Good day, ladies and gentlemen, and Welcome to the Bruker Corporation quarterly earnings call. My name is Pam and I will be your operator for today. At this time, all participants are in listen-only mode. Later, we will have a question and answer session. If at any time you require operator assistance, please press star followed by zero, and an operator will be happy to assist you. I would now like to turn the conference over to Ms. Stacey Desrochers, Treasurer and Director of Investor Relations. Please proceed.
Thank you. Good morning and welcome to Bruker Corporation's fourth quarter and full year 2011 financial results conference call. With me on today's call are Frank Laukien, Bruker's President and Chief Executive Officer, Bill Knight, Bruker's Chief Financial Officer, Tom Rosa, the Chief Financial Officer of our Bruker Energy and SuperCon Technologies, Inc. subsidiary, or BEST, and Brian Monahan, Bruker's Vice President of Strategic and Financial Planning. Before we begin, let me briefly cover our safe harbor statements. Various remarks that we may make about the company's future expectations, plans, and prospects constitute forward-looking statements. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those described in the company's filings with the Securities and Exchange Commission.
While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change. Therefore, you should not rely upon these forward-looking statements as representing our views as of any date subsequent to today. In addition to the financial measures prepared in accordance with generally accepted accounting principles, or GAAP, we will discuss certain non-GAAP financial measures, including adjusted EPS, adjusted operating income, and adjusted operating margin, which are non-GAAP measures that exclude certain items. We exclude these items because they are outside of our normal operations and/or, in certain cases, are difficult to forecast accurately for future periods.
We believe that the use of non-GAAP measures helps investors gain a better understanding of our core operating results and future prospects consistent with how we measure and forecast the company's performance, especially when comparing such results to previous periods or forecasts. A reconciliation of our GAAP to adjusted numbers can be found in our press release issued earlier today and is located in the investor relations section of our bruker.com website. Today, Frank will provide an overview of our results, some financial highlights, and our financial goals for 2012. Tom will describe the financial results of our BEST segment, and then Bill will discuss the financial results of our Bruker Scientific Instruments, or BSI segment, and some additional details on Bruker Corporation. I will now turn the call over to our President and CEO, Frank Laukien.
Thank you, Stacey, and good morning, everyone. We appreciate you joining us today. In the fourth quarter of 2011, for Bruker overall, our revenue reached a new record high of $475.1 million, corresponding to a GAAP increase of 14.2%, or an increase of 12.2% excluding acquisitions and currency effects compared to the fourth quarter of 2010. On the bottom line, Bruker's GAAP EPS in the fourth quarter of 2011 was $0.23 per diluted share compared to GAAP EPS of $0.18 per diluted share in 2010. Adjusted Bruker EPS in the fourth quarter of 2011 was $0.31 per diluted share compared to $0.28 per diluted share in the fourth quarter of 2010.
For the full year 2011, Bruker's overall revenue was $1.652 billion, which exceeds both the high end of our guidance given in late October 2011 and our preliminary estimates given at the JPMorgan conference in early January 2012. Our full year 2011 revenue is up 26.6% on a GAAP basis, 20.5% on a currency-adjusted basis, or 9.2% organically from $1.305 billion in fiscal 2010. Bruker GAAP EPS for the full year 2011 was $0.55 per diluted share compared to GAAP EPS of $0.58 per diluted share in 2010. Adjusted Bruker EPS for the full year 2011 was $0.86 per diluted share compared to $0.77 per diluted share in 2010. Let me now provide some additional color on our full year 2011 financial performance.
For our Bruker Scientific Instruments segment, or BSI, revenues in 2011 increased by 26.9% over 2010 to $1.554 billion, with 20.8% currency-adjusted growth, representing solid performance across the board from our four BSI operating groups. Adjusted 2011 EPS for BSI was $0.91 compared to 2010 adjusted BSI EPS of $0.81. Again, slightly exceeding the high end of our adjusted BSI EPS guidance from late October 2011. Including our Chemical and Applied Markets division, or CAM, and our investments in the CAM division, BSI adjusted EPS would have been $1 exactly in fiscal 2011, which would have corresponded to a 23% year-over-year growth. For our Bruker Energy and SuperCon Technologies segment, or BEST, full-year 2011 GAAP revenue grew 25.3% to $113.4 million, and currency-adjusted, all organic revenue growth was 19.8%. For the year 2011, BEST reached adjusted operating breakeven.
I'm very pleased that despite two sizable acquisitions in 2010, our balance sheet remained very solid, with an intangible asset ratio at an industry-leading low level of 14%, and our debt leverage ratio at a conservative 1.2x as of December 31st, 2011. Finally, as you may know, Bruker is very return on invested capital, or ROIC, focused, and despite the two significant acquisitions in 2010, our BSI segment achieved ROIC of 22% in fiscal 2011, or 25% including our CAM investments. Speaking about CAM, as you may recall, during 2011, our new CAM division moved all three of its manufacturing locations out of former Varian Inc. locations to new Bruker facilities, and our ICP-MS factory was moved from Melbourne, Australia, to Fremont, California.
