Bruker Corp
NASDAQ:BRKR
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
48.25
94.27
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Bruker Corp
You don't have any saved screeners yet
Good afternoon everyone, and welcome to Bruker's Q4 and Fiscal Year 2017 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note today's event is being recorded.
At this time I'd like to turn the conference call over to Ms. Miroslava Minkova, Head of Investor Relations. Ma'am, please go ahead.
Good afternoon. I would like to welcome everyone to Bruker's fourth quarter and year-end 2017 earnings conference call. My name is Miroslava Minkova, and I'm the 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, during today's conference call, we will be referencing a slide presentation. 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. Reconciliations 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 the financial performance of the company that involve risks and uncertainties. The company's actual results may differ materially from the 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 in subsequent SEC filings.
Also note that the following information is related to current business conditions and to our outlook as of today February 8, 2018. Consistent with our prior practice, we do not intend to update our forward-looking statements based on new information, future events or other reasons prior to the release of our first quarter 2018 financial results in May 2018. Therefore, you should not rely on these forward-looking statements as representing our views or outlook as of any other date subsequent to today.
We will begin today's call with Frank providing a business summary. Tony will then cover the financials for the fourth quarter of 2017 in more detail.
Now, I would like to turn the call over to Bruker's CEO, Frank Laukien.
Thank you, Miroslava good afternoon, everyone and thank you for joining us on today's call. Bruker had a strong finish to the year with revenue growth and non-GAAP EPS both exceeding our recently increased full year guidance. In the fourth quarter, Bruker's revenues increased 12.8% year-over-year, our 4% organic growth consisted of 3.4% organic growth in our Bruker Scientific Instruments or BSI segment and 11.6% organic growth in our BEST segment net of intercompany eliminations.
The stronger Q4 revenue resulted in full year 2017 total revenue growth of 9.6% including 3.6% organic growth. This was compromised of 2.7% organic growth at BSI and 14.5% organic growth at BEST again net of intercompany eliminations.
As our core, academic and industrial end markets improved over the course of the year and with BEST benefitting from strong MRI and big science demand. Our 3.6% organic revenue growth rate in 2017 exceeded our expectations.
We generated value for shareholders in 2017 as we've returned to positive revenue growth, successfully integrated several strategic bolt-on acquisitions, drove additional operational improvements and invested in our six key high growth, high margin initiatives.
We also again delivered on our long-term operating margin expansion targets of 75 to 100 bps per year on average on a multiyear basis. Specifically in 2017 our non-GAAP operating margin improved 80 bps, while absorbing an approximately 45 bps headwind from acquisitions and an additional 20 bps headwind from changes in foreign exchange.
Looking more closely at our Q4 2017 results on slide four, we reported revenues of $530.5 million, an increase of 12.8% year-over-year. Acquisitions contributed 3.6% to revenue, while an FX tailwind increased revenues by 5.2% year-over-year on an organic basis, our Q4 2017 revenue was up 4%.
In Q4 2017 our non-GAAP gross margin increased 120 bps year-over-year, our non-GAAP operating margin increased 130 bps year-over-year, while our non-GAAP operating profit grew about 20%. Tony will discuss the details behind these results.
In Q4 2017 Bruker reported a GAAP net loss of $0.02 per share compared to $0.43 of earnings per share in Q4 2016. The GAAP loss was the result of the effects of the U.S. tax reform in the quarter. On a non-GAAP basis, Q4 2017 EPS was $0.51, an increase of 11% year-over-year.
On slide five, our full year 2017 revenue of $1.766 billion increased $155 million or 9.6% year-over-year. Acquisitions contributed 4.8%, while foreign exchange was a 1.2% benefit. On an organic basis, Bruker's 2017 revenue was up 3.6% compared with 2016. As previously noted, this consisted of 2.7% organic growth in our Scientific Instruments business and 14.5% organic growth at BEST net of eliminations.
Going forward, we expect continued gradual organic growth acceleration in our Scientific Instruments segment as more and more of our high growth initiatives are expected to contribute meaningfully to our results.
Full year 2017 non-GAAP gross margin was consistent with 2016, as the impact of higher BEST revenues, unfavorable mix and FX effects offset volume and operational gross margin improvement elsewhere. In the full year 2017, Bruker delivered non-GAAP operating margin expansion of 80 bps, even with these unfavorable mix effects and after absorbing about 65 bps, operating margin headwind from our recent acquisitions and FX. Our 2017 non-GAAP operating profit grew a healthy 16%.
For 2017, Bruker reported GAAP EPS of $0.49 compared to $0.95 in the prior year again the lower GAAP EPS in 2017 was the result of the effects of U.S. tax reform. Our 2017 non-GAAP EPS was a $1.21 a 2% increase from a $1.19 in 2016. This was against a challenging effective tax rate comparison in FY2016, due to the recording of tax valuation and reserve reversals in 2016, as previously reported. Over the course of 2017, we saw further stabilization in our academic and government business, most notably in Europe, as well as improvements in our industrial and applied end markets.
