24 period, and then the '24 through '27 period. You see that for the 3-year period '21 through '24 using the estimated midpoint for '24, we delivered 9% 3-year organic revenue CAGR and an 8-year -- I'm sorry, 8% 3-year non-GAAP EPS CAGR. These CAGRs demonstrate sustained high growth rates under varying market conditions and really confirm the impressive success of our Project Accelerate 2.0 initiatives out of our continuous operational excellence drive over the period of '21 through '24. Looking forward to the new medium-term outlet period of '24 through '27 we forecasting organic revenue CAGR of 6% to 8% or 7% at the midpoint, assuming that Life Science Tools market resumed 4% to 5% organic revenue growth. We also anticipate a non-GAAP EPS CAGR of 16% to 17% over that '24 to '27 period as we rapidly improve the profitability of our acquired businesses. We expect to continue to invest 10% of revenues annually in R&D to fuel our emerging leadership in the post-genomic era life science tools and continue to deliver well above market organic revenue growth and strong non-GAAP EPS growth over the outlook period to fiscal year 2027. Next slide, please. And just to double-click for a moment on the 3-year outlook period, you can see the estimated implied revenue and non-GAAP EPS growth progression across the years. While we're not guiding to '25 or '26 today, it's clear that we do expect to considerably exceed our prior fiscal year '26 low end of the revenue range target of $3.4 billion already a year earlier in '25. Also notable is that we do add about $900 million of revenue over the new medium-term outlook period. On the EPS side on the right, our initially dilutive acquisitions closed in the fourth quarter and in the first half of '24, along with associated financing costs now reset our ability to hit or exceed the prior fiscal year '26 lower EPS target of $3.40 in '26 after all. Thereafter, as these acquisitions turn accretive, we see continued strong growth in EPS. Over the '24 to '27 outlook period, we expect to add about $1.50 in non-GAAP EPS and an EPS CAGR of 16% to 17%. Next slide, please. A few additional comments on our longer-term financial goals for 2028 and beyond. We expect to continue to deliver 200 to 300 basis points above market organic revenue growth as well as greater than 50 basis points of organic operating margin expansion annually. With the goal of leaving us over time into the low to mid-20% range for non-GAAP operating margins. Accordingly, we have a goal to deliver 13% to 15% non-GAAP EPS growth also in '28 and for several years thereafter. Next slide, please. So just to recap and wrap up, we expect to deliver north of $4 billion in revenue and north of $4 in non-GAAP EPS in fiscal year 2027. Our medium-term outlook for 2027 is now summarized as revenue in a range of $4.2 billion to $4.4 billion, non-GAAP operating margins in the range of 19% to 20%, and non-GAAP EPS in the range of $4 to $4.30 per share, with fiscal year 2027, EBITDA approaching $1 billion. And that concludes my remarks. Thanks very much for your continued interest in Bruker. Justin, back to you for a 5-minute break and then starting Q&A.

Yes. Thank you, Gerald, and thank you to all of our panelists for those very informative presentation. So as Gerald mentioned, we'll now take about a 5-minute break. During that break, if you'd like to ask a question during Q&A, we suggest that you either type your question into the Q&A box or raise your hand. And then when we return, we will start the Q&A session in about 5 minutes. See you soon. Thank you. [Break]

If our panelists are ready?

We are, go ahead.

We will set up our virtual stage here. All right. So we have several hands raised, so we'll go through those questions. First, without further ado, we have a question from Puneet. Puneet, I've unmuted your line, if you'd like to ask your question.

Great. Can you hear me?

Yes.

Great. so Frank, first of all, thanks for hosting this day and giving us insights into these businesses that you acquired. Maybe first one, good to hear about the high single-digit growth in 2Q. But I think the key question here is about 2025 expectations. It appears that you're returning back to 2026 estimates after pulling them forward. I mean you're ending up lower versus the prior guidance you had for EPS for 2025. So maybe could you talk about what are some considerations that you thought through that could push that higher closer to $3.40 that you initially had or any considerations that could pose a risk to that $3.10 number that you've highlighted here?

Yes. So we never said we would have $3.40 in 2025. We had said that we would get close to the lower range of a number of the financial metrics for 2025. And as you can say, we're obviously greatly, greatly exceeding on the revenue line. In fact, even the high end of the revenue line, I think we're exceeding by -- yes, by -- I think, by the lower range, I think we're exceeding by $300 million. We're exceeding the upper range as well. We are -- we thought we would -- on the EPS side, we've made sure that we obviously now have put all the moving pieces together. So the base business has no change in the outlook for the base business. That continues to be very solid. We made sure that we all include all financing costs, obviously, including the slightly higher interest rate that we're paying on the line of credit for the NanoString acquisition. And then we've also hopefully built in some conservatism for -- we're in an ongoing IP litigation side. We've had some nice successes there recently in Europe. And we just want to make sure that we're hopefully are prepared for any type of further rulings or any appeals that may become actionable and that may result in any further U.S. litigation outcomes. We hope they'll be favorable. We're optimistic, but we also want to be prepared.

