Good afternoon, and welcome to the Bruker First Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. Please also note that this event is being recorded. I would now like to turn the conference over to Ms. Miroslava Minkova. Please go ahead.

Good afternoon. I would like to welcome, everyone, to Bruker's first quarter 2017 earnings conference call. My name is Miroslava Minkova, Head of Investor Relations for Bruker. Joining me on today's call are Frank Laukien, our President and CEO; and Tony Mattacchione, Bruker's Senior Vice President and Chief Financial Officer. In addition to the earnings release we issued earlier today, we'll be referencing a slide presentation as part of today's conference call. The PDF of this presentation can be downloaded by clicking on the earnings release hyperlink on Bruker's Investor Relations website. During today's call, we'll be highlighting non-GAAP financial information. A reconciliation of our non-GAAP to GAAP financial measures are included in our earnings release, and are posted on our website at ir.bruker.com. Before we begin, I would like to reference Bruker's Safe Harbor statement, which I show on slide two. During the course of this conference call, we'll be making forward-looking statements regarding future events or financial performance of the company that involve risks and uncertainties. The company's actual results may differ materially from these projections described in such statements. Factors that might cause such differences include, but are not limited to, those discussed in today's earnings release and in our Form 10-K, as well as other subsequent SEC filings. Also, note that the following information is related to current business conditions and to our outlook as of today, May 3, 2017. Consistent with our prior practice, we do not intend to update our projections based on new information, future events or other reasons prior to the release of our second quarter 2017 financial results in August 2017. We'll begin today's call with Frank providing a business summary. Tony will then cover our financials for the first quarter of 2017 in more detail. Now, I would like to turn the call over to Bruker's CEO, Frank Laukien.

Thanks, Miroslava. Good afternoon, everyone, and thank you for joining us on the call today. I will begin today's earnings presentation on slide four. Bruker is off to a solid start in 2017 as our first quarter revenues and operating income exceeded our expectations. Bruker's reported revenues increased 2.5% year-over-year, while on an organic basis, our revenues were still down slightly year-over-year as we had predicted. We, again, improved our gross and operating margins year-over-year. Keep in mind that Q1 2016 was a challenging comparison, which included revenues from a high-margin 1 gigahertz NMR system, a major Bruker detection contract, and an unusually low tax rate. In Q1 of 2017, our European revenues remained soft as expected, but European bookings continued to recover as we, again, saw an increase in orders year-over-year, the second quarter in a row of positive order growth in Europe. We also saw a continued strength in China further stabilization in our microbiology orders and some positive trends in certain areas of our industrial, applied, and semiconductor metrology markets. We are encouraged with the continued stabilization we see in our business, and we remain confident in our ability to achieve our 2017 organic revenue growth and earnings objectives. Looking more closely at the quarter; we reported revenues of $385 million in Q1 of 2017, an increase of 2.5% year-over-year. Our late 2016 and January 2017 acquisitions contributed about 5.3% to revenue growth, while foreign currency translation lowered revenues by 2%. On an organic basis, our Q1 2017 revenue was down 0.8% year-over-year, and reflected the weak European orders in the first nine months of 2016, as well as last year's revenue recognition of our first shielded 1 gigahertz NMR and high Bruker detection contract revenue in the Middle East in Q1 of 2016. Our Q1 2017…

Thank you, Frank, and good evening. I will now provide some additional details on our financial performance in Q1 2017, starting on slide 11. Financially, Bruker had a solid start to the year, and we are on track to meet our full year commitment. Q1 revenue was up 2.5% year-over-year. On a non-GAAP basis, our operating margin of 12.8% expanded slightly versus the prior year, despite a very challenging comparison to Q1 2016, which included the high-margin 1 GHz NMR system. GAAP EPS of $0.13 was down $0.01 compared to $0.14 in Q1 2016. On a non-GAAP basis, our EPS came in at $0.19 per share compared to $0.21 per share in Q1 2016. Free cash flow was positive at $21.1 million versus a negative use of cash flow of $22 million in the first quarter of 2016. Net cash was $79.7 million at March 31, 2017, which was a year-over-year decline caused by cash deployed for recent acquisitions, the 2016 share buybacks, and our $0.04 quarterly dividend. Our working capital ratio was up modestly year-over-year to $0.37 per dollar of revenue in the first quarter, largely due to an increase in the BEST inventory for Q2 shipments. Turning to slide 12, I show the year-over-year revenue bridge for Q1 2017. On a reported basis, our revenue increased 2.5% versus Q1 2016. Our recent acquisitions, including B-OST, Hysitron and InVivo all contributed about $20 million in total, or approximately 5.3% to revenue growth. Changes in foreign currency translation rates negatively affected revenues by about $7 million or about 2%. On an organic basis, our revenue was down 0.8% year-over-year against the challenging prior year comparison that included the 1 GHz NMR magnet, and revenue from a large detection contract. Our modest year-over-year organic revenue decline reflected the soft European academic…

Thank you, Tony. Andrea, we are ready to open up the call to questions. In the interest of accommodating more of our analysts, please limit your questions to one and a follow-up.

