Bruker - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 revenue was $801.4M, up 11.0% year-over-year, with CER growth 12.5% and organic growth 2.9%; BSI organic growth was 5.1% while BEST declined, and non-GAAP EPS was $0.47 as expected M&A dilution weighed on margins.
• Against S&P Global consensus, Bruker delivered a clean beat on revenue and a modest beat on EPS; revenue came in above the preannounced range, signaling strong execution into the quarter.
• Management lowered FY 2025 guidance for organic growth (0–2%) and non-GAAP EPS ($2.40–$2.48) due to U.S. academic funding changes and new tariff headwinds, while outlining price, cost, and supply-chain actions to offset slightly more than half of ~$90M operating profit headwinds in 2025 and fully by 2026.
• Near-term catalyst: Q2 2025 is guided to a transient dip in organic revenue, non-GAAP margin, and non-GAAP EPS before improvement in 2H; execution on mitigation and visibility on academic/tariff policy will drive estimate revisions and stock narrative.

What Went Well and What Went Wrong

What Went Well

• “Double-digit reported and CER revenue growth” with $801.4M in revenue and 5.1% organic growth in BSI; proactive cost management supported organic operating margin expansion of ~100 bps year-over-year.
• CALID revenue reached $280.1M with mid-20s CER growth, led by microbiology/molecular diagnostics and timsTOF strength; BioSpin delivered mid-teens CER growth with U.K. 1.2 GHz installation and improving biopharma demand.
• Management saw strong AI-related bookings, highlighted TSMC as the single largest customer, and reaffirmed portfolio transformation with diagnostics and lab automation contributing steady growth.

What Went Wrong

• Non-GAAP operating margin fell to 12.7% (vs. 14.0% LY) and non-GAAP EPS declined to $0.47 (−11.3% YoY), primarily from expected dilution of Q2’24 strategic acquisitions and FX headwinds.
• BEST revenue declined to $59.3M (−18.9% YoY; organic −17.7%), with MRI superconductors weak and research instruments facing tough comps.
• Management now expects U.S. academic/government revenues down 20–25% in 2025 and flagged a ~$100M revenue headwind from funding changes and tariffs; China stimulus releases are delayed with limited visibility.

Transcript

Operator (participant)

Good day, and welcome to the Bruker Corporation First Quarter 2025 Earnings Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. 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.

Joe Kostka (Director of Investor Relations)

Good morning. I would like to welcome everyone to Bruker Corporation's First 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 irbruker.com. Before we begin, I would like to reference Bruker's Safe Harbor Statement, which is shown on slide two 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 our recent acquisitions, geopolitical risks, tariffs, 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 to our outlook as of today, May 7, 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 second quarter 2025 financial results expected in early August 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 progress and of the expected impacts from U.S. policy changes and new tariffs. Gerald will then cover the financials for the first 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.

Frank Laukien (President and CEO)

Thanks, Joe. Good morning, everyone, and thank you for joining us on today's first quarter 2025 earnings call. Bruker had a solid start to 2025 with double-digit reported and constant exchange rate, or CER, revenue growth. We also had 5.1% organic revenue growth in our Bruker Scientific Instruments segment and better operating margin performance than expected. In short, our teams executed very well under significant uncertainties in key markets. In the first quarter and in April, at the important AGBT, ENC, ESCMID, and AACR conferences at the Alphabet Soup, we launched a number of very innovative performance-leading new products in spatial biology, cellular analysis, NMR, microbiology, and molecular diagnostics, all strengthening our high-value offerings in key areas of our strategic focus.

I'll cover several of these important new products in a few moments, but the key message here is that in times of funding uncertainties, and in particular, it is particularly important to enable our customers with unique and highly relevant new research and clinical capabilities. We also expect these meaningful post-genomic innovations to drive continued higher revenue CAGR differentiation for Bruker beyond the present ACA/GOV headwinds in the U.S. and China. Let's begin on slide four with the performance of the business in Q1 2025. Then I'll walk you through the impact of recent U.S. policy changes and the new tariff regime, how we anticipate it will impact Bruker, and how we intend to mitigate the resulting headwinds to our margins slightly more than half in 2025 and then completely by 2026. On Q1 2025 performance, we delivered a stronger-than-expected first quarter.

Bruker's Q1 2025 reported revenues increased 11% year-over-year to $801.4 million, above our pre-announced range of $795-$800 million, and significantly above prior expectations. Our constant exchange rate CER revenue growth was 12.5% year-over-year, including organic growth of 2.9%, with, as I said earlier, reasonably strong 5.1% organic growth delivered by our BSI segment and a 9.6% contribution to revenue growth from acquisitions. If you recall, we did some of our larger acquisitions last year in the second quarter. Notably, performance in the biopharma end markets strengthened in the quarter and grew in the mid-single digits percentage. Our first quarter 2025 non-GAAP operating margin was 12.7%, which was down year-over-year due to the expected M&A dilution from the strategic acquisitions I just mentioned that we completed in Q2 2024. However, underneath, we again posted strong organic operating profit margin expansion of about 100 basis points year-over-year in the quarter.

Our first quarter 2025 diluted non-GAAP EPS was $0.47, down from $0.53 in Q1 2024 due to expected and more recent FX currency headwinds. Please turn to slides five and six, where we highlight the first quarter CER performance of our three scientific instruments groups, and of our BEST segment year-over-year. In Q1, BioSpin revenue was $208 million, with mid-teens % CER growth. BioSpin growth was driven by strong aca gov revenue, including an ultra-high field NMR system in the U.K., by industrial research and food safety markets, and a strengthening biopharma environment, as well as strong contributions from preclinical imaging and lab automation, the new ChemSpeed business. In Q1, our CALID group had revenue of $280 million, with mid-20s % CER growth.

CALID growth was led, as you might expect, by microbiology and infection diagnostics, including the acquired ELITech Molecular diagnostics business, as well as double-digit plus growth in life science mass spectrometry driven by strength in the timsTOF platform. CALID saw robust growth in Europe and the Americas and strength in clinical, industrial, and biopharma applications, while ACA/GOV performance was moderate. Turning to slide six, in Q1, Bruker Nano revenue was $257 million, with CER revenue growth up high single digits %. Growth was supported by inorganic revenue growth from Nanostring, which was not yet included in Q1 of 2024, the year-over-year comparison. Strength in APAC, ex-China, biopharma, and ACA/GOV markets were partially offset by softness in Europe and China, as well as in X-ray and nano-analysis tools.