Got it. That's helpful. And on -- I mean, a bigger question, Frank, as these acquisitions are integrated, again, maybe can you talk a little bit about what have you learned so far in terms of where you need to take sort of more aggressive action integration and where it's going to be sort of more moderated? But I think a bigger question that I would like to ask about sort of the longer term is, now with the number of these capabilities, products that you have. The lines between spatial proteomics and other technologies are mixing in this multiomics world. Are you thinking about any different approach to commercial and how you approach this market in a more solutions-based approaches versus simply product-based approaches that you have taken in the past? So just wondering if you're thinking about offering these products in a more comprehensive way to the broader customers?

Well, so quite a few questions. I get it. I think on some of your questions, I'll turn things over to Mark pretty soon, but let me just make the general observation that, of course, the automation business, Chemspeed is all about solutions. There are some modules for sure. There are some individual workstations, but very often, it's automation and lab scientific software and notebook and live digitalization solutions. So that's a poster child of modular integrated solutions. I would maybe observe that with Christoph's ELITech business, now Bruker Molecular Diagnostics, that's not one where we intend to take cost out or take cost synergies. That's a great business with beautiful growth rate. And high single-digit to low double-digit anticipated organic revenue growth and pretty good margins. I'm sure they can expand over time as well as Christoph manages that. And I think Christoph will mostly -- we can bring quite a few additional growth synergies to his business in markets like Germany, Austria, Switzerland or Scandinavia, a few other markets. where they have not been quite as strong and we're really quite strong with our MALDI BioTyper. But after those introductory remarks, maybe I'll turn things over to Mark on maybe both the PhenomeX and the NanoString. Of course, we're selling solutions. These boxes aren't selling them each themselves. And then Mark can -- Maybe 2 very different cases of what he had to do about cost and restructuring and what he's going to do about integration? Maybe he can give you some comments.

Yes. Just to maybe clarify your question a little bit. I think if you're -- as -- I think you're asking like interoperative workflows amongst the different solutions across Bruker. I don't see that as a primary focus of the buying decision for these tools. These workflows do sometimes sit, say in oncology or immunology, immuno-oncology, neuroscience with the same customer sets and they want to perform a number of tasks. And so we do now have a lot of very complementary workloads that a particular core lab or customers that can problem solve and do discovery together. But I think if you're actually getting to interoperative workflows, I think that's somewhat of a path to [indiscernible] and not necessarily -- it's not really a major buyer decision. But these do platforms across Bruker in those fields I mentioned are quite complementary, and you'll find labs using many of these techniques. Is that -- Puneet, explain your question, but that's kind of how I interpreted it.

Yes. That's helpful. And okay. Mark, before I turn to -- please -- to Christoph. I mean anything on NanoString, can you provide when can we get back to pre-bankruptcy revenue run rate that the question we've been getting from investors. So I appreciate it.

Sorry, real quick, but we do want to limit each question after to one and one follow-up. So after that, when we'll move on to the next question after. Go ahead, Mark.

Yes, I'll pick that in. I mean, clearly, business going into Chapter 11 is -- creates some skittishness in customers, and that's gone clearly with our asset purchase. So and -- I think that's really a major factor, right? You want -- customers want to know is the company going to survive. I mean clearly, we've rectified that by providing a really innovative [indiscernible] home. As you know, we're very innovative with [indiscernible] and so is Nanostring. So I think certainly, we expect to see a continued climb out of some of that suppression for sure.

Then Christoph, did you want to touch on the ELITech opportunity for leveraging some of the commercial synergies at Bruker?

So sorry, I didn't get that.

Just the other part of Puneet's question around -- and Frank referenced it around ELITech potentially having some commercial synergy opportunities with Bruker -- the Bruker brand...

Yes. Absolutely. So first of all, as Frank mentioned, there's geographic complementarity. We tended to be strong in Southern Europe. Bruker is stronger in Central and Northern Europe, so that would be one. The other one, of course, is the brand broker has an excellent brand name. And people do brand in IBD because essentially, if you make an investment decision in a laboratory, you're in for 10, 15, sometimes 20 years. So you want to make sure that your partner with a respectable company that's financially sound. That's, of course, always helpful.

Excellent. Thank you. And thank you, Puneet. So we'll move on to the next question asked for here. Patrick Donnelly, I have unmuted your line.

