BRUKER CORP (BRKR)

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes the principal factors affecting the results of our operations, financial condition and changes in financial condition, as well as our critical accounting policies and estimates. You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and notes to those statements, appearing elsewhere in this report.

Any statements other than statements of historical fact contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Annual Report on Form 10-K may be deemed to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “seek,” “may,” “will,” “intend,” “estimate,” “should” and similar expressions are intended to identify forward-looking statements.

Forward-looking statements include, but are not limited to, statements regarding:

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the impact of supply chain challenges on our business and operations;

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our working capital requirements and the sufficiency of our cash, borrowings and proceeds of indebtedness to fund our operations and investment activities;

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our plans to make capital investments;

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the impact of changes to tax and accounting rules and changes in law;

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fluctuations in estimates impacting costs related to our self-funded health insurance plan;

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our expectations regarding backlog and revenue;

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our expectations and the impact of our restructuring initiatives;

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the impact of our global IT transformation activities;

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the impact of foreign currency exchange rates and changes in commodity prices; and

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any other statements that address events or developments that the Company intends or believes will or may occur in the future.

Actual results may differ from those referred to in any forward-looking statements due to a number of factors, including, but not limited to, the risks described in Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K. We expressly disclaim any intent or obligation to update these forward-looking statements other than as required by law.

We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:

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general economic conditions, including inflation, uncertainties caused by recent banking industry volatility, the threat of recession, financial liquidity, currency volatility or devaluation, supply chain or manufacturing capabilities, and uncertain economic conditions in the United States and abroad, and additional tariffs, including those imposed or that may be imposed by the new presidential administration in the U.S.;

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geopolitical tensions, including those on our customers, such as the conflict between Russia and Ukraine and related economic sanctions, the conflict in the Middle East and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences, the ongoing tensions between the United States and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are significant to the Company’s supply chain operations, such as Taiwan and China;

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potential energy shortages in Europe where the Company has significant operations and overall higher energy and transportation costs;

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the impacts of climate change and certain weather-related disruptions;

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the timing of governmental stimulus programs and academic research budgets;

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the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;

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foreign currency exchange rates;

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the worldwide shortage of semiconductor chips, components and raw materials, such as copper;

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changes in raw material, component and logistics costs;

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the time it takes for us to receive critical materials to manufacture our products;

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the time it takes to satisfy local customs requirements and other export/import requirements;

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the time it takes for customers to construct or prepare their facilities for our products;

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the time required to obtain governmental licenses;

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our ability to identify suitable acquisition targets and successfully integrate and manage acquired business; and

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costs related to acquisitions of technology or businesses.

Several of these factors have in the past affected and may continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.

OVERVIEW

We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major research and development and manufacturing centers in Europe, Asia and North America and we have commercial offices located throughout the world. Bruker is organized into four reportable segments: the Bruker Scientific Instruments (BSI) BioSpin Segment, the BSI CALID Segment, the BSI NANO Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

During the fiscal year ended December 31, 2024, Bruker made several acquisitions including ELITechGroup, NanoString and Chemspeed. These acquisitions enable Bruker to extend our capabilities in molecular diagnostics (ELITechGroup), life science analytical instruments (NanoString) and to provide new capabilities in lab automation (Chemspeed). Refer to Note 4, Acquisitions in the consolidated financial statements.

Consolidated Results

The following table presents a summary of our consolidated results as of the year ended December 31, 2024 and 2023 (dollars in millions):

Discussion of GAAP financial measures follows in the Results of Operations paragraphs.

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Non-GAAP Measures

Uses and definitions:

Although our consolidated financial statements have been prepared in accordance with GAAP, we believe that describing revenue excluding the effects of foreign currency, and expenses excluding costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other costs (“non-GAAP adjustments”), provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures include constant exchange rate (“CER”) currency revenue growth, non-GAAP gross profit, non-GAAP gross profit margin, non-GAAP operating income, non-GAAP operating margin, and free cash flow.

Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance and are useful measures to evaluate our continuing business. Additionally, management believes free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt.

We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and it may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

We define our non-GAAP financial measures as follows:

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CER currency revenue growth as GAAP revenue excluding the effect of changes in foreign currency translation rates.

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Non-GAAP gross profit as GAAP gross profit excluding non-GAAP adjustments.

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Non-GAAP gross profit margin as GAAP gross profit margin excluding the impact of non-GAAP adjustments.

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Non-GAAP operating income as GAAP operating income excluding non-GAAP adjustments.

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Non-GAAP operating income margin as GAAP operating income margin excluding the impact of non-GAAP adjustments.

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Free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment.

Reconciliations of GAAP to Non-GAAP financial measures:

The amounts listed below are in millions of dollars. Where relevant, we have also included the associated percentage margins.

GAAP revenue to non-GAAP CER currency revenue:

The decrease in non-GAAP CER revenue growth was driven primarily by lower growth in our academic, government, and industrial markets against difficult high growth comparables in 2023. China was also a significant contributor to our slower growth in 2024 compared to the prior year. These markets were offset by revenue from acquisitions and organic growth.

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GAAP Gross Profit to non-GAAP Gross Profit:

The decrease in non-GAAP gross margin was primarily due to the mix impact of our 2024 acquisitions combined with a modest headwind from foreign currency.

GAAP Operating income to non-GAAP Operating income:

The decrease in our non-GAAP operating margins in 2024 was primarily due to lower margin mix and increased costs related to 2024 acquisitions.

GAAP Net operating cash flow to non-GAAP Free cash flow:

For the year ended December 31, 2024, our free cash flow was $107.2 million lower than the same period in 2023, primarily due to lower net income and significant acquisition-related expenses.

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RESULTS OF OPERATIONS

A discussion regarding our results of operations for the fiscal year ended December 31, 2023 compared to 2022 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on February 29, 2024, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at https://.ir.bruker.com under the “Financial Info” section.

Year Ended December 31, 2024, Compared to the Year Ended December 31, 2023

Consolidated Results

The following table presents our results for the periods presented (dollars in millions):

Revenue

The following table presents revenue, change in revenue, and revenue growth by reportable segment for the periods presented (dollars in millions):

(a)
Represents product and service revenue between reportable segments.

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Revenue increases were driven by strong demand for our differentiated instruments and solutions and revenue growth from acquisitions. The BSI BioSpin Segment revenue increase was primarily due to demand for our instruments across academia, government and biopharma markets. The BSI BioSpin Segment also saw increased revenue from the Chemspeed acquisition. We had revenue from four gigahertz-class NMR systems each in fiscal 2024 and fiscal 2023. The BSI CALID Segment revenue increase reflected strong demand for our differentiated instruments, primarily, in our Microbiology & Infection Diagnostics, driven by the MALDI BioTyper and the ELITechGroup molecular diagnostics business, which was acquired in 2024, as well as our Optics IR/NIR/Raman businesses. This was partially offset by softness in academia and government markets as well as our China market. The BSI NANO Segment revenue increase was driven by strong demand in its semiconductor metrology market as well as revenue increases from the NanoString and Bruker Cellular acquisitions offset by soft demand from biopharma. BEST revenue increased slightly by growth in accelerator and fusion technologies at our Research Instruments (“RI”) business which is gaining traction in extreme ultraviolet lithography technologies for next-gen semiconductors, and was mostly offset by softness in clinical MRI superconductors.

For more detail on our revenue by geography, see “Foreign Currency Risk” in Item 7A Quantitative And Qualitative Disclosures About Market Risk on page 49 of this Annual Report on Form 10-K.

Gross Profit

The following table presents gross profit and gross profit margins by reportable segment for the years ended December 31, 2024 and 2023 (dollars in millions):

The increase in gross profit was a result of pricing and volume leverage, marginally offset by net unfavorable impact of foreign exchange rate movements compared to 2023. The decrease in gross profit margin was primarily due to mix impact of our 2024 acquisitions combined, and unfavorable foreign exchange rate movements.

Selling, General and Administrative

Our selling, general and administrative expenses for the year ended December 31, 2024, increased to 26.6% of total revenue from 24.6% of total revenue for the comparable period in 2023. The year over year increase as a percentage of revenue was a result of increased mix of sales and marketing costs from 2024 acquisitions, increased spending related to additional headcount and personnel expenses, as well as increased consulting and professional fees related to acquisitions, tax, audit and audit-related fees.

Research and Development

Our research and development expenses for the year ended December 31, 2024, increased to 11.2% of total revenue from 9.9% of total revenue for the comparable period in 2023. The increase as a percentage of revenue is a result of our increased investment in research and development capabilities, and the mix of research and developments costs from 2024 acquisitions. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.