Thank you. We will now begin the question-and-answer session. Our first question comes from Dan Arias of Citi. Please, go ahead.

Hi. Afternoon, guys. Thank you. Frank, any additional commentary on the European markets, maybe academically, if we just look by country or compare Western Europe to Eastern Europe, what is the look there, if you could just parse out the European commentary a little bit?

Yes, Dan, we looked into that as well. I mean as we said, European orders, again, second quarter in a row, they were up year-over-year, which is good. Within Europe, not that much color that's really meaningful. I would maybe highlight that Germany was pretty good, and that France had a weak start, perhaps related to their elections or not, I'm not sure. But those are maybe the two observations that I would offer.

Okay. And then maybe on the industrial business, if we just want to put a finer point on your commentary on improvement there. Are you able to say what percentage of the business, what percentage of sales within that segment or end market you saw some lost (28:30) signs of life in?

No. We don't go to that level of granularity, but high level, last quarter, we said semiconductor looked good and we continue to say that semiconductor metrology look good. Last quarter, we weren't so sure. Now, we see selected area that our industrial and applied markets have seemed to have an uptick, and we cited some examples of that. The more global numbers which you probably know already, is that about 17% of our revenue, is industrial including semiconductor metrology. And so I'd say there's selective positive signs in our industrial markets, so we're incrementally more positive than we were a quarter ago, but we're also not yet saying, hey, all industrial is improving, that's not the case.

Okay. Thanks very much.

Our next question comes from Ross Muken of Evercore. Please, go ahead.

Hi. Good afternoon, guys. Could you just talk about, you obviously were quite busy on the acquisition front. You've been sort of integrating a number of them. Can you talk about how the organization's kind of responded to that level of activity, and how some of the acquired businesses have performed? Looks like the revenue results there were pretty good.

Yes. Ross, actually quite well. I mean quite honestly, we spread the work around a little bit, so the biggest acquisition and that integration will be a multiyear process, and it's a bit of a fixer upper, is that Bruker-OST acquisition in Carteret, New Jersey, and that had a good start. Well, I wouldn't say a good start, but better-than-expected start. They were busy, they had good capacity utilization, there's a lot of work to be done there over the next two years or three years to improve the margins and efficiency and productivity of that business, but it's a welcome opportunity, and that's why we acquired it. So we're very pleased with that. The Bruker NANO Group is – has a relatively smooth integration of the Hysitron business, which was only acquired at the end of January, so it only contributed about two months in the first quarter, but that's going very well, and that of course, we're not integrating it tightly, but mostly into the marketing, sales and service approach. And I think that's going really well, and they're on track. And last but not least, the consumables, I mean there are some smaller ones that were more technology wise. But the consumables business InVivo in Berlin, that's part of our Daltonics business now. That has done even somewhat better-than-expected in the first quarter, nothing that's needle-moving. But – so overall, we are really quite pleased with all the acquisitions and different teams at Bruker are focusing now on the integration, and it's really going well.

And maybe can you talk about just the pricing environment in general? Obviously, pricing was quite a nice tailwind for you last year. How was that sort of price capture trying to start the year, particularly in some of the markets where orders have been a little bit choppy?

Well, I mean, the larger price increase from 2015, that effective now, gradually declining relatively speaking in 2017. It's now embedded, but it also was in 2016. We're still probably getting a little bit of a benefit from that in early 2017, but that's not a major driver in 2017 anymore. We, of course, now do some continuous industry standard annual no-headlines type of price increases like everyone else and we do that throughout our portfolio. So that has an ongoing incremental effect. And I think, yeah, I hope that answered your question.

Yeah. No, that's perfect. Thanks, Frank.

Yeah, yeah.

And congrats on the improving trends.

Thanks, Ross.

Our next question comes from Brandon Couillard of Jefferies. Please go ahead.

Thanks. Good afternoon.

Hi.

Frank, any chance you could split out the growth from service and aftermarket in the first quarter relative to instruments? And could you talk about some of the initiatives you're working on to improve the attach rates there and the gross margin profile of those revenues?

Okay. So aftermarket, I – without becoming too quantitative, the growth in aftermarket was slightly higher than the overall – well, actually, let me – it was slightly higher than our organic growth. It was comparable for our growth overall, and was in the mid-single digits. So our – so yes, it was high – it was higher than our organic systems growth. It was comparable to our constant currency growth, which is why I stumbled here for a moment. It was – it grew in the mid-single digits. A lot of efforts, it had particularly nice growth in the Bruker BIOSPIN business where that had been an opportunity that'd be – that still has some low-hanging fruit, because that was under-managed somewhat in the past, and so in the BIOSPIN Group, for instance, that grew in the high-single digits. And we believe we have several more years of continued improvements through – throughout the company in generating more aftermarket service and services business. In addition, of course, we're now starting the next trend of generating more assay consumables and software business, in part, through some of the acquisitions that we're generating and that will still be some time before they really start to contribute, but that will be the next level of drivers to really substantially increase aftermarket business, including software and consumables over a multiyear period.

