Puneet Souda: Okay, fair. Thanks.
Operator: Our next question comes from Dan Arias from Stifel. Please go ahead with your question.
Daniel Arias: Hi, good morning guys. Thanks for your question. Gerald or Frank, on the deals that you’ve done here, it looks like you’re guiding to a three-point contribution from M&A. How conservative or nonconservative would you say that is? I mean you’ve got a half a dozen or so assets. So when you kind of look at the growth expectations that you have for them, I’m just curious what you’ve modeled relative to 2023. Did you pump the brakes because of the macro? Have you assumed some acceleration because now you’re able to support them? Just trying to put some context to the growth expectation there.
Frank Laukien: No, we’re at the middle of the fairway, neither super conservative nor bullish. That’s just a mathematical number of what comes out of these acquisitions. Again, other than the PhenomeX acquisitions, now BCA, the other acquisitions that have closed mostly don’t have very significant revenue in the aggregate, it adds up a little bit, which is why we get to the 3% but that’s a figure — that’s a middle of the fairway figuring out. So I think nothing overly conservative, nor bullish on that one.
Gerald Herman: Hey, Dan. Keep in mind, most of these transactions — so PhenomeX closed in Q4 of last year. Most of the other ones closed sort of very end of year or very beginning of this year. So it’s a comp situation. The underlying revenue growth of those acquired businesses, as Frank said, we don’t have aggressive assumptions within that.
Frank Laukien: And most of these are healthy businesses, of course, the one that we’re working through, of course, is the PhenomeX issue.
Daniel Arias: Correct. Okay. Helpful. And then, Frank, maybe just sort of in the spirit of Patrick’s question on academic, can you do a similar thing on Europe just in the way that you’re thinking about things and what’s under the outlook? I mean tough macro conditions, academic funding may be down a bit to your prior point. But you guys are doing well there. I think on a reported basis, you’re up 20% in 4Q. So what should we expect if we compare 2024 in Europe to ’23?
Frank Laukien: Yes. I mean, it’s something we have internet visibility into that, right? But I mean, academic government funding is always relatively stable. And in Europe, particularly so you might have more ups and downs in Japan and in China, in the U.S., depending on political situation or gridlock or continuing resolutions. In Europe, usually, this is not a political item, both at the country level, the major economies and smaller healthy countries in Europe. They don’t constantly debate about their governmental or academic R&D budgets. Those are just steadily increasing. And the things to at the European level. There’s some European overall European budgets much, much more importantly is what does it get allocated to. And the drivers are clearly favoring the post-genomic era, and I think it will be for the next decade or two.
And there, we are just very well — or increasingly very well positioned and really strongly positioned in proteomics, lipidomics, metabolomics, glycomics, you name it. So too much jargon, but the post-genomic era at a high level is very much the fundamental secular trend that supports our growth in academic government funded budgets that is much higher than the overall growth that you may read at a national level. It’s the reallocation of the post-genomic era that I think is the — that in artificial intelligence. So probably the two very big megatrends for Bruker for the next decade.
Daniel Arias: Okay. Okay. So Frank, just to close the loop on the thought. Germany macro conditions, recessionary conversation, not something that you see as a red flag right now.
Frank Laukien: No, but a yellow flag. I mean, Germany is bumbling along and strong growth has not been all that strong. And yes, it’s not one of the growth engines of Europe in ’24, probably either pretty clear.
Daniel Arias: Okay, super, thank you.
Operator: Our next question comes from John Sourbeer from UBS. Please go ahead with your question.
John Sourbeer: Thanks. Good morning and congrats on the quarter. I just want to follow-up on the BSI book-to-bill. I know you don’t break it out by region, but was China the real region there that drove that below one on the book-to-bill? And I guess, if you were to ex out China was book-to-bill greater than one and any additional color just around expectations for that?
Justin Ward: Maybe to clarify, so overall BSI book-to-bill was actually above 1. That includes China. Now China obviously is below 1 because of the bolus in orders we got from the stimulus. And again, that bolus was really focused in Q1, but we did have some in Q4 of last year as well. But overall BSI book-to-bill was above 1, including China.
Gerald Herman: And I would just say China had, I would say a bit of a recovery in the fourth quarter where we saw some challenges in the third quarter relative to that particular market. So from a bookings perspective, there was some improvement there.
John Sourbeer: And I guess as a follow-up, just on China there. Any expectations on the outlook for that market for the year, what sentiment are you hearing from customers there and just visibility into the backlog here starting the year?
Frank Laukien: Good backlog visibility. And I mean, China is perhaps the market for the entire industry where we have the least visibility for 2024. And I would say we’re not that different than that. We do note that their academic government and investment tends to be strong. And I think there’s a commitment that continues for that. So we think we’re well positioned. But while Q4 was a bit of a recovery in China BSI orders compared to Q3, after the very strong first half, we don’t have other — we don’t have more visibility to China than other peers.
