Participants

Joe Kostka; Associate Director, Investor Relations; Bruker Corp

Frank Laukien; Chairman of the Board, President, Chief Executive Officer; Bruker Corp

Gerald Herman; Chief Financial Officer, Executive Vice President; Bruker Corp

Puneet Souda; Analyst; Leerink Partners LLC

Patrick Donnelly; Analyst; Citi

Luke Sergott; Analyst; Barclays Capital Inc.

Brandon Couillard; Analyst; Wells Fargo Securities, LLC

Doug Schenkel; Analyst; Wolfe Research

Rachel Vatnsdal; Analyst; JPMorgan

Tycho Peterson; Analyst; Jefferies

Subbu Nambi; Analyst; Guggenheim Securities LLC

Presentation

Operator

Good day, and welcome to the Bruker Corporation fourth-quarter 2024 earnings conference call. (Operator Instructions) Please note this event is being recorded.
I would now like to turn the conference over to Mr. Joe Kostka. Please go ahead, sir.

Joe Kostka

Good morning. I would like to welcome everyone to Bruker Corporation's 4th quarter 2024 earnings conference call.
My name is Joe Coska, and I am the director of Broker Investor Relations. Joining me on today's call are Frank Laukin, 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 Brooker's Investor relations website.
During today's call, we will be highlighting non-gap financial information. Reconciliations of our non-gap to GAAP financial measures are included in our earnings release and are posted on our website at ir.broker.com.
Before we begin, I would like to reference Brooker'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 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 our form 10K for the period ending December 31, 2023 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, February 13, 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 first quarter, 2025 financial results expected in early May 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. Gerald will then cover the financials for the 4th quarter and full year of 2024 in more detail and share our full year 2025 financial outlook.
Now I'd like to turn the call over to Bruker's CEO Frank Laupy.