Finally, first quarter BEST CER revenues declined in the high teens % net of intercompany eliminations, as our research instruments business saw weaker performance in the quarter. They had a very strong prior year comparison, and that also was combined with continued softness in the superconductor market for clinical MRI. Moving to slide seven, we highlight the recent innovations underscoring Bruker's leading commitment to advancing spatial biology, announced first at AGBT and then expanded further at AACR in Chicago in late April. There's a lot of information on slide seven. Don't worry, I won't read it all, but it gives you a highlight. It gives you an idea about the breadth and depth and best-in-class performance of each platform, each significantly enhanced in terms of content or sensitivity or throughput, and of course, the completely unique Paintscape. Maybe one theme that comes here throughout is that spatial is going multi-omics.

Both our Geoax platform now allows high-plex transcriptomics. Of course, that's what we're known for, but also tissue proteomics. That is also, by the way, true for our non-spatial encounter system that you may recall from the Nanostring days. CosMx, with the whole transcriptome panel now that is ready for orders, where we can really look at 19,000 protein-encoding genes at the transcriptome level, is an unmatched research tool. Importantly, we've increased our detection efficiency by a factor of 2x, one of the areas that the customers were waiting for. Too much detail. Let me move on to slide eight. Eight is an important acquisition. It gets us into a different branch of diagnostics.

This is not microbiology, infectious disease, and it very much fits with our triple quad mass spec strategy, which, of course, is very differentiated with our particular claim to fame and focus to chromatography-free or chrome-free point-of-need mass spectrometry using triple quad targeted technology. This gives us the crucial assays and kits and consumables business. RECIPE is based in Munich, been in business for over 40 years. Revenues a little greater than $15 million, very profitable. For the European market, it gives us the therapeutic drug monitoring and other kits for IBD and other things that we do not need to go into detail. This combination kits assays contents with a diagnostic focus for therapeutic drug monitoring and also, by the way, eventually drugs of abuse because it cannot be so fast and inexpensive with the DART chrome-free approach is actually strategically quite exciting to us.

We think these two instruments plus assays and diagnostics coming together is an important additional growth trajectory for the company. We know you want to hear about the macro and ACA/GOV, so let's go into it. Let me make sure I'm on the right slide. Yeah. I will now review our assessment and anticipated impact from U.S. policy changes regarding federal funding for academic research and the current tariff regime on Bruker for the remainder of 2025. Moreover, I will provide an overview of our additional cost initiatives, new pricing actions, and already ongoing and now accelerating supply network re-engineering to partially mitigate at least half of the new headwinds in this year, fiscal 2025, and then more fully in fiscal 2026. Here we go. Our initial estimates are that U.S.

Policy changes to federal research funding, slower China stimulus funding release, and some temporary revenue impact of new China tariffs on revenue will amount to an approximately $100 million gross headwind to our organic fiscal year 2025 revenues before some mitigation. You cannot mitigate that much on the revenue side, but a little bit. Anyway, this $100 million fiscal year 2025 revenue headwind is broken into three buckets. First, and that is a smaller and transient one, some fiscal year 2025 China revenues that were to be shipped from the U.S. may be delayed, are delayed by customers, or may be partially canceled due to the current 125% Chinese import tariffs on U.S. goods. We are working with our customers to partially mitigate this impact with supply chain alternatives, tariff extensions, or delivery delays, with the largest transient impact now expected in the second quarter of 2025.

The second, but by far the strongest revenue headwind this year, not surprisingly, is related to U.S. ACA/GOV markets as a result of research funding policy changes. For Bruker, we now expect U.S. ACA/GOV revenue to be down 20-25% for this year. U.S. in fiscal year 2024 had grown to about 10% of overall Bruker revenues. In the updated guidance, we assume that the current academic funding uncertainty continues, even though we acknowledge there is some potential upside in the second half of 2025 if NIH and NSF and DOE R&D grants begin to flow again without further delays. Anyway, we have not baked those in, so hopefully this is a floor. Finally, we do not think that the president's initial budget request for NIH and NSF will be passed by Congress as is without an improvement.

We expect it to be down, but not as much as the opening bid. Third, a headwind related to anticipated China aca gov revenue as funding of the stimulus programs in China has been slow to be released by the provinces. Many shovel-ready projects, a lot of them with our instrumentation, high-end ACA/GOV, but slow to release as they're probably watching tariff and trade wars. This may improve throughout 2025, but at the moment, timing and amounts are uncertain. There are a number of moving parts that could provide additional upside, such as release of China stimulus funding, German and South Korean stimulus funding, European defense and security investments. We see some of that. Further, semiconductor metrology strength due to the AI machine learning trends, which are very profitable for us.

These factors could add upside, but we have not built them into our guide assumptions, hoping to provide a floor for 2025 with upside in any case more likely to benefit fiscal 2026. We also note that uncertainty around potential U.S. tariffs on pharma products could slow the encouraging recovery that we have seen in drug discovery and development markets in the last two quarters. Again, we have tried to take that into account in our guidance. That was the revenue piece. Let's move to operating profit or margins. With respect to 2025 operating profit, the gross headwinds before our mitigation actions are pretty meaningful. First of all, the roughly $100 million of reduced organic revenue previously noted is expected to lead to about a $50 million reduction in 2025 operating profit. Moreover, Bruker imports about 75% of our U.S.

Product revenue, obviously not the services revenue. There's another piece to it. But of our product revenue, 75% is imported largely from the European Union and Switzerland, but also from Israel and Malaysia. The current U.S. import tariff rate of 10% from those countries would result in an additional headwind of at most about $40 million to operating profit for the remainder of 2025, again before our ongoing mitigation actions. That's the gross headwind. U.S. tariffs on imports from China for Bruker have a negligible effect on Bruker, excluding some secondary supply chain inflationary effects, but we basically don't import any products from China. In total, we therefore estimate gross headwinds for our 2025 operating profit, primarily from U.S. ACA/GOV disruption and new tariffs, to be about $90 million altogether before our mitigation actions.