And, Brandon, just to add a quick comment to that. The aftermarkets that Frank refers to is consumables aftermarket service, it's altogether, including service.

Correct.

Okay. Okay, that's helpful. And then, two-part question for you, Tony. Any chance you could split out the revenue contribution from the OST acquisition within the BEST unit? And then secondly, could you give us the organic OpEx growth in the quarter, i.e., stripping out with the acquisitions and perhaps, currency contributed to the operating expense line?

Yeah. I'm not sure I'll give you the exact numbers. But obviously, we absorbed some dilutive businesses, predominantly OST in the margin expansion that we delivered, both on the gross profit and the operating profit line. OST is the biggest piece of the acquired businesses that we have in the numbers now. So order of magnitude, that's – most of it is the OST business and the acquisitions.

Thank you.

Our next question comes from Steve...

Let me just clarify one thing, we're just comparing notes here a little bit. It is the largest of our acquired units. It is not the vast majority of our acquired revenue. So Hysitron and InVivo are also somewhat meaningful, but OST is larger than either of those.

Yeah, that's it, yeah. That's right.

Our next question comes from Steve Willoughby of Cleveland Research. Please go ahead.

Hi, good evening. And thanks for taking my questions. Frank, I was just wondering if you could comment a little bit about the new NEO NMR system as it relates to how long you expect this to kind of become – replace your older system, the potential revenue and margin impact from this new system, and any initial feedback you've received from customers that you might be able to share?

The initial feedback from customers is very positive to perhaps enthusiastic because it is really a – in NMR it's a significant innovation, it's really a brand new architecture and concept. So I think there was probably – certainly, at this research conference, I'd say there was excitement about the NEO. It's shipping, I would expect that most orders going forward for research system and higher field systems would be NEOs. Of course, we also still have some other routine systems that are not NEOs. The NEO is designed for reducing the overall costs for us in COGS from manufacturing costs as well as installation and service costs with more built-in intelligence. It's not a – I think it also further improves our competitive position, which is already pretty good. So we are very pleased with it. And it was one of these introductions where we have done extensive internal and customer beta testing to where we absolutely hit the ground running, and it's going to play – make a difference very much this year already.

Okay. And then just one follow-up question to an earlier question regarding the contribution from M&A and the recent deals you've done. Given you've done a number of deals in the latter part of 2016 and early 2017, just any feel for what your desire and pipeline looks like for future M&A at this point following the number of deals you've done recently?

Yeah. It was a bit of a confluence of events. We had never planned it that way, but a lot of these deals had been discussed for months and quarters and then they kind of came together in late 2016, and some closed in early 2017. I mean typically, we tend to do some other – some smaller – I would expect the pace of and the number of deals to be lower this year than it has been last year, including some of these early 2017 closings. I expect there to be some strategically-oriented tuck-in M&A, so you'll – hard to say, but there might be one or two or three smaller deals still this year. But they'll be very, very strategically focused. And if they come to close, they will be very, very good fits.

Okay. Thanks very much.

You're welcome.

Our next question comes from Steve Beuchaw of Morgan Stanley. Please go ahead. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Hi, good afternoon. Thanks for taking the questions. So I caught in your prepared remarks, Tony, that you have not – you've taken an appropriately conservative view, and not embedded any expectation for a contribution from an NIH-budget release, or frankly, the presence of a U.S. federal budget and the outlook for the year. It sort of begs the question, well, let's isolate that part of the business. And based on your past experience, I mean, one, what do you think the U.S. business could do over the balance of the year given that we now have more visibility? And two, how much of that impact do you think can we see in 2017 versus 2018 given the transition time between orders and shipments?

What I would say is the U.S. business is down on a revenue basis, and we started off soft on orders. We haven't put our finger completely on it, but we feel a lot of that is due to some of the uncertainty around where this is all going to land. And like you mentioned, we're not counting on anything to contribute going forward in this regard. So – yeah, so like I just mentioned, we started the year flat – down on orders obviously. Now, whether the $6 billion (sic) [$2 billion] increase helps us or not, I think it's likely in 2018 with our cycle, even if we got orders today with this new funding, it would likely not affect us this year and you might recall last year there was a $6 billion (sic) [$2 billion] increase as well, which we didn't see a lot of that, not a lot of people saw a lot of that. So really we're not counting on much lift in the U.S. from that recent event.