Frank Laukien

Thanks, Joe. Good morning, everyone, and thank you for joining us on today's 4th quarter 2024 earnings call.
Brooker finished 2024 with another quarter of excellent constant exchange rate, revenue growth, and solid organic revenue growth, both higher than what we had expected for Q424, given our very strong Q423, which, if you recall, had organic revenue growth of nearly 16%.
For the full year 24, we again delivered double digit CER constant exchange rate revenue growth at 14% and 4% organic revenue growth, well above the market, which we estimate was flat to down slightly in fiscal year 204.
This is a testament to the strength of our portfolio of innovative solutions, culture of disciplined entrepreneurialism, and our broker management process.
In fiscal 24, we added strategic spatial biology, molecular diagnostics, and lab automation platforms to our portfolio, continuing our multi-year transformation into a growth-oriented industry leader with scale and position for leadership in the post genomic era.
This transformation is not just focused on growth, but also very much on higher margin potential and more rapid EPS increases going forward. We intentionally accepted initial margin and EPS solution from our strategic M&A in order to unlock new very large market opportunities and strong secular growth tailwinds, but also in order to further raise the margin potential and EPS growth profile of broker.
Looking to 2025, we entered the year with good booking's momentum. We start 2025 with solid BSI, segment backlog of still over six months of revenue, in part due to our Q424 book to build ratio of ended up at 0.99 or essentially 1.
We also have begun to receive first orders related to the China stimulus program. With over 15 million of China's stimulus orders in the second half of 24, most of it in the fourth quarter, and with more on the horizon.
We acknowledge US NIH and academic government market uncertainty and have built that into our guidance. But we fundamentally, after some settling, we fundamentally do not expect the reduction in NIH and other life science, medical, and research investment in the US.
Finally, we experience strong market trends in diagnostics and in semi-con metrology, as I will show you later, and we also see signs of a biopharma recovery.
Accordingly, we are establishing our fiscal '25 guidance for constant exchange rate revenue growth of 5 to 7%, with 3 to 4% organic growth and 2 to 3% contributions from M&A.
We are very committed to rapid non-gap operating profit margin expansion and assume about 140 bis operating profit margin improvement in fiscal '25 compared to our 24 level of 15.4%, which by the way, was also a bit higher than what we had expected.
Finally, we expect non-gap EPS growth of 11 to 13%, with 14 to 16% constant exchange rate, EPS growth all compared to 24%.
Turning to slide 4 now, in the 4th quarter of 24, Broker delivered strong revenues and non-gap operating and stronger operating margin margins than expected.
Q424 reported revenues increased 14.6% year over year to 979.6 million, which included an FX headwind of 1.2%. Constant exchange rate, or CER revenue growth of 15.8% year over year included organic growth of 3.9% with 4.5% organic growth in our BSI segment. And an organic decline of 2.8% at best on that of company in inter-company eliminations. Revenue from acquisitions added 11.9% in the fourth quarter of 24.
In the fourth quarter of 24, our non-gap operating margin was 18.1%, which actually matched our Q423 margin. A strong organic operating margin expansion of 300 bits fully offset margin dilution from M&A and FX.
Our strong organic operating margin expansion is evidence of the progress our operational excellence processes. And M&A integration activity initiatives are making.
Finally, Q4 non-gap diluted EPS was $0.76, up 8.6% from $0.70 in Q4 of 23, and we are pleased that in the fourth quarter of 24, we were able to resume non-gap EPS growth year over year.
All right, moving to slide 5 now, broker strong growth performance amidst challenging marketing conditions in fiscal '24 once again delivered above market organic revenue growth.
Fiscal year '24 reported revenues increased by 13.6% to 3.37 billion, with 14.% CER revenue growth. On an organic basis, revenues grew 4% year over year, consisting of 4.2% organic growth in scientific instruments and 1.9% organic growth at best, net of eliminations.
Acquisitions added 10% revenue growth and there was a slight 0.4% FX revenue headwind for the year.
Our 2024 non-gap growth and operating margin and gam GAAP and non-gap EPS performance are all summarized on slide 5. Margins and EPS were down year over year as a result of the expected initial dilution from our strategic acquisitions that closed in the first half of 204.
Please turn to slides 5 and 6 now, where we highlight our fiscal year '24 constant exchange rate performance of our three scientific instruments, groups and of our best segment year over year. In 24, Biospin Group revenue was 905.7 million and grew with low 10s percentage in constant exchange rate. Biospin saw strong revenue growth in Europe and the Americas, as well as in industrial research, Acagov markets and biopharma, with strong contributions also now from our automation service and software business.
We had revenue from 4 gigahertz class NMR systems each in 24 and 23, and in 424, we had revenue from 1.2 gigahertz NMR at the University of Zurz in Switzerland.
424, the Cali Group had revenue of 1.1 billion. And CR growth in the mid-teens percentage with strong growth in microbiology and infection diagnostics driven by both the multi biotyr and the newly acquired Elitech molecular diagnostics business, as well as our optics IR near IR and Rahman molecular spectroscopy business. This was partially offset by softness in Acagov and in our China business.
On slide 7, Broker Nano's 24% revenue was also 1.1 billion and grew in the high 10s percentage CER with growth driven by ACAgov research and semiconductor metrology.
The high performance computing and AI megatrend is a strong tailwind for our semiconductor and advanced packaging tools, and we now have north of 125 million of AI and HPC related semicon nanotool metrology revenues and more overall for semiconductor metrology, but not all of it is AI related as far as we can tell.
So anyway, integration of our cellular analysis and spatial biology business is progressing very well, but in 24, we still saw it was moderated by softer demand from biopharma.
Finally, 24 best revenues grew in the low single digit percentage net of intercompany eliminations driven by growth in accelerator and fusion technologies at our research instruments or our eye business. Our eyes also getting traction in extreme UV or EUV lithography technologies which are used in manufacturing next gen semiconductors.
This strength was partially upset at best by softness in clinical MRI superconductors.
Moving to slide 8, we highlight two of our businesses, namely our microbiology business and semicon metrology. Couldn't be more different, but both are doing very well, and both also when they grow and they do have above corporate average margins. Microbiology and infectious diagnostics. It had growth in the mid-teens in the fourth quarter and high single digits throughout the year with an installed base of now more than 7,000 ML biotyrs and also bolstered by the Elitech molecular diagnostics acquisition, which closed at the end of April in 204. Very pleased with that business. It has very little China, very little NIH, very little biopharma exposure. These businesses are coming along and doing really well. The same is true for semiconductor metrology, where organic revenue growth was actually greater than 20% in the fourth quarter.
And low 10s in the fiscal in fiscal year '24. Our total annual revenue for all semiconductor metrology is north of 250 million, and included within that, maybe half of that goes to high performance computing and AI.
Right, I will not spend a lot of time on slide 9. It is sort of a slide that we showed at the JPMorgan Healthcare Conference, but it is sort of the really big picture on broker. We have attained scale with 70% cumulative revenue growth in the last 4 years. We're now.
Above 3.35 billion, we added $400 billion in revenue, $400 million 400 million dollars in revenue last year and our four year constant exchange rate revenue keger had been it was 15%. I think that's industry leading. We've also demonstrated previously, namely in the 14 to 22 period that we have the management process and the team to really drive operating margin ex expansion. In fact, we drove 1,000 bits over eight years before we then very intentionally did some of the strategic acquisitions that are temporarily diluted, but I think that ultimately. Give us not only a bigger platform and scale and get us into key growth markets with very large stamps, but also financially improve the ultimate margin profile of the company.
So enough of that at the very bottom you'll see that our next for the next 3 year goals, 3 years, including 25, of course we're very committed to an annual greater than 125 bis non-gap GAAP operating margin expansion. As you've heard this year, we've got, we're aiming for 140 bits, and we're also very committed to 13 to 15% constant exchange rate EPS.
Growth this year you'll see we were aiming for 14 to 16%. So we really have executed and continued to execute this very successful multi-year transformation into a growth oriented industry leader with very attractive margin and EPS opportunities.
Right, so in summary, the year 24 was transformational for Broker. We completed key strategic acquisitions to access very large addressable markets with strong secular growth tailwinds while bringing additional spatial biology, molecular diagnostics, and lab automation and software platforms into our portfolio.
For the 4th year in a row, has delivered well above market organic and double digit CER revenue growth.
So after approximately 70% cumulative revenue growth in the last 4 years, we have transformed and we have achieved highly competitive scale, which is an excellent foundation for a significant margin expansion and rapid EPS.
So we have further transformed our differentiated portfolio to position it not only for growth and margin expansion, but very much to be a leader or the leader in the post genomic era, which we believe will define the next quarter century in life sciences.
So with that high level outlook, I'll turn things over to our CFO, Gerald.