Now, deploying our Bruker management process and strong leadership team that, as you've seen, has been really excelling, executing very well, not only this year, but for many years. We have already taken and are taking numerous actions to offset more than half of these margin headwinds this year, with the remainder expected to be fully effective next year in 2026. Our mitigation actions include new pricing actions, additional cost-cutting initiatives, and supply network and manufacturing re-engineering. We estimate these mitigation measures will offset slightly more than half of the operating profit headwind for 2025. We then expect to fully offset these headwinds through price, cost, and supply network and manufacturing re-engineering by 2026. Fortunately, we're a very international company with a lot of flexibility, but it takes a little bit of time. Anyway, finally, factoring in U.S.

ACA/GOV and tariff headwinds, as well as the recent weakening of the U.S. dollar, a significant effect, as well as our mitigation actions and baking it all into our updated fiscal year 2025 non-GAAP EPS projections leads us to a new guidance range for EPS of $2.40-$2.48. In summary, Bruker delivered strong CER growth and organic operating margin expansion in the first quarter of 2025. We are experiencing new headwinds as a result of aca gov policy changes and tariffs. As always, we remain agile in responding to the evolving dynamics. Our management process is navigating us through these headwinds in 2025 and setting us up for resuming margin expansion and strong EPS growth in 2026 and beyond.

With that, let me turn the call over to Gerald, our CFO, who will review our financial performance in more detail and provide further color on our updated outlook for 2025. Gerald, go ahead, please.

Gerald Herman (EVP and CFO)

Thank you, Frank, and thank you, everyone, for joining us today. Pleased to provide more detail on Bruker's first quarter 2025 financial performance, starting on slide 10. In the first quarter of 2025, we had another quarter of excellent execution, delivering a strong first quarter above our earlier expectations and the color provided to the investor community. In the first quarter of 2025, Bruker's reported revenue increased 11% to $801.4 million, which reflects an organic revenue increase of 2.9% year over year. Acquisitions added 9.6% to our top line, while foreign exchange was a 1.5% headwind, resulting in constant exchange rate revenue growth of 12.5% year over year.

Geographically and on a year-over-year organic basis, in the first quarter of 2025, our Americas revenue declined in the low single digits %. European revenue grew in the mid-single digits %, while Asia-Pacific revenue grew in the low single digits % despite a 10% decline in China. For our IMEA region, revenue was up mid-teens %. We delivered strong BSI organic revenue growth in the first quarter of 2025 at 5.1%, driven by strength in our BBio and CALID groups. BSI systems grew in the mid-single digit range, and BSI aftermarket revenue grew in the high single digit range organically year over year. Our order book performance in our BSI segment was down slightly compared to the prior year first quarter, with softer academic government orders in the U.S. and in China.

Non-GAAP gross margin increased 10 basis points to 51.3%, and Q1 2025 non-GAAP operating margin was 12.7%, which included 100 basis points of organic operating margin expansion on better mix and cost control, more than offset by planned M&A dilution as Q1 2024 did not include two of our largest strategic acquisitions that closed in the second quarter of 2024. On a non-GAAP basis, Q1 of 2025 diluted EPS was $0.47, down 11.3% from the $0.53 we posted in the first quarter of 2024, which did not yet include our key acquisitions last year. Our non-GAAP effective tax rate was 27.7% compared to 26.7% in the first quarter of 2024, with the increase driven mostly by an unfavorable discrete item. On a GAAP basis, we reported diluted EPS of $0.11 compared to $0.35 in the first quarter of 2024.

Weighted average diluted shares outstanding in the first quarter of 2025 were 151.9 million, an increase of 6 million shares or 4.1% from the first quarter of 2024, resulting from our follow-on equity offering in May of 2024. Turning now to slide 11, we generated $65 million of operating cash flow in the first quarter of 2025. Our capital expenditure investments were $26 million, resulting in free cash flow of $39 million in the first quarter of 2025. This reflects an improvement in free cash flow of about $39 million over the first quarter of 2024, driven by better working capital performance in the quarter. We finished the first quarter with cash, cash equivalents, and short-term investments of approximately $184 million. During the first quarter, we used cash to fund capital expenditures, select Project Accelerate 2.0 initiatives, and debt repayments.

Turning now to slide 13, as Frank noted earlier, we're updating our fiscal year 2025 outlook to reflect a strong first quarter and the impact of recent policy changes and tariffs. We now expect reported revenues of $3.48 billion-$3.55 billion, representing reported growth of 3.5%-5.5%. This guidance assumes organic revenue growth of 0%-2%, an estimated tailwind from foreign exchange of about 1%, and acquisitions to contribute approximately 2.5% to revenue growth. This implies constant exchange rates revenue growth of 2.5%-4.5% all year over year. The revenue guidance includes an organic revenue gross headwind of approximately $100 million from recent policy changes and tariffs, partially offset by pricing and other mitigation actions of about $20 million, for a net headwind of about $80 million.

We now expect our fiscal year 2025 operating margin to be roughly flat year over year, with organic improvement of greater than 70 basis points, including mitigation actions, to be roughly offset by headwinds from M&A and foreign exchange. Recent policy changes, academic government market weakness in the U.S. and China, together with the current level of U.S. and China import tariffs, are assumed to be a $90 million gross headwind to operating profit in fiscal year 2025. We anticipate over half of this impact to be offset through our mitigation actions, including pricing about $10 million, cost management about $30 million, and supply chain re-engineering about $10 million already in fiscal year 2025. On the bottom line, we're now guiding to non-GAAP EPS for 2025 in a range of $2.40-$2.48. This translates to roughly non-GAAP EPS growth of 0-3% compared to 2024.

