Bruker Corporation Aktie

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.

Good day, and welcome to Bruker Corporation's Second 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 Investor Relations. Please go ahead.

Good morning. I would like to welcome everyone to Bruker Corporation's Second Quarter '25 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, 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, August 4, 2025.

We do not intend to update our forward-looking statements based on notion, future events or for other reasons, except as may be required by law prior to the release of our third quarter 2025 financial results expected in early November 2025. 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 and updated thoughts and assumptions around the U.S. and global funding environment and tariffs. Gerald will then cover the financials for the second quarter of 2025 in more detail and share our updated fiscal year '25 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 Second Quarter 2025 Earnings Call. Life Science research instruments markets are under pressure at the moment with expected U.S. second funding headwinds and China stimulus delays for high-end research instrumentation.

In addition, global tariffs, pharma pricing and economic uncertainty in the second quarter have delayed biopharma and industrial research instrumentation investments. This resulted in lower-than-anticipated bookings and revenues in the second quarter. Our Bruker Scientific Instruments, or BSI, segment book-to-bill ratio was in the mid 0.9% range in the quarter, which was not great, but also not too bad.

We anticipate that the third quarter will bring additional visibility on U.S. NIH and NSF funding, both for the remainder of fiscal year '25 as well as for fiscal year '26 for all research budgets. We are encouraged by several recent settlements of disputes between major universities and the federal government, and we anticipate additional settlements to allow the resumption of grants, Fortune scientific and medical research.

On academic and disease biology research, we believe that our unique post-genomic tools will be in significant demand in all geographies and in particular, also when China releases its stimulus budgets for high-end medical research implementation. Moreover, as U.S. tariffs for many major countries and trade blocks get settled in early August, we believe that global biopharma, industrial and semiconductor companies will accelerate their investments in next-generation drug discovery and development systems as well as in research and quality control tools for advanced materials, clean tech and semiconductor research and production.

We are observing where U.S. tariffs on Swiss imports will settle, and we anticipate that ultimately, it will not be at 39%, the rate communicated last week. In a worst-case scenario for Switzerland, we intend to leverage our other European Union and U.S. factories for products designated for the United States market. Bruker is poised to zoom above market growth, particularly in the next-generation systems needed for disease research and drug discovery in view of the greater biological complexity revealed by the emerging post-genomic view.

Similarly, the enormous investments in artificial intelligence are very beneficial for our advanced and often unique semiconductor metrology tools. Finally, we have strong positions in microbiolind infection diagnostics with an exciting road map of medically needed and differentiated capabilities. Back to our second quarter, the stronger-than-anticipated organic revenue decline, coupled with higher U.S. tariffs and stiff currency trade winds from a decline in U.S. dollars cost margins and profitability to come in below our expectations.

On our first quarter call, we discussed our mitigation are mitigating price, supply chain and cost measures, but these take 2 to 3 quarters before they fully benefit our operating results. Today, we are announcing a significantly expanded cost savings initiative that is expected to reduce our annual costs for fiscal year 2026 by $100 million to $120 million annualized. These major cost reductions affect all parts of our business from supply chain and manufacturing to our commercial, administrative and R&D investments.

These are difficult but necessary decisions to rightsize our cost structure to match the trough demand levels currently seen in the market. As a result of our weaker second quarter performance, we are lowering our guidance expectations for fiscal year '25. We now expect approximately flat constant exchange rate revenue growth and organic revenue decline to decline minus 2% to minus 4% for the year with a mid-teens percentage non-GAAP EPS decline year-over-year.

Looking beyond 2025, even in a muted revenue growth scenario in fiscal year '26, it is our intention to deliver very significant margin improvement and double-digit EPS growth just based on our major cost reduction initiatives. If there also is a partial growth recovery in advanced life science research and drug discovery tools in fiscal year '26 then this could provide additional tailwinds.

Beyond 2026, we expect to return to our stated goal of organic revenue growth, 200 to 300 bps above market which we delivered many years in a row and with rapid margin expansion and double EPS growth once academic, trade and economic uncertainty ads. This is driven by our exceptional innovation in next-generation disease research and biopharma drug discovery tools for the post-genomic era.

This is also driven by other UC-specific growth drivers for semiconductor metrology for the AI revolution to unique applied and diagnostic solutions. Turning to Slide 4 for our Q2 '25 performance. As I just detailed in the second quarter of 2025, we faced delays in many end markets, most notably, biopharma and industrial, which drove both the top and bottom lines to come in below our expectations.

Group second quarter '25 reported revenues decreased 0.4% year-over-year to [ $797.4 million ], which included an FX tailwind of 2.9%. On an organic basis, revenues decreased 7.0%, which included a 7.2% organic decline in BSI a 4.8% organic decline at BEST, net of intercompany eliminations. Revenue growth from acquisitions added 3.7%, which implies a constant exchange rate CER revenue decline of 3.3% year-over-year.

Book-to-bill in the quarter was in the mid-9% range. Our second quarter -- sorry, our second quarter 25% non-GAAP operating margin was 9%, a decrease of 480 bps year-over-year as lower revenue absorption, additional tariff costs and currency headwinds were only partially mitigated in Q2 by our earlier cost and pricing actions.

In our second quarter '25, diluted non-GAAP EPS was at $0.32, down 39% from $0.52 in the second quarter of 2024 on organic revenue decline, impact of tariffs and in exchange headwinds. Gerald will discuss the drivers for margins and EPS later in more detail.

Moving to Slide 5. Our first half 25 revenues increased by 5.0% to $1.60 billion. First half organic revenue declined 2.3%, consisting of a 1.4% organic decline in Scientific Instruments, or BSI, and an 11.5% organic decline at BEST, net of intercompany eliminations. Our first half 2025 non-GAAP gross and operating margin and GAAP and non-GAAP EPS performance are all summarized on Slide 5.

Please turn to Slide 6 and 7, where we highlight the first half 2025 performance of our 3 scientific instruments group and of our BEST segment, all on a constant currency and year-over-year basis. In the first half of '25, BioSpin Group Revenue was $103 million and was roughly flat year-over-year. BioSpin saw contributions from NMR, preclinical imaging and lab automation, while the scientific software business was soft.

BioSpin saw weakness in biopharma revenues and softness in orders both in academic and applied markets. For the first half of '25, CALID Group revenue of $56 million increased in the low teens percentage with strong growth in microbiology and infection diagnostics driven by the MALDI Biotyper and Molecular Diagnostics business. Our applied mass spectrometry business saw robust growth, which offset some softness in the life science mass vectometry business.

Turning to Slide 7 now. First half '25, Bruker Nano revenue was $509 million and grew in the low single-digit percentage. Spatial Biology contributed growth in the first half of '25, while revenues from advanced x-ray were down year-over-year. Strength in BiPharma was partially offset by weakness in industrial markets.

Finally, first half 25 'BEST revenues declined in the low teens percentage, net of intercompany eliminations, due to softness in the clinical MRI market as well as a strong prior year comparison for the research instruments business. Moving to Slide 8. We highlight some of our recent innovations in the second quarter at ASMS obviously, an almost unprecedented lineup of new and market-changing instruments from our [indiscernible] product line as well as in Nano LC I won't go into these in detail today, but they significantly enhance our competitive position in traditional bottom-up proteomics, while also getting us in ushering in a new era of functional proteomics and proteoform analysis with the Tims omni. We had very good orders since ASMS already. And finally, a very serious play in benchtop metabolomics with the Times Metabo launch with very high sensitivity and because of the 4 dimensions and unprecedented annotation continence being very well received in the market.