Gerald Herman

Thank you very much, Frank, and thanks everyone for joining us today. Pleased to provide more detail on Brooker's 4th quarter and full year 2024 financial performance, starting on slide 11. In the fourth quarter of 2024, Bru's reported revenue increased 14.6% to $979.6 million. It reflects an organic revenue increase of 3.9% year over year. Geographically and on an organic basis in the fourth quarter of 24, America's revenue grew in the low single digit percentage. European revenue grew in the mid-teens range, while Asia Pacific revenue declined in the high single digit percentage all year over year.
For our IEA region, the fourth quarter of 24 revenue was up mid single digit percentage year over year.
PSI organic revenue growth in the fourth quarter of 24 was 4.5%. A solid revenue performance on top of an exceptional fourth quarter of 23, at 15.5% organic growth.
PSI 4th quarter 24 organic systems growth was in the low single digit range with aftermarket revenue growth in the low double digit range per% year over year.
For the full year 2024, aftermarket revenue represented over 30% of PSI revenues for the first time.
Non-gap gross margin increased 70 basis points in the fourth quarter of 24 to 52.5% as pricing and operational excellence initiatives continued contributed to gross margin expansion year over year.
Our fourth quarter, 24 non-gap operating income increased 14.9% year over year, and we posted a non-gap operating margin of 18.1%, equal to that reported in the fourth quarter, which did not yet have margin dilution associated with some of our first half 24 acquisitions.
On a year over year basis, we delivered excellent organic operating margin expansion of 300 basis points in the fourth quarter of 24, driven by volume, mix, operational excellence, and integration synergies.
This significant organic operating margin expansion fully offsets the margin dilutive impact of our earlier strategic M&A and FX in the quarter.
On a non-gap basis, fourth quarter 24 diluted EPS was $0.76, up 8.6% from $0.70 in the fourth quarter 23.
Our non-gap effective tax rate was 32.5% compared to 31.3% in the fourth quarter of 23, with the increase driven mostly by jurisdictional mix and discrete items.
On a on a GAAP basis, we reported diluted EPS of $0.09 per share, including significant acquisition related costs compared to $1.41 per share in the fourth quarter of 23, which included a one-time $0.99 per share non-cash bargain purchase gain arising from the phenomics acquisition.
Weighted average diluted shares outstanding in the fourth quarter of 2024 $452 million an increase of 6 million shares of 4.1% from the fourth quarter of 2023, resulting from our follow-on equity offering in May of 2024.
Turning now to slide 12, we generated $189.9 million of operating cash flow in the fourth quarter of 24. Our capital expenditure investments were $38.8 million resulting in free cash flow of $151.1 million in the fourth quarter of 24.
This reflects a cash flow decrease of $23 million compared to the fourth quarter of 23 as significant acquisition related expenses and restructurings more than offset better working capital performance in the fourth quarter of 24.
We finished the fourth quarter of 24 with cash equivalents, and short-term investments of approximately $183 million.
During the fourth quarter, we used cash to fund selected project Accelerated 2.0 investments, capital expenditures, and completed debt repayment of about $150 million. We continue to move forward with our delevering actions following the strategic acquisitions we completed in the first half of 2024.
In addition, with improved cash flow entering 2025, we're returning capital to our shareholders through our existing share buyback programs an attractive opportunity at this time.
Slide 13 shows our non-cap P&L results for the full year of 2024. Revenue was up 13.6% to $3.37 billion reflecting organic growth of 4%. Acquisitions added 10% to our top line, while foreign exchange was a 0.4% headwind, resulting in constant exchange rate revenue growth of 14% year over year.
The remainder of the non-gap P&L results for the full year of 2024 are summarized on slide 13 with the drivers as explained and on the slide.
Turning now to slide 14 in the full year of 2024, we generated $251.2 million of operating cash flow, down about $99 million from 2023 as a result of lower net income and significant acquisition related expenses and initial working capital needs for our acquired businesses.
We generated $134 million of free cash flow in 2024, down about $109 million from 2023, and lower operating cash flow and higher capital expenditures.
Turning now to slide 16, we enter the year with a stronger transformed portfolio, healthy backlog, and emerging order momentum.
We're initiating guidance for a full year 2025 as follows.
Reported revenue of $3.47 billion to $3.54 billion representing reported growth of 3 to 5% and constant exchange rate revenue growth of 5 to 7% all compared to 2024.
This guidance assumes organic revenue growth of 3 to 4% year over year, an estimated for an exchange headwind of 2%, with acquisitions contributing 2 to 3% to revenue growth.
For operating margins in 2025, we expect non-gap operating margin expansion of approximately 140 basis points compared to the 15.4% we posted in 2024.
On the bottom line, we're guiding to non-gap EPS for 2025 in a range of 267 to 272 for non-gap EPS growth of 11 to 13% compared to 2024.
This includes an approximate 3% foreign exchange headwind, and our non-gap CER EPS growth guidance for 2025 is therefore 14 to 16% year over year.
Other guidance assumptions are listed on the slide.
Our fiscal year '25 ranges have been updated for foreign currency rates as of December 31, 2024.
We anticipate the first quarter of 2025 organic revenue to be roughly flat year over year with CER revenue growth in the mid single digits. In the first quarter of 2025, we expect softer operating margin performance year over year as we experience some dilution from our nano string acquisition completed in early May of 2024.
As we saw in fiscal year 2024, we expect our organic revenue and operating margin performance to strengthen in the subsequent quarters of 2025.
To wrap up, Brecher delivered meaningfully above market organic growth in 2024 and were well positioned to deliver strong CER revenue and non-gap EBS growth in 2025. With that, I'd like to send the call back over to Joe.
Thank you very much.

Joe Kostka

Thanks, 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 one question and one follow up, operator.

Question and Answer Session

Operator

(Operator Instructions) Puneet Souda, Leerink Partners.

