Executive Summary / Key Takeaways

• Bruker Corporation has undergone a significant multi-year transformation via strategic acquisitions and organic innovation, repositioning its portfolio towards high-growth areas in the post-genomic era, including spatial biology, molecular diagnostics, and advanced analytical instruments.
• Despite achieving double-digit reported and CER revenue growth in Q1 2025 and strong organic margin expansion in its core business, Bruker faces significant near-term headwinds from U.S. academic/government funding uncertainty and new tariffs, leading to a tempered 2025 outlook.
• The company is implementing aggressive mitigation strategies, including pricing actions, cost reductions, and supply chain re-engineering, expected to offset over half of the operating profit headwinds in 2025 and fully by 2026.
• Bruker's differentiated technology platforms, such as the timsTOF mass spectrometers, advanced NMR systems, and spatial biology tools, provide competitive advantages through superior performance, sensitivity, and unique capabilities, supporting long-term growth potential.
• While the immediate impact of headwinds has shifted the timeline for previously communicated medium-term targets, management remains confident in the transformed portfolio's ability to resume above-market growth, rapid margin expansion, and strong EPS growth in 2026 and beyond.

A Portfolio Transformed: Bruker's Strategic Evolution Meets Macro Reality

Bruker Corporation, a long-standing developer and manufacturer of high-performance scientific instruments and analytical solutions, has embarked on a deliberate and multi-year transformation journey. Initiated with Project Accelerate and continuing through Project Accelerate 2.0, this strategic evolution aims to pivot the company towards faster-growing segments within the scientific and diagnostic markets, particularly those poised to benefit from the burgeoning post-genomic era. This transformation has been marked by both significant organic innovation and a series of impactful strategic acquisitions, fundamentally reshaping Bruker's portfolio and market positioning.

Over the four years leading up to 2024, this strategy yielded impressive results, with cumulative reported revenue growth exceeding 70%, translating to a robust CAGR of over 14%. Notably, approximately 58% of this growth was organic, underscoring the strength of Bruker's internal innovation engine. This period included three years of double-digit organic growth, positioning Bruker well above the typical market growth rates observed among its peers in the Life Science tool space.

The recent wave of strategic M&A has been central to accelerating this transformation and expanding Bruker's addressable market into large, high-growth areas. Key acquisitions in late 2023 and 2024, such as PhenomeX (now Bruker Cellular Analysis) for single cell biology, Chemspeed Technologies for lab automation, ELITechGroup for molecular diagnostics, and NanoString Technologies for spatial biology, were designed not only to add scale but also to unlock new market opportunities and enhance the company's long-term margin potential and EPS growth profile. While these deals were strategically compelling, they were expected to, and have, resulted in initial temporary dilution to margins and EPS.

Bruker operates through four main reportable segments: BSI BioSpin, BSI CALID, BSI NANO, and Bruker Energy Supercon Technologies (BEST). Each segment contributes specialized expertise and product lines, collectively forming a diversified portfolio serving academic, government, industrial, clinical, and biopharma customers globally.

The competitive landscape for Bruker is dynamic, featuring large, diversified players like Agilent Technologies (A), Danaher Corporation (DHR), and Thermo Fisher Scientific (TMO), as well as numerous smaller, niche competitors. While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Bruker holds an estimated 10-15% aggregate market share in its primary markets. Larger peers like TMO and DHR command significantly larger shares, estimated at 25-30% and 20-25% respectively in analytical instruments.

Financially, Bruker's TTM gross profit margin of 48.87% is comparable to peers like Agilent (54%) and TMO (41%), but its TTM operating profit margin of 7.14% significantly trails Agilent (23%), DHR (20%), and TMO (17%), reflecting its higher R&D investment and the initial dilution from recent acquisitions. Similarly, Bruker's TTM Net Profit Margin (2.31%) and EBITDA Margin (13.30%) are lower than those of its larger competitors. Bruker's strategy emphasizes innovation in niche, high-value areas, contrasting with the broader market penetration and operational excellence focus of larger peers. This positioning allows Bruker to compete effectively in specialized segments where its technology offers a distinct advantage, even against companies with greater scale and financial efficiency.