Other Charges, Net

Other charges, net for the year ended December 31, 2024, increased to $126.1 million compared to $52.2 million for the comparable period in 2023. The year over year increase was primarily due to $44.9 million of acquisition-related litigation charges primarily related to the acquisitions of BCA and NanoString as well as an increase of $38.1 million in acquisition-related expenses due to costs from 2024 acquisitions. Please refer to Note 11, Other Charges, net for more details on our other charges, net costs.

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Operating Income

The following table presents operating income and operating margins on revenue by reportable segment for the periods presented (dollars in millions):

(a)
Represents corporate costs and eliminations not allocated to the reportable segments.

The decrease in operating income and operating income margin was primarily due to unfavorable margin mix and increased costs related to 2024 acquisitions, and unfavorable foreign exchange rate movements.

Bargain purchase gain and associated measurement period adjustments

In 2023, the Company recorded a gain of $144.1 million, in connection with the PhenomeX acquisition, which closed on October 2, 2023. This bargain purchase gain reflected the excess of identifiable net assets acquired, including deferred tax assets related to acquired tax NOLs, over the purchase consideration paid.

In 2024, following the finalization of a review of income tax positions related to change in ownership limitations assessments on NOL/R&D credits at the end of the business combination measurement period in connection with the PhenomeX acquisition, the Company recorded a charge of $8.0 million

Interest and Other Income (Expense), Net

The increase in interest and other income (expense), net during the year ended December 31, 2024, as compared to the same period in 2023 was primarily due to higher interest expense of $47.9 million due to increased borrowings, and impairment of certain minority investments of $24.6 million, offset by higher foreign currency exchange gains of 23.7 million driven by strengthening of the U.S. dollar against other currencies.

Income Tax Provision

The effective tax rates for years ended 2024 and 2023, were 44.2% and 21.6%, respectively. The increase in the Company's effective tax rate was primarily due to changes in jurisdictional mix, an increase in tax reserves, and unfavorable return to provision adjustments.

Net Income Attributable to Bruker Corporation

The decrease in net income and earnings per diluted share was primarily driven by lower gross and operating margins, higher tax rate, as well as the bargain purchase gain recognized in 2023 in connection with the PhenomeX acquisition.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows

We anticipate that our existing cash and credit facilities will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations and a combination of debt financings and issuances of common stock. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or, if available, will be obtained on terms favorable to us.

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Effective in the quarter ended June 30, 2024, the Company entered into a multi-currency notional cash pooling agreement with a financial institution to manage cash flow more efficiently and optimize liquidity. Refer to Note 2, Summary of Significant Accounting policies for more information on our notional cash pooling agreement.

Cash and cash equivalents at December 31, 2024, and 2023 totaled $183.4 million and $488.3 million, respectively, of which $419.3 million and $398.4 million, respectively, related to cash, cash equivalents and short-term investments is held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, and Hong Kong. These balances include positive positions under our cash pooling arrangements.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):

Net cash provided by operating activities during the year ended December 31, 2024, resulted primarily from consolidated net income adjusted for non-cash items of $329.5 million, partially offset by a change in operating assets and liabilities, net of acquisitions of $78.2 million. Net Cash provided by operating activities during the year ended December 31, 2023, resulted from consolidated net income adjusted for non-cash items of $437.9 million, including the non-cash bargain purchase gain from the acquisition of PhenomeX, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $87.8 million.

The decrease in consolidated net income adjusted for non-cash items was primarily due to lower income as result of unfavorable margin mix and increased costs related to 2024 acquisitions. The decrease in the change in operating assets and liabilities, net of acquisitions was due to higher inventory balances to handle supply chain challenges, higher accounts receivable and lower deferred revenue and customer advances, partially offset by increases in accounts payable and accrued expenses

Net cash used in investing activities during the year ended December 31, 2024, resulted primarily from the acquisitions of $1,599.6 million, purchases of property, plant and equipment of $115.3 million, and cash paid for minority investments of $48.3 million. Net cash used in investing activities during the year ended December 31, 2023, resulted primarily from acquisitions of $226.6 million, purchases of property, plant and equipment of $106.9 million, and cash paid for minority investments of $24.8 million, partially offset by net proceeds from sales of property, plant and equipment of $11.1 million.

We currently expect capital expenditures in 2025 to be approximately $100.0 million.

Net cash provided by financing activities during the year ended December 31, 2024, was primarily from proceeds from long-term debt of $973.7 million (refer to Note 21, Debt), proceeds from our public offering of common stock of $403.0 million (refer to Note 27, Shareholders’ Equity), and net proceeds from our revolving line of credit of $37.6 million (refer to Note 21, Debt). These inflows were primarily offset by the repayment of our 2012 Note Purchase Agreement of $100.0 million and the payment of dividends to common shareholders of $30.2 million. The increase in equity financing and the net increase in debt financing was primarily due to acquisition activity. Net cash used in financing activities during the year ended December 31, 2023, was primarily attributable to cash payments made for shares of common stock under our repurchase program of $152.3 million, and $29.4 million for the payment of dividends.

Share Repurchase Program

During the year ended December 31, 2024, we did not purchase any shares under the 2023 Repurchase Program. Please refer to Note 27, Shareholder's Equity, in the Notes to our Consolidated Financial Statements for more information on our share repurchase program. Subsequent to December 31, 2024 and prior to the date of filing this annual report on From 10K, the Company purchased 200,731 shares at an aggregate cost of $10 million.

Public Offering

In May 2024, we completed an underwritten public offering. Please refer to Note 27, Shareholder's Equity, in the Notes to our Consolidated Financial Statements for more information on this public offering.

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Income Taxes

At December 31, 2024 and in accordance with the U.S. tax laws we recorded state and foreign withholding taxes, as well as subsequent foreign currency translations on these withholding taxes as they are an obligation of the parent company, on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from our foreign subsidiaries to the United States. We continue to be indefinitely reinvested in the amount of $1.8 billion of non-cash E&P that is subject to the 2017 Tax Act deemed repatriation. If this E&P is ultimately distributed to the United States in the form of dividends or otherwise, we would likely be subject to additional withholding tax. We will continue to evaluate our assertions on the cumulative historical outside basis differences in our foreign subsidiaries as of December 31, 2024. The amount of unrecognized deferred withholding taxes on the undistributed E&P was $104.2 million at December 31, 2024.

As of December 31, 2024, the Company has approximately $593.5 million of U.S. federal net operating loss carryforwards, of which $33.8 million begin to expire at various dates beginning in 2033 and the remainder $559.7 million will be carried forward indefinitely. The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, limits a taxpayer’s ability to utilize NOL deduction in a year to 80% taxable income for federal NOL arising in tax years beginning after 2017. The Company has approximately $184.6 million of state net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2024 to the extent that they cannot be utilized. The Company also has approximately $107.3 million of German Trade Tax and Corporate Income Tax net operating losses that are carried forward indefinitely.

In December 2021, the Organization for Economic Co-operation and Development (OECD) introduced its Pillar Two Framework Model Rules (“Pillar 2”) and provided guidance for a global minimum tax. Certain aspects of Pillar 2 took effect on January 1, 2024, while other aspects go into effect on January 1, 2025. The Company has evaluated the potential impact of Pillar 2 on its business and as a result, the Company has recorded a tax provision of $1.3 million for the period ended December 31, 2024. The Company continues to monitor the countries in which it operates as they enact legislation implementing Pillar 2.

Refer to Note 14, Income taxes for additional details of our loss carryforwards.

Debt and Credit Facilities

We have a total outstanding debt of $2.1 billion as of December 31, 2024, and a revolving credit facility that provides for up to $900.0 million of additional liquidity to finance working capital needs, refinance or reduce existing indebtedness, and for general corporate use of which $872.2 million is undrawn. In addition, the facility provides for an uncommitted incremental facility whereby, under certain circumstances, we may, at our option, increase the amount of the revolving facility or incur term loans in an aggregate amount not to exceed $400 million. As of December 31, 2024, we were in compliance with all covenants of our debt agreements.

Refer to Note 21, Debt in this annual report for additional information on our outstanding debt and credit facility as well as a summary of the fair and carrying values of our outstanding debt as of December 31, 2024.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, and are disclosed in Note 2, Summary of Significant Accounting Policies in the notes the consolidated financial statements. U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

We consider our accounting estimates to be critical to the consolidated financial statements if (i) the estimate requires significant judgment or is complex in nature and (ii) if different estimates and assumptions were used, the results could have a material impact on our consolidated financial statements. We evaluate our estimates and the application of our policies on an ongoing basis.