Keep in mind, it's not the orders to shipment with may be just two quarters apart, but by the time the good news at which surprised many of us on Monday morning – we'll take it, but it was a bit of a surprise. Until that turns into NIH institute directors, giving more funding in grant – in competitive grants to universities, that may well be six to 12 months and only then can people even place orders. So it's actually what happens before an order gets placed, before a grant gets funded in an extramural grant that is partially NIH-funded. There could be some incremental pickup in Q4, maybe from some direct NIH orders or so which is pretty small for us, so it's incrementally positive but mostly, I think it's – mostly that starts to be a pattern rather than the somewhat erratic, unpredictable, is there going to be a 6% increase or is there a 19% cut? I think that uncertainty is not good for spending, whereas if a pattern emerges that this or some small increase can be expected from some bipartisan consensus, in most years in the future, that would be very healthy. In short, it's mostly a 2018 story for us, and it's too early to tell, but certainly, very encouraging. Steve C. Beuchaw - Morgan Stanley & Co. LLC: ... there (42:52). One other topic I want to hit before I turn it back over, and it's the NMR Cryo debate. I don't know if there's anything new here scientifically or in terms of product features. But now that FEI is owned by Thermo, there's a lot of enthusiasm there about what they can do, with the consolidated effort in structural biology. It would be helpful to hear what you're seeing out in the field given that combination and how you're thinking about the trajectory for the business given that evolution. Thanks a bunch.

Yes. I mean, the Cryo-TEM capabilities and structural biologies that FEI has developed together with customers are very – are impressive and they are clearly becoming a third leg of beyond crystallography and beyond NMR, of tools that people want to have in structural biology. Clearly, most of them don't have that yet, so there's sort of they already have high field NMR, they already have access to X-ray crystallography, so there's a lot of buying for that right now. That's not a surprise to us that Cryo-TEM funding wave to some extent providing wallet competition for high field NMR that's been going on for at least a couple of years. We expect that to continue for a while. Nonetheless, we're pretty optimistic that there are things that Cryo-TEM and crystallography cannot do, which is the all-important dynamic information that is so important functionally and that's something where NMR is quite unique and certainly excels, which is why we think with some delay after the present Cryo-TEM wave, we actually expect there to be also a, perhaps, more modest pickup in ultra-high field gigahertz NMR for structural biology with dynamics and for intrinsically disorder proteins that aren't accessible to Cryo-TEM at all. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Great color.

And, Steve, sorry, I just wanted to jump in. I just wanted to correct the funding that I quoted. Obviously, it's a $2 billion increase, which is a 6% increase. I think I said $6 billion increase, so I just wanted to get that record straight. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Yeah. You did. I was afraid that they were going to keep you on the hook to fill in the gap there.

No, that's why I felt the need to correct it. Steve C. Beuchaw - Morgan Stanley & Co. LLC: Got it. Thanks, again.

Our next question comes from Amanda Murphy of William Blair. Please go ahead. Aurko Joshi - William Blair & Co. LLC: Hi. This is Aurko in for Amanda. Just a quick one for me. Can you provide any color on the ultra-high field backlog, and then whether there are still expectations for one shipment this year, or rather installation?

Yeah. Nothing has changed there. So we are – as part of our expectations, we expect to have in revenue of the 1-gigahertz systems this year. If that happens, that would be in Q4, not earlier than that. And of course, due to its complexity and timing, that could also – that could shift into 2018, which, quite honestly, isn't a very big deal. I mean there's plenty of other revenue drivers and so I don't think it would really have a big impact on guidance. So, yes, one of them is planned for Q4, but there is – of course, there is always a potential that it moves into next year given the technical complexity. Aurko Joshi - William Blair & Co. LLC: Got it. And then a second one for me is on the AVANCE console. I guess, what is the size of that installed base or replacement cycle that you're anticipating?

There, I don't have an exact number right now, but there are thousands of these systems out there. Of course, there's also consoles from our former competitor Varian, Inc. and Agilent, and some of them have been upgrading to other vendors' electronics already but this is probably a further impetus as even some of their existing and still working consoles sold by other vendors are now technically increasingly obsolete. And so, this probably gives additional impetus for them to look for upgrade budgets. So that was all somewhat more qualitative. I don't think we're prepared to give a quantitative number specifically for the NEO upgrades, but it further supports our thesis that NMR, for us, will be a mid-single-digit CAGR business. And this is one of the contributors to that and it will be for – really for the next two or three years, for sure. Aurko Joshi - William Blair & Co. LLC: Great. Thanks.

Our next question comes from Jack Meehan of Barclays. Please go ahead.

Hi, thanks. Good afternoon. I want to ask about the BioSpin growth. I was impressed, low-single-digit on tough comp. Was there anything worth flagging on the NMR side just despite the weakness in preclinical imaging?