Maybe just a quick one to follow up on some of Puneet's questions there on 2025 in particular on NanoString. I think it would be for Frank and Gerald. I guess how do you think about the visibility into the cost savings on that one, just given -- I assume there's some level of investment needed to reaccelerate the growth, but at the same time, you're taking out costs. So Frank, can we talk a little bit about the near-term opportunity there and how you're thinking about that piece again? Obviously, the visibility we see is a little bit limited. But again, on the cost out piece, how do you balance the two in terms of getting back to the growth and also pulling out the cost, so it's not too dilutive in the near term?

Yes. I'll pass that on to Mark, but keep in mind that even just before they went into Chapter 11, they actually finally took a lot of cost out there twice actually in Q4 and then in Q1 before they went into to Chapter 11. But Mark, I'll let you take that further.

Yes, just to emphasize that those 2 cost actions that NanoString took on their own. One was in October, substantial and then another one in beginning January substantial. Now we're taking -- we took some more actions in the G&A functions. There's a lot of public company costs, a lot of overlapping costs, but we're able to take a little bit more. So those 3 combined for pretty -- we're pretty comfortable. I'd say we're very comfortable with our cost modeling and our cost position on that. To your other part of your question, there's still substantial commercial infrastructure in place, and we already have substantial commercial infrastructure in place. There's NanoString one is larger than what we have in CellScape. But those 2 combined also for now for some -- a lot of opportunities in co-selling co-marketing. So we're pretty comfortable for our position.

Okay. That's helpful. And then maybe on the near term, it sounds like 2Q, it was coming a little bit better. Can you guys talk about what you're seeing? And obviously, you had that $50 million pushout from 1Q. Is it just that's been captured and feeling a little bit better about the outlook? It would be helpful just to kind of talk through what you're seeing in the near-term environment. And then visibility, and obviously, 2Q coming in a little bit better, the second half looks pretty conservative. So we'd love to just talk through that as well.

Yes, Patrick, I'll take that one, and forgive us, we're not going to do a regular quarterly earnings call. We just did one 2 weeks ago. Of course, we anticipate doing one, I guess, in early August for Q2. But we -- yes, we're -- as Gerald said earlier, we're a little deeper into the quarter and of course, now have more complete information on the first month of April than we had on May 2 when we reported Q1. So we have better -- we have a little bit better visibility. We're still only in the middle of the quarter. But yes, we are more confident and that we would have not just middle -- that was [indiscernible] a bit conservative and with our April data looking good. In many areas, we felt we could give some color update because I know many of you care about the quarters as well, of course, we do too. So we think we can grow in the high single digits organically year-over-year. And yes, that indeed includes that push out from Q1 into Q2. Nonetheless, that's a good number. And I think relatively in our industry, it's a very good number. I don't want to -- there's nothing new that we would have to report or have great new insights into the second half of the year compared to what we discussed on our quarterly earnings call a couple of weeks ago. So more focusing on the longer-term picture today and then, of course, update you again on the quarter when we report Q2.

Yes. Thank you, Patrick. So we'll move on to our next question asked by Doug Schenkel. I'll unmute your line here. .

Okay. Thanks, Justin. Thanks, team Bruker. I appreciate you doing this morning and taking the questions. I have 2 topics. One is on margin trajectory. And then the second is just a follow-up on Chemspeed. So on margin trajectory, I believe you -- and I think you have a slide on this. You previously indicated that you would be generating 21% to 22% operating margin in 2026. When I look at Street consensus, they reflect that assumption. And I believe most Street models included at least -- at the most recent update, all deals other than NanoString. Today, you have a slide in there in your presentation where you're, I think, targeting an operating margin of 19% to 20% in 2027. So that's a year later. I may be missing something, but does that fact pattern lead to a fair conclusion that NanoString is expected to depress operating margin that far out by about 300 basis points? Or are there other factors? Again, just tell me if I'm messing something up. But I just want to -- I want to clarify that because I think there's a little confusion around that. So that's the first -- and I want to pass there and then I'll come back to Chemspeed.

Yes, very good question. The 300 bps is about right, but it's not all NanoString. NanoString is a significant part of that. But we also, today, have really pulled up everything, right, including some of those smaller acquisitions, almost all of these smaller subscale businesses that we've acquired are at lower margins than our average margin today. So they all need multiple years of good Bruker management process and growth and cost efficiencies and some synergies. And yes, so it's primarily NanoString as an initial dilution and still some dilution into '25 as well but it is not only, it is also -- many of these other smaller businesses, even a breakeven business, like [ Barentz ] business at Chemspeed at breakeven, of course, that implies near 0 operating profit margin. So even a business of that size, we all need to bring these operating margins into the teens and then eventually, many of them will move into the 20s. So there's a lot of work to be done on multiple of these acquisitions. But what it means is that we -- Gerald cited about 280 bps of operating margin expansion that we're anticipating with that new set -- a deck of cards, so to speak, so that implies nearly about 100 bps of expansion per year in '25, '26 and '27 again. And then we think we'll -- that will become a little bit more moderate in our longer-term goals or sort of 50 bps of operating margin expansion into the low end of the mid-20s. So that's the cadence. But the -- your fundamentally, the short answer would have been the 300 bps is about right. It's a little bit more than 300 bps of operating margin dilution from the various acquisitions in -- at least initially in '24.