Justin Ward: But we do have quite a different mix in China as a reminder. So our end market mix in China is about 50% academic and government, which as Frank just mentioned, is one of the bright spots. Our biopharma revenue mix in China is only about 10%. That’s really where the weakness is concentrated on.
Frank Laukien: And we did not exceed that, Biopharma go away in China in Q4.
John Sourbeer: Thanks for taking the questions.
Frank Laukien: Sure.
Operator: Our next question comes from Doug Schenkel from Wolfe Research. Please go ahead with your question.
Douglas Schenkel: Good morning. Thank you for taking my questions. The first topic I wanted to touch on is backlog. I believe at some point over the course of Q4, you talked about having eight to nine months of backlog. I think the norm is closer to 6%. So I’m just curious if you people can comment on where that is now? And is there an assumption embedded into guidance that this comes down a bit?
Frank Laukien: Yes. For your [indiscernible] which we enjoy reading has come down a little bit to closer to 7.5 months now. And that’s still elevated. So we expect that, that will come down over the next two to three years. So some of that is built into our guidance for fiscal year ’24. Mostly, it’s driven by reasonable and above here, it seems. Order momentum, given the various secular trends that we have mentioned, in particular, but we also expect that without quantifying it, Doug, we also expect that our backlog will come down a bit further. But as I said, it was 7.5x, 7.5 months at the end of ’23. So it’s come down a little bit.
Douglas Schenkel: Okay. No, that’s helpful just to make sure that’s not — it helps, but it’s not a major driver to growth. So that’s helpful. Can I just touch on M&A real quick? Lots of questions there, lots of focus on all the activity there. I would love to just take a step back and think about this bigger picture. How are you going about identifying these opportunities? Why so many so quickly? And as we kind of think about these, are they filling gaps in the portfolio? Or are they kind of moving you into new markets. So there’s a lot there, but I would love to just hear the philosophy and just kind of the logic behind getting so active so quickly? Thank you.
Frank Laukien: Very good questions, and the answer is a little of both. First of all, it is just the end of ’23 when most of these deals were negotiated, right, some of that closed in January or February, but we’ve been obviously working on them in the second half of ’23. And on some of them, we’ve literally been in the second or third round some of these companies. We’ve just known without any process for literally for years. And finally, the stars aligned in an unusual way, right? We’re not on a buying spree, it’s just in an unusual way, we will finally be able to in various areas, pull together the right valuations and deals with sellers and buyers both thinking it was fair, and it was fine. So it’s very unusual. I don’t expect that pace to continue.
This is not a different type of Bruker. We do selected strategic acquisitions. Some of them clearly fill gaps or holes in our fees, gaps in our portfolio like Tornado or SII or even Nanophoton. Now I don’t mean to degrade those companies in any way. They have beautiful product lines. They have technology. They have market traction, demonstrated and margin traction demonstrated in some markets. But usually, they’re not acting globally or at least not fully globally. We can help them with that, and they fill real gaps in our product lines. The pending acquisitions of Chemspeed will take us further into new areas of biopharma, in chemicals and even cosmetics and consumer products, R&D and QC automation. So those are new areas but adjacent. In a way, we’ve been in infectious disease biology, but primarily with the MALDI Biotyper with a very small hold in molecular diagnostics.
ELITech is a much bigger sample-to-answer molecular diagnostics play. It will not make us a Tier 1 competitor, right? Those are [indiscernible] and others, but it would get a solid Tier 2 competitors. So it expands our infectious disease franchise, again, not new to us but very nicely complementary to the MALDI Biotyper that’s of course, focused on bacteria and not on viral detection versus molecular diagnostics, there’s a lot of infectious disease viral detection. So adjacencies or gaps in our product line don’t expect this pace and frequency to continue. That’s really very, very unusual. But it has to do, of course, with markets in late ’23, market valuations in late ’23 permitting to come to compromises on valuation that seems reasonable and that support again, long-term high ROIC, while providing fair valuations for these companies that are where the founders or others might be exiting.
Douglas Schenkel: That’s great. Thank you very much.
Frank Laukien: You’re welcome, Doug.
Operator: Our next question comes from Derik De Bruin from Bank of America. Please go ahead with your question.
Derik De Bruin: Hi, good morning. Thanks for taking my question. Hey, Gerald, just to clarify, just I got a couple of questions from clients. You said the book-to-bill in Q4 was not far from one and then your comment about being greater than one was for the full-year?
Gerald Herman: Actually, both the fourth quarter was above — a book-to-bill of above one and the full-year as well above one.
