Bruker Management Presents At Bank Of America Merrill Lynch 2012 Health Care Conference (Transcript)

Bruker Corporation (BRKR)

Bank of America Merrill Lynch 2012 Health Care Conference

May 15, 2012 02:20 PM EST

Executives

Derik De Bruin – Bank of America Merrill Lynch

Bill Knight – CFO

Presentation

Derik De Bruin

Derik De Bruin, the Life Sciences Tools and Diagnostics Analyst here at Bank of America Merrill Lynch. Our next company presenting in this track is Bruker Corporation. Presenting for the company today will be Bill Knight, Chief Financial Officer and also Stacey Desrochers, Head of IR is with us today. There will be a short presentation and we’ll follow it up with some Q&A afterwards.

So with that I’ll it over to Bruker Corp. Thank you.

Bill Knight

Thanks Derik and good morning everyone. I think you are all familiar with Safe Harbor statements, so I won’t spend a lot of time there. I think Bruker, what we would like to remind everybody is that, it’s a 52 year old company, significant financial operational improvement, a very strong product development engine. We have global distribution. We really focus I think on growing the business organically, strong market segment position and a very-very strong brand name and the company is certainly poised and positioned for future strong growth.

Geographically, the company was founded in Germany, significant product development and manufacturing states still in Europe, Germany, France, Switzerland. We have several production sites now in the U.S. We have sales and marketing distribution service offices throughout the world. We do distribute primarily direct, some areas we do use distributors. We’ve got from – we’ve been known historically as a strong life science company but Bruker certainly has made inroads into the applied markets and into the industrial, the chemical marketplace and food safety detection, homeland security. And so our market basket is really much more balanced than it has been in the past.

These are 2011 numbers. You can see the product by revenue. We’re still primarily a capital equipment company. We do have a small 20% segment that’s related to after-market sales, service, some consumables. The revenue by customer type, the industrial, in the slide, you see is 30%, in 2008 that was 16%.

And that – it’s not that the life science piece is shrunk, that is still growing, significant growth, but we’ve made quite a few investments in products and technologies in the industrial area and we would like to see over time that there’s probably closer to a 50-50 mix between life science and applied and industrial.

Europe is still the significant marketplace for us. I think part of that is because of our historical background. That is our backyard. But Asia-Pacific is the fastest growing region. China is the fastest growing marketplace. China represents close to 10% of our business and we still have significant opportunities in the Americas.

Bruker Scientific is – plays in market that total around 47 billion, of that, we serve specifically an addressable markets of about 8 billion. So, Bruker has significant opportunities through its four major product groups within BSI to further growth, further product development, some M&A activities. But we have a lot of markets face yet that we can grow the company.

2011 financial achievement, improvements year-over-year, 2011 was not quite the growth that we wanted to achieve, but we had significant infrastructure improvements that we put in place, distribution improvement. And I think when you look at our Q1 numbers, you can see that we had significant growth in overall Bruker Corporation, but in both the BSI segment and the best segment, and significant margin and profit improvements. And we certainly anticipate with our backlog and the product portfolio that we have that this is a trend that we can expect to continue.

Our financial goals for the full year 2012, we are looking at revenue growth of 7% to 10%, which will get us to little over 1.7 billion to a 1.8 billion in revenue, significantly increase operating income, operating margin improvements of 120 to 140 basis points, which will come from improved gross profit margin and continuing to leverage our operating expenses.

Improved BSI EPS, another area that we spend significant amount of time working on operational excellence is our working capital ratio that is a ratio of working capital to $1 revenue. We were in $0.45 for Q1. We have a long-term goal of getting that down to about $0.30, four years ago, that was closed to $0.60. So, we’ve already pulled probably 150 to 170 million of cash off our balance sheet through improved inventory metrics. We expect to have potential for a similar amount when we’re going to get into the $0.30 to $0.32 range. Our BEST group which is the superconducting division had good organic revenue growth of 15% they did lose some – they expected to lose some money in 2012, but we will anticipate in ‘13 and ‘14 that that will start to smooth out a bit.

We expect by 2014 to have revenue in excess of 2 billion and operating income in the BSI segment greater than 18% excluding the CAM division. The CAM is the group of products that we bought from Varian and we anticipate that they will get to their 18% target by 2016. These are four graphs showing revenue and EPS growth in the BSI Group not going to go over each one specifically but I think you can see a good trend. The return on invested capital is impacted somewhat with the CAM investment that we made and the debt refinancing that we had done in January.

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