Let me move to Slide 9, probably the key theme for today, how are we navigating through this macro and research instruments weakness. You are aware of the U.S. academic funding disruption for high-end research instrumentation for academic and medical research, China stimulus continues to be delayed, although our customers remain optimistic for release in the second half.

And in the second quarter, we saw that drug discovery and industrial research tools saw CapEx delays and weakness in both of these segments. We're looking forward to more visibility and on what time frame still recover once tariffs and other items settle in. We also had more tariff and FX cost headwinds so a lot of headwinds in the second quarter.

We focus on our industry-leading innovation and continue our strategy to reaccelerate growth and enhanced market share in the post-genomic era in academic and medical research but also very much in biopharma drug discovery tools when they come back. Very importantly, we're broadly expanding our cost reductions, which we had begun previously, but we're expanding those with a goal of $100 million to $120 million of annualized cost reductions to improve margins and profitability, and we're obviously looking for a very significant step-up in fiscal year driven just by the cost reductions and hopefully some emerging recovery in the markets.

Of course, we are seizing new opportunities in spatial biology and multiomics, our very large growth drivers even if they're muted at the moment as well as new growth drivers in lab automation, scientific software, India improving semiconductor metrology for AI being an incredible opportunity, emerging growth in European chemical and explosive detection, airport security, airline security, and finally, our industrial research business in clean tech, batteries, Fusion, and we are adding to our consumables business organically and inorganically.

To wrap up, the second quarter was a challenging one for Bruker, and we are aggressively executing on our expanded cost reduction initiatives with the goal of delivering strong margin expansion and EPS growth in 2026 even in a flat to low growth scenario. We are, however, cautiously optimistic for fiscal year '26 partial recovery and point to Bruker's successful track record of rebounding very strongly from previous market disruptions in 2008, 2009 and in 2020, a from which Bruker emerged with multiple years of double-digit organic revenue growth in each scenario.

We remain confident that Bruker's innovation engine will continue to drive differentiated high-value solutions in attractive markets. Our culture of disciplined entrepreneurialism and our Bruker management process will position us well for sustained financial success in the years to come. Let me now turn the call over to our CFO, Gerald Herman, who will review Bruker's Q2 financial performance and updatefiscal year '25 outlook in more detail. Gerald?

Thank you, Frank, and thank you, everyone, for joining us today. I'm going to go through more detail on Bruker's second quarter and first half 2025 financial performance, starting on Slide 11. In the second quarter of 2025, our results came in below our expectations on both the top and bottom lines.

In the second quarter of 2025, Bruker's reported revenue decreased 0.4% to [ $197.4 million ], which reflects an organic revenue increase of 7% year-over-year. Acquisitions contributed 3.7% to our top line, while foreign exchange was a 2.9% tailwind, resulting in constant exchange rate, revenue decline of 3.3% over year.

Geographically and on a year-over-year organic basis in the second quarter of 2025, our Americas revenue declined in the low double-digit percentage. European revenue also declined in the low double-digit percentage while Asia Pacific revenue grew in the low single digits percentage despite a low single-digit decline in China. For our EMEA region, revenue was up high single digits percentage. BSI organic revenue declined 7.2% in the second quarter of 2025 with organic declines in all groups.

CSI Systems declined roughly 10% and BSI aftermarket revenue was flat organically year-over-year. Our order book performance in the BSI segment was down organically in the high single-digit percentage year-over-year, with softer academic government research orders in most geographies and a significant decline in BioPharma orders in the U.S.

Non-GAAP gross margin decreased 270 basis points to 48.6%. And Q2 2025 non-GAAP operating margin was 9.0%, impacted by weaker volume ridge unfavorable mix, tariffs and foreign currency. On a non-GAAP basis, Q2 '25 diluted EPS was $0.32, down 38.5% from the $0.52 we posted in the second quarter of 2024.

Our EPS performance was significantly impacted by the decline in the U.S. dollar in the quarter, which resulted in a $0.06 headwind. Our non-GAAP effective tax rate was 23.6% compared to 28.4% in the second quarter '24, with the decrease driven mostly by a favorable discrete item in the quarter. On a GAAP basis, we reported diluted EPS of $0.05 per share, flat compared to the second quarter of '24. Weighted average diluted shares outstanding in the second quarter of 2025 were $151.7 million, an increase of 3.7 million shares from the second quarter of '24, resulting from our follow-on equity offering in May of 2024.

Slide 12 shows Bruker's performance for the first half of 2025, which has similar drivers to the second quarter. Turning to Slide [ 14 ] now. During the first half of 2025, we had a decrease in operating cash flow of $85 million, driven principally by the timing of tax payments and other items.

We had a modest year-over-year increase in capital expenditures in the first half of '25, which resulted in a free cash outflow of $110 million in the first half, '25 million. Given the challenging market conditions, today, we announced the expansion of current cost-saving initiatives intended to take $100 million to $120 million of annualized costs out of the business. These actions across all business units, geographies and all functions within Bruker.

This expanded cost program is already underway, but the majority of savings is expected in fiscal year 2026. These cost actions are expected to contribute approximately 300 basis points of operating margin improvement in fiscal year '26, even under flat or muted market demand conditions.

Turning now to Slide 15. We're updating our full year 2025 outlook to reflect Q2 results and current market tariff and foreign exchange headwinds. Our outlook for fiscal year '25 now [indiscernible] revenue in a range of $3.43 billion to $3.50 billion with an organic revenue decline of 2% to 4%. Contribution from acquisitions is expected to be approximately 3.5%, and we now expect a foreign currency tailwind of 2.5% on the revenue line. That leads to updated reported revenue growth guidance in a range of 2% to 4%, with approximately 0.5% constant exchange rate growth year-over-year.

For operating margins in 2025, given softer market conditions, we now expect lower organic revenues, expected M&A dilution and tariff on foreign exchange headwinds to lead to an approximately 210 basis point decline in operating margins year-over-year. This anticipated full year 2025 operating margin decline consists of headwinds of 40 basis points from 2024 M&A activity, 60 basis points from tariffs, 90 basis points from foreign exchange as well as a 20 basis point decline in organic operating margin.

On the bottom line, our updated fiscal year 2025 non-GAAP EPS is expected to be in the range of $1.95 to $2.05, which implies non-GAAP EPS down 15% to 19% compared to fiscal year '24. The midpoint of our updated EPS guidance is down $0.44 from our previous guidance. primarily driven by roughly $50 million decline in expected fiscal year '25 revenue associated with the present trough in global academic biopharma drug discovery and industrial research instrument markets as well as a higher foreign exchange headwind than previously expected of an additional $0.05.

We expect a very significant EPS rebound in fiscal year '26 based on our significant cost-cutting initiatives with or without meaningful revenue growth. Other guidance assumptions are listed on the slide and our fiscal year '25 ranges have been updated for foreign currency rates as of June 30, 2025. With respect to the third quarter of 2025, we expect relatively weak organic revenue performance again, mid- to high single-digits percent decline year-over-year in the third quarter of 2025.

On EPS, we expect GAAP EPS for the third quarter of 25 to be similar to EPS in the second quarter of '25, with a reacceleration EPS expected in the fourth quarter. To wrap up, market tariff and foreign exchange headwinds impacted our second quarter of '25. We remain cautiously optimistic about the fiscal year '26 partial recovery in research instruments and are very committed to significant margin expansion and EPS growth in fiscal year '26and beyond. And 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] The first question comes from the line of Puneet Souda with Leerink Partners.