We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable. Actual results could differ from these estimates. Changes in estimates are recorded in the period in which they become known.

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We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment. The full accounting policies are disclosed in Note 2, Summary of Significant Accounting Policies in the notes the consolidated financial statements.

Revenue Recognition:

We recognize revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. The standard results in significant management judgment and estimates as a result of inherent uncertainties in the following areas:

Multiple Performance Obligations: Many of our contracts include multiple performance obligations, such as systems, installation, accessories, parts, and services. Allocating the transaction price to these obligations requires us to estimate the standalone selling price for each distinct good or service. While we primarily rely on observable prices from standalone sales, in cases where such evidence is unavailable, we use an expected cost-plus-margin approach, and this estimate requires judgments and is subject to potential variability if our assumptions about cost or margin change.

Timing of Revenue Recognition: We recognize revenue when control transfers to the customer in an amount that reflects the consideration we expect to receive. For most of our performance obligations, this occurs at a point in time, such as upon shipment or customer acceptance. However, for certain customized systems or services, revenue is recognized over time based on progress toward completion, typically measured using a cost-to-cost method based on cost incurred to date relative to total estimated costs. This method requires us to make reasonable estimates of total contract costs and assess progress. Revisions to cost estimates could significantly affect the timing and amount of revenue recognized, particularly for complex, long-term arrangements. Losses are recorded immediately when we estimate that contracts will ultimately result in a loss.

For systems with customer-specific acceptance criteria, management evaluates whether the customer assessment criteria have been satisfied, which may involve judgment in determining whether successful factory acceptance testing or customer sign-off has been achieved. Changes in customer requirements or delays in acceptance can impact the timing of revenue recognition.

Collectability assessment: Differing assessments of the probability of collection could impact the amount and timing of revenue recognition. However, based on our customer profile combined with an established practice of requiring advances for certain larger product sales, we have not historically experienced significant adjustments to revenue.

Income taxes

Deferred tax assets and liabilities are recognized for temporary differences between the financial statement carrying amounts and their respective tax bases, measured using enacted tax rates expected to apply when these differences reverse. The realizability of deferred tax assets is evaluated based on historical taxable income, current tax liabilities, and projected future taxable income, with the latter involving inherent uncertainty. A valuation allowance is established if it is more likely than not that some or all of the deferred tax assets will not be realized. Changes in estimates or assumptions regarding taxable income may require adjustments to the valuation allowance, which could materially impact our financial position and results of operations.

Liabilities for uncertain tax positions are recorded based on a minimum recognition threshold, requiring significant judgment to determine if it is more likely than not that a tax position will be sustained.

Business Combinations

We account for business combinations under the acquisition method of accounting. Accordingly, at the date of each acquisition, we measure the fair value of all identifiable assets acquired (including intangible assets), liabilities assumed and any remaining noncontrolling interests and allocate the amounts paid to all items measured. Any excess of fair value of acquired net assets, including identifiable intangible assets over the acquisition consideration, results in a bargain purchase gain.

The determination of the fair value of identifiable assets and liabilities is based on valuations that reflect management’s best estimates of inputs and assumptions, consistent with those a market participant would utilize. These valuations rely significantly on estimated future cash flows, which are critical inputs in the valuation models. The preparation of these estimates involves substantial judgment and incorporates information from multiple sources, including historical data of the acquired entity, insights obtained through due diligence, and industry publications available to us and all of which are subject to their own inherent limitations when estimating future outcomes.

Impairment

Goodwill and indefinite-lived intangible assets arising from our acquisitions, are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may

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not be recoverable. We typically identify other amortizing intangible assets as part of the acquisition accounting, and the amount and amortization period are determined at the time of the acquisition. In assessing the recoverability of goodwill and other indefinite-lived or amortizing intangible assets, we must make assumptions regarding the estimated future cash flows, including forecasted revenue growth and the discount rate to determine the fair value of these assets. If these estimates or their related assumptions adversely change after the acquisition date, we may be required to record impairment charges against these assets in the reporting period in which the impairment is determined. Refer to Note 6, Goodwill and Intangible Assets, for more information on goodwill and indefinite-lived intangible assets impairment assessment for current year acquisitions.

RECENT ACCOUNTING PRONOUNCEMENTS

Information regarding recently issued accounting pronouncements may be found in Note 3, Recent Accounting Pronouncements to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and notes to those statements, appearing elsewhere in this report. This report contains forward-looking statements reflecting our current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Our actual results may differ materially from those indicated in the forward-looking statements due to a number of factors, including those discussed in Item 1A, Risk Factors and elsewhere in this report.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes the principal factors affecting the results of our operations, financial condition and changes in financial condition, as well as our critical accounting policies and estimates. Our MD&A is organized as follows:

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Non-GAAP Measures. This section provides appropriate disclosures regarding forward looking statements and our use of Non-GAAP financial measures.

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Overview. This section provides a brief discussion of our reportable segments’ results of operations, significant recent developments in our businesses, and challenges and risks that may impact our businesses in the future.

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Results of Operations. This section provides our analysis of the significant line items on our consolidated statements of income and comprehensive income for the year ended December 31, 2023, compared to the year ended December 31, 2022.

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Liquidity and Capital Resources. This section provides an analysis of our liquidity and cash flow and a discussion of our outstanding debt and commitments.

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Critical Accounting Policies and Estimates. This section discusses the accounting estimates that are considered important to our financial condition and results of operations and require us to exercise subjective or complex judgments in their application. All of our significant accounting policies are summarized in Note 2 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

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Recent Accounting Pronouncements. This section provides a summary of recent accounting pronouncements and discusses their potential impact on our consolidated financial statements.

Non-GAAP Measures

Although our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we believe describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit margin and non-GAAP operating margin. Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance.

We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other non-operational costs and we believe these are useful measures to evaluate our continuing business.

We define free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt.

We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

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OVERVIEW

We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, Asia and North America and we have commercial offices located throughout the world. Bruker is organized into four reportable segments: the BSI BioSpin Segment, the BSI CALID Segment, the BSI Nano Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

Revenue for the year ended December 31, 2023, increased by $433.8 million, or 17.1%, to $2,964.5 million, compared to $2,530.7 million for the comparable period in 2022. Included in revenue was an increase of approximately $11.2 million from favorable foreign exchange rate movements, and an increase of $56.2 million from acquisitions. Excluding the effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased $366.4 million, or 14.5%. Revenue increases were driven by strong demand for our differentiated high-value scientific instruments and life science solutions in addition to pricing benefits compared to the same period in 2022.

Our gross profit margin decreased to 51.0% for the year ended December 31, 2023, as compared to 51.6% in the same period in 2022, primarily as result of the unfavorable impact of foreign exchange rate movements offset by modest improvement from mix, pricing, and acquisitions compared to 2022.

The income tax provision for the years ended December 31, 2023, and December 31, 2022 was $117.7 million and $116.4 million, respectively, representing effective tax rates of 21.6% and 28.1%, respectively. The decrease in our effective tax rate for the year ended December 31, 2023, compared to 2022, was primarily due to the non-taxable nature of the gain on bargain purchase from the acquisition of PhenomeX.

Diluted earnings per share for the year ended December 31, 2023, was $2.90, an increase of $0.91, compared to $1.99 per share in the same period in 2022. The increase in diluted earnings per share was primarily driven by higher net income including the bargain purchase gain associated with the acquisition of PhenomeX, and reduced diluted outstanding shares resulting from our share repurchase activity during the year.

The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow as used by management (in millions):

For the year ended December 31, 2023, our free cash flow was $98.0 million higher than the same period in 2022, primarily due to improved working capital performance and lower capital expenditures.

The following table presents a reconciliation from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (dollars in millions):

Our non-GAAP gross profit margin was 52.2% and 52.6% in the years ended December 31, 2023, and 2022, respectively remaining fairly consistent year over year.

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The following table presents a reconciliation from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions):

Our non-GAAP operating margin was 18.4% and 20.0% for the years ended December 31, 2023, and 2022, respectively. The decrease in our non-GAAP operating margins in 2023 was primarily due to acquisitions and the impact of foreign exchange rate movements.