Okay. And I know I want to get to Chemspeed, but presumably, Frank, if you're going to do this the way you did it, you're skewing the error bars where if IP spend is less if some of these other deals accelerate a little quicker I would assume that the bias is to the upside on these targets?

One would hope, of course, right. On the other hand, by definition, these are all businesses that we acquired. So we have done our due diligence, we've done our work. But it's not that we have the experience of running them for 2 or 3 years. So inherently, you have less confidence when you have existing businesses, but that you're running with your management process with your financial analytics and goals for the first time. So it's completely prudent for us. I think to just say, well, we have to -- we may be more conservative. But I think it's also totally appropriate because these businesses are new to us, even though we studied them extensively. Feel free to jump in if you have a further observation on that, but that's sort of my high-level comment.

Okay. and Justin -- and you can totally cut me off and I know you would but...

Why don't you squeeze one more in, Doug.

Okay. Bernd and again, this may take too long for the form we're in, but I really enjoyed yours in the other presentations. They were very informative. I guess some of the follow-ups I would have would be about customer mix, how much is -- you talked about some of the applied applications, some of the biotech and academic applications. So I'd love to just get a little more on mix of customer, how you think that's going to evolve. Who are the key competitors that we should be looking at as we're learning more about this business? And then after you place -- make the initial placements, what's the opportunity to really drive recurring revenue over time.

Yes. Thanks for the compliment. And yes, I think -- as Frank said, it's kind of early stage. But when we talk about materials, and you can imagine that also when we talk about synergies. For example, with the Nanogroups, there are a lot of touch points. We also had -- or before the acquisition, we already had joint projects where certain Bruker divisions plus Chemspeed came together. And as I said, we have these general megatrends like sustainability, cleantech and so on. And I think, yes, just take the field of batteries. I think as mentioned before, and Bruker is very well positioned, and we are looking into that to see how big the opportunity is there.

I would add to that. I think that was also part of your question. This is almost -- none of that is academic. These type of automation solutions that tends to be biopharma, pharma, industrial, industrial cleantech research, industrial battery research. So that's applied markets research. You will see some of that -- but so there is very little, if any, academic or academic medical school funding here. So that's a little -- that's why the customer mix for Chemspeed will be fairly different and give us a lot of exposure in the good cleantech and biopharma, specialty chemicals by small molecule precursors, formulation in various industries, including biopharma, those other type of customers. Chemspeed doesn't have that many competitors, quite honestly. If you look at the liquid handling markets, there's Beckman, Tecan, Hamilton, Agilent, and the list goes on and on and on. When you go to powders, to solids to automating all of that, it's actually an underserved area and Chemspeed built out a rather unique position there. It is a vendor agnostic. This isn't just, "oh, my God, what a great way to sell Bruker FTIR is a little benchtop NMRs". This is sure that we'll build -- there'll be some Bruker detectors, but this is vendor-agnostic, so there will be many different detectors by other companies at the end of the day. But it's a pretty unique positioning for Chemspeed. And I think but everybody else looking at liquid handling only or primarily, they're actually in a very favorable position to also have good pricing power and gross margins over time. But again, that was a little under managed and Bernd is very, very experienced and of course, also driving much better gross margin profiles, which will lead to bigger -- to higher operating margins.

All right. Well, thank you, Doug, for your questions. We'll move on next to Rachel. Rachel Vatnsdal.

Perfect. So first off, I wanted to ask on market growth. It looks like the updated medium-term guidance assumes 4% to 5% for market growth. I know that the prior guidance assumes 4% to 6% market growth. So just given the environment that we're in, can you walk us through how did you arrive at those updated market growth assumptions and really what drove that updated view relative to the update you guys gave us in June last year?

I'd have to concede that you got us there. We use those numbers interchangeably. We really don't know where the market will go back after this '24 -- '23, '24 dip. And before that, of course, we had market hyper growth with post COVID and then the biotech boom, that's also not going to come back, at least not in that boom scenario. So what the future market growth will be -- the short answer is please don't read anything into that. Sometimes we say 4% to 5%, sometimes 4% to 6% it literally is -- don't read anything into it would be the short answer. We're just not sure that things will look exactly as they did before COVID after things normalize, perhaps by '25. We just hope that we can continue to outgrow the market by 200 to 300 bps. That's the thing -- that's the takeaway message rather than the absolute number.

Fair enough. Then maybe...