First one on the guide. I understand the magnitude of cut. But maybe just given the backdrop of the market, could you parse out why is the backlog, which has been strong, why is that not helping this year? And how should we think about -- you talked about book-to-bill, but how should we think about the recovery here in the fourth quarter, given that's an important quarter for -- from an instrumentation perspective?

And then on fiscal '26, Gerald talked about the recovery there? How should we think about fiscal '26? I know it's a bit early, but I would love your thoughts there.

Thank you, Puneet. So backlog, we are using our backlog to some extent, obviously, you can't accelerated it will, as in delivery times, production and delivery times are very much planned and locked in by the customers also. Our backlog has come down slightly from 7 months to 6.5 months.

So we are [indiscernible] in using that. Yes, we think it's actually our Q4. I know Q4 has a bit of a ramp, but we're actually feeling pretty comfortable with that with all of our financial planning. I think that looks doable. And as we -- as Joe has [indiscernible] in Q3, we think we'll be somewhat weak. A little too early to talk about '26. We just wanted to make sure that even in a no-growth scenario, we can deliver very significant margin expansion and EPS growth whether next year will be no growth or a partial recovery of a few percent growth. We don't have the visibility yet and we hope to gain that in the next 1 or 2 quarters. Obviously, a lot of things -- a lot of moving pieces still, especially when it comes to U.S. federal budgets.

Got it. And then on the UHF magnets, I didn't apologize if I missed this. I would love to know if you're expecting that any in the third quarter or the fourth quarter? And there's a recent acquisition in the space of the BB assets. That channel sells your multi biotyper? Do you expect any impact on the MALDI and the sales from that, obviously, that's an LCMS company that acquired those assets. So

Presently, ultra-high field. We don't expect an ultra-high field revenue recognition in the third quarter. We do expect one in the fourth quarter on that topic. Then you're talking about the BD microbiology business being in an acquisition process is that what Yes. So obviously, we'll -- yes. I don't know because, obviously, if water closes that in early '26, we'll see what their intentions are.

Keep in mind that in these diagnostics businesses that, quite honestly, the little benchtop MALDI 10% and 90% is the all the assays, all the content, all the regulatory approvals and all. So we can only observe that when Danaher, which has the SIMs divisions, when they acquired Siemens Microbiology, they continue to work with us on the Beckman Coulter Diagnostics business in an excellent manner going forward.

And we're attempted by, hey, we can build a mass spec. Anybody can build a mass spec to the MALDI Biotype of franchise that has worked extremely well with Ed. Hopefully, that will continue. But we don't have any -- until that closes we will see in 2016, I guess. If someone -- if someone wanted to develop something like this, it would be a very, very large 5-year investment. And by that time, of course, we're moving on. So anyway, but it's -- it would be speculative. Quite honestly, we don't expect it, but we don't know.

I would point out that we obviously sell more than how our MALDI Biotypers ourselves directly. So if at some point, a channel was no longer able I think we could handle that very well. .

Next question comes from the line of Tycho Peterson with Jefferies.

Frank, I want to push on the cost outs. And really, the idea is earnings today are 30% below where they were 90 days ago. And then only $0.05 of that is FX. I know you're protecting the P&L now, but a couple of things. I guess did you initiate some of these costs out sooner. And are you committing to the $100 million to $120 million revivers even if the top line does start to come back?

Good questions, Tycho. So we did start earlier early in the year when -- before any of the headwinds appeared, we had an initial savings program where we just try to grow our -- expand our margins more than what we had guided to initially.

And we had planned an additional $25 million -- and new $25 million cost savings plan. We then -- when the tariffs began to appear, we expanded that to $50 million plus in a second phase. And which is good because most of the cost savings are kicking in next year, but about $30 million of cost savings are kicking in our -- and are part of our guidance for fiscal year '25.

So the bigger effect will be in '26 admittedly, but at least we do have 30 -- about $30 million of cost savings in our fiscal year '25 guide. To the last point, Tycho, yes, we are completely committed and dialed in for the $100 million to $120 million in cost savings. We hope to be at the upper end of that, and that's going to -- we expect that to happen independent of market conditions or recovery, if that gives us in a flat scenario of 300 bps of an improvement next year, that's great.

And if the growth comes back, we don't expect it to snap back fully, but comes back partially wonderful, then we can deliver more margin expansion and EPS growth. But we're completely committed to that, yes.

Okay. And then on the growth side, if I go to our conference in June, you had effectively committed to 4% growth in '26. Now it seems like you're not wanting to go there. Maybe just talk about what has really changed in the past 2 months here on the growth side? And then maybe just before I jump off, one for Gerald on leverage, over 4 turns, but the covenant is 3.5 turns. Can you maybe comment on that dynamic as well?

Okay. I'll take the first part. So we were indicating at your conference that we didn't expect growth in '26 to come back to more traditional for us, 6% to 8% levels. And at that point, we were a little bit more optimistic that it might be -- and maybe it wasn't a commitment to that, but we were speculating, it could be 2% to 4% organic growth next year.

What has happened is that somewhat as expected, the U.S. academic and China academic stimulus is not flowing yet. That was somewhat expected and expected, I think when we saw you at your conference, the additional U.S. biopharma weakness in [indiscernible] was for high-end drug discovery research instrumentation, I know it doesn't take all companies equally, but for research instrumentation, we saw a significant slowdown there. And we'll see whether once tariffs settle and some of the other political supplements kick in, whether that's additional headwind goes away or abate in the second half of this year.

And that will, of course, in part, drive '26. We also saw because of the economic uncertainty that's certainly our interpretation. We saw general Europe, U.S. and China weakness in industrial research instrument investments. So that was also something that became clearer in the second half, which is why we're more muted in our -- we don't have growth expectations for '26, but we do want to be realistic and ready for a no-growth scenario.

That's not our expectation. We don't have an expectation yet, but I want to make sure that we can do the significant margin expansion and double-digit EPS growth even without growth, at least, my words are even without growth, we hope for some modest growth or partial recovery. We don't know. We don't -- we cannot give guidance for '26 of what that might be.

And Tycho, on your question regarding leverage ratio, we don't comment specifically on ratio dynamics quarter-by-quarter. I mean I can tell you that we have satisfied our debt covenants for the first and second quarters of '25. And we have a target, as I think we've discussed directly in around that 2.7 range, and that's what we're working towards.

Over several years, right now.

Next question comes from the line of Brandon Couillard with Wells Fargo.

Gerald, just a follow-up there. Could you unpack the free cash flow burn in the second quarter? How much was onetime? And what you -- what are you expecting for operating cash flow in the second half? And why is it CapEx coming down by a larger degree?

Sorry, I wasn't sure, I caught the last part of your question.

How is the CapEx coming down?

Why is the CapEx coming down?

Yes, I think our CapEx -- let me just add the last part of your question first. The CapEx is plan to scale down. We have dialed that back for the third and the quarters. I mean we do typically have programs that are already in motion for the first and second quarters, and that's why you see the CapEx levels where they are.

And on the cash flow, Brandon, yes, we did have a couple of what I would describe as a new outflows in the second quarter related specifically to some tax payments, which we highlighted, those we don't expect to recur. So those will -- we expect to get back to a normal cash flow.

And Brandon, those are sizable for $50 million to $60 million, including some tax payments for -- that are prepayments, some of which we expect to recover. But yes, there were some sizable tax payments in the second quarter.

Okay, helpful. And then Frank, I think Gerald said BSI aftermarket was flat in the quarter. Can you kind of unpack what you saw between diagnostics and maybe some A&G customers? And just a surprise to see the aftermarket utilization kind of flat in the quarter.