We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:

•
general economic conditions, including inflation, uncertainties caused by recent banking industry volatility, the threat of recession, financial liquidity, and currency volatility or devaluation, supply chain or manufacturing capabilities;

•
geopolitical tensions, including those on our customers, such as the conflict between Russia and Ukraine conflict, the conflict in Israel, Palestine and surrounding areas, the possible expansion of such conflicts and potential geopolitical consequences, the ongoing tensions between the United States and China, tariff and trade policy changes, and increasing potential of conflict involving countries in Asia that are critical to our supply chain operations;

•
potential energy shortages in Europe where we have significant operations and overall higher energy and transportation costs;

•
the impacts of climate change and certain weather-related disruptions;

•
the timing of governmental stimulus programs and academic research budgets;

•
the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;

•
foreign currency exchange rates;

•
the worldwide shortage of semiconductor chips, components and raw materials, such as copper;

•
changes in raw material, component and logistics costs;

•
the time it takes for us to receive critical materials to manufacture our products;

•
the time it takes to satisfy local customs requirements and other export/import requirements;

•
the time it takes for customers to construct or prepare their facilities for our products;

•
the time required to obtain governmental licenses;

•
our ability to identify suitable acquisition targets and successfully integrate and manage acquired business; and

•
costs related to acquisitions of technology or businesses.

Several of these factors have in the past affected and may continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance.

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RESULTS OF OPERATIONS

A discussion regarding our results of operations for the fiscal year ended December 31, 2022 compared to 2021 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 1, 2023, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at https://.ir.bruker.com under the “Financial Info” section.

Year Ended December 31, 2023, Compared to the Year Ended December 31, 2022

Consolidated Results

The following table presents our results for the years ended December 31, 2023, and 2022 (dollars in millions):

Revenue

The following table presents revenue, change in revenue, and revenue growth by reportable segment for the years ended December 31, 2023, and 2022 (dollars in millions):

(a)
Represents product and service revenue between reportable segments.

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Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing actions taken primarily to address inflation cost pressures. The BSI BioSpin Segment revenue increase was related primarily to the strong demand for our instruments across biopharma, academic government, industrial research and applied markets, our new integrated data solutions division and especially our Nuclear Magnetic Resonance (NMR) and related services. We had revenue from 4 gigahertz class NMR systems each in fiscal 2023 and fiscal 2022. The BSI CALID Segment revenue increase reflected strong demand for our differentiated instruments, primarily, in our life science mass spectrometry proteomics solutions, and our optics spectroscopy and microscopy instruments. Our growth in life science mass spectrometry was driven by the timsTOF platform and aftermarket business, as well as strong growth in applied mass spectrometry and our optics infrared, near infrared and Raman business. Microbiology and infectious disease revenue was up slightly as solid demand for MALDI Biotyper consumables was offset by a final drop of our modest COVID-19 molecular diagnostics revenue. The BSI NANO Segment revenue increase was driven by strong demand in its academic, government, industrial and semiconductor metrology markets. Revenue growth was primarily driven by our advanced X-ray solutions and nano surfaces, core tools and fluorescence microscopy. The BEST revenue increase was driven by strong superconductor demand from our magnetic resonance imaging original equipment manufacturer customers as well as by growth in big science, fusion research, and key new extreme ultraviolet EUV technologies for semiconductor lithography tools by large OEM customers, all in support of the strong artificial intelligence demand.

Geographically for the year ended December 31, 2023, our North America revenue grew 11.4% Asia Pacific increased by 22.9%, and European revenue increased by 16.9%, in each case, as compared to the same period in 2022.

Gross Profit

The increase in gross profit was a result of pricing and volume leverage, partially offset by net unfavorable impact of foreign exchange rate movements compared to 2022.

Selling, General and Administrative

Our selling, general and administrative expenses for the year ended December 31, 2023, increased to 24.6% of total revenue from 24.0% of total revenue for the comparable period in 2022. The year over year increase as a percentage of revenue was a result of inflation and increased planned spending in sales and marketing capabilities compared to 2022. Increased spending is related to additional headcount and personnel expenses as well as increased consulting and professional fees related to acquisitions, tax, audit and audit-related fees.

Research and Development

Our research and development expenses for the year ended December 31, 2023, increased to 9.9% of total revenue from 9.3% of total revenue for the comparable period in 2022. The slight increase as a percentage of revenue is a result of our increased investment in research and development capabilities, especially in our key Project Accelerate 2.0 initiatives. Investments are primarily related to additional headcount and personnel expenses as well as increased consulting and professional fees related to research and development activities.

Other Charges, Net

Other charges, net for the year ended December 31, 2023, consisted of $16.8 million of acquisition-related charges primarily completed in 2023, $18.8 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives mainly related to the PhenomeX acquisition as detailed in Note 21 Other Charges, net, $5.0 million of costs associated with our global IT transformation activities, $0.6 million related to professional fees and $5.7 million related to long-lived asset impairments. Acquisition-related charges relate primarily to the integration cost of newly acquired entities and the cost of post-combination employment services in the period acquired. The IT transformation initiative is a multi-year project aimed at updating and integrating our global enterprise resource planning and human resource information systems.

Other charges, net for the year ended December 31, 2022 consisted primarily of $19.3 million of acquisition-related charges related to transactions completed in 2021 and 2020, $3.9 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $3.0 million of costs associated with our global IT transformation activities, $2.4 million related to professional fees and $0.3 million related to long-lived asset impairments.

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Operating Income

The following table presents operating income and operating margins on revenue by reportable segment for the years ended December 31, 2023 and 2022 (dollars in millions):

(a)
Represents corporate costs and eliminations not allocated to the reportable segments.

The increase in operating income was due to higher gross profit resulting from, volume leverage, and price realization offset by planned sales and marketing investments, supply chain and logistics challenges, inflationary margin challenges in 2023, as compared to 2022, and investments in research and development capabilities.

Bargain purchase gain

In the fourth quarter of 2023, the Company recorded a gain of $144.1 million, or $0.99 per share, in connection with the PhenomeX acquisition, which closed on October 2, 2023. This bargain purchase gain reflects the excess of identifiable net assets acquired, including deferred tax assets related to acquired tax NOLs, over the purchase consideration paid.

Interest and Other Income (Expense), Net

The increase in interest and other income (expense), net in the year ended December 31, 2023, as compared to the same period in 2022 was primarily due to impairment charges recognized of $18.2 million on certain minority investments and higher foreign currency exchange losses of $13.3 million driven by weakening of the U.S. dollar against other currencies.

Income Tax Provision

The effective tax rates for years ended 2023 and 2022 were 21.6% and 28.1%, respectively. The decrease in our effective tax rate for the year ended December 31, 2023, compared to 2022, was primarily due to the non-taxable nature of the bargain purchase gain from the acquisition of PhenomeX.

Equity in Income of Unconsolidated Investees, net of tax

Equity in income of unconsolidated investees, net of tax represents the Company’s proportionate share of the earnings or losses as reported by equity-method investees.

Net Income Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.

Net Income Attributable to Bruker Corporation

The increase in net income and earnings per diluted share was primarily driven by the increase in revenue, gross profit and operating profit as a result of strengthened demand and recovery in our business and end markets.

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LIQUIDITY AND CAPITAL RESOURCES

We anticipate that our existing cash and credit facilities as of December 31, 2023, together with proceeds from notes offerings to be completed pursuant to note purchase agreements entered into in February 2024 and increased borrowing capacity under the amended and restated credit agreement entered into in January 2024, will be sufficient to support our operating and investing needs for at least the next twelve months. Our future cash requirements could be affected by acquisitions that we may complete, purchases of our common stock or the payment of dividends in the future. Historically, we have financed our growth and liquidity needs through cash flow generation from operations and debt financing. In the future, there are no assurances that we will continue to generate cash flow from operations or that additional financing alternatives will be available to us, if required, or if available, will be obtained on terms favorable to us.

Cash, cash equivalents and short-term investments at December 31, 2023, and 2022 totaled $488.3 million and $645.5 million, respectively, of which $398.4 million and $593.8 million, respectively, related to cash, cash equivalents and short-term investments is held outside of the United States in our foreign subsidiaries, most significantly in the Netherlands, Switzerland, China and Hong Kong.