Technological Differentiation: The Engine of Bruker's Moat

At the heart of Bruker's strategy and competitive positioning lies its portfolio of differentiated technologies. The company invests heavily in research and development, with R&D expenses representing 12.1% of total revenue in Q1 2025. This investment fuels innovation across its segments, creating competitive moats and enabling access to high-value applications.

In the BSI CALID segment, the timsTOF mass spectrometry platform is a prime example of this technological edge. This platform offers breakthrough 4D-Metabolomics™ and 4D-Lipidomics sensitivity, specificity, and annotation confidence. The recent launch of the timsTOF Ultra 2 system further enhances sensitivity for single-cell proteomics and immunopeptidomics, opening new windows on subcellular analysis. The neofleX MALDI-TOF enables multiomic mass spec imaging on tissue, uniquely allowing colocalization of proteins, lipids, metabolites, and glycosylation. While facing competitive dynamics, particularly from instruments like the Astral, Bruker has improved its competitive position through continuous innovation, leading to a recovery in win rates and customer opportunities.

Within BSI BioSpin, Bruker is a leader in magnetic resonance technology. The development of the world's first high-resolution 1.3 GHz NMR spectrometer with a standard-bore magnet pushes the boundaries of NMR research, offering unprecedented capabilities for structural biology and macromolecular analysis. The innovative Fourier 80 multinuclear benchtop FT-NMR brings advanced capabilities to a more accessible platform. These technologies provide unique insights into molecular structure and dynamics, critical for drug discovery, materials science, and fundamental research.

The BSI NANO segment leverages advanced microscopy and X-ray technologies. Bruker's atomic force microscopy tools offer superior resolution compared to some competitors, providing a performance edge in nanotechnology research. The recent launch of the Beacon Discovery™ Optofluidic System expands access to live single-cell functional analysis, building on proprietary Opto-Electrical Positioning technology. In spatial biology, the acquisition of NanoString Technologies for spatial biology brings leading platforms like CosMx, which with the new Whole Transcriptome Panel, allows subcellular spatial imaging of 19,000 protein encoding genes with increased detection efficiency (up by a factor of 2x). The PaintScape™ platform visualizes 3D genome architecture. These advancements in spatial biology and cellular analysis are critical for enabling scientists to explore life at microscopic and cellular levels in the post-genomic era.

The BEST segment contributes superconducting and non-superconducting materials, including metallic low-temperature superconductors essential for high-field NMR and MRI systems, fusion energy research, and high energy physics. BEST also provides EUV/XUV technologies for semiconductor lithography tools, supporting the AI megatrend. While the clinical MRI superconductor market has seen softness, the RI business, including accelerator and fusion technologies and EUV, is gaining traction.

Collectively, Bruker's technological advancements provide tangible benefits: superior sensitivity and resolution in mass spec and microscopy, unique capabilities in spatial and single-cell analysis, and cutting-edge performance in magnetic resonance. These differentiators support premium pricing, drive demand in specialized niches, and contribute to a competitive moat, positioning Bruker for long-term growth, although the immediate financial impact can be masked by market headwinds and acquisition integration costs.

Performance Amidst Headwinds: Q1 2025 and the Current Landscape

Bruker delivered a solid start to 2025, demonstrating resilience despite a challenging market backdrop. For the three months ended March 31, 2025, the company reported total revenue of $801.4 million, an increase of 11.0% year-over-year from $721.7 million in Q1 2024. Constant exchange rate (CER) revenue growth was even stronger at 12.5%, including 2.9% organic growth and a 9.6% contribution from acquisitions. The BSI segment showed particular strength with 5.1% organic revenue growth.

However, the impact of recent strategic acquisitions and market headwinds was evident in profitability. GAAP operating income decreased to $31.8 million in Q1 2025 from $64.8 million in Q1 2024. Non-GAAP operating margin was 12.7%, down from 14.0% year-over-year, primarily due to the expected initial dilution from the Q2 2024 acquisitions (ELITechGroup, NanoString, Chemspeed). Despite this, the core business showed underlying strength, with approximately 100 basis points of organic operating margin expansion year-over-year.