That granularity we do not have. Obviously, the Diagnostics business has been growing very nicely sort of according to plan, although placements for the ELITech molecular diagnostics business, which you don't see in revenue placements, new platforms going out there generate future revenues but placements there.

That's one of the highlights of the quarter or for the first half of the year are way ahead of our plan. So the ELITech business in placements is doing great. And in terms of growth and margin expansion, it's according to plan. So that gives an indirect partial answer to what you're saying, namely there, of course, 80% or 90% consumable space.

And they are as well as the multi-biotyper consumables are doing well. Therefore, aftermarket in other segments was also down partially, but we don't have granular percentages on that. Hope that helps.

Mr. Couillard, are you done with the question?

Yes.

Next question comes from the line of Luke Sergott with Barclays.

Just wanted to talk a little bit about like the underlying dynamics as you think about that more muted growth in the '26, particularly around China from peers right now that they're starting to see some of the stimulus flow-through. So have you guys started to see any of that? And then as you think about those dynamics in the '26 on more muted growth?

Also following hip here on Tycho's question, but kind of is that just assuming the current market environment just continues there, just to figure out like if China should start getting better, what would -- in that more muted growth scenario, what's getting worse?

Well, a muted growth scenario in our -- maybe muted growth scenario is still a growth scenario. Right now, we're seeing a decline in our scientific and industrial and biopharma research markets. So a muted growth scenario and a no growth scenario next year would be better than the headwinds that we're observing right now.

We don't mean muted growth scenario, meaning a decline next year, at least at this point, that's not what we're anticipating. So maybe with that clarification, we also do not expect a market growth for us a 6% to 8% organic growth snapback next year hopefully, we'll get there by '27, but let's not comment on that one right now.

China stimulus, for high-end research instrumentation, we have not seen those releases yet. We've seen reasonable tender activity in China lately, including into July, but that wasn't necessarily the high-end mules funding. There was just normal China activity, which maybe is getting a little bit stronger -- our Chinese customers that are looking for shovel-ready large projects that include NMR and mass spec and a high end microscope remain very optimistic that this is just a question of time until the province is released it perhaps once there is greater clarity or maybe there is greater clarity there may not -- that there's probably isn't going to be an all-out China-U.S. trade during that time.

We think the province is held back to see whether they needed a rainy day fund. Anyway, so tristimulus not released yet for our high-end research instrumentation and remarkable optimism by the customers that it's going to happen. We just don't know exactly when. We do also expect that as tariffs settle in and the new economic world order is emerging for trade that CFOs in major industrial and biopharma companies will be less reluctant to release CapEx investments because they do need the research capabilities, whether it's industrial materials, semiconductor or, of course, drug discovery.

So in that sense, we expect an improvement in '26 compared to '25, but we cannot quantify it at this moment. Having said all of that, and we don't want to rely on that improvement even with no growth, we expect to deliver the 300 bps or greater margin improvement. That's the [indiscernible] .

That's the -- Okay. Great. And then first -- when you -- we talked about this a little bit before about with the NIH and the -- or the U.S. academic funding issues? How you ultimately kind of see this shaking out whether it's more of a democratization from the coast or from the IV to the high end users of the institutions going more towards like state systems and things like that.

So are you starting to see -- do you have an update on how you kind of see this ultimately playing out with the funding releases and over the next few years?

We have -- we can read some tea leaves yes. So I think I don't think NIH budgets will be flat or up. I don't think they'll be down 40%, either data for NSF or DOE research or so. We assume that the deal will be that they'll be down and we're if they're down 20%, that's not unrealistic from what we're expecting, but maybe they're only down 10%, we shall see.

So that's the bigger picture. The other trend that you've mentioned that this is not only temporarily, but longer term going to be a more level-playing field away from the coast or also investments that aren't primarily in Massachusetts and Northern California. I think that trend -- political trends, I continue to see. So I think some very excellent universities elsewhere may be able to get a bigger piece of the pie. And this is even after some of the already announced and potentially pending settlements of the government with some very well-known universities.

We do see NSF for '25 calling for some final presentations on big-ticket NMR items. I don't know whether -- what they will do with that and whether there is then '25 funding that may still come through even while we're mostly focused on '26 budgets, there are some encouraging signs.

We -- a couple of things went through with NIH budgeting and the customers got ordering from us 2 days later. But it's not needle moving yet. So it's early days, and we don't have clear visibility yet there are some signs that maybe the worst of the academic funding crisis would be over soon. but we do not expect the snapback to the full growth rates we had previously.

Next question comes from the line of Subu Nambi with Guggenheim.

I had a question on 2025 guide itself. If the cost savings aren't hitting until 2026 and heads into EPS is getting worse with FX. How are you thinking about the second half, just given the soft orders in the quarter? .

Subu, good question. So we do we do think that of our cost savings for the full year, $25 million, about $30 million of cost savings will begin and will benefit us this year. They are being overwhelmed by the headwinds from the previous M&A from the organic decline of 2% to 3% -- 2% to 4% that we're now projecting as well as currency interest but they are meaningful that just to a bigger they're kicking in to a much greater extent than in 2026.

And of course, we've only recently within the last several weeks have expanded our cost-cutting initiative very significantly and more than doubled it from what we had previously already and to core tariffs. Did that answer your question or did I miss something Subu?

No, that did Frank, I was just hoping for some more granularity in terms of the bridging between revenue and EPS to hit the 4Q ramp. What's partially definitely answer the question.

Subu, it's Gerald. I'll just add, Frank's referenced to that $30 million, the bulk of that is going to hit for fiscal year '25 in the fourth quarter. So we're -- and then the remaining larger majority of it's going to hit in fiscal year '26.

So we are seeing some improvement in our guide expectations around the fourth quarter versus the third quarter just to help you with respect to that.

Next question comes from the line of Dan Brenon with TD Cowen.

Maybe just on NAH Frank and Gerald. Frank, you're obviously the largest U.S. academic government player amongst the large tools so you should have, I think, more skin in the game in view here. So kind of you're thinking about down 10% to 20%, we'll see where things land in 2026. But I think there's been more optimism. I think, has been raised here given the seman appropriation, saying up 1% and focusing that CR could be likely. So I'm just wondering when you think down 10% to 20% kind of, a, what's the mechanism to get there; and b, if things were better, would you expect your customers would spend that money? Or what does your commercial team think about with AB reticent just given recisions and things like that?

So the 10% to 20%, I want to be -- I don't have an expectation. There's been too many surprises to have an expectations of fiscal year '26 budgets. I know the Senate Committee marked it up and had a small increase and the administration was initially setting from a 40% decrease. I just want to be prepared for NIH budgets being down 20% for '26 and deliver the margin expansion.

For this year, fiscal year '25, we expect U.S. academic government to be up 20% to 25%. That's what we see at quarter already. So this is a fiscal -- this is our calendar year '25. And that plays out above, as we said, so far, it's down about minus 15% for the first half of the year. And so by for the full year '25 calendar year for us.

U.S. academia being down 20%, 25%. It seems like a realistic expectation. I think we -- I don't think it's kind of worse than that. So funding is still blowing. And then for next year, as I said, I have no predictions. I've stopped making predictions there. I just want to be prepared for a 20% fiscal year '26, government fiscal year '26, NIH budget reduction. And if it's better than that, I'll be delighted. And we can more can flow through our bottom top and bottom line in '26 -- I think customers will spend in a heartbeat. If they get grants, they can't give the grants to the universities who are struggling otherwise financially. When they get specific grants, I think they'll order in a heartbeat.