Our CAM division also invested in direct and indirect distribution channels and made very significant investments in R&D in order to develop new products, specifically the new aurora M90, our new ICP-MS system, plus our breakthrough new SCION triple quadrupole and single quadrupole mass spectrometers for gas chromatography detection. Due to these very significant investments in CAM, our BSI segment's full-year adjusted operating margin declined from 15.6% in 2010 to 13.4% in 2011. Excluding the CAM division investments, our adjusted operating margin for the remainder of our BSI segment was 15.5% for the full year 2011. In 2011, our BSI segment launched 40 new products, which address an expanding array of life science, pharma, biotech, clinical, food, petrochem, environmental, homeland security, materials and nanoscience, as well as academic research and educational markets.
The new systems introduced are focused on bringing robust, easy-to-use, affordable, yet best-in-class performance solutions to routine analysis, as well as on opening new scientific horizons for research customers. With the breadth of our products, we now serve approximately $8 billion in addressable markets, allowing our divisions to significantly increase revenue and backlog in 2011. In the fourth quarter of 2011, we again had excellent bookings, and we ended the year 2011 with record backlog well over $1 billion. We believe the R&D initiatives, products, and distribution networks are in place to continue our fast revenue growth and to expand our margins. Assuming current market and currency conditions, our full-year 2012 financial goals are: currency-adjusted revenue growth of 7%-10% to reach revenue of $1.76 billion-$1.81 billion. BSI-adjusted operating income of $230 million-$240 million, an increase of 15%-18%.
BSI-adjusted operating margin improvement of 120 to 140 basis points. BSI segment adjusted EPS of $0.94-$0.98 compared to pro forma 2011 BSI adjusted EPS of $0.87. Please recall that both of these numbers now include $0.04 of non-cash stock-based compensation expense in both 2011 and in our 2012 goals. We intend to improve our BSI segment working capital per revenue ratio from 0.47 in fiscal 2011 to 0.45 in fiscal 2012. We intend to increase our BSI return on invested capital, or ROIC, to the range of 23%-25%.
Last but not least, we intend to generate for Bruker overall, Bruker operating cash flow of $130 million-$160 million, and we expect free cash flow of $80 million-$120 million. With that, I will now turn the call over to Tom Rosa, the CFO of our BEST segment.
Thanks, Frank. 2011 was a good year for BEST, with revenue growth of 25.3%, currency-adjusted organic revenue growth of 19.8%, and break-even adjusted operating performance. During 2011, we received long-term, low-temperature superconductor, or LTS contracts totaling more than $110 million from several leading manufacturers of clinical magnetic resonance imaging, or MRI systems, significantly increasing BEST's backlog. These new multi-year contracts give us significant additional visibility into future demand as we continue to move forward with our planned LTS capacity expansion in support of our major customers with long-term commitments. These orders contributed to BEST's external multi-year backlog, which increased by 51% in the last 12 months, from $152.2 million as of December 31st, 2010, to now $229.8 million as of December 31st, 2011. These external backlog figures exclude Bruker intercompany orders.
Some of this backlog will take several years to convert into revenue, with deliveries scheduled through the end of 2014. In 2011, we invested in BEST infrastructure and R&D in order to further develop our broad technology platform in superconducting materials and devices, including $9.3 million in capital equipment designed to increase our production capacity. We also continued to make progress on the commercialization efforts of new products. During the year, BEST announced an order for three superconducting crystal growth magnets from a European customer. BEST also announced that it passed factory acceptance test and shipped a superconducting crystal growth magnet system. A follow-on order for two more CGM systems was received from the same customer in Asia in the third quarter of 2011. Superconducting crystal growth magnet systems are used in the semiconductor industry, especially for larger diameter ingots, in order to improve the quality of monocrystalline silicon.
BEST is also making good progress on demonstrating the positive effect of superconducting crystal growth magnets on photovoltaic conversion efficiency in manufacturing yield of single crystal silicon, thus potentially increasing the overall efficiency and cost-effectiveness of solar power. On the financial side, revenues for the BEST segment during the fourth quarter of 2011 increased by 14.7% to $33.6 million, exceeding $30 million in one quarter for the first time ever, compared to $29.3 million in the fourth quarter of 2010. Excluding the effects of foreign currency, fourth quarter revenue increased by 15.6% year-over-year. For the full year, BEST revenue increased by 25.3% to $113.4 million from $90.5 million in 2010, or by 19.8% in terms of currency-adjusted organic growth. BEST adjusted operating loss in the fourth quarter of 2011 was $0.4 million, compared to an operating profit of $0.5 million in the fourth quarter of 2010.