Specific financial details from Q1 2025 highlight the dynamics:

• Product revenue grew 9.6% to $643.3 million, while Service and other revenue increased 17.3% to $158.1 million.
• Gross profit increased 10.9% to $391.2 million, but gross profit margin slightly decreased to 48.8% from 48.9%. Non-GAAP gross margin was 51.3%, consistent with Q1 2024 (51.2%).
• Selling, general and administrative expenses rose 15.4% to $225.4 million, increasing as a percentage of revenue (28.1% vs. 27.1%), driven by headcount and personnel costs from acquisitions.
• Research and development expenses increased 18.7% to $97.1 million, also rising as a percentage of revenue (12.1% vs. 11.3%), reflecting increased investment and acquisition mix.
• Other charges, net surged to $36.9 million from $10.9 million, primarily due to $18.6 million in acquisition-related litigation charges (BCA, NanoString) and $7.6 million in restructuring charges.
• Consolidated net income attributable to Bruker Corporation was $17.4 million ($0.11 per diluted share), down significantly from $50.9 million ($0.35 per diluted share) in Q1 2024.

Geographically, Q1 2025 saw North American revenue grow 10.0%, driven by the ELITechGroup and NanoString acquisitions. European revenue increased 16.5%, also primarily from 2024 acquisitions. Asia Pacific revenue increased 4.4%, though China revenue declined to $101.2 million from $115.7 million.

Liquidity remains adequate, with cash and cash equivalents of $184.2 million at March 31, 2025. Net cash provided by operating activities improved significantly to $65.0 million in Q1 2025 from $21.8 million in Q1 2024, primarily due to better working capital performance and lower acquisition-related expenses. Free cash flow also saw a substantial improvement, reaching $39.0 million compared to $0.4 million in the prior year quarter. The company maintains a total outstanding debt of $2.10 billion and a $900.0 million revolving credit facility, remaining in compliance with all debt covenants. The share repurchase program continues, with $10.0 million purchased in Q1 2025, leaving $359.9 million available.

Operationally, the BSI segment's order book was down slightly year-over-year in Q1 2025, with softer academic/government orders in the U.S. and China, partially offset by strength in biopharma and industrial markets. The backlog remains elevated at around 7 months, providing a buffer against market uncertainties, though management aims for a normalized level closer to 5 months in the medium term.

Outlook and Strategic Response to Headwinds

The near-term outlook for Bruker is significantly shaped by macro and policy-related headwinds. Management estimates that U.S. policy changes impacting federal research funding, slower release of China stimulus funding, and the temporary revenue impact of new China tariffs will collectively amount to approximately a $100 million gross headwind to organic revenue in fiscal year 2025. Specifically, U.S. academic/government revenue is now expected to decline 20% to 25% this year. Furthermore, new U.S. import tariffs, particularly the 10% baseline tariff on goods from key manufacturing regions (EU, Switzerland, Israel, Malaysia), are expected to create a gross headwind of up to $40 million to operating profit in 2025. In total, gross headwinds to 2025 operating profit from U.S. ACA/GOV disruption and new tariffs are estimated at approximately $90 million before mitigation.

In response, Bruker is deploying aggressive mitigation actions. These include new pricing actions, additional cost-cutting initiatives (expected to contribute about $30 million in FY25), and supply network and manufacturing re-engineering (expected to contribute about $10 million in FY25, with a larger impact in FY26). These measures are designed to offset slightly more than half of the operating profit headwind in 2025 and are expected to fully offset these headwinds by 2026. Mitigation efforts involve exploring shifts in final assembly and testing locations and utilizing flexible labor mechanisms in regions like Switzerland and Germany.

Based on these factors and mitigation plans, Bruker has updated its fiscal year 2025 guidance:

• Reported Revenue: $3.48 billion to $3.55 billion (3.5% to 5.5% growth).
• Organic Revenue Growth: 0% to 2%.
• Acquisitions Contribution: Approximately 2.5%.
• CER Revenue Growth: 2.5% to 4.5%.
• Non-GAAP Operating Margin: Roughly flat year-over-year (organic improvement >70bps offset by M&A/FX headwinds).
• Non-GAAP EPS: $2.40 to $2.48 (0% to 3% growth). This includes an estimated 5% FX headwind to EPS, implying 5% to 8% CER non-GAAP EPS growth.