Puneet Souda

Yeah, hi, Frank. My first question is on the guide. I mean, the full year guide is a, 3 to 4% organic growth, which is higher at the higher end versus what you had before the NIH indirect announcements and direct cuts. So just trying to understand what gives you the confidence on the instrumentation sales. I mean, obviously Booker's instrumentation, it has more exposure to instrumentation. I mean, so just trying to understand, is it LE tech, is it AI, is it aftermarket service or European offsets that are counteracting through the year that sort of give you the confidence and because you're, and you're also stepping up your margin guide as, I mean, 140 this expansion here that you have for the year. So just getting a number of inbounds on that and if you could help us understand.

Frank Laukien

Thank you, Punit Yeah. No, I think there's puts and takes. There's plenty of them. It's a dynamic environment. We are already for somewhat other reasons that indicated that we, even at JPMorgan, that we thought that the, there would be.
Uncertainty in government supported research and of course that uncertainty is there. We all know why.
And we just looked at that. I mean, NIH is less than 5% of our exposure if you like. I did some of them, we did some of the modeling. Look, if that was came down 8 to 10%, which I think it's not going to happen, but it could happen. Well, that would be maybe 15 million, a little bit more of less revenue, and for that, I think we have enough other growth drivers, outside of the United States with biopharma coming back a bit, maybe not roaring back, but coming back, some China stimulus funding that may be offsetting or more than offsetting that.
Microbiology, semiconductor, AI, applied markets all the way to defense spending in Europe, quite H1stly, there are enough drivers that if we put it all together, 3 to 4% organic growth is not an astounding number, but for this year I think it's solid and I think we've filled up.
I'm not saying this is conservative. I think it's very balanced, quite H1stly, and yeah, and we really manage at the end of the day for the constant exchange rate revenue growth, right, even as you go through the quarter, some of them will have more CER, some of them will have more organic growth. So I'm very.
Confident that we can reach the 5 to 7% CER revenue growth this year, and yes, I think it it'll include the 3 to 4% organic revenue growth.
Could we do better? Yes, but you know there are headwinds and that's why I think this is appropriately balanced.
And yeah, we're very committed to the operating profit margin. It's going very quickly to back towards 20% over the, over 3 years, obviously, and want to take a sizable step in 25. Management teams completely plugged into that and.
With that, and there we have also enough enough opportunities to make that happen even with some NIH, which we're now assuming some NIH funding being less certain in the first half of this year or maybe throughout the year. So we feel good about this and are very committed to that and it then all adds up to.
14 to 16% constant exchange rate EPS growth. Unfortunately, there's a bit of a headwind, but I've for EPS and I've indicated that at JPMorgan already as well. So with that, the reported EPS growth of 11 to 13%.
Is not.
It's not, it's a good number and it's even better if you disregard FX, but of course it's a reality. So we think all in, I think this is a, this is very greater commitment to solve for margins and EPS if in doubt, that's what we, that's what will change in the company in terms of ops and other things to deliver that, but also reasonable confidence in the revenue growth.

Puneet Souda

Thanks for that. And could you talk a bit about, the assumptions in Q1, what you're hearing from the customers in terms of instrumentation placements, their ability to, take the instruments and install and get them signed off in Q1 and sort of, the main question being that some of the facilities are very much supported by the indirect cuts. I mean, I recall when I purchased your SolarX15 Tesla magnet many years ago. I mean, we had to take down a wall, and that was facilities. So if you could maybe just elaborate what you're hearing from the customers and your ability to, continue to install here and any backlog cancellations that you contemplate just given the backdrop.
Thank you.

Frank Laukien

We have not heard anything about any backlog cancellations.
That's why we're a little bit cautious on Q1, as you've heard from Gerald, right? We think we've baked that into that. Fortunately, in Q1, we still also have quite a bit of M&A growth. So I think our, mid single digit CER revenue growth looks good, but indeed, as you've seen, we, we've said organically we might be.
Near flat in 21, which is baking in, a cushion and some belts and suspenders so for some of that uncertainty. No specific anecdotal, hey, I don't get my I don't get my lab ready or I don't have, I don't know, power cryogens. We haven't heard any of that. But right now, obviously there is uncertainty and then, yeah, there was a stay of that order, and we think this has to be that there will be a new. Paradigm. I think there's no going back, but I think there also will be either they'll have a new funding category where they put the $4 billion saved back into infrastructure or other, scientific or clinical research projects. We don't think there'll be simply a cut, quite H1stly, I think that's almost bipartisan in Congress and And I don't know that the new HHS and NIH administration has said we want to cut budgets. I think they want to reprioritize and we'll see what that does, but I think net net, there'll still be a lot of research and validation funding for the type of instruments and and aftermarket solutions that we that we and others in the industry make. So I'm not doom and gloom on the NIH and overall spending, philanthropic and other and state spending. Many of these things are very strong. There are many other funding sources, but yes, we've built in, hopefully something that.
That accepts that there is uncertainty, certainly in Q1 and probably into Q2, into the cadence of our quarters.
By the way, it's also not all back and loaded, I think, already by Q2, we're much more, even just the way our revenue flow is going, Q2 to Q4, I think you'll see pretty strong improvements year over year.

Puneet Souda

Got it. Thanks for that.
Yeah, thank you.

Operator

Patrick Donnelly, Citi.

Patrick Donnelly

Hi, good morning. You have Lizzy on for Patrick. Thanks so much for taking my question. I guess first, can you talk a little bit about, academic government budgets, in Europe and China? I think you touched a little bit on stimulus there, but it would be great to hear more on that.
Thank you.