The following table presents our cash flows from operating activities, investing activities and financing activities for the periods presented (in millions):

Cash provided by operating activities during the year ended December 31, 2023, resulted from consolidated net income adjusted for non-cash items of $437.9 million, including the non-cash bargain purchase gain from the acquisition of PhenomeX, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $87.8 million. During the year ended December 31, 2022, net cash provided by operating activities resulted from consolidated net income adjusted for non-cash items of $418.5 million, partially offset by a change in operating assets and liabilities, net of acquisitions and divestitures of $144.1 million. The increase in net income adjusted for non-cash items was mainly due to higher revenue, gross profit, and operating income. The increase in operating cash flows was due to changes in operating assets and liabilities, and was impacted by improvements in receivable collections, timing of tax payments and accounts payable offset by an increase in inventory purchases and prepayments to meet increased order demand.

Cash used in investing activities during the year ended December 31, 2023, resulted primarily from the acquisitions and advances of $226.6 million, purchases of property, plant and equipment of $106.9 million, and minority investments of $24.8 million, partially offset by net proceeds from sales of property, plant and equipment of $11.1 million. Cash used in investing activities during the year ended December 31, 2022, was primarily from the acquisitions of $182.3 million, purchases of property, plant and equipment of $129.2 million, and minority investments of $60.2 million, partially offset by maturity of short-term investments of $100.0 million and $13.9 million of net proceeds from sales of property, plant and equipment.

We currently expect capital expenditures in 2024 to be approximately $125.0 million.

Net cash used in financing activities during the year ended December 31, 2023, was primarily attributable to cash payments made for shares of common stock under our repurchase program of $152.3 million, and $29.4 million for the payment of dividends. Net cash used in financing activities during the year ended December 31, 2022, was primarily attributable to cash payments made for shares of common stock under our repurchase program of $263.1 million, repayment of our 2012 Note Purchase Agreement of $105.0 million and $29.8 million for the payment of dividends.

Share Repurchase Program

In May 2021, the Company’s Board of Directors approved a share repurchase program (the “2021 Repurchase Program”) authorizing the purchase of up to $500.0 million of the Company’s common stock over a two-year period, in amounts, at prices, and at such times as management deems appropriate, subject to market conditions, legal requirements and other considerations. During the year ended December 31, 2023, the Company purchased a total of 315,318 shares at an aggregate cost of $22.2 million under the 2021 Repurchase Program. During the year ended December 31, 2022, the Company purchased a total of 4,215,094 shares at an aggregate cost of $264.7 million under the 2021 Repurchase Program. Authorization for the remaining $94.4 million on the 2021 Repurchase Program expired in May 2023.

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In May 2023, the Company’s Board of Directors approved a share repurchase program (the “2023 Repurchase Program”) authorizing the purchase of up to $500.0 million of the Company’s common stock over a two-year period, in amounts, at prices, and at such times as management deems appropriate, subject to market conditions, legal requirements and other considerations. During the year ended December 31, 2023, the Company purchased a total of 2,097,119 shares at an aggregate cost of $130.1 million under the 2023 Repurchase Program. At December 31, 2023, $369.9 million remains available for future purchase under the 2023 Repurchase Program. We intend to fund any additional purchases from cash on hand, future cash flows from operations and available borrowings under the revolving credit facility.

In August 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States. The IRA introduced new tax provisions, including a 1.0% excise tax on stock repurchases. The Company expects additional guidance and regulations to be issued in future periods and will continue to assess its potential impact on its business as further information becomes available. The estimated excise tax on our stock repurchases was not material and was recorded in other current liabilities and additional paid in capital for the year ended December 31, 2023.

Shelf Registration

On June 2, 2023, the Company filed a registration statement on Form S-3ASR with the SEC (“2023 Shelf Registration”) for the issuance of common stock, preferred stock, debt securities, warrants, units, subscription rights and purchase contracts, which became effective immediately upon filing. At the time any of the securities covered by the 2023 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

Income Taxes

At December 31, 2023 and in accordance with the tax reform legislation signed by the President of the United States on December 22, 2017, or the 2017 Tax Act, we recorded state and foreign withholding taxes, as well as subsequent foreign currency translations on these withholding taxes as they are an obligation of the parent company, on the cash and liquid assets portion of the unremitted earnings and profits (E&P) of foreign subsidiaries expected to be repatriated from our foreign subsidiaries to the United States. We continue to be indefinitely reinvested in the amount of $1.4 billion of non-cash E&P that is subject to the 2017 Tax Act deemed repatriation. If this E&P is ultimately distributed to the United States in the form of dividends or otherwise, we would likely be subject to additional withholding tax. We will continue to evaluate our assertions on the cumulative historical outside basis differences in our foreign subsidiaries as of December 31, 2023. The amount of unrecognized deferred withholding taxes on the undistributed E&P was $95.6 million at December 31, 2023.

As of December 31, 2023, the Company has approximately $588.9 million of U.S. federal net operating loss carryforwards, of which $36.4 million begin to expire at various dates beginning in 2031 and the remainder $552.5 million will be carried forward indefinitely. The Tax Cuts and Jobs Act (TCJA) enacted on December 22, 2017, limits a taxpayer’s ability to utilize NOL deduction in a year to 80% taxable income for federal NOL arising in tax years beginning after 2017. The Company has approximately $676.6 million of state net operating loss carryforwards available to reduce state taxable income that are expected to expire at various times beginning in 2024. The Company also has approximately $97.9 million of German Trade Tax and Corporate Income Tax net operating losses that are carried forward indefinitely. Additionally, the Company has $28.7 million of other foreign net operating losses that are expected to expire at various times in the future. The Company has U.S. federal foreign tax credit carried forwards in the amount of $3.3 million. The Company also has U.S. federal and state research and development tax credit of $1.2 million and $10.3 million respectively. Utilization of these credits and net operating losses may be subject to annual limitations due to the ownership percentage change limitations provided by the Code Section 382 and similar state provisions. In the event of a deemed change in control under Code Section 382, an annual limitation on the utilization of net operating losses and credits may result in the expiration of all or a portion of the net operating loss and credit carryforwards. The Company is in the process of finalizing the impact of Section 382 related to the PhenomeX acquisition but believes the provisions will limit the availability of losses to offset future income. Additionally, the Company has $91.4 million of gross interest expense carryforward as provided by Code Section 163(j) that can be carried forward indefinitely.

Uncertain tax contingencies are positions taken or expected to be taken on an income tax return that may result in additional payments to tax authorities. If a tax authority agrees with the tax position taken or expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.

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Credit Facilities and Note Purchase Agreements

On February 8, 2024, the Company entered into a note purchase agreement pursuant to which the Company will issue and sell (i) CHF 50 million aggregate principal amount of 2.60% Series A Senior Notes due April 15, 2036 and (ii) CHF 50 million aggregate principal amount of its 2.62% Series B Senior Notes due April 15, 2039 in an offering exempt from the registration requirements of the Securities Act of 1933, as amended. The issuance and sale of the notes is subject to satisfaction of a variety of customary closing conditions and is expected to occur on or about April 15, 2024.

On February 1, 2024, the Company entered into a note purchase agreement, pursuant to which the Company will issue and sell (i) CHF 50 million aggregate principal amount of 2.56% Series A Senior Notes due April 15, 2034, (ii) CHF 146 million aggregate principal amount of its 2.62% Series B Senior Notes due April 15, 2036 and (iii) CHF 135 million aggregate principal amount of its 2.71% Series C Senior Notes due April 15, 2039 in an offering exempt from the registration requirements of the Securities Act of 1933, as amended. The issuance and sale of the notes is subject to satisfaction of a variety of customary closing conditions and is expected to occur on or about April 15, 2024.

On January 18, 2024, the Company, together with certain of its subsidiaries, as borrowers and guarantors, entered into an amended and restated credit agreement with Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., TD Bank, N.A., and Wells Fargo Bank, National Association, as Co-Syndication Agents, BofA Securities, Inc., Deutsche Bank Securities Inc., JPMorgan Chase Bank, N.A., TD Bank, N.A. and Wells Fargo Securities, LLC, as Joint Bookrunners and Joint Lead Arrangers, Citizens Bank, N.A., Credit Suisse (Switzerland) Ltd., and U.S. Bank, N.A., as Co-Documentation Agents, ING Bank B.V. and PNC Bank, N.A., as Managing Agents, Bank of America, N.A., as Administrative Agent, Swing Line Lender and Issuing Bank, and the several banks or other financial institutions or entities from time to time party thereto as lenders. The amended and restated credit agreement amends and restates the credit agreement entered into by the Company and certain of its subsidiaries on December 11, 2019 with the other parties thereto.