The BEST adjusted operating income for the full year of 2011 was $0.1 million, which excludes $3.4 million of S-1 offering costs, which were expensed in the third quarter 2011 due to the uncertainty surrounding the potential initial public offering of BEST. This compared to an adjusted BEST operating loss of $1.9 million for the year 2010. It should be noted here that BEST has an S-1 registration statement on file with the SEC and is therefore not in a position to provide standalone forecasts or forward-looking projections for the year 2012 at this time. I will now turn the call over to the CFO of Bruker Corporation, Bill Knight.
Thanks, Tom, and good morning, everyone. As a quick recap, on the top line for Bruker Corporation during the fourth quarter of 2011, revenues increased by 14.2% to $475.1 million, compared to $416.1 million in the fourth quarter of 2010. For the full year, revenue increased by 26.6% to just over $1.652 billion, from $1.305 billion in 2010. Excluding the effects of foreign currency translation, revenue increased by 12.5% in the fourth quarter of 2011 and by 20.5% for the full year. Please note that in the fourth quarter of 2010, due to a change in revenue recognition policy for the then newly acquired Bruker Nano Surfaces, or BNS division, our revenue was lower by approximately $13 million. As Frank mentioned earlier, the top-line growth in 2011 was a result of solid performance across all of our operating divisions.
As we do annually, I will provide some color on our 2011 revenues. As a percentage of total BSI segment revenue in 2011, the contributions from each of the four operating groups within BSI were 38% of the revenue came from the Bruker BioSpin group, 32% from the Bruker Materials or BMAT group, which includes the new BNS division, 21% of the revenue came from the Bruker Daltonics group, which includes the new CAM division, and 9% from the Bruker Optics group. Geographically, by location of end customers, BSI's breakdown of revenues for the year 2011 was as follows: 41% from Europe, 30% from Asia Pacific and Australia/New Zealand, 23% from the Americas, and 6% from India, the Middle East, and Africa.
The region with the highest growth rate in 2011 was Asia Pacific, which increased from 27% of revenues in 2010 to 30% in 2011, primarily due to continued strong growth in China and Japan. Between our organic growth and the acquisitions done in 2010, we have further diversified Bruker geographically. By customer end markets, BSI's breakdown of revenues for 2011 was 54% from academia, medical schools, and other nonprofits, 30% from industrial and applied markets, 8% from biopharma, diagnostics or med tech companies, and 8% from governments. As a percentage of revenue, the contributions from academic, medical schools, government, and other nonprofits decreased again this year from 64% in 2010 to 62% in 2011. This is in line with our strategy of increasing revenue contributions from our industrial, applied, biopharma, IVD, and related markets, which went up from 36% in 2010 to 38% in 2011.
Lastly, for BSI, the full-year 2011 breakdown by type was 80% from system sales and 20% from service, upgrades, consumables, and software, which we refer to as aftermarket revenue. Moving down the income statement for BSI, adjusted gross profit margins in the fourth quarter of 2011 was 48.3%, compared to 50.8% in the fourth quarter of 2010. For the full year, adjusted gross profit margin was 48.8%, compared to 49.2% in 2010. Adjusted operating income for BSI in the fourth quarter of 2011 was $64.4 million or 14.4% of revenue, compared to $67.3 million or 17.3% of revenue in the fourth quarter of 2010. For the full year, adjusted BSI operating income was $207.7 million or 13.4% of revenue, compared with $191.7 million or 15.6% of revenue in 2010. As Frank discussed earlier, we expect BSI operating margins to improve by 120 to 140 basis points during 2012.
We anticipate our CAM division will have an adjusted operating loss in the range of $9 million-$10 million in 2012 on expected revenues of greater than $100 million, which would be higher than the historical Varian revenue levels. The CAM Division expects to break even in 2013, and its goal is $250 million in revenue and 18% adjusted operating margin by 2016. Continuing down the income statement in the fourth quarter of 2011, our GAAP effective tax rate was 24.4%, and for the full year 2011, it was 35.4%. Our GAAP tax rate was negatively influenced by the outcome of two Swiss and German multi-year tax audits and unbenefited losses due to CAM in the U.S. Excluding these effects, our effective tax rate would have been 28.9% for the full year 2011.
Moving to the bottom line, adjusted net income for the BSI segment in the fourth quarter of 2011 was $53.8 million, or $0.33 per diluted share, compared to net income of $49.4 million or $0.29 per diluted share in the fourth quarter of 2010. For the full year 2011, adjusted BSI net income was $151.4 million or $0.91 per diluted share, compared to net income of $134.3 million or $0.81 per diluted share for the full year 2010. Cash flow from operations in the fourth quarter of 2011 was $92.1 million, compared to $93.4 million in the fourth quarter of 2010. We ended 2011 with cash equivalents, and restricted cash of $248.2 million and net debt of $54.9 million. In 2011, we made improvements to our BSI working capital to support $1 of revenue, decreasing from $0.49 in 2010 down to $0.47 in 2011.
