Bruker (BRKR) Q4 2017 earnings summary

Executive summary

• Q4 revenue rose 12.8% YoY to $530.5M, with 4.0% organic growth; FY17 revenue increased 9.6% to $1.766B, including 3.6% organic growth.

• FY17 non-GAAP operating margin expanded 80 bps to 15.6%; 2018 guidance targets continued revenue growth, 50-80 bps margin expansion and 11-14% non-GAAP EPS growth.

Financial highlights

• Q4 non-GAAP operating income grew 20% YoY; non-GAAP operating margin expanded 130 bps and gross margin rose 120 bps to 50%.

• Q4 non-GAAP EPS increased 11% to $0.51; GAAP EPS was a loss of $0.02 versus earnings of $0.43 in Q4 2016, including U.S. tax reform effects.

• FY17 non-GAAP operating profit grew 16%; non-GAAP EPS rose 2% to $1.21 from $1.19, while GAAP EPS fell to $0.49 from $0.95, primarily due to U.S. tax reform.

• FY17 non-GAAP gross margin was flat YoY; higher volume and operational improvements were offset by mix, BEST revenue, BioSpin mix and FX.

• FY17 free cash flow was $111M, up $17M or 18%; Q4 free cash flow was $91M, up $11.6M or 15% YoY.

Outlook and guidance

• FY18 revenue guidance: ~7% reported growth, including ~3% organic growth and ~4% FX translation benefit; BSI growth improves modestly while BEST declines low single digits organically.

• FY18 non-GAAP operating margin expected to expand 50-80 bps from 15.6%, despite a 70 bps FX headwind; non-GAAP tax rate ~25%, diluted shares 156M and CapEx $50M.

• FY18 non-GAAP EPS guidance is $1.34-$1.38, up 11-14%; profitability and cash flow expected to be weighted to H2, with a strong Q4 pattern continuing.

• BSI organic growth expected to improve gradually; management anticipated growth beginning with a 3 in 2018, not a step-up to 4%, and further acceleration over time.

• BEST revenue expected to decline low single digits organically in FY18 after strong FY17 growth and project acceleration; one 1 GHz system was targeted for H2 revenue, subject to timing risk.