Bruker Corporation — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022; comparisons are with the same 2021 periods. Amounts are in U.S. dollars, millions, except per-share data. Bruker develops and sells scientific instruments and analytical and diagnostic solutions through BSI Life Science, BSI Nano and BEST.
Financial performance
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $588.4 | $570.8 | $1,183.4 | $1,125.5 |
| Gross profit / margin | $298.2 / 50.7% | $280.6 / 49.2% | $604.5 / 51.1% | $559.3 / 49.7% |
| Operating income / margin | $73.9 / 12.6% | $85.6 / 15.0% | $170.4 / 14.4% | $174.7 / 15.5% |
| Net income attributable to Bruker | $49.5 | $57.6 | $111.1 | $114.3 |
| Diluted EPS | $0.33 | $0.38 | $0.74 | $0.75 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $33.4 | $119.9 |
| Free cash flow (non-GAAP) | Not provided for quarter | Not provided for quarter | $(3.5) | $72.6 |
Q2 revenue increased 3.1%; management reported organic growth of $50.1 million after excluding foreign-exchange effects and acquisitions. For the first half, revenue rose 5.1%, with reported organic growth of $108.3 million. Unfavorable currency movements reduced revenue by approximately $41.8 million in Q2 and $65.5 million for the first half. Gross margin improved, but higher operating expenses and acquisition-related costs contributed to lower operating income and net income. Management cited increased sales and marketing and R&D investment, supply-chain and logistics challenges, and inflationary pressures.
For the first half, BSI Life Science revenue was $711.1, BSI Nano $360.7 and BEST $118.9. BSI Nano and BEST grew 9.4% and 9.1%, respectively; BSI Life Science grew 2.5%. Q2 revenue growth was reported across all three segments, though CALID group revenue declined amid supply constraints. First-half regional revenue grew in North America and Asia Pacific, while Europe declined 8.3%.
Balance sheet, liquidity and capital allocation
- At June 30, cash and cash equivalents were $723.0, down from $1,068.2 at year-end; short-term investments were nil versus $100.0. Inventory increased to $759.0 from $710.1.
- Total debt was $1,185.0, compared with $1,334.2 at year-end, including $1,171.0 of long-term debt. The company repaid $105.0 of 2012 notes during the first half. It reported no revolver borrowings and $599.9 available under its $600.0 revolving credit agreement; it was in compliance with debt covenants.
- Management stated existing cash and credit facilities should be sufficient for operating and investing needs for at least the next 12 months. The filing also notes there is no assurance that future operating cash flow or financing will remain available on favorable terms.
- First-half operating cash flow fell to $33.4, primarily reflecting a $104.6 inventory cash outflow, other working-capital movements and timing of tax payments. Investing activities used $44.7; financing activities used $297.2. Cash and restricted cash declined $345.4, including a $36.9 foreign-exchange impact.
- Bruker repurchased $165.9 of shares and paid $15.0 in dividends during the first half. $215.3 remained under the $500 million repurchase authorization at June 30.
Outlook, risks and unusual items
- The filing provides no specific full-year revenue or earnings guidance. Remaining performance obligations were approximately $2,082.3; management expected to recognize about 76% within the next 12 months.
- Management cited continuing risks from COVID-19 disruptions, supply shortages and longer lead times, inflation, higher energy and transportation costs, potential recession, geopolitical tensions and foreign-exchange movements. It noted that these factors may delay revenue, raise costs and disrupt manufacturing. Bruker largely suspended its Russian operations and recorded $0.5 of related first-half charges.
- Other charges were $12.5 in Q2 and $20.0 for the first half, including acquisition-related, restructuring and IT transformation costs. Acquisition-related charges were $8.3 in Q2 and $13.4 for the first half; the first-half total also included Russia-related costs.
- Bruker completed several acquisitions and strategic investments during the first half, including a 74.15% interest in PreOmics. Acquisition-related hybrid-instrument liability remeasurement contributed to lower EPS, according to management.
- The first-half effective tax rate rose to 31.7% from 29.5%, primarily reflecting U.S. rules limiting R&D expense deductibility, foreign tax credit effects and resolution of a U.S.-Germany tax matter. A related liability was paid in Q2.
- A German patent-infringement case brought by Carl Zeiss against subsidiary Luxendo remains pending; Bruker is defending the claim. The company said it had recorded no material accruals for potential contingencies.
Key facts for investors to verify
- Whether supply-chain constraints, inventory growth and customer shipment delays continue to weigh on cash conversion and revenue timing.
- How much of reported growth is sustainable after foreign-exchange effects and acquisitions, and whether margin gains persist amid inflation and planned investment.
- The trajectory of operating cash flow and free cash flow, given the substantial first-half decline and share repurchases, acquisitions and strategic investments.
- Debt repayment requirements, liquidity availability and the effect of currency movements on reported debt, cash and comprehensive income.
- Potential effects of the Zeiss litigation, tax uncertainties and acquisition-related contingent and hybrid liabilities.