Given the recent weakening of the U.S. dollar against major currencies, foreign exchange is now a 5% headwind to our non-GAAP EPS, implying constant exchange rate non-GAAP EPS growth of 5-8% for fiscal year 2025. Other guidance assumptions are listed on the slide. Please note our fiscal year 2025 ranges have been updated for foreign currency rates and tariff rates as of April 30, 2025. While there are other policy and macroeconomic risks that could further impact our fiscal year 2025 financial performance, with this updated guidance, we hope to have established a floor based on current headwinds and our robust mitigation actions. Given the lower base years of 2024 and 2025, it's now become clear that our previously communicated medium-term outlook targets are not likely to be realized under our originally planned cadence.

We intend to provide updated medium-term outlook targets when we have a clear line of sight on U.S. federal research policy and funding and stabilized tariffs. Fundamentally, we remain optimistic that we've transformed Bruker's portfolio for above-market revenue growth, rapid margin expansion towards the mid-20% operating margins, and mid-high teens EPS growth once new headwinds abate. Finally, to add color on the second quarter of 2025, given softer U.S. and China academic government market conditions and some U.S.-produced China revenue likely delayed from the second quarter, we expect our second quarter 2025 organic revenue to decline in the low single digits, while constant exchange rate revenue is expected to increase in the low single digits % both year over year.

In the second quarter of 2025, we also expect to see a transient year-over-year decrease in non-GAAP operating margin and non-GAAP EPS performance, with significant improvements in both metrics expected in the second half of this year. To wrap up, Bruker delivered a solid BSI organic revenue growth and organic operating margin expansion in the first quarter of 2025 under uncertain conditions. Moving forward, we remain confident in our ability to continue to execute well under a challenging environment. With that, I'd like to turn the call over to Joe. Thank you very much.

Joe Kostka (Director of Investor Relations)

Thanks, Gerald. I'd now like to turn the call over to the operator to begin the Q&A portion of the call. As a reminder, to allow everyone time for questions, we ask that you limit yourself to one question and one follow-up.

Operator (participant)

We will now begin the question-and-answer session.

To ask a question, you may press star, then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. Our first question comes from Puneet Souda of Leerink Partners. Go ahead, please.

Puneet Souda (Senior Research Analyst)

Yeah, hi, Frank. Thanks for the questions here, and thanks for all the details on the tariffs for quantifying that. Could you elaborate if there was any pull forward in the quarter because of the tariffs worries or any other worries in the market that the customers might have had? Are you baking any impact from that as a result of that pull forward?

In China, I appreciate you mentioned cancellations, but are you seeing any cancellations in the U.S. or European markets, specifically maybe around UHF gigahertz magnets? I did not hear guidance on that for the year.

Frank Laukien (President and CEO)

Okay, Puneet, thank you. There really was not any pull forward that is being talked about due to tariffs or ACA/GOV. We did not see that. However, we acknowledge that the U.K. 1.2 gigahertz system that we had expected for Q2, it just technically just went in easily, and so it got in in Q1. That was not a pull forward. That was just a really smooth installation. That helped Q1 a little bit. Of course, I would not call it a pull forward. It was not a market-driven pull forward. To cancellations, we do not really see any China cancellations yet.

Customers who do not have the budget to pay the extra 125%, for which they, according to the terms, would be mostly, we think, would be on them, but they just do not—they presently right now are a little bit in this holding pattern. Hey, do not ship yet. We cannot accept it because we cannot pay the import duties. It is not a big effect, but of course, in Q2, it is going to be noticeable, as Gerald explained. We do not see any cancellations. We see lots of uncertainties and delays in the U.S. and ACA/GOV. We have not seen any cancellations because of that. No cancellations yet in China, but delays. In some cases, we are also simply rerouting and maybe building some of these systems in Europe or Malaysia. Hopefully, we can mitigate, but typically with a quarter's delay.

Puneet Souda (Senior Research Analyst)

Okay, that is helpful.

Frank Laukien (President and CEO)

Hopefully, that answers your questions. Yeah.

Puneet Souda (Senior Research Analyst)

Yeah, thank you. When we think about the offsets, obviously a lot of challenges in the market today, but when we think about the offsets, the AI chips, on shoring of that, the funding initiatives in Germany, maybe lower interest rates, can you walk us through how you are thinking about some of those offsets potentially sort of mitigating the impact maybe into the second half?

Frank Laukien (President and CEO)

In terms of orders, they may—I mean, AI remains very strong in our tools. I mean, of course, there are more important partners, but without us, the AI revolution also would not work, right? TSMC absolutely needs our tools. I think they are our single largest customer in the world at this point. Of course, they are doing a lot of work both in Japan and in the U.S. They are also upgrading and investing in Taiwan.

That remains strong and has remained strong. In fact, for AI-driven bookings in Q1, we are quite strong. That is strong. A lot of the delivery times for these things are longer. When their fab is ready middle of next year, you cannot really ship it earlier. German and Korean and similar stimulus funding or European defense fund spending, these are all good trends. Some of them are beginning to turn into orders. Some of them just are very encouraging in Germany, I would say. That is nearly 10% of our revenue in typical years. I do not think they will make much of a difference anymore in revenue and in our P&L this year. They are, however, welcome tailwinds for 2026 and even into 2027, 2028. AI will help us also this year.

Although if I take an order today, it's probably for next year, but I have orders that I can ship this year, and that continues to be strong demand. Yes, the on shoring in Japan, in the U.S., also in Europe plays a role, but that's also very significant continued investments by the leading technologically leading companies in Taiwan and in Korea. It's actually quite good.

Puneet Souda (Senior Research Analyst)

Okay, helpful. I'll hop back into the queue. Thank you.

Frank Laukien (President and CEO)

Thank you, Puneet.

Operator (participant)

The next question comes from Michael Ryskin of BoA. Go ahead, please.

Michale Ryskin (Managing Director)

Great. Thanks for taking the question. Frank, I want to talk about a comment you made towards the end of the prepared remarks in terms of the medium-term guide being a little bit unrealistic in the current environment. If we just focus on the U.S. policy changes, you mentioned Trump's initial proposal is 40%.

You do not think that will happen because Congress will offset, but let's say it is 20%-25% cut to next year's budget, just to pick a number similar to what your assumption is for this year. How does Bruker offset that next year? Could you talk about how you would respond, what different levers you are, how we should think about possible ways to get around that, whether it is pharma biotech, whether it is Puneet just asked on AI and some of the more industrial tech parts of the business? Just sort of at steps would you take to offset that U.S. A&G cut? It could be a little bit more medium term?