We continue to see working capital, and particularly inventory turns, as an area of opportunity and expect continued improvements in 2012, which will positively benefit our operating and free cash flows. Before we open up the call for questions, I wanted to comment further on our financial goals for 2012. I won't repeat all of our goals since Frank outlined them earlier, and they also are included in our press release earlier this morning. But I did want to provide some additional information in certain areas to help with financial modeling. We expect margin growth to start slowly in the first half of the year and accelerate through the back half of the year. We expect approximately 45% of our annual revenue to be generated in the first half of 2012, and 55% in the second half of the year.
Consistent with historical trends, we expect the least amount of revenue in the first quarter. We expect Q4 to be the highest revenue quarter of the year, and quarters two and three being in the middle and roughly comparable with each other. We expect a 1% foreign currency headwind in 2012 on revenue growth. We expect our weighted average shares outstanding in 2012 to remain comparable with our fourth quarter weighted average shares outstanding, which was 166.7 million. We expect interest expense to increase in 2012 over 2011 by approximately $8 million due to the elimination of our short-term revolving debt, which was replaced by the issuance of $240 million of private placement debt in January of 2012. We can expect our CapEx investments to be approximately $50 million in 2012. Lastly, we expect our tax rate to be approximately 32% in 2012.
For the first quarter of 2012, we expect currency-adjusted revenue of $380 million- $390 million, and BSI adjusted EPS of $0.11- $0.13 per diluted share. With that, I will turn the call back over to the operator for any questions you may have.
Ladies and gentlemen, if you would like to ask a question, please press star followed by one on your touchtone telephone. If your question has been answered or you would like to withdraw your question, please press star followed by two. All questions will be taken in the order received. Please press star one to begin. Your first question comes from the line of Peter Lawson with Mizuho Securities. Please proceed.
Bill, just a couple of things. Could you clarify? Just on the, what happened between the pre-announcement, this $465 million number and now? Just trying to understand the differences over a month and a half.
Of the Q4 revenue?
Yes.
All our revenue forecasts are based upon what we predict customer installations and acceptances will occur. We try and be a little bit conservative. We were successful in getting that equipment installed and accepted, and the customer signed off, and that's what was reported for our revenue.
Peter, also, this is Frank. We didn't regard this as a pre-announcement. We just tried to give some color on the fourth quarter at the JPMorgan conference, and that was the best estimate that we had at that time. Obviously, very early in January.
Where was the biggest surprises? Was it on the BEST business or the BSI business?
Nothing stands out. It really was across the board. There's no particular segment or division that made the difference.
Bill, just on the low tax rate, I may have missed this. What drove that kind of 16%-17% tax rate?
In the fourth quarter, we had, in the U.S., income that we were able to benefit with previous quarters and years losses. So that was somewhat of, I will say, a one-time event. We expect in 2012, as I said earlier, to have an overall effective tax rate of around 32%, which will vary slightly from quarter to quarter.
Just a final question, just on SG&A. What were the moving parts there? Because that bounced up considerably between Q3 and Q4. Are we missing something or is that going to continue through to Q1?
I think the two investments, well, BEST just keeps making investments and growing rapidly, as you've seen. Obviously, we're investing in our CAM division across the board in all functions of that new division, from manufacturing operations to R&D and distribution. But we're also continuing to invest in the distribution of all divisions to really remain a fast growth company and of course also to pull along the organic margin growth that we're seeking. So there is a lot of new markets and market segments and opportunities that we are entering. As you've seen for some time, not so much G&A, but marketing and selling, there's a continued investment across all divisions, whereas G&A and R&D tends to be more constant or constant corrected for inflation.
Great. Thank you so much.
Your next question comes from the line of Ross Muken with Deutsche Bank. Please proceed.
Hi. Thank you for taking my question. This is Vijay for Ross. Frank, could you talk about what the potential impact would be if the EU were to enter into a mild to moderate kind of recessionary scenario? How do you see Europe growing, I guess, in 2012?
Yeah, Europe for us remains strong. It has been strong in Q3, Q4, and we expect it to be strong going forward. Of course, there are significant differences within Europe. But with our depth and breadth in Europe, we see Europe continuing strongly. So I think Europe has entered technically, I'm not exactly sure, but I think it has recently entered into negative growth. I guess that would be a slight recession. But the demand drivers that we see in our bottom-up forecasts from the various countries look generally solid, again, with regional differences, of course. Even in some of the countries that you'd expect from the headlines to be weak, I'm not talking about Greece right now, but other countries that seem to are a concern, even they have some special programs for funding that have been approved some time ago.
We expect European demand for our products to be also, again, solid in 2012.
Sure. And maybe a follow-up with turning guidance. Your 7%-10% currency-adjusted growth, what portion of that is market growth versus share gains, just given your new product momentum?