Frank Laukien

Yeah, they've been, of course, in China, there is now stimulus funding, it's not going to be this one or two quarter bolus, which in a way is nice for us.
It's going to be much more spread out. We've some of that has begun to come in already, a little tiny bit in Q3, a little bit more in Q4. We expect more in the first half of this year, but it may even come out throughout the year. It may be more for us in terms of revenue at 24, sorry, I misspoke, 25 and 26 effect, which is great. I'd rather have these things be a little bit smooth over multiple quarters. Europe has been I should also mention the rest of Asia. There is a lot of Asia Pacific, Taiwan, Korea, even Japan, other parts of India, which is not the Pacific, but nonetheless those have been strongish and some of that is making up for a little bit of weakness in China. You may you'll hear that from others as well.
Europe has been reasonably good recently and so all in, I think Agov is not going to be great this year, but I think it's not going to be that bad. It's not all, I think it's good. And then, there's just a lot of other strength and growth drivers that we see this year that I mentioned earlier that don't depend on AcagAov. So, yeah.
With all in, I think, again, we TRY to bake all of that into our guidance range of this, 5 to 7% CR revenue growth and.
I think it's reasonable.

Patrick Donnelly

Great, and then just one more, for the deal delusion this year, is 8 to 10 sounds kind of the right way to think about it entirely, or, am I thinking about that right? Thanks.

Gerald Herman

Yeah, this is Gerald. Yes, you are thinking about it correctly, we're moving from roughly 15 to 20 cents dilution coming out of 24 to 8 to 10 in 25 on the EPS line. That's correct.

Frank Laukien

And then hopefully near very much hope to be near break even in 26, so it's it's a, it's.
And and again, it shows you some of our ability to flex with some of the biopharma business and cellular analysis and spatial biology being being relatively weak in 24, we flex to make that happen, and again, we're on track for exactly those numbers that you asked about for 25.
And still very much looking to have a break even from that in 206 already.

Patrick Donnelly

Okay. Appreciate it.

Operator

Michael Ryskin, Bank of America.

Hi, this is Julia on for mic. Do you have an update on BioPharma recovery timing? Are you expecting that to be the second half of this year? Thanks.

Frank Laukien

Good question, Julia. We think it's going to, we don't think it's a step function. We think it's going to be gradual, so we're expecting that already in the first half of this year, but maybe getting stronger in the second half of the year. I think that's maybe a better way to think about it.

Okay. Thank you very much.

Operator

Luke Sergott, Barclays.

Luke Sergott

This is Sale on for Luke. Thanks for the questions. Is the expectation still to play somewhere in the realm of 3 to 4 UHF NMRs this year kind of in line with the 4 you've placed in the past couple years and then, could you talk about the geographic concentration of the backlog and BSI, is that, relatively in line with your exposure, or do you see it kind of higher in regions where, you're seeing the most strength?

Frank Laukien

Good question. Yeah, this might be a year with 3 ultra high field systems in 25, indeed, last two years we had 4 of them.
Could be 4 this year, but we're presently expecting 3, all baked into the guidance.
And geographic breakdown of backlog for BSI. I'm, I assume it's consistent with our.
Jason, do you have a thought on that?

Gerald Herman

It would be consistent with our geographic.

Frank Laukien

Mix. Yeah, so nothing unusual there is the answer, right?

Gerald Herman

Yeah, the only thing I would add is, the backlog level at this point, Close to 7, a little over 7 months at this stage, so it hasn't really changed dramatically from the 3rd quarter coming out of the 4th. So we still have a fairly significant backlog level. The composition is as Frank just described, similar to our overall geographic mix, but the numbers a little bit, not terribly changed from where we were in the 3rd quarter.

Frank Laukien

And if I may, since the consumables heavy businesses like Elitech Molecular diagnostics or even the cellular analysis and spatial biology businesses.
By their nature, have less backlog, we we probably will have a normalized backlog level that's not 5.5 but 5. So we have we can continue to cushion this year and any uncertainties, etc. And we do some of that with our still elevated backlog that has remained.
Stubbornly high and that's a good thing, of course we had modeled it previously to where it would come to, below 6 and 5.5 by right about now, but it but book to build has been reasonable throughout the year and pretty quite good for a strong Q4 being at 0.99 is excellent. So yeah, so we.
We continue to benefit from that, and it also allows us to do some good quarterly planning and cushioning because we, it's a bit of a luxury position, but it's good.
Good to have.

Luke Sergott

That's helpful. I appreciate that. And then, on operating margins you're targeting around 140 basis points of expansion, right? And, I'm just wondering if you could give some puts and takes on that, kind of bucket out the assumptions on the operational improvements on the existing business versus, what's continuing to come from the integration of M&A maybe a little bit on FX as well, and kind of in that vein, I know you guys do. A good amount of manufacturing in Europe. Are you guys contemplating anything on potential tariffs there?
If not, how are you thinking about the potential risks?