No, it's just generally healthy. And not – the nice thing is it's not so dependent on the signature 1-gigahertz deals. And I really wouldn't highlight anything in particular, maybe – or at least no one systems deal in particular because not one of them made the difference. NMR, not unlike some other parts of our business, have seen continued strength in Chinese academic spending. And since we earlier talked about selected highlights in industrial research, we have analyzed the data and, over the last 12 months, the NMR orders for industrial research by NMR have clearly picked up from the prior 12 months period. So maybe those two market and geographic trends rather than single customers, all bode well for a healthy NMR business independent of price increases and independent of Europe or any other, or a particular 1-gigahertz customers. It's a pretty healthy market right now.

Good, thanks. And just also wanted to follow-up on the Daltonics commentary with MALDI. Got the order book commentary, was the revenue decline more of a function of the tough comp? And maybe could you just comment on what the expectation is for 2017 there? Thanks.

Yes, it was – correct, it was very much a function of the tough comp. Daltonics actually had a pretty – really quite good Q1 of 2016 as well. That's – and only later quarters last year did the weakness in European academic orders really hit them. And then an even bigger effect actually was the one large Detection contract, which we revenued in Q1 2016 in the Middle East, that was sizable. And so it's those two factors. So to your last part of your question, really, we're pretty optimistic that Daltonics will develop well this year. And to our delight, they really – their margin improvement efforts showed very good traction in Q1 already.

Great. Thank you.

Our next question comes from Doug Schenkel of Cowen. Please go ahead. Chris Lin - Cowen & Co. LLC: This is Chris Lin on for Doug today. Thanks for taking my question. So, I believe, if you exclude the 1-gigahertz NMR headwind from the year-over-year comparison, organic growth this quarter would have approximated 1%. Is that about right? And just relatedly, your full year guidance is for 1%, 2% organic growth. The growth comparisons become much more favorable over the next several quarters. And if our math on a 1-gigahertz order is correct, then it seems like you're embedding only a slight growth improvement over the balance of this year. So is this largely a function of being a bit conservative since it is still early in the year? Or are there other incremental headwinds that we should be thinking of?

Yeah. I mean, I would just go back to our prepared comments there. So, you're right, if you exclude the 1-gigahertz magnet in Q1, we would've grown organically in Q1. But like I said, based upon our guidance and what we reported in Q1, we're expecting on average, 2% to 3% growth for the remainder of the year. That won't all – I wouldn't expect that in every quarter but, on average, it's what will get us to our guidance that we feel confident with. We don't feel like there's a tremendous amount of upside or downside to that, we're reiterating our guidance. And don't forget as well, we called out a large Detection order in Q1 of last year as well that affected the comp. Chris Lin - Cowen & Co. LLC: Got it. And then maybe just, can you just provide a bit more detail on the China strength, which end markets were particularly strong? And then just how sustainable was that growth right there?

China is kind of on fire for us. I mean, we've had a couple of 20%-plus quarters, and I was there in the beginning of the year, and we're getting higher business levels in both academic and industrial, the 13th five-year plan is two years in and a lot of the priorities there are – a lot of its nationalistic type of priorities where some of the funding that the eastern part of the country got in terms of building capabilities is now being focused on the western part of the country and the northern part of the country. So there's a lot of focus on basic research in those underdeveloped areas, and we're the beneficiary of that type of stuff. So like I said, both academic and industrial is up. Most of our businesses have seen increases in China, and I think it's the 13th, the second – the 13th five-year plan is one of the big factors fueling that. Chris Lin - Cowen & Co. LLC: Got it. Thanks so much for taking my questions.

Our next question comes from Isaac Ro of Goldman Sachs. Please go ahead. Isaac Ro - Goldman Sachs & Co.: Good afternoon, guys. Just one on NIH since it's been a big topic. I think maybe there's been a lot of focus on the headline use there or the $2 billion, which obviously is important, but if you look within that, it does seem like there's also some changes going on with regards to how the dollars get allocated. And I'm curious if you could remind us, typically when an NIH grant is received, how does those dollars find their way to an order for one of your instruments, especially at the high-end, because if I have it right, there's some new conversation out of NIH just in the last day or so where they might limit – they might cap the grant support for any given recipient. And if that were the case, just wondering the extent to which people sometimes pool their grant dollars or need larger grant awards in R01s, would that be a factor to watch when it comes to orders in that specific part of your customer base?

