Bruker Corporation — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021. Bruker develops and sells scientific instruments and analytical and diagnostic solutions across BSI Life Science, BSI NANO and BEST.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $570.8m (+34.4%) | $424.6m | $1,125.5m (+32.6%) | $848.6m |
| GAAP gross profit / margin | $280.6m / 49.2% | $186.2m / 43.9% | $559.3m / 49.7% | $378.5m / 44.6% |
| Operating income / margin | $85.6m / 15.0% | $37.9m / 8.9% | $174.7m / 15.5% | $54.3m / 6.4% |
| Net income attributable to Bruker | $57.6m | $24.1m | $114.3m | $34.6m |
| Diluted EPS | $0.38 | $0.16 | $0.75 | $0.22 |
| Operating cash flow | Not provided for quarter | Not provided for quarter | $119.9m | $46.8m |
| Free cash flow (non-GAAP) | Not provided for quarter | Not provided for quarter | $72.6m | $(4.0)m |
Q2 revenue increased $146.2m; management attributed approximately $28.7m to foreign currency translation and $1.8m to acquisitions. Organic revenue growth, excluding currency and acquisitions, was $115.7m. For the first half, those contributions were approximately $55.5m and $5.0m, respectively, with organic revenue growth of $216.4m. Management cited strong demand and recovery from the pandemic-affected 2020 comparison. Higher revenue, volume leverage and, for the first half, favorable product mix lifted margins.
Q2 revenue by reportable segment: BSI Life Science $341.8m (+32.6%), BSI NANO $175.3m (+39.7%) and BEST $56.6m (+26.3%). First-half segment revenue was $693.6m (+33.6%), $329.7m (+34.2%) and $109.0m (+19.8%), respectively.
Balance sheet, debt and liquidity
- At June 30, 2021, cash and cash equivalents were $608.1m and short-term investments were $97.9m, versus $681.8m and $50.0m at year-end 2020. Total cash, cash equivalents and short-term investments were $706.0m; $583.2m was held outside the U.S.
- Total debt was $829.3m, down from $844.5m at December 31, 2020. Of this, $108.2m was classified as current, compared with $2.2m at year-end. The filing reports $721.1m of long-term debt, less current portion.
- The $600m revolving credit facility had no borrowings and $599.9m available after letters of credit; total revolving lines, including other arrangements, showed $599.9m available. Bruker was in compliance with debt covenants.
- Current assets were $1,968.2m and current liabilities were $954.6m. Inventories rose to $730.2m from $692.3m.
- Management expects cash and credit facilities to support operating and investing needs for at least the next 12 months.
Material changes and capital allocation
- First-half operating cash flow rose to $119.9m from $46.8m. Capital expenditures were $47.3m, compared with $50.8m, resulting in reported non-GAAP free cash flow of $72.6m versus negative $4.0m.
- Cash and cash equivalents declined by $73.8m during the first half. Financing cash outflows included $71.1m of share repurchases and $12.1m of dividends; investing outflows included $48.0m for short-term investments and $47.3m for property and equipment.
- The company completed its $300m 2019 repurchase program in April and authorized a new $500m, two-year program in May. It repurchased $36.6m under the new plan in Q2; $463.4m remained available at June 30.
- Contract liabilities increased to $415.2m from $399.4m, partly reflecting new obligations and installation delays caused by customer closures or reduced operations. Remaining performance obligations were approximately $1,969.9m; Bruker expected to recognize about 64.9% within 12 months.
Outlook, risks and unusual items
- The filing provides no specific full-year revenue or earnings guidance. Management describes continued recovery and strong demand, but cautions that quarterly results may fluctuate and that interim results are not necessarily indicative of full-year performance.
- COVID-19 remains a material uncertainty: renewed restrictions, new variants, customer-site access and delayed installations could affect demand, shipments and operations. Semiconductor, component and raw-material shortages, including copper, could constrain manufacturing; the filing also cites recent flooding in Germany and Europe as a potential source of disruption.
- Other risks include foreign-exchange and interest-rate movements, commodity prices, changes in government and academic funding, customer spending, and recruiting and retention costs. First-half foreign-currency translation adjustments included a $53.6m loss.
- The effective tax rate was 26.6% in Q2 and 29.5% for the first half, versus 22.7% and 22.3% in the prior-year periods. Management attributed the increase to higher pretax income and jurisdictional profit mix; unfavorable discrete items also affected the first half.
- Other charges were $4.4m in Q2 and $7.4m for the first half, including restructuring, acquisition-related and IT transformation costs. Bruker is defending a German patent-infringement claim brought against subsidiary Luxendo; it reported no material accrual and believes pending proceedings are not expected to materially affect its financial statements. It also notes that governmental investigations could result in penalties or other adverse consequences.
Important facts for investors to verify
- Whether demand, organic growth and margin improvement persist as pandemic comparisons normalize, and whether supply constraints delay deliveries.
- Conversion of the $1.97bn remaining performance obligations into recognized revenue, particularly given customer installation delays.
- Inventory growth, working-capital movements and the sustainability of first-half cash flow and free cash flow.
- Debt maturity and classification details behind the increase in current debt to $108.2m, alongside planned repurchases and dividend funding.
- Future effective tax rates, foreign-exchange exposure, and developments in the Luxendo litigation or any governmental investigations.