Frank Laukien

Okay, lots of good questions. Yeah, 140 bits, of course, there's always a bit of a range around that, but that looks like a reasonable number. So yeah, that would bring us to about 16.8, but it could be a little bit higher, it could be a tad lower than that. But I think that's 140 bits is a good number. .
It's all in, so we haven't tried to. There is some, there is continued organic headwind here, probably around 50 bis, but there's also a little bit of FX tailwind. So it's net net, there is a non-organic, let me get this right, non-organic headwind. So without all these headwinds in an ideal world, it would be even better than 140 bits, but this is an all in number including FX and including, yeah, about 50 bits of organic headwind.
Tariffs, Right, I mean, we do manufacturing in the US. We manufacture in Europe, we manufacture in Malaysia. Those are our major sites we do not manufacture in China.
So, we have a lot of flexibility and, we can't turn on a dime, but if they're So far, we don't seem to be affected, but you never know what happens. Things are happening quickly. So if we needed to respond, we can respond within a few quarters and and yeah.
I don't think we'll be singled out for punitive tariffs or anything like that. I mean, this is our instruments also including those coming from Europe, and many of them are coming from the US, but many of them coming from Europe are needed for our life science research enterprise here in the US, so.
We can, we have flexibility, we have a number of Operations in the US that do manufacturing and final test, and if we needed to modify some of some of the production over here for the US market, we could certainly do that.

Luke Sergott

Appreciate that detailed answers Frank.

Frank Laukien

Thanks.

Operator

Brandon Couillard, Wells Fargo.

Brandon Couillard

Hey, good morning. Frank, it'd be great to get an update just on the tempmpSoft platform, any updated install based figures you have a revenue run rate for that platform, how you think about growth in in 25.

Frank Laukien

Yeah, so same stuff is doing better again, obviously, we have some competitive dynamics there, when the, when that other instrument first came out, and we've recovered from some of that with some very good.
Further improvements of the various Timop models and stuff is more of a platform with multiple models, both at ASMS and then also quite importantly at the International Upo last.
Last year, so, our win rate has come back and it's, it remains competitive. There's two good platforms on that market, and that's good for the market overall. So the somewhat muted the growth, but, with the win rate improving more recently, I think that will pick up again and.
Yeah, it's about a.
Not not far from a 200 million business, so it's a meaningful business for us and and also tends to have good margins and of course it's strategically very important to us. You'll see a lot of activity this year in terms of further improvements, refinements, new models and things like that. So we're invest a lot of our investments are going in this direction for the For for proteomics and the various flavors of that from proteoform profiling of intacts to all the way to To lipidomics, metabolomics, glycomics. It's it's a very key, it's one of the breakout along with spatial biology, it's one of the breakout opportunities of the company, and we're very heavily investing there.
So Doing it's doing, it's doing good and its growth rate is recovering.

Brandon Couillard

Two questions for Gerald. Could you break up the impact of currency on operating margin guidance for the year? And then secondly, inventories came down a lot sequentially, maybe that was currency just how do you think about free cash flow conversion in 25.

Gerald Herman

Yeah, so on the first question, Brandon, yeah, I think generally for 25%, we're expecting a 3% foreign exchange headwind right now, and that's just where it is. We'll see how it all plays out, as we get down further, in 2025 we start to see some movement thereafter.
And on the cash flow conversion, yeah, we had quite a good quarter, I would say, notwithstanding, some acquisition related expenses in the 4th quarter, we generated a significant amount of working capital improvement in the 4th quarter, and I'm expecting to see that continue, and as we move into 2025. Our cash flow conversion has improved, I think, significantly after, I would say some Challenges especially related to initial working capital associated with their acquired businesses, but overall we're pretty pleased with the performance in the 4th quarter and expect to continue to see it. Yeah.

Frank Laukien

Our operational teams and our finance teams are doing a great job with free cash flow conversion that's already improving as you've seen in Q4 and that'll be another big focus for 25 obviously as we either further deleverage or do more share buybacks. I think that's a priority, gives us more flexibility.
I think maybe one earlier modeling question that you had, Brandon, on our 140 25 operating profit margin.
Expansion, the net headwind between a larger M&A headwind and a smaller FX tailwind is about the net headwind is about 20 bits.
I hope that helps him and addresses your question.

Brandon Couillard

Okay. Thank you.

Operator

Doug Schenkel, Wolfe Research.

Doug Schenkel

Hi, this is Madeleine Moman on for Doug. For Gerald, if conditions with the NIH or in China do deteriorate, can you talk through what levers you have at your disposal to protect the margin and EPS guidance? And then thinking about the NIH funding specifically, if the environment does deteriorate, are there things that you can do to reduce adoption, friction to adoption of products like funding for capital funding for capital equipment becomes more challenging?

Frank Laukien

It's all, it's sort of, as I said earlier, it's kind of baked in, right? We have done some sensitivity modeling.
We read your research, so for instance, we did model an 8% decline, which we don't think will happen, but it could happen in the first half, maybe with some catch up in the second half. And so, those type of reasonable scenarios including delays and also a flat out reduction in NIH budget this year by, for instance, that 8% figure that's floating out there mathematically, we think we've got, we, we've put that into the guidance. That's why, otherwise maybe our guidance would have been a little higher, but this is something we've really tried to take into account. Can you predict everything this year? Of course not, but I think we've done a reasonable job in putting some scenario some unpleasant NIH scenarios into our guidance.
Have we put in a worst case? Of course not, no, but I think there won't be a worse case, but a reasonable contingency has been built in. And we've also, as you've seen, have taken that through margins and EPS, so it's also built into that not only at the revenue growth level, but we think we have enough strength. Gerald, you would like to add something to that.

Gerald Herman

I was just going to say with respect to your other part of your question on 25 in the company, I just remind folks that the company is still quite a global organization, and we still have significant revenue performance in Other geographies outside of the United States, 70% of our revenues coming ex US. So there's still a significant order backlog.
Our performance across most of our other areas of growth are continuing here I'm talking about. The two areas Frank highlighted the semiconductor metrology area are microbiology, infectious disease businesses, and we have very solid performance across industrial businesses in other geographies. So I think that The general portfolio of the company is really pretty transformed to a level where it's not really only about academic government research funding and even if it's more focused on that, there's plenty of global opportunities outside of the US.

