Derik De Bruin: Got it. Thank you. Just wanted to clarify that. And going back to the Chemspeed and the ELITech deals, I mean we have a general idea on the revenues because you disclosed those. Are those — how profitable are those businesses? Basically, when those come in, we’re not going to see like another step down in the margin, right? I mean your guide right now is basically assuming that those there, right? Can you just talk a little bit about profitability of those businesses?
Frank Laukien: They’re not in our guide nor in the ’26 to ’25. Pull forward, as I said earlier, Derik, we have not — we have just said that they’re both profitable. And when or if — when we close them, then we’ll give more details with a more detailed press release on each of those. We just don’t want to jump the gun.
Derik De Bruin: Got it. I just wanted to clarify the profitability comment. And then just one final one. You’ve called out geopolitical risks a couple of times. I’m starting to get some questions from investors about, obviously, what’s going on with China and your sales into the semiconductor market and people are starting to worry about competition and just pushbacks. I guess, how do you sort of like think about the geopolitical risk in China right now? And just what’s going on there, just sort of your broad thoughts.
Frank Laukien: Well, geopolitical risks for us is code for a Ukrainian-Russian war and Israel-Hamas war and the potential of some more like action around Taiwan happening at some point or these war spreading. So it’s not — it’s sort of related to wars and conflicts as opposed to how fast is China growing or not. So they are with two war spending and they increased risk of a conflict over Taiwan and possible at some point in the next decade. That’s why we’re highlighting that. It’s an unprecedented level of geopolitical risk and everybody is facing that the industry is facing. But we mean that narrowly by conflicts rather than an economy growing or slowing, maybe that helps.
Derik De Bruin: Yes. Well, I was thinking more about trade, just in terms of restricting R&D, restricting instrumentation sales. So I’m getting some questions from investors on your metrology tools into China and things like that, just the sense that there might be some trade pushback. That’s where I was going.
Frank Laukien: Yes. Remember, you may remember that about two years ago, there were some additional restrictions on selling certain semiconductor, most advanced semiconductor metrology tools in China. And so of course, that was implemented a couple of years ago, if I recall. And that’s long baked into our model. But of course, if there was a conflict there on Taiwan, if there were new restrictions, those are some of the geopolitical risk that the industry is facing. And so that’s what we mean by that, Derik.
Derik De Bruin: Got it, thank you for clarifying.
Justin Ward: Operator, I think we’ll take one final question, operator.
Operator: Our final question comes from Brandon Couillard from Jefferies. Please go ahead with your question.
Brandon Couillard: Hi, thanks. Good morning. Frank, you mentioned the IDS business within BioSpin. Just curious what else you think you need to I guess, accelerate the vision you have around software? And how do you differentiate in lab software in what seems like a pretty crowded space?
Frank Laukien: Yes, it’s crowded, but some of these assets previously acquired haven’t done all that well or some of them have older concepts. So we think we can bring some fresh breath of air into some of that scientific and lab software. And the assets that we have acquired and now — to some extent, are integrating, right? We provide nice portfolio, vendor agnostic, scientific and lab digitization software solutions that we think has good growth potential with excellent margin potential. Some of the automation acquisitions like the one we did already Optimal in the U.K. about a year ago, 1.5 years ago and the pending potential Chemspeed acquisitions also have software components and we’ll benefit from some of the software assets that we have already in this IDS.
So don’t know that we need a lot of other things. I think we’re getting together or we did get managed to quietly build and pull together the assets that we needed for a serious lab and QC software business. So we’re pleased with that. Still early days, but a nice aftermarket growth, if you like, first of all, something we’re always trying to strengthen then, of course with good, very good gross margin and operating margin potential and just good revenue growth potential.
Brandon Couillard: And then one more for Gerald. For the year, what are you embedding for interest expense in the guide? And we’ve done a couple of debt rounds in the last few weeks? And how do you think about free cash flow conversion for the year? Thank you.
Gerald Herman: From a — just let me answer your last question first. Our cash flow position actually for 2023 improved sharply from ’22. You saw we added almost $100 million to that number. So I’m pretty encouraged about where we are. Some of that is coming from working capital management improvement. We’ve had a number of initiatives there. We’re pleased with how that’s performing. So our expectation is also that we’re going to continue to improve that, especially during the ’24 period. I guess I’d also say in terms of our overall interest, the cost from an interest perspective for 2024, we’re guiding somewhere in that $17 million — to up a little bit above that $17 million for the full-year.
Justin Ward: Yes. So interest expense will come up a little bit, obviously, right? So last year, it’s closer to $10 million, it will come up a little bit into that.
Gerald Herman: Yes. Just for those that haven’t seen it, we have announced some additional financing activities, particularly with some institutional investors and the overall rate — interest rate coupon rate picture there is quite favorable. Well, these are bigger numbers. The overall impact is not as giant as some might think it is.
Frank Laukien: And maybe a final comment, Brandon, some of these things only get funded when we — or we only need to pull from them for funding. If and when we close, for instance, the ELITech acquisition, which is the larger one. So we can time that to some extent that the interest expense only, additional interest expense kicks in if and when we get the additional profitability from these businesses.
Gerald Herman: We draw them as required.
Frank Laukien: Some of them we draw as required, and some of them have delayed drawdown dates anyway.
Brandon Couillard: Okay, thanks for that clarification. It’s helpful. Thank you.
Frank Laukien: Good question.
Justin Ward: All right. With that, we want to thank everyone for joining us today. Bruker’s leadership team looks forward to meeting with you at an event. We’re speaking with you directly during the first quarter. Please feel free to reach out to me, if you have any follow-ups. Have a great day.
Operator: Ladies and gentlemen, with that, we’ll conclude today’s conference call and presentation. We thank you for joining. You may now disconnect your lines.