That's been an issue for NMR and Cryo-TEM and other big ticket items for a while and that there is and always has been a limit to the maximum grant size. So these larger systems are almost never purchased on a single grant, but almost always stitched together with some state, some university, some endowment, some foundation, some industrial. And NIH grant is very rare that really big-ticket items, let's say, above $2 million or so, are funded on a single grant application. That is really, unless there are some fine-print I haven't seen yet, that's really been the case for a very long time, for a decade or more. And people have adjusted to that deans and faculties and universities, have adjusted to that and they've stitched it together. Isaac Ro - Goldman Sachs & Co.: Okay, got it. Yeah. No, I think the R01 grant math, it's evolving. Again, there's no specifics yet, but I think they are talking about capping it like 31 points or something like that. The other question I had was on margins, Tony, which is, if I look at operating leverage, continues to improve. And I'm wondering if for some reason you guys are at the lower end or maybe a little light of your organic growth goals. Can you guys still hit your margin expansion targets this year? It seems like there's enough operating changes under the hood that you should be able to defend margins even without much help on top-line. I just want to clarify the operational gearing in the model this year.

No, no, I think you had that right. I mean, we had good expansion of gross profit margins of 90 basis points. And there was multiple factors, there wasn't any one thing, there's multiple things that fueled that, BioSpin price, the continual operational efficiencies that we're getting in that business, the restructurings we've done in Daltonics and AXS, the facility consolidations. We do have the – to offset the – funding the dilution with the acquired businesses, so that – we'll manage through that. But we've done a pretty good job of delivering on our commitments on profitability. And we feel that we can modulate the spending based upon the business levels that we see to be able to deliver that. So this quarter, there was some timing with some investments in R&D and sales and marketing that will smooth out over the course of the year. So I think comfortably, we'll – we're in a position to deliver what we put out in our guidance to your point, with the organic growth that we put out as well, which is approaching market base and not there yet this year. Isaac Ro - Goldman Sachs & Co.: Got it. Thank you, guys.

Our next question comes from Tim Evans of Wells Fargo Securities. Please go ahead.

Thanks. One more on China, really quickly. I think APAC in 2016 was 28% of your revenue, how much of that is China? In other words, how big is your China business now?

China is greater than 10%. It's in the low-teens. I don't have the exact figure right now, maybe 11% or 12%.

Okay. Close enough. And, Frank, could you elaborate a little bit on the preclinical business? I think that was, if my memory serves me correctly, fairly weak all through 2016. Do you see an infection point at some point in 2017? And then also, like how big is that business now, roughly speaking?

Yeah. I mean, just generally, that business is less than $100 million. It has a couple of weak years. The initial setup this year isn't strong either. I think the big difference is once we really have the Oncovision acquisition integrated and have all the PET, SPECT, CT and PET NMR products that we've been developing and continue to develop on our roadmap. I think that will make a positive contribution. But that's a little bit more longer-term that maybe – that for the first half of – after two weaker years, the first half of that business this year is not strong, and it's relatively flat. So it's a little bit of a disappointment. But we've also taken the cost actions in that business already. And so it has its own cycles that are really not related to anything else, and some of that is also simply the way our own product roadmap, particularly in nuclear medicine, PET and SPECT is evolving to where, I think, we may see an acceleration in orders in the second half of the year. Actually, that's what we're expecting, but until that business is really back in growth mode, probably will be 2018. Luckily, it's in other sites to where the well good performance in aftermarket and NMR and EPR and then the applied and industrial magnetic resonance product lines and B Bio still overall make up for that, and the B Bio group is doing very well despite that one weaker division.

And the struggles with that business has been more market related, or is it kind of a competitive issue? What's just your high level take away on kind of why that struggle been a long for a couple of years now?

A mix of the two. I think there are some new smaller competitors that are sometimes, taking that much business, but have left a little bit of price erosion. And there's been some major change over in the preclinical head SPECT business with the former market leader, Siemens, a few years exiting that business and some other exits of other players. There's almost a complete turnover, who the competitors are, and that's still sort of sorting itself out.

Okay. Thank you.

Our next question comes from Tycho Peterson of JPMorgan. Please go ahead.

Hey, thanks. Maybe, one for Tony, just kind of circling back on some of the margin questions. Can you – and maybe give us a sense this quarter, you have gross margin expansion, how much of that was an NMR and pricing versus some of the efficiencies and as we think about some of the other things you hit on the Q&A between price and aftermarket services, how should we think about gross margin trends for the course of the year?

So in the quarter, in terms of the expansion, it was – like I said it wasn't any one thing, it was a collection of things. BioSpin pricing, the efficiencies there was a big piece of it, but another significant contributor was the restructuring actions. So those are the major two drivers. Going forward, the model, obviously, comes on volume, so the organic increase that's embedded in the second half of the year will get the benefits in the margin from that, but stay focused on continuous process improvements that we have in place, and we'll be facing some difficult comparison like some of these other things in the BioSpin side, and roll off. But we believe that the margins – most of the margin, operating profit margin contributions will come from the gross margin improvements.