Doug Schenkel

Great, thank you. And then on the topic of the Make America Healthy Again movement, can you talk a little bit how Broker is positioned to benefit from things like increases in food, water, environmental, and PAS testing? What's your exposure there? And do you have anything built into your guidance around that?

Frank Laukien

Yeah, we have an applied a markets business as well. So we do some PFAS testing and PFAS, Research, testing, some other companies have more of that than we do, but we are involved in some of those markets as well.
Clearly, as people are looking at validation studies on, I think in my the the Maha in some ways make my friend healthy again.
In my way of thinking, very much supports that you look at, now I'm going to get a little nerdy, but that you look at the phenome, that you look at the post genomic total organism, the patient, and don't just do genomic medicine and things like that because they don't change so much with food and environmental factors. So in a in a subtle way, but perhaps in a in a in a in a fundamental way, it's going to us much more towards this whole whole human phenome biology testing and and and and not and and that's all very much where we're aligning directionally. So there is a subtle long term effect that I think will be very powerful for for the type of medical research that We are prepared to support and that this new administration seems to be focusing on. Nobody has quite said it that way, but if you think about it more deeply, it's actually going to very much accelerate this post genomic era and the whole human phenome biology.
So it was a bit much for a financial call I think it's important.

Operator

Rachel Vatnsdal, JPMorgan.

Rachel Vatnsdal

Perfect. Good morning. Thanks for taking the questions with you guys. So I wanted to dig into this first quarter guide. You mentioned that you're assuming flat organic growth, mid single digit CER, so that's really implying a mid single digit contribution from acquisitions. It looks like the street was modeled. A double digit number for the first quarter in terms of M&A contribution. So can you unpack those M&A assumptions for us in the first quarter? Are there any one-timers? Is there conservatism baked into the M&A assumption? And then what type of cadence are you assuming for M&A contribution throughout the year?

Frank Laukien

Right, it'll have the biggest impact in the first quarter, Rachel, of course, right, because that the two larger acquisitions close back to back in April 30th and May 6th from what I remember, that's Elitech and nanostring.
Whereas Cam speed closed somehow in the middle of the first quarter. So indeed, our M&A.
Benefit in the first quarter will be mid mid to high single digits perhaps and accordingly, that's very satisfactory since we're aiming for overall revenue growth, we're managing the quarters not for one of these elements that go into it, but overall revenue growth. So it'll be that'll be that. Be reasonable for us and that that fits our cadence. M&A will then have a moderate impact a benefit in the second quarter and then it'll fall off in Q3 and Q4 as all of these things will by then be organic.

Rachel Vatnsdal

Got it. That's helpful. Then just for my follow up just regarding China stimulus, so you mentioned that you had 15 million of stimulus orders in the back half of 2024. Can you walk us through what are you assuming in terms of benefits from China stimulus into the 2025 guide versus what would be upside, and then also just where are you seeing the orders either from a provincial level, from a product level, any color there would be helpful as well. Thanks. So. Much.

Gerald Herman

Rachel Fitzgerald, I'll take that. Hello. On the stimulus orders in the guide, we would simply assume that it's, first of all, we did see some improvement in stimulus orders in the fourth quarter, 24, but we're expecting to see those orders spread out in continue to be spread out in the first half. Of 25, so we expect to see more in the first quarter, for example, in 25, and then the benefit itself from a revenue perspective to mostly hit into the second half of 25 and into the first half of 26. So those are already essentially baked in, but I think we've not. Substantially large numbers in those cases largely due to the delays that we have seen and continue to see with respect.

Frank Laukien

So so modest levels are baked in, and we're not about to prematurely harvest potential higher levels because of NIH uncertainty, so maybe that'll end up offsetting itself, but, remains to be seen. We we've baked in.
If in an isolated world, we've probably been quite conservative on China's stimulus being baked in, because, of other uncertainties that that we're all aware of.
Hope that helps.

Operator

Tycho Peterson, Jefferies.

Tycho Peterson

Hey, thanks. A couple on guidance as well, I guess the 2 to 3% from M&A, could you maybe just delineate between nano string? I know that, had been running below plan, ChemSpeed had been running above plan, and then Ela tech, are you seeing synergies, with the Maldi business there yet? And then also Gerald, expectations for further, backlog reduction in 25, and potentially bringing that down. And are you guys assuming a reversal of the import export, restrictions?
And then lastly, Frank, semi, could semi accelerate from here? I think you've got, new gated architecture replacing thinset. There's a lot more sampling and process that's needed and maybe just talk a little bit about whether semi could actually pick up from here.

Frank Laukien

So yeah, nano string, it's doing okay. I mean, it's not quite running at the 10 million per month, 120 million run rate, a little bit lower, but maybe it's running at 110 million or so, and that's in a year, remember, when, of course we all remember where biopharma was relatively weak and often that tends to be third of nano string revenue and that was just the weak part. So we expect that to pick up, but we don't expect nano string to go back yet in 25 to its Pre-chapter 11 levels, but we expect nice growth in nano string as well as in cellular analysis this year. Elitech is just chugging along. It's just, oh my God, I've never had such a predictable business. It's good. It has, as you may recall from JPMorgan, it had more placements of instruments last year than than we had expected. That bodes well for these instruments then coming up to full speed and having the consumables pull through by.
Maybe in the middle of this year, so that they're doing great. MSpeed is doing better than expected.
SEmi is so strong already and it is on such a good trajectory. I don't know that it would further accelerate, but I also, to your point, maybe don't expect any.
Deceleration in our semi portfolio, so it's just a delight and it's been on a good growth trajectory with terrific margins.
And I mean something on import export. I apologize. What was the question.