Frank Laukien (President and CEO)

Yeah, no, you listed most of them. As you have seen, our 2024, mid-2024, medium-term outlook, 2024, 2025, the two base years, that is obviously changed. That is what we are talking about.

Therefore, we are very committed to resuming very significant margin expansion this year. We had a lot more than the 140 basis points lined up, and we're hoping to do much better than that. Turns out this year, we're kind of moving sideways because we're using all of these improvements plus new costs and pricing and supply chain actions to just deal with the headwinds this year. Assuming no new headwinds by 2026 and beyond, I think this operating model, operational excellence integration, that all still works, but it kind of takes with a one-year shift because this year we're playing defense, quite honestly. Right. I think all these trends that you did mention, biopharma has been picking up nicely our tools for biopharma, including those from spatial biology and Beacon cellular analysis. You've seen we've not just done cost cuts.

We've done incredible, fantastic, fast product development to resume growth in these businesses when the headwinds abate, right? We're doing very well with AI. We just discussed that with Puneet, and you asked about it. That's doing well. European security and defense spending, European investment, quite honestly, infusion research, other clean energy projects are all helping us. There are a lot of good growth drivers that are overshadowed this year, but that I think will play a bigger role next year. There are also some transient effects that we've explained a little bit that just go away. Your estimate that I don't know where NIH and NSF funding comes out once it gets through Congress. I'm pretty sure it's not the opening bid. Would it be? I think it will be down. I agree with you. It will be down.

Maybe just not as deeply as proposed by the White House initially. There are many other. I mean, Germany's not only looking at defense. They're really looking at significant R&D and innovation infrastructure and tools investments and other the weakness of the U.S. academic system. There will be other countries that try to, quite honestly, exploit that a little bit and say, "Oh, great. We can get some researchers. Let's give them a startup budget." You see some of that dynamic. There are a lot of growth drivers that just most we're not baking them in this year, even if they help us a little bit in the second half. Mostly, I think it'll be on orders. We're just trying to set ourselves up for giving a baseline for 2025, moving sideways a little bit with some organic growth and a little bit of EPS growth.

Actually, EPS growth, excluding currencies, reasonable for us this year and what we're projecting, and then really fully resuming fast margin expansion, EPS growth, etc., next year.

Michale Ryskin (Managing Director)

Okay. That's all really helpful. Then, Gerald, if I could squeeze in a follow-up for you. You mentioned a comment in your prepared remarks about order book and BSI down year over year on A&G in U.S. and China. Obviously, makes sense given what's going on there. Any way you could quantify that, either via book to bill or just an order growth number? Then could you touch on your backlog, your existing backlog ability to offset maybe a lower order book in one Q, two Q this year, just sort of what that buffer gives you? Thanks.

Gerald Herman (EVP and CFO)

With respect to the order performance in the first quarter, it was actually just slightly under the first quarter of 2024.

The general composition of that was, well, we did see slightly weaker performance in academic and government research sectors in both China and the U.S. We saw strength, actually, in biopharma and in some of the industrial markets, including SEMI, of course. I think, generally speaking, right now, we're reasonably well positioned on the order book in order for us to continue to these orders, of course, benefit as you march into the second half of 2025 and further into 2026. I think, generally speaking, our general position is we're feeling pretty good about that. I would say on the backlog, we are still at seven months on a backlog level. We do have some remaining backlog to be able to pull on in some of these quarters. We didn't see much decrease in the backlog drawdown level in the first quarter.

We'll see how this all plays out over the next couple of quarters. Fundamentally, we still have quite a bit of backlog to be able to pull on. I think that's the high-level view, Frank?

Frank Laukien (President and CEO)

BSI book-to-bill just below 0.95, not great, a little weaker in March as you would have expected, which fits the overall picture as expected. Not great, not bad.

Michale Ryskin (Managing Director)

Okay. Thanks a lot, guys. I'll leave it there. Appreciate it. Sure.

Operator (participant)

The next question comes from Patrick Donnelly of Citi. Go ahead, please.

Patrick Donnelly (Managing Director of Equity Research)

Hey, good morning, guys. Maybe one more on the tariff side. Encouraging to hear you guys offsetting that for 2026. Can you just talk through, it sounds like pricing, cost initiatives, moving to manufacturing around, supply chain management? Can you just talk through, I guess, the new pricing assumptions, what you're doing on the manufacturing side?

Just want to talk through that confidence level of offsetting it into 2026 and preserving that number, and again, kind of moving into 2026 with a clean slate on the tariff offset. If you could just talk through pricing, manufacturing, cost initiatives that you're using to offset it?

Frank Laukien (President and CEO)

Yeah. Patrick, thank you. Good questions. Pricing, yeah, we're taking some U.S., but also some worldwide additional pricing action. I think for competitive reasons, we'd like to not go into that. It's not across the board, right? You kind of do it in a way that's smart and like all other companies. In terms of supply chain, yeah, certainly the usual things that you do as an international company. I mean, there are some products that you can do the final assembly and systems test.

We can do it in the U.S., or we can do it in Europe, or we can do it in our Malaysia, Penang, Malaysia major manufacturing centers. We are exploring all of that and looking at all of that. Vice versa. We used to do X-ray and mass spec and NMR final assembly and systems tests in the U.S. We are talking to third-party trusted contract manufacturers that are international that we are already using either in Malaysia or in Europe, quite honestly. One of them has a facility here in New Hampshire, and others have other U.S. facilities about onshoring parts of our production even. For that, of course, we also need a little bit more visibility about where transatlantic tariffs or respect to Israel and Malaysia end up.

Right now, we assume existing tariff rates, which may not be a bad assumption for where things end up, but then again, nobody is entirely sure. Yeah, cost actions, I think Gerald mentioned those, the additional cost actions. We expect this year to amount to about $30 million, so pretty aggressive. By the way, we did not wait for that. That has started actually, some of it has started right at the beginning of the year because we wanted to overperform our initial guidance. More of that has been significantly accelerated as more clouds moved in. Yeah. Here, the cost actions are significant. The supply chain, you do not see such a big number, $10 million this year, but that has a little bit more of a delayed effect. That will be a much bigger effect next year.