That's great. And then maybe just 1 on the backlog and kind of bookings. Obviously, the book-to-bill is on weak now for, I think, 4 or so quarters. Can you just remind us in a given year, what percent of your revenue growth comes from that backlog, what's book-and-bill? I think there's been some concern like could broker even grow in '26 just given you had 4 consecutive quarters of weak book-to-bills, but obviously, bookings turn up and that would support growth. So can you just walk through a little bit of kind of the visibility and the mix between conversion and kind of new turns?

Yes. I mean we now have aftermarket consumable service offer of more than $1 billion. So it's become a significant -- it's become a meaningful part of Bruker that, of course, tends to flow -- turn into revenue pretty much in the quarter when it gets ordered.

We also have smaller benchtop and some hundred thousand dollar scientific instruments that very often achieve revenue in the same quarter within 2 or 3 months so they get ordered. So some things, maybe there is some part of our revenue that turns more quickly. And then there's, of course, some revenue were sometimes some -- order to revenue can be 18 to 30 months or so.

So we have that mix. So our backlog is still elevated at 6.5 months. This is the -- this is the backlog of 6.5 months. We expect that eventually to level out with a new mix as we have more consumables, more ELITech things like that, more now, we added some metabolomics consumables and some therapeutic drug monitoring consumables with some recent smaller acquisitions. So we expect that 6.5 months eventually to go down to about months of backlog as a new normalized level. So we still have some cushion from backlog for the second half and for next year. But of course, we also need the bookings.

Next question comes from the line of Patrick Donnelly City.

Can you tell us a little more on the second half cadence. The 4Q step-up still seems pretty steep. I mean, I think if you're talking about 3Q looking at similar earnings, call it, $32 an impact around $0.90 in 4Q. And again, the revenue kind of step up with that. So I just want to talk through the visibility into that 4Q number, if impact things are maybe getting a little more challenge in at the end of the quarter. So can you just talk about visibility and confidence in that 4Q ramp?

Yes. Patrick, it's Gerald. I'll take this, and Frank may want to add some more color. So just generally, in terms of the scaling we're graduating the fourth quarter, as you already know, our fourth quarter is really not a quarter. It tends to be more like a 30% of the -- another on an annualized basis.

So we do see a more significant ramp historically. And I -- we have no reason to believe that, that will not happen. And fundamentally, I would also say, as I mentioned earlier in the comment to Subu, we do have some cost savings that are going to get kicked into the fourth quarter that's already planned and scheduled.

So we're pretty confident that you're going to see a pretty significant lift in the operating margin and EPS performance for the fourth quarter. I think your math, as usual, Patrick, is not terribly far off what our estimates are for the fourth quarter. So that's kind of the -- I'd say at a high level, our expectations are still some flat to down revenue growth for the fourth quarter given the market conditions, but improved profitability given the scale.

We get -- as you all know, we get significant leverage down to the bottom line on higher volume -- and the expectation is...

And this is just typical for us. We tend to have pretty huge for us and every year we do and then some often, it's even better than what we had anticipated to our fourth quarter pattern. So we feel comfortable with the cadence.

Two more questions perhaps.

Next question comes from the line of Josh Waldman with Cleveland Research. .

Two for you. First, Frank, on the academic, I think Gerald mentioned softer academic orders in most geographies. I wonder if you could comment on what you're seeing in Europe. Is that market getting worse on the academic side? Or -- and I guess, more broadly, are there other geographies that stepped down unexpectedly.

And then within the U.S. academic environment, I wondered if you could talk on the timing of potential revenue recovery? I mean how long would it take to kind of work through the softer order book to flush this kind of through the revenue side or cash epidemic...

On the epidemic side, when would you need to see a recovery in orders for that to show up, yes, in revenue into the hit '26.

Yes. Yes. So clearly, on the academic orders, the 2 bad guys are the U.S. and China for us. That's where we have the most pronounced reduction in orders in the first half from the academic -- and academic research market. Europe, rest of APAC that just fluctuates up and down. There's really no trend that's discernible there. Q2 wasn't strong.

But I don't -- I think that's -- if you look at it then over several quarters, then -- it's the U.S. and China that I think are crucial in academic side. How long -- well, obviously, with less backlog, we can now do faster deliveries. So there are some products, ultra-high field NMR or very large stem microscopes or so that indeed sometimes take 1 or 2 years to deliver.

But it's a '26 story even if orders came in and August, September. And I don't expect a lot of -- I don't expect that necessarily. There could be some U.S. orders come through before the end of our fiscal year at the end of September. There's a possibility of that. By now, these are higher-end systems. This will go into '26 so I don't think there is any step-up to be expected in '25 anymore.

And then, Frank, on tariffs. I'm curious if you think you're seeing gets negatively impact your competitive position and new opportunities at all. I'm thinking on the price or surcharge front. Does it seem like customers they're holding off on placing orders because of price increases or surcharges or maybe even looking to other suppliers?

Yes. If I look at each of our market segments in facial biology, main competitor sets were U.S., NMR, main competitor is Japanese where European Union ended up at a level playing filled with the new tariffs. In mass spec, a lot of the other Masset companies manufacture in Europe, also in Germany, in Singapore and so.

And you go down the line, x-ray, et cetera. It turns out that there hasn't been a significant distortion competitively from the new tariff picture. Again, we're still observing Switzerland. That's obviously a somewhat of a pathological number at the moment. We expect that to be less and maybe be more in line with what we have in Europe or from Malaysia and either way, in an MRI.

In MRI, we have the most flexibility to say, okay, I mean, almost immediately could turn a dime and say any of these systems for the U.S. market come from Germany or from France, where we have large far factories. So there, we could move very, very quickly if come August 7, that Swiss number was still extraordinarily high for a while. So the short answer would have been, we think it's -- we think there is no competitive shifts based on that. It's just a cost headwind.

All right. I have one more question, and then we'll wrap things up for today.

Next question comes from the line of Rachel VatnsdalBatista with JB Morgan.

This is Markus Arena on for Rachel from JPMorgan. I just wanted to clarify your comments on tariffs just now. What are you assuming in your guide for those tariffs at this point? Are you assuming 39% or something lower? And perhaps more broadly, if you could give more color on your updated tariff assumptions given the changes in swift tariffs but also European tariffs.

Yes. We're -- for the European Union and Israel, we're at 15%, where Malaysia, we're at 19%. Switzerland, we're presently modeling at 15%. In a worst-case scenario that we didn't shift supply chain, and it was 39% that could be an additional 10 million hits that we presently don't have here, but we think that's just not going to happen.

A, we think the number will be lower and b, in that case, we'll just not ship from Switzerland. We will build our and which is primarily an NMR story and make them in Germany or France. So that's why I think our modeling is appropriate.

Thank you. This concludes our question and ask session. I would like to turn the conference back over to Joe Koser for closing remarks.

Thank you for joining us today. Bruker's leadership team looks forward to meet you at an event or speaking with you directly during the third 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.

We're going to kick it off. I'm Tycho Peterson. It's my pleasure to introduce Bruker.

Frank, maybe just to kick it off, came out of ASMS earlier this week, the biggest conference for you guys for the mass spec side of the business. Maybe just talk a little bit about some of the highlights there. You've got a couple of new product cycles that could be pretty meaningful.

Yes, indeed. Thank you, Tycho. A pleasure to be here. Thank you for all hanging in there. It's post 5:00 somewhere. So yes, we just came in from Baltimore late last night. That's, of course, where the ASMS was and still is going on. And it was the most important set of product introductions and innovations from Bruker, actually, I think, at the conference period, but also from Bruker since 2017 when we introduced the timsTOF for bottom-up proteomics to begin with.