The amended and restated credit agreement increases the aggregate principal amount from $600 million to $900 million and extends the maturity date to January 18, 2029, as may be further extended by the Company for the periods and on the terms set forth in the amended and restated credit agreement. In addition, the amended and restated credit agreement increases the uncommitted incremental facility whereby, under certain circumstances, the Company may, at its option, increase the amount of the revolving facility or incur term loans in an aggregate amount not to exceed $400 million.

In addition, we paid the remaining $100 million of our 4.46% Series 2012A Tranche D, private placement notes on January 18, 2024.

On January 12, 2024, the Company borrowed CHF 230 million under the Company's 2019, Revolving Credit Agreement.

As of December 31, 2023, we have several cross-currency and interest rate swap agreements with a notional value of $139.1 million of U.S. Dollar to Swiss Franc and a notional value of $239.1 million of U.S. Dollar to Euro to hedge the variability in the movement of foreign currency exchange rates on portions of our Euro and Swiss Franc denominated net asset investments. As a result of these agreements, we lowered our net interest expense by $18.3 million and $8.6 million during the year ended December 31, 2023, and 2022, respectively. We anticipate these swap agreements will lower net interest expense by approximately $12.7 million in 2024 and $8.8 million in 2025.

For a summary of the fair and carrying values of our outstanding debt as of December 31, 2023, and December 31, 2022, please read Note 12, Debt, to our consolidated financial statements included in our 2023 Form 10-K.

As of December 31, 2023, we had no off-balance sheet arrangements.

As of December 31, 2023, we were compliant with the financial covenants of these debt agreements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period.

We consider our accounting estimates to be critical to the consolidated financial statements if (i) the estimate requires significant judgment or is complex in nature and (ii) if different estimates and assumptions were used, the results could have a material impact on our consolidated financial statements. We evaluate our estimates and the application of our policies on an ongoing basis.

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We base our estimates and judgments on our historical experience, current market and economic conditions, industry trends, and other assumptions that we believe are reasonable. Actual results could differ from these estimates. Changes in estimates are recorded in the period in which they become known.

We believe the following critical accounting policies and estimates to be both those most important to the portrayal of our financial position and results of operations and those that require the most estimation and subjective judgment.

Revenue recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (ASC 606). The key elements of ASC 606 are: 1) identifying a contract with the customer; 2) identifying the performance obligations in the contract; 3) determining the transaction price; 4) allocating the transaction price to the performance obligations in the contract; and 5) recognizing revenue when (or as) each performance obligation is satisfied.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of our contracts have multiple performance obligations, most commonly due to providing additional goods or services along with a system, such as installation, accessories, parts and services. For contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation using the best estimate of the standalone selling price of each distinct good or service being provided to the customer. Our best evidence of standalone selling price is our normal selling pricing and discounting practices for the specific product or service when sold on a standalone basis. Alternatively, when not sold separately, we may determine standalone selling price using an expected cost plus a margin approach.

Our performance obligations are typically satisfied at a point in time, most commonly either on shipment, or customer acceptance. Certain performance obligations, such as maintenance contracts and extended warranty, are recognized over time based on the contractual obligation period. In addition, certain arrangements to provide more customized deliverables may be satisfied over time based on the extent of progress towards completion. For performance obligations recognized over time, revenue is measured by progress toward completion of the performance obligation that reflects the transfer of control. Typically, progress is measured using a cost-to-cost method based on cost incurred to date relative to total estimated costs upon completion as this best depicts the transfer of control to the customer. Application of the cost-to-cost method requires us to make reasonable estimates of the extent of progress toward completion and the total costs we expect to incur. Losses are recorded immediately when we estimate that contracts will ultimately result in a loss. Changes in the estimates could affect the timing of revenue recognition.

We include costs incurred in connection with shipping and handling of products within selling, general and administrative costs. Amounts billed to customers in connection with these costs are included in total revenues. When control of the goods transfers prior to the completion of our obligation to ship the products to our customers, we have elected the practical expedient to account for the shipping services as a fulfillment cost. We expense incremental costs of obtaining a contract as and when incurred if the expected amortization period is one year or less or the amount is immaterial. We exclude from the transaction price all taxes assessed by a governmental authority on revenue-producing transactions that are collected by us from a customer.

We recognize revenue from systems sales upon transfer of control in an amount that reflects the consideration we expect to receive. Transfer of control generally occurs upon shipment, or for certain systems, based upon customer acceptance for a system once installed at a customer facility. For systems that include customer-specific acceptance criteria, we are required to assess when we can demonstrate the acceptance criteria has been met, which generally is upon successful factory acceptance testing or customer acceptance and evidence of installation. For systems that require installation and where system revenue is recognized upon shipment, the standalone selling price of installation is deferred until customer acceptance. Revenue from accessories and parts is generally recognized based on shipment. Service revenue is recognized as the services are performed or ratably over the contractual obligation and includes maintenance contracts, extended warranties, training, application support and on-demand services.

When products are sold through an independent distributor or a strategic distribution partner, we recognize the system sale upon transfer of control which is typically on shipment. When we are responsible for installation, the standalone selling price of installation is deferred until customer acceptance. Our distributors do not have price protection rights or rights of return; however, our products are typically warranted to be free from defect for a period of one year.

We require an advance deposit based on the terms and conditions of contracts with customers for many of our contracts. Typically, revenue is recognized within one year of receiving an advance deposit. We do not have any material payment terms that extend beyond one year. There is minimal variable consideration included in the transaction price of our contracts.

Other revenues are primarily comprised of development arrangements recognized on a cost-plus-fixed-fee basis and licensing arrangements recognized either when the licenses are provided or ratably over the contract term depending on the nature of the arrangement.

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Income taxes

The provision for income taxes includes federal, state, local and foreign taxes. Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences of temporary differences between the financial statement carrying amounts and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the year in which the temporary differences are expected to be recovered or settled. We evaluate the realizability of our deferred tax assets and establish a valuation allowance when it is more likely than not that all or a portion of deferred tax assets will not be realized.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the level of historical taxable income and income tax liability and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries, net of the recorded valuation allowance. In the event that actual results differ from our estimates, or we adjust our estimates in future periods, we may need to adjust or establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.

We record liabilities related to uncertain tax positions in accordance with the guidance that clarifies the accounting for uncertainty in income taxes recognized in our financial statements. This guidance prescribes a minimum recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We include accrued interest and penalties related to unrecognized tax benefits and income tax liabilities, when applicable, in income tax expense.

Goodwill, other intangible assets and other long-lived assets

Goodwill and indefinite-lived intangible assets are not amortized, but are evaluated for impairment on an annual basis, or on an interim basis when events or changes in circumstances indicate that the carrying value may not be recoverable. In assessing the recoverability of goodwill and indefinite-lived intangible assets, we must make assumptions regarding the estimated future cash flows, including forecasted revenue growth and the discount rate to determine the fair value of these assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges against these assets in the reporting period in which the impairment is determined.

We test goodwill for impairment at the reporting unit level, which is the operating segment or one level below an operating segment. We have the option of performing a qualitative assessment to determine whether further impairment testing is necessary before performing the quantitative assessment. If as a result of the qualitative assessment, it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, a quantitative impairment test will be required. Otherwise, no further testing will be required. If a quantitative impairment test is performed, we compare the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. We determine the fair value of reporting units using a weighting of both the market and the income methodologies. Estimating the fair value of the reporting units requires significant judgment by management. If the carrying amount of a reporting unit exceeds the fair value of the reporting unit, an impairment charge is recognized for the amount by which the carrying value amount exceeds the reporting unit’s fair value up to the total amount of goodwill allocated to the reporting unit.

In process research and development, or IPR&D, acquired as part of business combinations under the acquisition method represents ongoing development work associated with enhancements to existing products, as well as the development of next generation products. IPR&D is initially capitalized at fair value as an intangible asset with an indefinite life and assessed for impairment on an annual basis, or when indicators of impairment are identified. When the IPR&D project is complete, it is reclassified as a finite-lived intangible asset and is amortized over its estimated useful life. If an IPR&D project is abandoned before completion or is otherwise determined to be impaired, the value of the asset or the amount of the impairment is charged to the consolidated statements of income and comprehensive income in the period the project is abandoned or impaired.

Business Combinations

We account for business combinations under the acquisition method of accounting. Accordingly, at the date of each acquisition, we measure the fair value of all identifiable assets acquired (including intangible assets), liabilities assumed and any remaining noncontrolling interests and allocate the amounts paid to all items measured. The fair value of identifiable intangible assets acquired is based on valuations that use information and assumptions determined by management and which consider management’s best estimates of inputs and assumptions that a market participant would use. Any excess of fair value of acquired net assets, including identifiable intangible assets over the acquisition consideration, results in a bargain purchase gain.