Maybe I'll add to that, Tycho. The really – the driver that's getting bigger and bigger beyond taking out costs, restructuring, efficiencies as you call them and resumption of growth at some of our markets have less headwinds, or strengthened. The bigger and bigger driver will be the changeover in our portfolio. With our growth initiatives and strategic growth initiatives that we've been investing in, they really fundamentally, have higher growth characteristics and margin characteristics. And as over time they become a bigger part of our business, over time, maybe not so much yet in 2017 but certainly in the outer years, they will become one of the bigger drivers of our further gross margin and then therefore, operating margin improvement. So, it's portfolio and cost and growth not just cost and growth.

And I guess thinking about growth drivers for Nano, I know you're still somewhat reluctant to call for an inflection in semi, but AXS has gotten, better metrology has gotten better. Maybe just what's baked into guidance for semi improvement in the back half of the year?

Semi, we're pretty positive about. All of – there's other industrial where there's selected strength in other areas that are not getting worse at least, so – but the rest of industrial is still a little bit mixed with some positive signs. Semi is pretty positive in both orders and revenues and obviously, baked into our forecast, but we were pleased with the orders in Q1 and with revenue. So semi, I think, is going to be – it was a good year last year, and I think it's going to be an incrementally even better year this year. So the semi metrology trends are healthy for us, even though the big volume or capacity buys for 7 nanometers, of course, are a few years away, but already now with 10 nanometers and memory and so on and some technology buys early evaluation of 7-nanometer, and in some cases even 5-nanometer, although that's more research-based. We're doing quite well, and we're setting ourselves up for doing really well, once we get into capacity buys in a couple of years.

And Tycho, just keep in mind that semi growth is more back half loaded.

Understood. Thanks.

Our next question comes from Derik de Bruin of Bank of America Merrill Lynch. Please go ahead.

Hi, great. Thanks for getting me in. Two questions, one's fast, and one's a little bit longer. The short one, unless I missed it, could you – Tony, could you give me the FX impact for the BSI and the BEST segments, how was it split?

It was mostly BSI, and it was very small. It was – it didn't move the numbers at all in terms of – sorry, Derik, are you talking about the...?

On the top line, what was the FX headwind, what was – to revenues, what was the FX headwind to revenues?

Minus 2%.

Yeah. Minus 2%.

But, is it split evenly between both segments?

It's mostly BSI.

Okay. All right. Great. And then, just one other longer question. So whenever I see the phrase upgrade cycle, I'm – it makes me want to ask three questions, which is, what is the size of your installed base, how much of that installed base is in the middle of an upgrade? And then what's an ASP? Just trying to put a revenue number around it.

For the NEO, for the NMR?

For the NEO. Yeah. For NMR and NEO.

I don't have an exact number right now, but it is several thousand consoles, it's maybe 2,500 consoles to 3,000 consoles. I don't have an exact number. Actually, the number is probably somewhat larger, but of course, we'd also have to look at those that generally are seven or more years old.

Yeah.

Someone who bought one in the last two or three years, still have a pretty modern system, and of course, continued support, so they may not be able to upgrade yet. And ASP for these type of console upgrades where people keep the magnet, very often, they buy some additional probes with it. It can be anywhere from 200K to 500K, depending on what's included in the package. Let's say an ASP maybe, let's say 300K is a number in the ballpark, and I think that's probably as much detail as we can give you at this point, but maybe that helps you.

Yeah. No, that's great. That puts some reference around it. Thanks appreciate it.

The upgrade cycle in that, this is not – I don't know, it's not like Illumina bringing our their latest sequencers, and everybody upgrades. This is the...

Right.

...NMR world, that's spread over multiple years. So – but honestly, it's spread over five years, but of course, it tends to be, maybe, a little bit more frontloaded in the next two years or three years.

Right. But that's what's giving you confidence in the overall mid-single digit growth rate, CAGR for that NMR business?

Yeah, that, and ultra-high field picking up our ultra-high field's backlog that we have, once it's technically feasible to build these type of 1.2 gigahertz magnets, and the nice growth in aftermarket and the nice growth in applied industrial and clinical research market, so there's – plus pharma growth for NMR. Actually, NMR – it has a lot of – it's nice that NMR or the B Bio story, that's not only the – it's not a one-trick pony, thank goodness. But this is another nice contributor.

Great. Thank you very much.

Our next question comes from Dan Leonard of Deutsche Bank. Please go ahead.

Thank you. I was hoping you could size the kit opportunity for the Biotyper. What the ramp curve could look like, and any timing you could offer around additional menu expansion plans?