Our semiconductor metrology business had an excellent year with a healthy mix of new technology buys and robust semi-market conditions. Our BSI Scientific Instruments order rates showed momentum over the course of 2017 and we expect further gradual improvement in our BSI organic revenue growth rate in 2018. While BEST benefited from softer 2016 comps, and some project accelerations into 2017, we expect BEST revenue to decline in the low single-digit year-over-year on an organic basis in 2018.
Please turn to slide six and seven now, where I'll provide further insights and highlights on the 2017 performance of our three Scientific Instrument groups and of our BEST segment on a constant currency basis. BioSpin Group revenue of $572 million was modestly above 2016 levels. Excluding the impact of currency translation, BioSpin operating margins were lower year-over-year as BioSpin product mix included more low-field NMR systems in 2017 with lower gross profit margins versus more high-field systems in 2016.
NMR revenue was similar to 2016 level, as a reminder our 2016 results included a 1 gigahertz system and we did not record of anyone gigahertz systems revenue in 2017. Within BioSpin and specifically for NMR, the aftermarket and service business continued to post strong revenue growth year-over-year.
We also remain encouraged by the recovery in pre-clinical imaging or PCI markets, as we stabilize performance in our PCI business over the course of 2017. In 2017 PCI exited a non-profitable optical molecular imaging product line and had good success in growing its pre-clinical nuclear molecular imaging business particularly pre-clinical (inaudible).
Our CALID Group reported mid-single digits constant currency growth with revenues of $499 million for the year. CALID operating margins improved meaningfully year-over-year on better volume, efficiencies in the 2016 restructuring. Within the CALID Group our Daltonics mass-spec revenue grew in 2017, as European academic markets recovered with strong growth in microbiology, aftermarket consumables and services impart bolstered by our 2017 acquisitions.
The Optics business product had a strong year on improved demand from industrial and applied markets, as well as the European recovery. CALID's detection revenue declined year-over-year with a challenging comparison due to large contract in 2016. Finally, CALID also benefited from the InVivo molecular biology consumables acquisition in January 2017.
Please turn to slide seven, now Bruker NANO reported low teens constant currency revenue growth with revenues of $513 million for the full year, NANO's results included both strong mid-single digit organic growth and contributions from our January 2017 Hysitron acquisition of Nano indenting products. With the Nano Bruker AXS revenue grew nicely in 2017 following a challenging 2016. AXS growth was fueled by higher industrial revenue, China demand and the European markets recovery.
Semiconductor metrology revenues were up strongly in 2017, reflecting the healthy underlying end market as well as new technology by far X-ray metrology systems. As expected, semi recorded a strong finish to the year in the fourth quarter of 2017.
Our Nano Surfaces business grew on the contributions from the Hysitron acquisition, which continues to perform well, as part of Bruker. In total the Nano Group had a strong finish to the year with strengthened demand from industrial markets, excellent performance in semi and improved academic markets.
Last but not least, our best revenue in 2017 was substantially higher year-over-year, driven by both our November 2016, BOST [ph] acquisition as well as double-digit organic growth with our core BEST business. While BEST delivered on strong demand for MRI superconductors and some accelerated big science projects in 2017 we expect BEST revenues to be lower year-over-year in 2018.
Next, let me give you a high level update on our six high growth, high margin initiatives on slide eight. Over the course of 2017 we sharpened our strategic portfolio transformation focus on six initiatives, which we believe can result in faster organic growth and continued multi-year operating margin expansion for Bruker over time.
As we had projected we exited 2017 with the five product area, proteomics and phenomics biopharma and applied, microbiology and diagnostics, neuroscience and cell microscopic and next gen nanotechnology tools comprising about a quarter or 25% of Bruker's revenue.
The high growth aftermarket initiative in this case excluding the microbiology after market because we list that elsewhere, comprised an additional 15% of revenue. In total our six high growth initiatives delivered high single-digit, constant currency revenue growth and operating margins that are significantly above corporate average. So I think we're on the right track here.
Some of these initiatives are already up meaningful scale and are contributing significantly. For example, our microbiology business, our next gen semiconductor metrology tools and our aftermarket initiatives. Others are now becoming meaningful contributors. And for example, our biopharma and pharma and applied product revenues grew very nicely in 2017 to where they will begin to move the needle for us in 2018 and beyond.
Finally, some other initiatives are still early on the adoption curve, such as our pathology, proteomics, clinical phenomics and ultra-high-field NMR in our initiative. Looking out over the next five years, we have significant growth opportunities across all of these and we expect continued strong performance from these high growth initiatives also in 2018.
Together with a cadence of new product and solution launches M&A investments and more regulatory approvals, these are key elements of our portfolio transformation strategy towards faster growing markets, where we believe we can also achieve sustainably higher margins.