We introduced many additional solutions and software and chromatography. I won't go into that. But we introduced 3 major new products, all related to our timsTOF platform which is really foundational for a lot of this multiomics and other applications. And I'll put them into 3 market categories for you that may help you. So it's not just technology and applications. So the first one is in the traditional bottom-up proteomics. That's what we call proteomics. It's all bottom up, meaning you digest your proteins, you take the peptide to tryptic peptide fragments, you stitch them back together with software. That's what we generally call mass spec-based proteomics.

We and Team Red are sort of a 2-horse race there. They've done some innovation. We launched a new product called timsUltra and AIP. AIP is a new Bruker name for an Athena Ion Processor. Don't worry what that is. It was developed in Athens, Greece by a very capable team that we acquired a few years ago, and it improves MSMS sensitivity and bandwidth and gives you more peptides and proteins.

Is that still important? I mean more protein groups is always good. We showed together with one of the new LCs that another smaller company brought to the market, the Evosep, some very high throughput towards 500 samples per day, and that's all good. I would call that on the tech proteomics, as you can tell from publications and the market is growing beautifully. But the technology is now getting a little bit into the technology S-curve is flattening again. So you have more throughput, more samples per day, more protein groups. We do all of that.

The one area where the timsUltra AIP is still really differentiating itself, and I think it makes a difference is sensitivity. So sensitivity, it's further improvement. I think it's already the most sensitive instrument out there. It's predecessor and now it's even more so. For instance, in single-cell proteomics, years ago, we were amazed that we could do proteomics on a single HeLa cell, a cancer cell line. Today, those -- we cannot go to small bacterial to small immune cells. One collaborator even did precursor red blood cells, which are tiny. They're something like 25x smaller than the big fat HeLa cells. And yes, we can do proteomics on all of that now. We can also do subcellular proteomics.

So in that space where that has advanced so rapidly and become much more than a niche, it's become a major subfield of proteomics, we can -- pushing further actually does make a difference. I'll give you one other example, and then I'll move on. In immuno-oncology, people take fine needle aspirates from individual patients. You don't get a whole lot of cells. And if you -- if that is enough cells to do the neoantigen discovery with a field called immunopeptidomics, which we do very well on our instruments, we can do that even better and now we can do it on patient-relevant sample and cell numbers that come out of fine needle aspirate. So this really facilitates these wonderful promising approaches to go into individual patients, clinical research, at least in clinical trials. So sensitivity still matters. But for us, this tims -- proteomics timsTOF business is about a $200 million business. It's a 2-horse race. We're innovating very significantly. Team Red also had some nice new introductions.

Then we took -- leveraged this TIMS technology for an even larger market that is more competitive, a little bit more red ocean, as I would call it. And that is the high-resolution, accurate mass market for small molecules that has applied markets such as PFAS research or novel psychoactive substances or therapeutic drug monitoring and environmental and applied and toxicology applications. It's a huge market. And on the other hand of that is the omics market, which is metabolomics, lipidomics. We estimate that, that market is another $1 billion market opportunity, in which we so far have only -- we didn't have a dedicated instrument. So we have a very minimal presence in that.

That's a busy market. Thermo, SCIEX, Waters, Agilent are all in it. Who needs a fifth player. We have some very importantly differentiated new product offering with the, what I call, game-changing timsMetabo instrument that we launched. That's a benchtop instrument, very much targeted for that market. It's 10x more sensitive, always at speed, at scale, at depth that these are table stakes. And then what really differentiates us is the specificity and this 4D. What does this 4D mean anyway, 4 dimensions. We have these incredibly complex haystacks in the omics world in general. And metabolomics is the most challenging in a way because when you start with thousands of peaks initially, and this may surprise you, you probably can only annotate or identify maybe 15%, maybe 20%, very different from proteomics where you should identify most of the tryptic peptites. Metabolomics, there's a huge dark metabolome and many of these peaks cannot be annotated. We don't know what they are.

So getting the biggest pain point is annotation confidence, us being able to take apart peaks that are strictly overlapping that have exactly the same mass on the mass spectrometer, but different molecular shapes with our TIMS technology, which gives us an additional dimension of separation. It also gives us another molecular attribute that's really good for very high-quality AI and machine learning and for what we now call with that 4D quality and differentiation, the digital metabolome archive. You can analyze it now, but you might want to accumulate that data and maybe search it again with AI a few years from now when you have a lot more data or maybe some new questions.

So timsMetabo, what does it mean financially? I think within a few years, this could double the market opportunity. If we have $200 million now sort of mostly in proteomics, and that's growing very nicely, I think we could have an equal amount if we gain that market share of maybe just 20% in that market. And I think we should have a really fair chance at that because we have something very differentiated and it addresses the key pain point. It's not some spec that doesn't matter. I think it really matters to customers.

Last but not least, it's been quite an ASMS. This is obviously the most innovation we've driven. And check our press release as we don't -- we never ever -- just about never ever used the word revolutionary. We launched a revolutionary new mass spectrometer called the timsOmni. TimsOmni is a combination of our timsTOF technology and a technology developed by another very capable technology, small technology company called the Omnitrap, which is sort of a structural Swiss Army knife. That structural Swiss Army knife coupled with our high-speed very sensitive TIMS technology, cleverly called timsOmni, so people know right away what it does, that is a new category of mass spectrometer that opens up, what I would call, maybe proteomics 2.0, doing proteomics top-down with intact proteins, not breaking the vase and stitching the puzzle pieces of the pieces -- broken pieces back together, but really working your way through intact proteins, industrial enzymes, profiling antibodies or looking or sequencing parts of an antibody or a chromatin or other types of molecules.

So it allows sort of a protein-centric protein science at a level of specificity that's impossible today. And much more importantly, that's kind of the new -- that's finally the era of functional proteomics. We don't just look at protein groups. We look at the fully dressed modified, glycosylated, whatever it may be, maybe otherwise mutated. Of course, we call that an amino acid substitution proteins that have the biological function or that may have the pathological function or that may be a much better cancer marker or neurodegeneration marker than what we've seen so far with protein groups.

That's blue ocean. There is no competition there. It's the field that's been fledgling around for 20 years, but we're really blowing this open with an instrument that can do it with sensitivity, at depth, at speed, at scale and with a software to deal with this incredibly complex data.

So pretty exciting, really missionary. We have to develop that market. That will be the beginning of the S-curve is always shallow. It will take a while for that market to develop. Maybe next year, that's just 2 dozen instruments, but at $1.5 million, that adds up 2. And who knows in 5 or 7 years, maybe that's as big as the bottom-up proteomics market is this functional proteomics 2.0. And you'll hear -- also hear it as top-down or as proteoform market, kind of means the same thing.

Sorry, I'll stop there, not to take them all the time. But now you've had the broad side. It was really the most significant innovation and meaningful innovation that almost tripled our addressable markets over time in the omics world, if you like.

Super. I want to maybe step back a minute and address some of the backdrop of the macro. I'm sure you've probably gotten the NIH question all day long, but you guided academic down 20%, 25%, that had previously been about 10% of revenues. A couple of questions there. Is your mix of consumables instruments within academic kind of consistent with overall corporate? And then are you kind of doing anything different in terms of how you're allocating resources? Are you shifting more R&D and other resources towards pharma, diagnostics and industrial? And is having visibility and resolution on the '26 budget enough to get that market to start spending again, even if we're down 20% or so next year?