Patrick Donnelly (Managing Director of Equity Research)

Okay. That is helpful.

Maybe a bit of a follow-up on Mike's question there. When you think about the academic market, Frank, I know you're talking about academic government, I think down 20-25% this year. I guess when you look forward, Gerald mentioned that mid-high teens earnings once these headwinds are absorbed. Are you thinking that the academic market, one of the big questions again, is this structural for the next few years, right, where this declines every year for the next few years, or is it you rebase this year and then have opportunity for that piece to grow? How do you think about the academic government exposure here? Is this, again, with the new administration in office, structural until things change on that front over the next few years?

Frank Laukien (President and CEO)

Yeah. We still assume that U.S.

AC/GOV will be weak on the weaker side next year. Of course, we do not have straight visibility about some of the budget negotiations. I know they will be negotiated, but I do not think that Congress will in and say, "Hey, never mind, Mr. President, we are going to have an NIH budget increase." Probably, hopefully, a lesser decrease. Other things, of course, I mean, ACA/GOV, 75% of the ACA/GOV market for us worldwide is outside the U.S. That is doing well. There is even some stimulus funding. There is some that is actually one of the better pieces of our demand in the U.S.

We also expect it to be weak, but probably growing compared to this year's more disrupted ACA/GOV market, where there's also been the delays and the arguments over what's allowable overhead and indirect costs, and then certain universities being in political fights with, and some of them are big, right? Some of them, that's not insignificant. I think some of that we believe will be somewhat temporary, although temporary, not one or two quarters, but for this year. We still expect some weakness next year, although probably growth year over year compared to this year in the U.S. ACA/GOV, right?

Patrick Donnelly (Managing Director of Equity Research)

Understood. Thanks.

Frank Laukien (President and CEO)

Thank you, Patrick.

Operator (participant)

The next question comes from Tycho Peterson of Jefferies. Go ahead, please.

Tycho Peterson (Managing Director of Global Equities)

Hey, thanks. Frank, I want to dig into your pharma comments. You mentioned strengthening biopharma a few times. Did it get better as the quarter progressed?

Anything you can say in April? Is that mostly timsTOF? And then in your guidance, you alluded to maybe baking in some pharma slowdowns. Maybe just talk about the give and takes.

Frank Laukien (President and CEO)

Yeah. Biopharma, as you know, we're partly in the late regulated, but mostly in the drug discovery and development. Yeah, biopharma has been increasing from a weak base last year or before that even. Biopharma has trended very nicely for us in Q4 already and in Q1. I don't really, for us, because we're not primarily consumables, April, I can't comment. Taking that in and knowing that there's a threat of biopharma tariffs, we have put in a moderated recovery, a dampened recovery in biopharma, but not it falling back into a hole as it was maybe a year ago or so. timsTOF NMR, but also a little bit of spatial.

Of course, our cellular analysis, Beacon tools, now that we have the new benchtop discovery system. We're having more and more. We're not a one-trick pony or a two-trick pony in biopharma anymore. There are a lot of tools, including some process analytical tools and things like that, process Raman and some of the automation things from our Chemspeed acquisition, some of the software that all supports efficiency and productivity and investments in pharma towards the digital lab and maybe eventually the lights-out lab and things like that. We have a bunch of things that are driving that. It's not only a one or two product story anymore. That's all been reasonably healthy. Actually, it's been quite healthy the last two quarters.

Tycho Peterson (Managing Director of Global Equities)

Okay. That's helpful.

Then follow-up on M&A, you're adding the RECIPE deal just over $15 million or so in revenues, but you're not really changing your contributions here. It was two to three before, and now it's two and a half. Maybe just talk a little bit about what the offsets are on M&A, and are you kind of more optimistic on revenue synergies from some of the deals, maybe just a scorecard now that we're kind of a year into these deals?

Frank Laukien (President and CEO)

Yeah. Chemspeed is doing great, better than expected with its automation demand in pharma and elsewhere. Very happy with that. ELItech, my God, the most predictable business ever, and they're doing well. In fact, they did well again in Q1. That's a good space, and they're doing a little better than our acquisition model.

They also did better last year in getting more platforms out that then over the first year after deployment, that's when the consumables fall through growth as they add more and more assays. Spatial biology and cellular analysis, they both suffered from weak pharma this year, and they're both suffering a little bit from weak academic this year. Of course, it gets harder to export things to China when there's a 125% increase. We're making great progress on taking cost out, on efficiency, on putting in a new management process, amazing progress in new competitive products from cellular analysis and spatial biology, but they're both somewhat weaker than what we had expected because, of course, the U.S.ACA/GOV this year, they both noticed that even as biopharma, which was weaker last year, is recovering.

That's sort of muted, but I think we're still on track there for looking at a 2026 break even for these two businesses. That was a quick run down, ACA/GOV. Yep.

The next question comes from Rachel Vatnsdal of JPMorgan. Go ahead, please.

Rachel Vatnsdal (Equity Research Analyst)

Perfect. Good morning. Thanks so much for taking the questions. I wanted to follow up on Mike's earlier question around order book trends. Appreciate all the color you gave us on orders in the quarter and book-to-bill as well. Can you talk to us about your expectations for bookings going forward? Do you think we've kind of hit the bottom on orders? Are you expecting it to get worse as we get into the second, third quarter, given some of the headlines on NIH budget proposals?

Where are you expecting to exit this year on backlog, given you said you still have the seven months of backlog that you're working with?

Frank Laukien (President and CEO)

I think the academic order weakness, I think, is just beginning. Q1 or maybe March, we saw just a little bit of that. U.S. academic orders and a lot of that headwind this year, I think you'll see that in weak U.S. academic government orders in the U.S. in Q2, probably in Q3. We'll see whether there is some budget flush and grants moving through finally with much delay. I think the brunt of that is now coming in Q2 and Q3, hence the revenue headwind that we've taken into account in this new guidance and that we've explained.