For the second quarter of 2025, the company anticipates organic revenue to decline in the low single digits, with CER revenue increasing in the low single digits, reflecting the immediate impact of softer U.S. and China ACA/GOV conditions and delayed China revenue. A transient year-over-year decrease in non-GAAP operating margin and EPS is expected in Q2, with significant improvements projected for the second half of the year as mitigation actions gain traction.

Given the lower base years in 2024 and 2025 due to these headwinds, the previously communicated medium-term outlook targets are unlikely to be realized on their original cadence. Bruker intends to provide updated targets once there is clearer visibility on U.S. federal research policy and stabilized tariffs. However, management remains fundamentally optimistic that the transformed portfolio is positioned for resuming above-market revenue growth, rapid margin expansion towards the mid-20% operating margins, and mid-high teens EPS growth in 2026 and beyond, once the current headwinds abate. Potential upsides not fully factored into the 2025 guidance include faster release of China stimulus funding, stimulus programs in other countries (Germany, South Korea), European defense investments, and continued strength in semiconductor metrology.

Risks and Challenges

While Bruker's strategic transformation and technological strengths provide a solid foundation, several risks and challenges could impact its performance and the investment thesis:

• Market Demand and Economic Conditions: General economic downturns, inflation, and geopolitical tensions can reduce customer spending, particularly in academic and government markets (as seen in the U.S. and China) and potentially impact industrial and biopharma spending.
• Tariffs and Trade Policies: New and potential future tariffs (U.S. import tariffs, China import tariffs on U.S. goods, potential U.S. pharma tariffs) can increase costs, disrupt supply chains, and delay or reduce customer orders, directly impacting revenue and profitability.
• Acquisition Integration: Successfully integrating recent significant acquisitions (NanoString, ELITechGroup, Chemspeed, RECIPE) is crucial for realizing expected synergies, driving operational excellence, and achieving margin expansion. Delays or difficulties in integration could hinder financial performance.
• Litigation Risks: The company is involved in litigation related to acquired businesses, particularly patent infringement cases concerning NanoString's GeoMx and CosMx products and the BCA (PhenomeX) Beacon products. Adverse outcomes could result in significant damages, royalties, injunctions, and potential intangible asset impairment charges.
• Funding Uncertainty: The uncertainty surrounding U.S. federal research funding (NIH, NSF, DOE) and the timing and amount of China stimulus funding release directly impact demand from key customer segments.
• Competitive Pressures: Competition from larger, well-funded players and smaller, innovative companies requires continuous investment in R&D and operational efficiency to maintain market position and profitability.
• Supply Chain Disruptions: Global shortages of components (e.g., semiconductor chips) and raw materials, along with logistics challenges, can impact manufacturing capacity, costs, and delivery times.

These risks, particularly the near-term headwinds from U.S. ACA/GOV funding and tariffs, are significant and have necessitated a recalibration of the 2025 outlook. However, Bruker's mitigation strategies and diversified portfolio are designed to manage these challenges and position the company for recovery.

Conclusion

Bruker Corporation is navigating a complex period marked by the culmination of a significant strategic transformation and the emergence of notable market headwinds. The company has successfully repositioned its portfolio towards dynamic, high-growth areas like spatial biology, molecular diagnostics, and advanced analytical tools through a combination of organic innovation and strategic M&A. This has resulted in a more diversified and resilient business, capable of delivering above-market organic growth over the long term.

While the first quarter of 2025 demonstrated underlying strength in the core business and progress in integrating acquisitions, the impact of U.S. academic/government funding uncertainty and new tariffs presents a material challenge to the 2025 financial outlook. Bruker's proactive implementation of mitigation strategies underscores its commitment to protecting profitability and setting the stage for future margin expansion. Despite the necessary adjustment to near-term guidance and the cadence of medium-term targets, the fundamental investment thesis remains centered on Bruker's differentiated technology, its expanded presence in attractive growth markets, and its operational capabilities to drive profitable growth once the current transient headwinds subside. Investors should monitor the effectiveness of mitigation efforts, the trajectory of U.S. research funding, and the timing of China stimulus release as key indicators for the pace of recovery and the realization of Bruker's long-term potential.