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RECENT ACCOUNTING PRONOUNCEMENTS

Information regarding recently issued accounting pronouncements may be found in Note 3 to our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and notes to those statements, appearing elsewhere in this report. This report contains forward-looking statements reflecting our current expectations that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. The cautionary statements made in this report should be read as applying to all related forward-looking statements wherever they appear in this report. Our actual results may differ materially from those indicated in the forward-looking statements due to a number of factors, including those discussed in Item 1A, Risk Factors and elsewhere in this report.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, describes the principal factors affecting the results of our operations, financial condition and changes in financial condition, as well as our critical accounting policies and estimates. Our MD&A is organized as follows:

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Non-GAAP Measures. This section provides appropriate disclosures regarding forward looking statements and our use of Non-GAAP financial measures.

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Overview. This section provides a brief discussion of our reportable segments’ results of operations, significant recent developments in our businesses, and challenges and risks that may impact our businesses in the future.

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Results of Operations. This section provides our analysis of the significant line items on our consolidated statements of income and comprehensive income for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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Liquidity and Capital Resources. This section provides an analysis of our liquidity and cash flow and a discussion of our outstanding debt and commitments.

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Critical Accounting Policies and Estimates. This section discusses the accounting estimates that are considered important to our financial condition and results of operations and require us to exercise subjective or complex judgments in their application. All of our significant accounting policies are summarized in Note 2 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K.

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Recent Accounting Pronouncements. This section provides a summary of recent accounting pronouncements and discusses their potential impact on our consolidated financial statements.

Non-GAAP Measures

Although our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), we believe describing revenue and expenses, excluding the effects of foreign currency, acquisitions and divestitures, as well as certain other charges, net, provides meaningful supplemental information regarding our performance. We rely internally on certain measures that are not calculated according to GAAP. These measures are organic revenue, free cash flow, non-GAAP gross profit margin and non-GAAP operating margin. Our management believes that these financial measures provide relevant and useful information that is widely used by equity analysts, investors and competitors in our industry, as well as by our management, in assessing both consolidated and business unit performance. We define the term organic revenue as GAAP revenue excluding the effect of foreign currency translation changes and the effect of acquisitions and divestitures. We define the term non-GAAP gross profit margin as GAAP gross profit margin with certain non-GAAP measures excluded and non-GAAP operating margin as GAAP operating margin with certain non-GAAP measures excluded. These non-GAAP measures exclude costs related to restructuring actions, acquisition and related integration expenses, amortization of acquired intangible assets, costs associated with our global information technology transition initiatives, and other non-operational costs and we believe these are useful measures to evaluate our continuing business.

We define free cash flow as GAAP net cash provided by operating activities less additions to property, plant, and equipment. We believe free cash flow is a useful measure to evaluate our business as it indicates the amount of cash generated after additions to property, plant, and equipment which is available for, among other things, investments in our business, acquisitions, share repurchases, dividends and repayment of debt. We regularly use these non-GAAP financial measures internally to understand, manage, and evaluate our business results and make operating decisions. We also measure our employees and compensate them, in part, based on such non-GAAP measures and use this information for our planning and forecasting activities. These measures may also be useful to investors in evaluating the underlying operating performance of our business. The presentation of these non-GAAP financial measures is not intended to be a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP and may be different from non-GAAP financial measures used by other companies, and therefore, may not be comparable among companies.

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OVERVIEW

We are a developer, manufacturer and distributor of high-performance scientific instruments and analytical and diagnostic solutions that enable our customers to explore life and materials at microscopic, molecular and cellular levels. Our corporate headquarters are located in Billerica, Massachusetts. We maintain major technical and manufacturing centers in Europe, Asia and North America and we have commercial offices located throughout the world. Bruker is organized into four reportable segments: the BSI BioSpin Segment, the BSI CALID Segment, the BSI Nano Segment and the Bruker Energy & Supercon Technologies (BEST) Segment.

Revenue for the year ended December 31, 2022 increased by $112.8 million, or 4.7%, to $2,530.7 million, compared to $2,417.9 million for the comparable period in 2021. Included in revenue was a decrease of approximately $168.0 million from unfavorable foreign exchange rate movements, partially offset by an increase of $34.3 million from acquisitions. Excluding the unfavorable effects of foreign exchange rate movements and our recent acquisitions, our organic revenue, a non-GAAP measure, increased $246.5 million, or 10.2%. Revenue increases were driven by strong demand for our differentiated high-value scientific instruments and life science solutions in addition to pricing benefits compared to the same period in 2021.

Our gross profit margin increased to 51.6% for the year ended December 31, 2022 as compared to 50.0% in the same period in 2021, the result of favorable mix, pricing, volume leverage and net favorable impact of foreign exchange rate movements, partially offset by increased costs in 2022 due to supply chain and logistics inefficiencies and inflation compared to 2021.

The income tax provision for the years ended December 31, 2022 and December 31, 2021 was $116.4 million and $113.0 million, respectively, representing effective tax rates of 28.1% and 28.7%, respectively. The decrease in our effective tax rate was primarily due to the impact of tax planning initiatives partially offset by the resolution of tax controversies.

Diluted earnings per share for the year ended December 31, 2022 was $1.99, an increase of $0.18, compared to $1.81 per share in the same period in 2021. The increase in diluted earnings per share was primarily driven by higher net income and reduced diluted outstanding shares resulting from our share repurchase activity during the year.

The following table presents a reconciliation from net cash provided by operating activities, which is the most directly comparable GAAP operating financial measure, to free cash flow as used by management (in millions):

For the year ended December 31, 2022, our free cash flow was $45.2 million lower than the same period in 2021, primarily from an increase in net income offset by an increase in working capital due to increased inventory build for 2022 orders and supply chain management as well as increased capital expenditures. The BEST reportable segment acquired the land and building previously being leased at its Hanau, Germany location in June 2022 for a total purchase price, inclusive of closing costs, of Euro 34.2 million ($33.8 million).

The following table presents a reconciliation from gross profit and gross profit margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP gross profit and non-GAAP gross profit margin as used by management (dollars in millions):

Our non-GAAP gross profit margin was 52.6% and 51.1% in the years ended December 31, 2022 and 2021, respectively. The increases in our non-GAAP gross profit margins were driven by favorable mix, pricing, volume leverage and net favorable impact of foreign exchange rate movements, partially offset by supply chain and logistics challenges compared to 2021.

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The following table presents a reconciliation from operating income and operating margin, which are the most directly comparable GAAP operating performance measures, to non-GAAP operating income and non-GAAP operating margin as used by management (in millions):

Our non-GAAP operating margin was 20.0% and 19.4% for the years ended December 31, 2022 and 2021, respectively. The increase in our non-GAAP operating margins in 2022 was due to the gross margin expansion, partially offset by increased investments in our research and development capabilities, as compared to 2021.

We can experience quarter-to-quarter fluctuations in our operating results as a result of various factors, some of which are outside our control, such as:

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the impact of the COVID-19 global pandemic, inflation, the threat of recession, financial liquidity, currency volatility or devaluation and geopolitical tensions on our customers, supply chain or manufacturing capabilities;

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potential energy shortages in Europe where we have significant operations and overall higher energy and transportation costs;

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the impact of certain weather-related disruptions;

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the timing of governmental stimulus programs and academic research budgets;

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the time it takes between the date customer orders and deposits are received, systems are shipped and accepted by our customers and full payment is received;

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foreign currency exchange rates;

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changes in raw material, component and logistics costs;

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the time it takes for us to receive critical materials to manufacture our products;

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general economic conditions, including the impact of COVID-19 or other factors on the global economy;

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the time it takes to satisfy local customs requirements and other export/import requirements;

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the time it takes for customers to construct or prepare their facilities for our products;

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the time required to obtain governmental licenses;

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our ability to identify suitable acquisition targets and successfully integrate and manage acquired business; and

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costs related to acquisitions of technology or businesses.

Several of these factors have in the past affected and may continue to affect the amount and timing of revenue recognized on sales of our products and receipt of related payments and will likely continue to do so in the future. Accordingly, our operating results in any particular quarter may not necessarily be an indication of any future quarter’s operating performance. Throughout the COVID-19 pandemic, we have been focused on and continue to focus on three key priorities: the health and safety of our employees, customers and partners; maintaining business continuity and service levels for our customers; and delivering our enabling research and diagnostic products to help fight the pandemic, and to support other essential priorities of our society.