We have enough other strength in our forecast that we still think we'll come out at the end of the year with a 6.5-7 months backlog. I know we're all focused on U.S. ACA/GOV, and every day there's a usually not very nice headline, but there is other stuff that we do. We are so diversified and so international that we actually still, we think our long-term normalized backlog should be around 5x now that we have much more consumables and aftermarket that's a little lower than historically when we would have said 5.5x. I think at this end of this year, we'll almost certainly be at 6.5, possibly still at 7. That's stubbornly high, which is a good thing, of course. You see, I mean, we've outperformed in Q4. We've outperformed in Q1.

Q2 will be tougher because of some of the transient effects. I hope that helps your modeling and gives you some additional insights on the timing.

Rachel Vatnsdal (Equity Research Analyst)

Yeah. No, that was great color. Thank you, Frank. Just my follow-up, I wanted to dig into some of the China stimulus comments. You called out that being a little bit slower in light of the tariff situation and provinces just being slower to release those funds. Can you unpack that for us a little bit more? How much stimulus revenues did you guys recognize in China in the first quarter? Are you assuming any China stimulus revenues for the rest of the year? Thanks.

Frank Laukien (President and CEO)

I know more by orders, it was low.

It was very little, less than $10 million, certainly in Q1, as I would think most of the provinces are hanging on to the money if they have it. It has been deferred while China is trying to figure out what's going on with tariffs and trade war, I assume. Yeah, it has been delayed, essentially. As I said earlier, we have not baked in by now, now it's May, we have not until that gets, even if it got released and then turned into orders, most of these orders then might come in in Q3. By that time, because that's a lot of high big ticket cutting edge and leading edge performance things that they order on these stimulus packages, most of that would go into 2026 for our revenue. We do not expect China stimulus to be significant in our P&L in 2025.

Rachel Vatnsdal (Equity Research Analyst)

Thanks, Frank.

Frank Laukien (President and CEO)

You're welcome, Rachel.

Operator (participant)

The next question comes from Luke Sergott of Barclays. Go ahead, please.

Luke Sergott (Director of Healthcare Equity Research)

All right. Thanks, guys. I just wanted to kind of dig in a little bit on the 2Q, get some cleanup modeling. Can you just help us with the guide assumptions by the segment for BSI and BEST, what's embedded there for that low single-digit constant currency growth, kind of FX, M&A? And then on the operating profit, I understand that the cost outs, excuse me, for that $90 million or the mitigation efforts for that $90 million turned into $45 million. How much of that $45 million net are you guys looking to hit in that 2Q?

Frank Laukien (President and CEO)

In Q2. Gerald?

Gerald Herman (EVP and CFO)

That's a long-term thing.

Frank Laukien (President and CEO)

You get the question. Yeah. Yeah. Yeah. I appreciate it. Probably more of that in Q3 and Q4, right? Yeah.

Gerald Herman (EVP and CFO)

Some of the mitigation actions that we've already put in place, particularly around pricing and supply chain items, are not going to fall into the second quarter for sure. It's really more about our cost management elements that we're pushing hard on for sure that will have some modest impact in the second quarter, which is why I think we've triggered a more significant reset on the second quarter expectations. Once those elements kick in, specifically around the third and the fourth quarter, I think there's an expectation that our performance, financial performance at the EPS line will improve sharply in the second, I mean, sorry, in the third and the fourth quarter in the second half of the year. It's sort of the big picture.

Frank Laukien (President and CEO)

As we've been already slowing hiring and using retirement and attrition and so on, we've been doing that for.

Some things we can actually implement relatively flexibly. I'll give you an example. In Switzerland and, if needed, also in Germany, in certain businesses, we can pretty quickly turn down our production capacity by almost about 20% with this short-term work mechanism where basically people end up working 20% less and they're still paid like 95%-98% because the government kicks in for up to two years. That's a great way of keeping your highly trained workforce and then ramping them back up six months or 12 months later, whatever it will be. We've already been doing that. We've announced that in Switzerland, for instance. It's a very smooth and fast mechanism, and it doesn't require, it doesn't cost you as much on the GAAP side in terms of restructuring and cash. You can also implement it very quickly.

Very quickly means still it is mostly going to have a Q3 and Q4 effect, and maybe it is just a tiny bit of an effect. It will be effective as of Q2, but it will not move the needle financially yet in Q2.

Luke Sergott (Director of Healthcare Equity Research)

Okay. Thanks. I—

Frank Laukien (President and CEO)

Of course, things, I am sorry, there are things like discretionary spending and hiring, and we are doing all of these things. Also, things that you do on pricing, until you put them in the price list and get a new order, until that then works out on pricing, also has always a time delay. That is why these things do have an effect more into the second half and then a much more significant annualized effect next year.

Luke Sergott (Director of Healthcare Equity Research)

Yeah. Okay. Understood.

I guess when you talk about the other regions that are doing stimulus like South Korea and Germany and Japan, I understand that this is more of an out-year dynamic and potential tailwind, but with a little context for what those countries have done in the past from a stimulus perspective, have you done any work or have any insight there of what this could look like? Would this look like something like China stimulus in the past where you just get a huge bolus, or is this more infrastructure and more secular?

Frank Laukien (President and CEO)

Yeah. I think in Korea, a number is known, and there was also, I forget, it is over three years or something like that, and it was, Joe, do you have the number?

Joe Kostka (Director of Investor Relations)

23.

Frank Laukien (President and CEO)

23 what? Billion. Of what currency? U.S. dollars?

Joe Kostka (Director of Investor Relations)

Yes.

Frank Laukien (President and CEO)

Okay. Over three years or so, so meaningful.

Germany is huge, but it'll pay for a lot of other stuff. It is kind of $50 billion per year over the next 10 years. Some of that goes into defense, right? We do have some detection equipment that on the margin goes there. That is a good trend for us in one of our little niches. A lot of it is supposed to go into innovation and technology regaining or expanding where they have a technology leadership. There is some, we are pretty optimistic that a fair, but I cannot quantify it because it is also, as you know, the new government was elected yesterday finally. They have some really big numbers. Some of that will build bridges. Some of that will build tanks that will not really help us, although it may be good for the economy in general.