Tycho Peterson

Are you assuming that gets unwound?
The the restrictions so.

Frank Laukien

Wet, so we have certain semi-restrictions on China. They're not going to go away. Those were already implemented 2 or 3 years ago for very high performance equipment that you cannot export to China. That's completely baked in as of years ago. And these other more recent stuff that came out just in Early January, none of that affected us, and so therefore it won't go away, yo, but only because it doesn't affect us. These instruments, mostly I do bottom up proteomics and the few instruments that we have that do top down proteomics, they come from Switzerland or Germany, so they're not affected directly.

Tycho Peterson

Okay, and then Joe, can you come in on the backlog dynamics and then also I had people asking about first quarter operating margins. It looks like they're pretty soft. So could you touch on that as well?

Frank Laukien

Thanks.
Yeah, right, so as we said, we think the cadence will be that operating margin improvements will be more in the back not only back half but in the Q2 through Q4. So Q1 will be not strong on operating profit margin, that is correct, simply though, simply because that's still mathematically a quarter where the nano string dilution is new to us.
Year over year, last 124, I'm stating the obvious, sir, we didn't have nano string yet, so therefore it didn't have its diluted effect yet. So it's H1stly, it's just math. There's nothing more than that in there. It's just how the math comes together.

Gerald Herman

And Tao, with respect to your question on backlog in 25, we're not assuming any significant change. I mean, at this point, to be blunt about it, we've talked about dragging that backlog down over multiple years and our order performance, particularly in the fourth quarter, has just made that challenging, as Frank mentioned earlier. In a good way, so we haven't been able to bring it down significantly because of the order.

Frank Laukien

But that's that's the put or the take. I don't know which it is, but you know if NIH was really just terrible for the rest of the year and there was no new political consensus of how to redeploy those savings into research infrastructure. And maybe uncertainty would be the biggest problem, right? I think we have that we're sitting on that extra two months of backlog cushion that we'd like to not use up this year. We don't think we will, but that comes down a little bit this year is fine.
And also baked into. This a little bit, but we're not expecting to go from 7 to 5 months, but that's kind of the, that's the free variable that we can choose to come down, by half a month or by a full month this year, depending on how order patterns are. That's why we are in an unusual position to where we can, we have that other steering wheel that we can. That we can that that just nicely counteracts any other uncertainty.

Tycho Peterson

Great, thank you.
We can take one more question.

Operator

Subbu Nambi, Guggenheim Securities.

Subbu Nambi

Hey, thank you so much for taking my question. Frank, you mentionedimtoff that the new product launches is back on track. Where are you seeing most growth in terms of geography, given recent micro funding events, especially in the US? Could you lay out what your mass exposure is in the US and then what is the GM in the 2025 guide?

Frank Laukien

Yeah, stuff.
So indeed, yeah, we, we've signaled that the Tims Omni will be launched, hopefully at ASMS but sometime this year, that's sort of a an unusual new field of proteoform analysis within mass spectrometry. So, we hope that we'll have a launch this, we're sure we, we're pretty sure we're confident with that we have a launch this year, hopefully at ASMS. There will be other improvements that for competitive reasons, we don't want to hint at right now, but there's a lot in the pipeline.
The geographic contribution on Tim is not that unusual. It's obviously US heavy and Europe heavy, but there is a meaningful contribution also from Asia Pacific, China, but also, Japan, Korea, Korea's stimulus package that's now coming along. Biopharma and biosciences is part of that. We're also benefiting from the battery part and other driver of strength.
So Timoff had been suffering also a little bit from weaker biopharma funding. So, we think that may begin to gradually reverse this year. So that might be another driver that lifts all boats, maybe that's, and a lot of that biopharma funding tends to be primarily in the United States.
A lot of it in Europe, a lot of it in Asia Pacific, but the US is clearly leading there. Hope that helps to boo.

Subbu Nambi

Yeah, so that means the NIH funding is probably not going to just have an isolated effect on us.
One thing you said interact, does that mean it's top down, then should we worry about something else, or is this what you told Taiko that it's manufactured elsewhere, not in the US?

Frank Laukien

Did you say, did you use the word interactone?

Subbu Nambi

Yes.

Frank Laukien

Okay, interact is different from top down. A lot of people use bottom up proteomics, to look at protein-protein interaction. Interact is also very much studied by NMR, ultra high field NMR, so, the.
Anyway, I think that without getting into too much scientific detail on the financial call, none of that, none of this matters. All of these instruments, none of these instruments, interactome is not top down, so those are separate, but either way, none of this is, none of this restricts any of our products that for these type of applications are all made in Europe.

Subbu Nambi

Perfect. That's all I wanted to hear.
Thank you.

Frank Laukien

Right.
Thank you for asking.
All right, I'm afraid we're out of time, ?

Operator

Yes, sir. This concludes our question and answer session. I would like to turn the conference back over to Mr. Joe Cosa for any closing remarks. Please go ahead.

Joe Kostka

Thank you for joining us today. Kruger's leadership team looks forward to meeting with you at an investor event or speaking with you directly during the 1st quarter. Feel free to reach out to me to arrange any follow-up. Have a good.
Day.

Operator

The conference is now concluded.
Thank you for attending today's presentation. You may now disconnect.