The honest answer is I do not know exactly. I believe this includes market share growth, but I am not prepared to give you quantitative numbers because I do not know exactly. We feel we are growing, we are gaining momentum and growing our market share in most of our product lines or almost across the board, but I cannot really dissect it quantitatively.
Thank you. I will step back in the queue.
Your next question comes from the line of Amanda Murphy with William Blair. Please proceed.
Hi. Thanks. I just had some follow-up on the margin side. In terms of the guidance for BSI operating margin improvements, I am just curious, can you help us understand the swing factor between the low end and the high end range there, and then also just the progression through the year from the first half to the back half?
Sure. Obviously, margin growth comes from revenue growth, and as we have explained that we are looking for 7%-10%, that obviously helps us leverage our operating expenses. But we do expect the second half of the year to be stronger on the revenue growth than the first half. We also expect continued improvements in our gross profit margins on our products. Again, each generation of product that is introduced, and I think we discussed about the 40 new products that we had in 2011. We typically will see the significant impact of those products in 2012, 2013, as they gain foothold in the marketplace. So as far as the range of operating margin improvement, it certainly will fall in that range. It really is dependent upon, again, the revenue growth and the product improvement, the new products that hit the marketplace.
What about the offshoring initiatives that you have talked about in the past, is that something that could have a meaningful impact in 2012?
That's continuously ongoing. At this point, I don't want to use a baseball term, a grand slam every month or every quarter. It's steady improvement of tenth of a percent here, a half a percent there. But those are ongoing continuous efforts, so that certainly is part of the process. We continue to run more products through our existing factories, which spreads that fixed factory overhead amongst many more products, which helps us leverage. Again, the new product designs that come out typically have fewer parts, faster assembly times, quicker install times, in addition to better specs and customer ease of use. But everything that we design these days and for the last couple of years is really not only focused on the historical scientific capabilities that Bruker's had and its products, but improved cost, design for offshoring, everything that's involved with margin improvement.
Amanda, this is Frank. You may have seen our announcement of the appointment of Stefan Westermann this morning. Offshoring is a big part of his mission, obviously taking that over from Bill. We've made some very good progress on that. Again, you see that trickle in really, but you see that trickle in steadily. We've made progress in 2011. You'll see more progress in 2012 and 2013. The best cost sourcing sometimes is with U.S. or European vendors rather than with Southeast Asian vendors. It really depends, and we're doing it very meticulously and carefully and thoughtfully, product line by product line. But it's a major initiative, a multi-year initiative.
I'd also like to add, these efforts and other efforts are also continuing to help with inventory turn improvements, working capital improvements, which again, remains. Frank mentioned Stefan Westermann, his real two focus items are gross profit margin improvements and pulling cost out of that area, and then improving our working capital metrics. We did see improvement in 2011, and we expect these trends to continue, not only 2012, but certainly beyond.
Okay, thanks very much.
Your next question comes from the line of Tycho Peterson with JP Morgan. Please proceed.
Hey, thanks for taking the question. Maybe just to follow up on the last one on the working capital assumptions. Are you able to give us any quantitative thoughts on what you think we should be thinking about for working capital improvements for 2012? Can you maybe just touch on inventory turns and receivables as well?
At least at the working capital ratio level, we are expecting to take our BSI division from 0.47 times, so working capital per revenue dollars from 0.47 in 2011, which was an improvement over 2010, to 0.45. I think drilling deeper, a lot of that comes from inventory turns. Some of them also comes from DSO improvements, but the majority comes from inventory turns.
Okay. BEST had an operating loss in the quarter. I think you had had two small profits the prior two quarters. Obviously, you are investing there as well. How do we think about profitability for that business?
Well, on an actual basis, our Q4 profitability, we had a small loss. That reflects several things: higher depreciation, higher R&D expenses in one of our primary business units, and also the fact that compared to last year, we had a very high-margin project that completed in the Q4 of 2010. We are continuing to invest in the business. I'm unfortunately not at liberty to discuss any kind of forward-looking details at this point.
But Tycho, if I may, at BEST, I would almost look at more of an annual basis. The quarters do fluctuate, and the margins fluctuate given the small revenue base. Well, not so small anymore at around $30 million run rate. But if you look at the full year, you will see that they actually just eked out an adjusted operating income of-
0.1
0.1 million. Okay, let's call it break even. But nonetheless, that's obviously a significant improvement over historical adjusted operating losses. Last year, no, the year before that, 2010, they reached EBITDA breakeven. In 2011, BEST reached adjusted operating income breakeven. We have plans for profitable growth for BEST. But due to Form S-1, we cannot go into more details.
And then you've talked about investing in CAM and rejuvenating the Varian portfolio there. Are you able to talk at all about the level of R&D investment you need to make for CAM specifically? When do we start to see the benefits of some of those investments in terms of new product flow?