But a lot of that probably will also go into innovation, including into life science tools. I cannot quantify it yet, and it will almost certainly be 2026 and beyond, but could be not just a bolus, but a little bit of a longer-term trend.

Luke Sergott (Director of Healthcare Equity Research)

Great. Thanks.

Frank Laukien (President and CEO)

We will probably keep going for another five minutes or so, going over a little bit. For those who want to stay, we will try to get to a few more, a couple more people on questions. All right. If we move on to the extent they are still on.

Operator (participant)

Okay. The next question comes from Subbu Nambi of Guggenheim. Go ahead, please.

Subbu Nambi (Managing Director and Senior Analyst)

Hey, guys. Good morning. Thank you for taking my question.

Agree, BEST is only 10% of the revenue, but do you expect the clinical MRI supercon to eventually improve for Bruker, given that it's taking some time for AI trends to impact your revenue? One of the things is Bruker's strength is the diversified product portfolio, and therefore not seeing strength in one of these segments when aca government is down always remains a question. The diversified portfolio is supposed to offset all these weaknesses. That's why I'm asking about it.

Frank Laukien (President and CEO)

You are talking about the BEST portfolio. Did I understand that correctly?

Subbu Nambi (Managing Director and Senior Analyst)

Yeah. That's right.

Frank Laukien (President and CEO)

Yeah.

Subbu Nambi (Managing Director and Senior Analyst)

Yes.

Frank Laukien (President and CEO)

I think that's going to be a slower recovery in the MRI market. Obviously, these are other big healthcare companies that you're all familiar with. The trends there don't fluctuate all that much, so we expect that to be a weak year for BEST.

A reasonably better year for the nearly $100 million RI research instruments component. They just had a tough comparison in Q1 year over year. They had an incredible Q1 of last year. The ROI business, I think, will be not growing fast, but be steady. The superconducting materials business this year will be weaker, probably for the full year, but not as pronounced in a percentage year over year as you've seen in Q1. It'll be much more, it'll stick out less. All right. We have one more question for us. Yeah. Thank you. Thank you, Subbu. One more question if the next person is on or.

Operator (participant)

Okay. Okay. The next question comes from Doug Schenkel of Wolfe Research. Go ahead, please.

Doug Schenkel (Managing Director and Head of Life Science Tools & Diagnostics)

Hey, good morning. One question, I guess what I would call portfolio evolution, and then just a follow-up on China.

Portfolio evolution, some of your bigger acquisitions over the past couple of years ostensibly served to move your revenue mix away from China and into areas outside of academic research. I'm not saying those were the primary motivations, but they're certainly features of a lot of those deals. China seems like a complete black box right now, and it seems like it plausibly could be structural. Academic government funding, as we've talked about extensively, is at risk globally. I guess what I'm wondering is, when would you expect the deals you did in 2023 and 2024 to grow year over year on a same-store sales basis? Is that going to happen in 2025 and 2026? Are we kind of in the background starting to see the benefits of portfolio evolution? That's what I'm wondering.

Frank Laukien (President and CEO)

Oh, absolutely. Yeah. Yeah, go ahead.

Doug Schenkel (Managing Director and Head of Life Science Tools & Diagnostics)

No, no, no.

Why do not we answer that, and we will come back to China in a second?

Frank Laukien (President and CEO)

Okay. Then we will wrap it up. Yeah, absolutely. The portfolio evolution is already visible. I mean, diagnostics is steady as can be. When other things are weaker, steady, high single-digit growth in diagnostics, molecular microbiology is awesome. Of course, also a lot of consumables, so that works. The automation and multiple smaller software, scientific software acquisitions, I kind of take them a little bit together because they feed each other towards the digitized lab, more automated lab. That is all working really nicely. Even as people are a little biopharma and other industries, cleantech and fine chemicals love to invest in that because they either cannot find the staffing or they are prepared to do it with more productivity and less hands-on time. Those are all good trends.

The investments of the old Berkeley Lights, which is cellular analysis, the Beacon platform, as many of you know it. And about that third of spatial biology that does go into biopharma, yeah, they're helping us in the biopharma recovery. So a lot of these things are already active and are offsetting some of the ACA/GOV weakness. Without the portfolio evolution, including the pretty rapid evolution with our acquisitions in the last five, six quarters or so, this would be a tougher call. Maybe we would not, maybe we would go down organically this year. We think we will still grow a little bit despite all of the headwinds. Okay. Thank you for that. Yeah. China is hard to read. I agree.

Doug Schenkel (Managing Director and Head of Life Science Tools & Diagnostics)

My question there was just going to be, and I know I will keep it tight.

If we think about even what you guys were saying a month, month and a half ago about orders related to China stimulus, it obviously sounds different today, and a lot has changed in that period. My question is really, do you think in general your visibility on what's going on in China and what's going to happen in China is just a lot lower than it has been for the last decade? Do you think you have that adequately captured in guidance at this point?

Frank Laukien (President and CEO)

It is lower, and I hope we've got it captured because we're not still, there is stimulus plans. It's amazing when some of our executives are over there, the projects that are ready, approved by the university, maybe even approved locally, just no funding yet, would be quite favorable for us in NMR, mass spec, and other fields.

The funding does not get released, and I do not know whether it gets released ever or in Q2 or Q3 or Q4, and I do not think they know. However, unlike past China stimulus programs, which were sort of one or two-quarter wonders, this one seems to be much more sustained. Some of the professors or PIs of large consortia for academic medical research say, "Yeah, yeah, this will get funded. We just do not know whether this year or next year, or in worst case in three years, but this will get funded. This is a priority." It is more the timing, but the timing is really, there is no visibility into timing, and they do not have it either. It could be next quarter. It could be next year. They are all pretty confident they will get it. That is the answer. I wish I knew the time.

That is how it works right now. Yeah. All right. 9:40, so we are 10 minutes over. Yeah.

Operator (participant)

Okay. This concludes our question and answer session. I would like to turn the conference back over to Joe Kostka for any closing remarks.

Joe Kostka (Director of Investor Relations)

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-ups, and have a good day. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.