Well, 3 softball questions. Thank you very much. Okay. I'll try to take them in that series. So the aftermarket in consumables and academia can be a little bit lower, although, of course, some of the diagnostics tends to be in academic medical centers, but it's really in hospitals. So it's probably more of the hospital market. So it's probably a little bit lower than on average. I don't have a number for you actually, but it's a little bit lower than on average. Also academia sometimes does not get service contracts in pharma or diagnostic laboratories almost always get service contracts.

The reallocation of resources, yes. No, I mean it's not a coincidence that the timsMetabo can use -- do metabolomics and lipidomics, but it can also do a lot of applied markets, including new diagnostic applications, maybe initially as LDT and things like forensics and toxicology because that doesn't depend so much on ACA/GOV budgets. Even the timsOmni, we expect about 1/3 of these systems initially to go even right off the bat. Yes, it's a new technology, but it will be incredibly useful for biopharma in making very crucial decisions whether to advance a therapeutic program or to ask for more data or maybe do freeze it or discontinue it or divest it or so.

So I think it provides very crucial decision-making information, whether it's a protein target, whether it's biologic drugs. Oh, by the way, it also is great for these RNA drugs. We had a customer from the University of Geneva, but she works on a lot of these modified oligonucleotide drugs with pharmaceutical collaborators. It's very, very good for that. And it will even be used in very advanced, at-line bioprocessing, not in the processing workflow per se, but biological processes, you've got to monitor their heterogeneity. These processes can evolve and drift away on you over time or you may find, "Oh my God, only half of my biologics are actually therapeutically have efficacy and are active and the other ones may have some glycosylation or modification, which makes them hopefully not toxic, but they may not have the efficacy of the main compound that you would like." So I think this goes into biopharma pretty quickly into drug discovery and development mostly, but also probably in some very high-level troubleshooting and at-line bioprocessing. So those are some good examples that come to mind.

And then just on the budgeting process, uncertainty, obviously, now, but I guess, is having visibility and resolution on that budget for next year enough to get customers to start to spend even if we're down?

Well, they'll spend some this year, but it's greatly depressed. I mean grants that will go down and it's greatly reduced, and they're all slowed down in NIH and NSF, but some grants will come out at the other end of that. And if a PI gets a grant, they'll spend it probably pretty quickly, right? So there is some greatly reduced spending this year.

A resolution of what the NIH, but also NSF budget decrease will be for next year is on everybody's mind. Basically, 40% for NIH in that case would be a bad outcome, and that would be -- that could make next year even weaker. We don't expect that, but we don't know either. If it comes out at minus 20%, we'll say, "Yes, okay, that's what we expected." And then I would expect '26 to be maybe not down further from '25, but also not a rebound from '25 on U.S. ACA/GOV. If it was down 10%,I might almost be happy. That's a strong word. I would be pleased because it could have been worse.

And so generally, we are -- because we don't know, and it will -- this may get all resolved in September. But then again, there is Republican-Republican disputes, an infighting, if you like. So we may even with one party rule temporarily, we may not have a budget in time. So this could drag on for a while, that would not be good. Uncertainty is never good. But we, Bruker, what are we doing? We are preparing with for a moderate growth here, 2026. I can't give guidance today. We don't have enough visibility to do it anyway. But if we are normally in a normalized year, whenever that happens, grow -- expect to outgrow the market at 200 to 300 bps. That's our goal. We think our high-growth portfolio can do that. That implies 6% to 8% organic growth. This year, 0% to 2% because of all the headwinds. We're expecting something in between for 2026 from what we see right now.

With that moderate growth, we, Bruker, are very committed and are working towards still delivering very significant margin expansion and very significant, hopefully, mid-teens or higher EPS growth. So that's why we're taking very meaningful additional cost out in cost of sales in terms of taking some of our European sites, for instance, to an 80% work week. There are mechanisms over there that you don't actually have layoffs, but they get paid by the government temporarily for a few quarters and then can snap back -- go back to 100% or over time. We've had that in the past. And you don't have to rehire and retrain.

We're also taking out G&A costs from some of the acquisitions we did. We think we can squeeze out -- not even squeeze out, just get more from the integration. We did a successful ERP transition with S/4HANA, that was raised at lunch. Yes, that worked, and we're still in business. We did that in early May. It's always a little nerve-racking, but we're everything within -- literally within a few days, factories were all running and procurement is running, so it looks all very good.

We're taking some R&D costs out, what you saw at AGBT and AACR for spatial biology, what you've seen now in mass spectrometry. If you paid attention to ESCMID, what you saw in our microbiology and molecular diagnostics, this is probably the peak of R&D spending this year. It's not going to go from 11% to 7% because then we would be underspending on this post genomic era and other opportunities that we have. But it will begin to lever off and there's no holy cows. We'll do that as well. And yes, we'll thin out some of our marketing and sales and commercial organization a little bit in response, for instance, in the U.S. to slower demand. That's not going to just snap back in '26. So that's the setup.

Maybe talk about some of the markets where you're feeling better. Semiconductor has been a nice growth driver for you. We talked at lunch about defense and some of the new opportunities there. So maybe just talk about some of the strengths in the end markets.

Yes. Some of our other idiosyncratic drivers. Yes, we have a small defense and homeland security detection business that sort of radiological, chemical, chemical warfare agents or other toxins or toxic small compounds and explosives at airports. And normally, that's sort of a $30 million to $40 million somewhat sleeper business for you. You probably have zero visibility on that. Some -- it's mostly in Europe. But that's really been growing very significantly. And that could grow by $20 million next year. There's a lot of backlog for Europe reinvesting in defense. Our stuff doesn't shoot. It measures. It detects. But you need that as well to protect not only troops, but also behind the lines. There's sort of a very, very low-level warfare going on in Europe already with sometimes train lines mysteriously being blown up. And so there's a lot of concern and that people need those detectors.

We've also, and this will all -- this will be very familiar. If you fly through Frankfurt airport, it's more than 100 of our explosive trace detectors, Zurich and Geneva. Geneva, we had that for a while. Zurich is now also on. We're getting Brussels. We're getting all the Norwegian airports. We have Incheon in South Korea. We have a few French airports. Also very familiar and close to home for more of you, we had a very significant order recently or a few quarters ago from United Airlines. Now we're getting -- we got a very large order from American Airlines.

This is not where your iPhones get swapped. This is for their international facilities, where they're looking at bags and cargo and have additional American Airlines security in addition to whatever security the local government or airports provide, and they've selected our explosive trace detection. So probably stuff that you haven't been aware of, and it's a nice margin business, and it's now growing pretty significantly. It doesn't grow enough to make up for ACA/GOV, but it's one of these idiosyncratic growth drivers. It could add 50 bps of growth or something like that in the next 2 years, not bad.

Much bigger is metrology for high-performance computing and AI and other chip, foundry, logic chip, much less memory. We don't add in that. That's also not as good of a market. And then advanced packaging, which you need for high-performance computing. That goes to some of the best companies in the world. I mean our -- probably 1 of our top 2 customers in the world is now TSMC, who buys the very best equipment from us for making chips and then also for a very advanced packaging, where we are a market leader.

We have the best technology in the world as they now expand into the U.S., as they expand also into Japan, they're building a big factory there as well. And then they're doubling down and building the next next-generation capabilities on Taiwan. By the way, Samsung does the same in Korea. There, we really have an incredibly strong for our technology, for leadership, for geopolitical reasons, reshoring or shoring in the U.S., even Japan and of course -- I misspoke, Taiwan and Korea not wanting to fall behind. And then doubling down and investing even more into next next-gen. This is really, really strong for us. Oh, yes, plus there's a pretty big AI trend out there.