Well, it's a very considerable R&D investment. You've begun to see that on the ICP-MS and on the GC-MS side. These products are well-received, and our order books and our backlog on these are really quite considerable. They're making an impact. Really the new factories, until they are really humming along, especially the Fremont factory, it's getting there. But moving a factory is one thing, and then getting it to run really smoothly with high volume and therefore good margins. I believe you'll see that in the second quarter of this year. You're beginning to see the difference already in the first quarter of the year, but it's certainly not at a steady state yet. As to R&D, we're not done with new product introductions. You'll see product introductions from CAM this year, 2012, and in 2013, I believe some pretty significant product introductions.
You've seen the beginning, but you ain't seen nothing yet, so to speak.
All right. Last one, did you give tax rate guidance for 2012? If you did, I may have missed it, so did you?
Yes. We said a 32%, expected 32% tax rate.
Perfect. Thank you.
Your next question comes from the line of John Wood with Jefferies. Please proceed.
Hey, good morning. This is Brandon Couillard in for John. Frank and/or Bill, with respect to the BSI margins next year, can you quantify what you anticipate for the CAM dilution? Should we assume somewhere between the midpoint of the $0.09 drag in 2011 and the breakeven expectation in 2013?
For CAM, we're looking at this year, 2012, at an adjusted operating loss of about $10 million, Brandon. So cutting the loss roughly in half. So midpoint is not a bad estimate, yes.
Okay. Bill, did I hear you correctly with respect to the first quarter revenue guidance that was $380 million - $390 million in total revenue or constant FX revenue?
It was in $380 million - $390 million total revenue.
Roger. Any chance you could give us a breakdown on how you see the Veeco and CAM revenues trending in 2012?
Directionally, the Veeco, of course, we prefer to call it Bruker Nano Surfaces, but we know what you mean. So the BNS division had very fast growth last year and will have slower growth this year. In some years, they get a lot of business from data storage and SEMICON, which is sort of the gravy in the gravy years, which they had last year. This year they'll have less of that. The rest of the business is growing very nicely, particularly the research AFM with their fast scan on their high-end AFMs. They really have some very unique capabilities in making AFM much faster, quantitative, and easier to use. So you have different growth drivers within that former Veeco, now BNS division, but they'll be in the single digit or low single-digit growth. We expect well above 10% growth for our CAM division in 2012.
And in fact, Bill has said we expect to have that greater than $100 million in 2012. For the first time, then actually exceeding the highest historical Varian Inc. revenue levels for these types of businesses, which actually occurred pre-recession in 2008 when they were just below $100 million, I believe. We expect that to exceed that this year. I think the growth for CAM is actually higher than 20% of what's scheduled this year or planned for this year.
Okay, that's helpful. Thanks. Lastly, could you give us an update on the traction you're seeing for the MALDI Biotyper unit? Any update on the installed base and then where you stand on the FDA approval timeline?
Okay. Let me just interject to make sure I'm clear on a question you asked. That is currency adjusted revenue of $380 million-$390 million, and we did also state that we expect a 1% foreign currency headwind in 2012. Then I'll let Frank talk about your question.
Brandon, on the MALDI Biotyper, that continued uptake around the world has been very rapid. Again, growth for that high margin business has been very rapid. More of the order of 50% in last year. We expect that growth to continue, not necessarily at that rate, but we expect continued solid growth in MBT. We are working with the FDA and may be able to have FDA approval in the second half of this year, but that obviously is difficult to predict.
Great. Thank you.
Your next question comes from the line of Dan Leonard with Leerink Swann. Please proceed.
Thank you. Two questions. For starters, Frank, how would you characterize the visibility you have on your revenue growth for 2012?
Dan, I would think it's excellent for the first half of the year because we have very strong backlogs. Then, of course, the backlog doesn't carry us through the entire year. So inevitably the visibility becomes less for the second half. But I think our divisions in their bottom-up analysis, I think, are seeing that there's some known areas of weakness. We all know about them. You all know about them. But there are many areas and secular trends or local trends, local budgets that give us a pretty good visibility. In short, it's really just about like every year. I think we have better visibility than in other years for the first half because of our very high backlog. For the second half of the year, I think we have decent visibility. This isn't like 2009 where nobody knew what was going to happen.
I think things have already, in some of the industrial markets, as far as I can tell in the last couple of months or so, three months, things have already stabilized and are a little bit more upbeat. That's the case. I see that in the U.S. and in Europe, elsewhere. So I think we have decent visibility for the year and very good visibility for the first half of the year.
Okay, thank you. My follow-up for Bill. Bill, why is the tax rate increasing so much in 2012? Do you still have plans in place to march that downwards over time?
We are working on realigning some of our historical legal entity structure throughout the world to get a more effective tax rate and to allow us to make it easier to move some of our cash around. But we do expect to be in that 32% range in 2012 overall for Bruker Corporation, which is an improvement from 2011.