Okay. Starting with the last one, probably further expansion. The American Society for Microbiology Meeting is coming up same week and pretty much before ASMS in New Orleans. Of course, with FDA clearance, that always tends to be two years or three years later than IVD-CE, so there is always some differences in what we offer in Europe already and what we then end up offering in the U.S. or when we get FDA clearance. So right now, it's primarily a European story. Keep in mind that of the roughly 2,500 MALDI Biotypers that are out there, roughly half of them are in Europe, because that's where we started originally with the business. So with that microbiology business installed base, it's unusually large in Europe, with actually, right now still slightly more than half of it in Europe. The ramp up will – on these kits will not be needle moving for our financials this year. These are modest numbers. If that ramps up, we – maybe we get $1 million or $2 million in this type of business, with these type of numbers. But over time, obviously, that can build up, and initially, it will take some missionary work to convince the labs that these fairly cost-effective solutions that they get from us without needing a culture, have a clinical value and have a good clinical workflow. And I think price, performance will play a significant role, particularly in the more cost-sensitive European clinical microbiology market. We think all these drivers will be very positive over multiple years, but it's not going to be needle moving for us this year...

Okay. Thank you.

Our next question comes from Puneet Souda of Leerink Partners. Please go ahead.

Yeah, hi, Frank. Thanks for taking my question. So as we head into ASMS here in just a few weeks, I just wanted to see if there's anything in Daltonics, which you would highlight in the mass spec business, either on the top end and going into the pharma or anything else that's worth noting there? And then just briefly on the NMR, I mean the ultra-high field, 1 gigahertz, plus 1.2 gigahertz and 1.1 gigahertz. What appears to us, most of those orders are outside U.S. with the NIH funding in place now, does it give you any more sense compared to before, that the pendulum could potentially shift to maybe a one order in the U.S. or more? Any color on that would be helpful? Thank you, and thanks for taking the questions.

Sure, Puneet. Yeah, as we discussed, we were at ENC and we had a little bit of a discussion starting with the second question. I mean I find the additional $2 billion and again 6% increase in NIH budget, and the fact that this was apparently bipartisan, and it's about the only thing we make a bipartisan buy-in from – buy-in on. I find that pretty encouraging, but I probably pay to be an optimist, so I think that's good. I think that should give some university consortia or some deans of departments or schools of science or medical schools additional confidence. And they were all anecdotally, they were all very, very distraught the last few weeks in – my God, are we going to see a small increase or a 19% decrease. And that uncertainty, I think, was pretty toxic actually, at least, in an anecdotal conversation. So again, that's only one more year, but nevertheless, this could – a trend could emerge though where NIH funding might could get bipartisan support for healthy increases. So I'm optimistic that, that could lead over time, I don't know whether it's this year and future years to more U.S. ultra-high field business. I think that's a good medium-term driver. It won't help us this year. ASMS, don't mean to frustrate you, but of course for competitive reasons, do not preview or discuss what we may release at conferences, but I'm sure ASMS will be interesting for us and our customers.

Operator, next question, please?

Our next question comes from Bryan Brokmeier of Cantor Fitzgerald. Please go ahead.

Hi. Good afternoon. Frank, you commented on the new resistance assay and the Biotype a little bit. I was just curious, is that going to create any new instrument opportunities? Are the labs largely penetrated at this point, so the impact will be more seen in higher utilization and consumable revenue?

Yeah, a little bit. I mean you don't need a new instrument to run this assay, but as they see more and more labs, the increasing utilization. And as some of these newer test, they do take a little bit more instrument times, or more laser shots, so over time, this may need more labs to buy markets, but also perhaps upgrade to our newer instruments, for instance, the MBT smart, which is like three times higher throughput and more up time, so this will be incrementally positive also for additional instrument demand. It further enhances the competitiveness of our platform as we're obviously have a much larger vision of what one can do on a MALDI system. And I think our customers are acknowledging that. So I think it has a few other benefits from competitiveness to perhaps, also driving a little bit of an instrument upgrade cycle or perhaps, the desire to buy a second instrument for a number of our customers that I have pretty good utilization already.

And on the NEO, how long does it take to convert an order into revenue? And then also is it consistent with some of the other comments you made around new products that you're introducing that – are NEO's margins higher than sort of the overall margins you had in NMR?

So, typically, in NMR from order to revenue, tends to be about six months. Of course, it's much longer for a highfield system, and it can be shorter for a relatively straight forward chemistry 400-megahertz system where it could be three months to four months only. And yes, we've designed – NEO, it's nothing dramatic, it's not that its COGS are dramatically lower, but obviously COGS have played a role in its design and built an intelligence that make servicing and installations easier. So, we expect a small but incremental margin effect also from the NEO.

Okay. Thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Ms. Miroslava Minkova for any closing remarks.

Thank you for joining us this evening. During the second quarter, Bruker will participate at the Deutsche Bank Annual Health Care Conference in Boston tomorrow, the Jefferies Health Care Conference in New York, the William Blair Annual Growth Stock Conference in Chicago and the Goldman Sachs Annual Health Care Conference in Rancho Palos Verdes, California. We invite you to meet these conferences or to visit us at our headquarters in Billerica Massachusetts. Thank you, and have a good evening.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.