So we're not -- we are in the AI supply chain. It's not AI -- NVIDIA aren't that successful because of us, but they also wouldn't be successful without us because you just -- you really need those metrology and measurement tools and we have some very unique ones there. So that's about 8% of our revenue, probably we'll go to 10%, maybe eventually 12% of our revenue, great growth, great margins. It's not usually in the life science sell-side analyst report because it's not bioprocessing, it's not diagnostics, it's not life science, but hey, it's something that we do and that's somewhat idiosyncratic to us, and it's just a very beautiful market. And it's a great natural application of the very high-end material science tools we have in the Bruker NANO Group.

Maybe just sticking with the theme of stuff that could be getting better into next year. China, you were a big beneficiary last time of stimulus. I think you're not seeing it in a meaningful way now. Maybe you're going to be a little bit later than somebody like an Agilent in food testing. But talk a little bit about how you think about the pacing of stimulus, where you'll see it in the portfolio and how meaningful that could be?

Yes, it's actually interesting because Agilent and us, we see sort of different ends of the animal. So it seems they're seeing it environmental, PFAS. They saw -- I think they reported some orders in Q4, Q1. And more recently, I think they may have also said, "Hey, it's locked and loaded and promising, but not being released." And that's what we're seeing, shovel-ready, locked and loaded. We're seeing a very high-end research bio life science and biology, molecular biology and cell biology research tools, mass specs, NMRs would benefit tremendously some of our high-end microscopes. High-end, big-ticket items that you can only get when you get a really big stimulus package.

Not quite -- they're not -- great news is they're not releasing it in Q2 yet as far as we can tell. We had our Chinese mass spec sales country manager at ASMS in Baltimore. And he said, "Yes, these projects are really very well defined and accepted by deans and University Presidents. They have all the stamps and approvals. All they need in order to order is the budget release. And the budget release just haven't been coming yet. So our customers and we, therefore, don't know the timing of that. But the read by our customers is while there was this extreme tariff war or skirmish at least between the U.S. and China at 145% versus 110%, everybody was going slow on giving up cash. And now that there is a truce at least, at least temporary, they are hopeful that these budgets will be released.

For us, they would be mostly -- if they come through, which we're hopeful, but we don't know the timing. If they came through in the second half of this year, which is possible, I don't want to call it probable because we just don't know, then that would be -- really would be very much a good guide for us in '26. That could be a significant additional tailwind for us in '26 because we've been unusually strong beneficiary because we have so many high-end tools that are really also enabling new stuff. They want the latest and greatest. Even 3, 4 months ago, Juergen, who was here who heads the CALID Group, he had to quote timsMetabos and timsOmnis that weren't even on our price list on the market or released yet because they wanted to make sure that in their stimulus proposals, they have the latest and greatest even if we were just releasing it at a later time, which we now have. So very much focused on high-end, really unique capabilities and intending to be leading in biomedical and life science research.

Maybe just in the closing minutes, we can talk a little bit about some of the newer markets you've gotten into. Obviously, spatial through this -- the NanoString deal, ELITech, a great microbiology business that sits well with the MALDI Biotyper. Talk a little bit about strategy in diagnostics and then also cell analysis.

Yes. Cell analysis. This was the old Berkeley Lights or PhenomeX, right? We have launched a next-generation $0.5 million benchtop product. The Beacon Discovery is really a wonderful product, but it used to cost $2 million and some of the high-end, higher throughput versions still cost $1 million, and they're worth it, of course. But the -- you also need it for smaller CROs or academic labs or cancer research labs. When they do antibody discovery, the $0.5 million benchtop system just really broadens that market.

We did launch that at AACR in Chicago, not long ago. And that has all the same capabilities, just less throughput, less cost, less size, so much more manageable. It used to be in the early days used very much and still it continues to be used for very advanced antibody development, including antibodies to antigens that were very hard to have a good immuno profile. Now it's also used for a lot of cell line selection in cell and gene therapy, and there's other very nice applications coming out. But we needed the smaller, less expensive instrument in order to broaden the market for that.

The customers who have it, wow, it's their beacon. They love it. It's like on the old whatever. -- used to be my Tesla, now people don't brag as much. My Porsche, whatever, except you really need it. So my Beacon is the thing out there in the pharmaceutical industry, and we now have a half the size, half the price, less throughput, but scientifically and for biopharma has all the capabilities, just more affordable. We really think that will broaden the market and reignite the growth for that business.

We've, of course, taken out tremendous cost there at 5 sites, 2 in Connecticut, 2 in Northern California, 1 in Southern California. We have 1 site in, not Berkeley, in Emeryville, California and have taken out costs, and it's a very -- it's an excellent team. It's very, very motivated, very driven. So that's making good progress.

Moving up the coast to Seattle, spatial biology, right? Weaker market because, of course, of the headwinds from ACA/GOV, which they're feeling quite a bit. But within that, other than taking out cost and consolidating and putting in a strategic and management process that I think the team there really, really enjoys. They're thriving in that. We've taken out costs, lots of site consolidation. We've also very much invested and reinvested in innovation, things that they had in the pipeline already and things that we added to them in more chemistry, in more detection efficiency, and they were already on their way towards the whole genome -- whole transcriptome on the CosMx that's now been announced and launched, and we're shipping that, I think, late summer.

So these are capabilities that are very unique. We settled the IP lawsuit recently. You saw that. So that big overhang and cloud over the GeoMx. By the way, GeoMx will be a great product because we've taken it to multiomics. They were very transcriptomics focused. We said, "Hey, we love multiomics and proteins. Now you can do both on that." That's more for tissue. That's not for subcellular. And then, of course, the chromix for -- CosMx, I'm sorry, it's been a long day. It's been a long week. The CosMx, I misspoke, I apologize. For the CosMx without IP overhang and with the whole transcriptome launched and also quite a bit of protein content.

And one of its areas where it was a bit behind was in throughput and detection efficiency. And there, I think we've drawn even. We've really improved that. That was post AGBT, that was AACR. So we've also enhanced our spatial proteomic products, which now go through that NanoString sales channel. This is competing with Akoya and Lunaphore at Bio-Techne. And I think there, we're moving up in the world very rapidly because of performance and very high ability to go to much higher plexing without losing epitope or tissue without damage and that's kind of unique.

And then last but not least, and then I guess it is also almost over here, we launched the PaintScape instrument, which is a new -- entirely new category of intra spatial biology for looking at location and interactions and structures within the nucleus in the DNA. So that's a unique capability. That's more of a research capability, but it's not only fundamental researchers, people who do fundamental cancer biology, they want to know, "Oh, my God, why do you have these aneuploidies? I didn't know there's so much extra chromosomal DNA in our nucleus. I didn't know that location within the nucleus made such a big difference. I thought Illumina just gives us 1D strings of genes and that's the genome." No, it's 3D, it's location, it's interactions, it's extracellular, it's aneuploidies. It's many, many more effects that we're only beginning to understand. And there -- some of them may be aging, some of them may be signs of recent viral infection, some of them may be precursors to cancer, and some of them may be a lot of biology and cell biology we really have never seen.

So just about everything they touch with the customer is probably going to be a cell paper. So very exciting, high-margin product, early days. That will not take a lot of missionary works. People will look at that and said, "Oh my god, we've got to have this." And so hopefully, they'll fight budgets, even in these budget constrained times. Thanks for hanging in there so long.

Great. I think we'll leave it at that. Thanks, Frank.