Dan, this is Brian. I would add that the 32% excludes the 10 million of CAM losses, which are mostly U.S.-based, which we can't benefit. So excluding that would be in the high 20s for our tax rate, so more comparable to 2011, probably slight improvements over 2011.
Okay.
Which is why we are not giving specific guidance, but this suggests by 2013, 2014, our tax rate, we should be able to improve that further as CAM reaches break even and then profitability.
Okay. Thank you.
Your next question comes from the line of Dan Arias with UBS. Please proceed.
Hi. Thanks for the questions. Bill, am I doing the math right in saying that the BSI op margins, if you exclude CAM, were right around 16.7% or so for the fourth quarter? If so, what was that up sequentially? I know you said it was 15.1% for the first nine months, but are you able to give us a 3Q- 4Q improvement?
It was 15.5% for the full year if you exclude CAM. In the way we reported 2011, which was excluding stock compensation, you will notice that in our forecast for 2012, we are changing that to include that in our adjusted numbers.
Okay. If I look at the 4Q number excluding CAM, are you able to give us the sequential basis point improvement, just going to the 15.5 overall for the year?
Yeah. Sequentially, this is Brian, between Q3 and Q4, CAM's results were pretty comparable, so it had about the same impact in both Q3 and Q4. As Frank described earlier, we certainly expect improved profitability or lower losses throughout the course of 2012. So Q3 and Q4, the CAM results, the impact on the overall business in BSI was comparable.
Okay, thanks. I guess just on a follow-up to the BNS question, do you see the operating margins expanding meaningfully for that business, or is the 20%+ op number now expected to be similar to the 20%+ number that we are looking for a few years down the road?
We expect that to be roughly similar as in this year and resume growth in the margin numbers and in the revenue for that business in 2013, 2014.
All right. Thanks, Frank. I guess just lastly, can you comment on the purchase of the Michrom Bioresources products? What does that do for you, and maybe if you could quantify the sales gain there, that would be great. Thanks a lot.
Yeah. That is not a huge acquisition, and the effect of that might be of the order of 1.5 million - 2 million of revenue for 2012. So it is a very interesting technology that we also will use in other parts of our product line. I expect some steady growth, but it is a niche product. It is an important niche product that closed a gap that we had quite candidly. So it is financially not enormous, but I think it was, again, a very good ROIC acquisition that filled a small technology gap in an interesting and expanding market, particularly where SAXS and NMR come together in structural biology.
Okay, thank you.
Your next question comes from the line of Derik de Bruin with Bank of America. Please proceed.
Hi, good morning.
Morning, Derik.
There's been some changes in some of the shared instrumentation grant programs at NIH and stuff. Can you just talk about what your order activity is, your quote activity is from the U.S. labs right now? Are people still looking at big-ticket items for capital equipment? Can you just quantify a little bit about the U.S. market?
Well, in 2011, where we have real data, the U.S. market has generally been quite strong for us. Now, it really depends more on what product lines, what applications, what new research fields they're focusing on. That is always the issue for us. The total size of the budget is less important for us, and whether that goes up or down, then what do they allocate it to? That is really the game for us. And generally, there, the trends have been favorable. I do not know that I have any great insight into how that is going to come out in Q1 or Q2, but I do not have anything very remarkable to report. So we expect general academic funding in the U.S. to be one of the weaker areas in 2012. And we have expected that for some time.
But I have to say, we expected that already in the second half or throughout 2011, and it actually did not come true because it was stronger than what we had anticipated. But again, that may not be the overall budgets. That may be more the allocation and the scientific priorities of the customers and of the funding agencies.
Great. The nuclear chemical biological radiological detection business has been relatively flattish from what your commentary has been in the past. Are you expecting anything unusual in that? Are there any tenders that are out there right now?
Yeah, we were disappointed with our CBRNE detection. We actually thought we would get and could deliver some larger orders, and we could not get the orders/export permit/letter of credit, all the things that you need to line up by the end of the year. We hope to be able to do that this year. So we think it will have a much healthier year this year. But it was indeed, at bottom line, it was disappointing last year. Not because of total demand of our products, really simply because of the complicated timing in that field of order, end-user certificate, export permit, and letters of credit. I do not want to bore you with all the details, but it did not all line up for us to deliver it. So we actually had some things in inventory that we will be able to ship sooner.
This year will be the big year for that division to really enter the explosives trace detection. There are some very interesting trends because as we may have all read in the newspaper, bad guys are getting creative with new explosives types. Therefore, the analytical requirement for explosives detection have really changed after being about the same for 20 years, have changed pretty dramatically, and we think even though we are entering that field late, we can comply with a lot of the new requirements, analytical requirements. We are actually pretty bullish on getting a strong start in explosives detection with some novel technologies.