Health and safety of our valued employees, customers and partners

Although we expect that COVID-19 vaccinations and boosters broadly distributed and administered will continue to improve conditions, the COVID-19 pandemic has had and if conditions deteriorate again, could continue to have an adverse effect on the United States and global economies, as well as on aspects of our operations and those of third parties on whom we rely. In response to the COVID-19 pandemic, we have implemented strict social distancing, enhanced cleaning protocols and other preventative measures

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in our major facilities to ensure the health and safety of our valued employees, customers and partners - and we may take further actions, or be required to take further actions, that are in the best interests of our employees, customers and partners. While many of our office colleagues worked remotely at the height of the pandemic and through subsequent surges, we placed enhanced focus on the safety of our service organization and factory employees for whom work from home was not feasible. Where customer sites were accessible and open, our field service organizations operated under social distancing protocols with proper face coverings to ensure the safety of customer sites, when our employees needed to be on site. Consistent with local government and health organization guidelines, many of our facilities have started a gradual return to the office for employees who have been working remotely. Although we are adhering with applicable government and health organization guidelines, an outbreak of COVID-19 at one or more of our facilities could cause a facility shutdown and a reduction in our workforce. As we continue to monitor developments and make appropriate adjustments, as needed, employee and visitor health and safety will remain our paramount concern.

Maintaining business continuity and service levels for our customers

Ensuring our ability to supply our enabling technologies and solutions and maintaining high service levels for our customers is another top priority for Bruker. In late March and during parts of April 2020, several of our manufacturing sites underwent temporary controlled shutdowns or were operating at reduced capacity to implement new safety protocols, comply with local rules, and manage cost and inventory levels. These sites thereafter ramped back up with expanding capacity and productivity levels. However, with any resurgence of the virus or the emergence of additional variants and subvariants, particularly those that are resistant to existing vaccines, we may again need to consider temporary controlled shutdowns or reduced capacity measures. In addition, we are continuing capital investments in production facilities for efficiencies and expansion. We continue to encounter supply chain risks associated with the pandemic, the global economy, including inflation, the threat of recession, financial liquidity, currency volatility or devaluation and geopolitical tensions, and the worldwide shortage of semiconductor chips, components and raw materials, such as copper.

Delivering enabling research and diagnostic products to help fight the pandemic and to support other essential priorities of our society

Bruker is providing critical technologies and solutions to help combat the COVID-19 crisis, most notably our Microbiology and infectious disease diagnostics portfolio and our nuclear magnetic resonance and mass spectrometry systems which are used in critical disease, therapeutic and vaccine research.

The COVID-19 global pandemic has driven volatility and uncertainty in global markets and has in the past affected our operations. We continue to monitor the impact of COVID-19 on our business and our supply chain and respond accordingly. For additional information on the various risks posed by the COVID-19 pandemic, refer to Item 1A. Risk Factors included in this report.

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RESULTS OF OPERATIONS

A discussion regarding our results of operations for the fiscal year ended December 31, 2021 compared to 2020 can be found under Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022, which is available on the SEC’s website at www.sec.gov and our Investor Relations website at https://.ir.bruker.com under the “Financial Info” section.

Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021

Consolidated Results

The following table presents our results for the years ended December 31, 2022 and 2021 (dollars in millions):

Revenue

Revenue increases were driven by strong demand for our differentiated instruments and solutions as well as pricing improvements offset by the negative impact of foreign currency translation. The BSI BioSpin Segment revenue for the year ended December 31, 2022 was $696.7 million, an increase of 0.8% compared to the same period in 2021. The increase was driven by strong growth in the biopharma market. The BSI CALID Segment revenue for the year ended December 31, 2022 was $822.2 million, a slight increase of 0.3% compared to the same period in 2021. The increase in revenues was a direct result of strong demand for our differentiated instruments, partially offset by supply chain constraints and the negative impact of foreign currency translation. The BSI Nano Segment revenue for the year ended December 31, 2022 was $787.0 million, an increase of 12.8% compared to the same period in 2021, driven by strong demand in its industrial and semiconductor metrology markets. The BEST revenue for the year ended December 31, 2022 was $237.1 million, an increase of 5.9% compared to the same period in 2021, driven by strong superconductor demand from major medical magnetic resonance imaging manufacturers.

Geographically for the year ended December 31, 2022, our North America revenue grew 16.9%, Asia Pacific increased by 10.4%, while European revenue declined by 8.8% compared to the same period in 2021.

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Gross Profit

The increase in gross profit was a result of favorable mix, volume leverage and price realization, partially offset by the net unfavorable impact of foreign exchange rate movements and by supply chain, logistics, inefficiencies and inflationary challenges compared to 2021.

Selling, General and Administrative

Our selling, general and administrative expenses for the year ended December 31, 2022 increased to 24.0% of total revenue from 23.2% of total revenue for the comparable period in 2021. The increase as a percentage of revenue was a result of investments in our commercial infrastructure related to Project Accelerate 2.0 initiatives and driven by higher freight, logistics and commission costs.

Research and Development

Our research and development expenses for the year ended December 31, 2022 increased to 9.3% of total revenue from 9.1% of total revenue for the comparable period in 2021. The consistent percentage relates to higher overall revenues in addition to our increased investment in research and development capabilities period over period related to Project Accelerate 2.0 initiatives.

Other Charges, Net

Other charges, net for the year ended December 31, 2022 consisted primarily of $19.3 million of acquisition-related charges related to acquisitions completed in 2022 and 2021, $3.9 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $3.0 million of costs associated with our global IT transformation activities, $2.4 million related to professional fees and $0.3 million related to long-lived asset impairments.

Other charges, net for the year ended December 31, 2021 consisted primarily of $6.1 million of acquisition-related charges related to acquisitions completed in 2021 and 2020, $4.8 million of restructuring costs related to closing facilities and implementing outsourcing and other restructuring initiatives, $2.8 million of costs associated with our global IT transformation activities, $1.1 million related to professional fees and ($0.5) million related to long-lived asset impairments.

Operating Income

The increase in operating income was due to higher gross profit resulting from favorable mix, volume leverage, price realization and net favorable impact of foreign exchange rate movements offset by planned sales and marketing investments, supply chain and logistics challenges and inflationary margin challenges in 2022, as compared to 2021, and investments in research and development capabilities.

Interest and Other Income (Expense), Net

The modest decline in interest and other income (expense), net in the year ended December 31, 2022, as compared to the same period in 2021 was primarily due to lower foreign currency exchange losses driven by the strengthening of the U.S. Dollars against other currencies as well as fair value gains from strategic investments.

Income Tax Provision

The effective tax rates for years ended 2022 and 2021 were 28.1% and 28.7%, respectively. The decrease in our effective tax rate for the year ended December 31, 2022, compared to 2021, was primarily due to the impact of tax planning initiatives partially offset by the resolution of tax controversies.

Equity in Income of Unconsolidated Investees, net of tax

Equity in income of unconsolidated investees, net of tax represents the Company's proportionate share of the earnings or losses as reported by equity-method investees.

Net Income Attributable to Noncontrolling Interests and Redeemable Noncontrolling Interests

The net income attributable to noncontrolling interests represented the minority shareholders’ proportionate share of the net income recorded by our majority-owned subsidiaries.

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Net Income Attributable to Bruker Corporation

The increase in net income and earnings per diluted share was primarily driven by the increase in revenue, gross profit and operating profit as a result of strengthened demand and recovery in our business and end markets.

Segment Results

Revenue

The following table presents revenue, change in revenue, and revenue growth by reportable segment for the years ended December 31, 2022 and 2021 (dollars in millions):

(a)
Represents product and service revenue between reportable segments.

The increase in revenue for the BSI BioSpin segment was due to strong growth in its service and support revenues, as well as strong growth in pre-clinical imaging and notable contribution from our biopharma process analytical technology, offset by unfavorable currency impact. BSI CALID segment revenue increased with continued growth in the life science mass spectrometry business and notable strength in proteomics applications and the timsTOF portfolio offset by unfavorable currency impact. The increase in revenue for the BSI Nano Segment was driven by strong demand in industrial markets and semiconductor customers. The increase in revenue for the BEST Segment resulted from strong superconductor demand by our magnetic resonance imaging original equipment manufacturer customers.

Operating Income

The following table presents operating income and operating margins on revenue by reportable segment for the years ended December 31, 2022 and 2021 (dollars in millions):