Is that business higher or lower margin? If I remember correctly, just based upon when you did some of the Ministry of Defence orders in the past, those were not exactly pretty high margin businesses. Has the pricing got better than that? Has the margins gotten better on that, or is it still very cutthroat?
That tends to be one of our higher margin businesses.
Okay. Right. I guess, is there any desire to do potentially share buybacks or anything like that, or is it still mostly your big focus is in terms of doing capital deployment for small bolt-ons?
I think the focus is on the latter. I wouldn't completely rule it out, but it's not a priority to do share buybacks. I think our repayment of debt and small bolt-ons is our priority for capital deployment.
M&A contribution for 2012 seems to be right around 1%?
Brian, is that correct?
It's probably just under 1%. It's not-
Just under 1%.
1%.
Okay. Great. Thanks.
Your last question comes from the line of Isaac Ro with Goldman Sachs. Please proceed.
Good morning. Thanks for squeezing me in this morning. First, wanted to ask about your growth assumptions for BNS, just to revisit that topic. I think in the past, you guys have guided to a 20%+ CAGR through 2015 for that area, and you also mentioned that this year that's going to be a slightly slower growth area. It just sort of implies that 2013 and beyond will be in excess of 20%, and I wanted to square that up with your previous comments, just given the importance of that business unit to the growth profile of your overall business in the out years.
Yes, Isaac, that business, most of it is not cyclical, but it has a cyclical component of maybe 15%-20% of its business. I think I don't have all the numbers in front of me, but I think your assumption is essentially correct, that they're looking for slower growth this year, or that's the reality that they're facing, likely, at least in the first half of the year. And they're looking for very fast growth from a reversing cycle, but also from their new product lines and products that they still have in the pipeline for 2013, 2014.
Okay. So 20% long term is still a fair CAGR, kind of 2012 through 2015 is the overall kind of growth rate. Is that right?
I believe so.
Okay. Then just sort of secondly, more qualitatively, can you maybe comment on the success you've had in expanding the NMR market at the low end? I know you had some new product launches there in the last year or so. Then sort of what your expectations are for that market over the next one to two years as the competition there sort of rebounds perhaps more aggressively.
Yeah, there is sort of a steady multi-year effort to come out with, to not only focus on the high-end research capabilities and the ultra-high field magnets, but also on routine, ease-of-use, applications-driven NMR systems. I think those are in the early seed days to some extent. So that market is growing, but from a relatively small base. Of course, the routine 300 MHz, 400 MHz chemistry, clinical chemistry market, that's always been there, and that's healthy. As to competitive positioning, I think in 2011, we're very satisfied with our competitive position with NMR. It hasn't changed dramatically one way or the other. And we continue to invest in new products and solutions at both the high-end research end, if you like, and also in the routine NMR space. So we're cautiously optimistic that we will hold our own in NMR.
Got it. Thanks a bunch.
And you do have a follow-up question from the line of Peter Lawson with Mizuho Securities. Please proceed.
Right. Just on Pittcon and ASMS, what are the expectations for new products coming through? What are the key products that would be highlighted, and do you think it's a better than last year Pittcon?
Definitely not, because in this year, we will have a very de minimis Pittcon participation. We essentially don't exhibit in even years because we focus on Analytica, which is a month later in Munich. We kind of go back and forth now every other year, Analytica in even and Pittcon in odd years. Pittcon for us will not be a priority this year. ASMS, of course, is always very important, and if I may simply substitute Analytica for Pittcon in your question. At Analytica and ASMS, as well as the specialty conferences, the microscopy conference in August or the ENC NMR conferences in April and August, we expect a strong new product flow as in prior years. However, sorry to disappoint, we just don't go into a lot of details about what type of products we may bring out for competitive reasons.
But you think the highlight is really for Analytica this year?
Yes and no. All the generalist conferences like Pittcon and Analytica overall are of diminishing importance, whereas the specialty conferences like an ASMS or the ENC NMR conference or specialty preclinical MRI conferences really are more of our focus, rather than bringing things out for a generalist conference like a Pittcon or Analytica, as the case may be. I think it's going to be much more spread out throughout the year and more likely to see significant introductions at a. The SCION came out at a pesticide symposium in Florida last July, and that's really more relevant than a Pittcon, for example, just as an example. I would expect more at the specialty conferences and still healthy product flows at the generalist Analytica and Pittcon.
But they are not as important to us as the sum of all the specialist conferences that we really focused on markets and where there are many more budgeted customers.
Got you. Then, Bill, what is the expectations for total interest income other for 2012? You said there was an $8 million delta on interest expense.
Stacey, do you want to take that one?
I think it is $11 million is what we have for total.
Got you. Thank you.
I guess so.
There are no further questions at this time.
Okay. We would like to thank you for participating today, and we look forward to seeing some of you at some of our press conferences at Pittcon, Analytica, or ASMS later, and of course, to speaking to you at future conferences and on future earnings calls. Thank you very much and have a good day.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the presentation.