On slide nine I show Bruker's key priorities for 2018, I will not read all of them, but for 2018 we obviously aim to position the company for further revenue growth acceleration by continuing the positive momentum in our scientific instruments business, and by driving our six key high growth initiatives. We remain focused on transforming Bruker's portfolio for faster growth and continued multi-year operating margin expansion. I invite you to read the other comments and bullets.
In summary, 2017 was a year of continued progress, we returned to revenue growth, we successfully integrated our acquisitions, quite pleased with that and once again delivered on our margin expansion commitments and exceeded our revenue growth and EPS objectives. We look forward to delivering another solid year in 2018.
So on that note, let me now turn the call over to our CFO, Tony Mattacchione.
Thank you, Frank and good afternoon everybody I will now provide some additional details on our financial performance in the fourth quarter for 2017 and the full year starting on slide 11.
As you saw in our press release, Bruker's reported revenue increased 12.8% to $530.5 million in Q4, which included organic revenue growth of 4%. We reported a GAAP EPS loss of $0.02 per share, this compares to EPS of $0.43 per share in Q4 of 2016. The GAAP EPS loss in our fourth quarter is entirely driven by the effects of U.S. tax reform enacted in late December this year, totaling approximately $69 million.
This charge consists primarily of the transition tax on accumulative foreign earnings and the revaluation of deferred tax assets under the new tax law. We also accrued the withholding taxes associated with our non-U.S. cash earnings that we expect to repatriate. On a non-GAAP basis and excluding these items Q4 EPS increased 11% year-over-year to $0.51.
On a non-GAAP basis, Q4 2017 operating income was up 20% from Q4 of 2016 and operating margin expanded 130 basis points year-over-year. Q4 2017 free cash flow of $91 million increased $11.6 million or 15% compared with the fourth quarter of last year.
We ended the quarter with a net cash position of $23.6 million and that compares to a net cash position of $88.6 million at December 31, 2016. The decrease in net cash resulted from the continued use of cash to fund our dividend, acquisitions and stock buyback.
We exited 2017 with higher working capital balances and that was attributable to our revenue growth, recent acquisitions and the weaker U.S. dollar. These effects also resulted in a slight deterioration of our working capital to revenue ratio.
Turning to slide 12, I show the revenue bridge for Q4 2017. In addition to organic revenue growth of 4%, acquisitions contributed 3.6%, primarily from the Hysitron, Bruker OST and InVivo acquisitions. Financially these acquisitions are all meeting or exceeding our expectations. Foreign currency translation was a 5.2% tailwind due to the declining value of the U.S. dollar over the last few months.
From an organic growth perspective, the 4% organic growth included strong gains at NANO and BEST. NANO Group revenues rose low-teens on an organic basis with significant growth in our semiconductor metrology business and growth in the X-ray and nano-analysis products for material research, industrial and academic research applications.
CALID revenue increased low-single digits on an organic basis with strong performance in the mass spec and optics product line. This was partially offset by a year-over-year decline in our CALID detection business, which faced a tough comparison due to a large contract in Q4 2016.
BioSpin revenue declined low-single digits on an organic basis due to customer push outs into to 2018. A highlight within BioSpin remains a continued solid growth in our aftermarket and service business. BioSpin sales to applied markets including full screening labs and clinical customers grew strongly in the quarter. However, these positive dynamics were offset by the timing of system installations relative to Q4 2016.
BEST revenue increased 11.6% on an organic basis and this was net of intercompany eliminations and over 30% on a reported basis including contributions from the Bruker OST acquisition and foreign currency. BEST year-over-year revenue growth continued to benefit from scheduled deliveries of superconductors to MRI customers and acceleration of some big science project in the year.
Regarding BEST, we have modified our presentation of BEST revenue growth to exclude intercompany shipments, which we view as a better indicator of BEST underlying growth. From an end market perspective, we saw sustained momentum with academic, industrial and applied market customers for our CALID and NANO groups.
We continue to see growth in biopharma markets, this quarter led by our mass-spec biopharma solutions portfolio. Our microbiology diagnostic business had a strong finished to the year. And semi order rates remained healthy in the fourth quarter as well although conversion into revenue for semi orders can take multiple quarters.
Geographically and on an organic basis, our European revenue increased high-single digits year-over-year in Q4 and this was up mid-single digits for the year, reflecting a solid recovery from our European academic and industrial customers.
North American organic revenue was down mid-single digits year-over-year in Q4 and was modestly lower for the full year. Timing of large orders and shipments and flat materials research demand for atomic force microscopy systems were the primary causes. Asia Pacific revenues grew double digits in Q4 and that included improved performance in Japan and other Asia regions and were up high-single digits for the year.
China revenue growth slowed to mid-single digits in Q4, but was up high teens for the year. Going forward, we continue to anticipate moderation in our China growth rate on a full year basis after a very rapid pace of the China business in the last few years. Overall we are pleased with another quarter of positive organic growth momentum and the sustained end market tailwinds we have been experiencing.
Turning to Slide 13, I show our Q4 2017 non-GAAP results. Our Q4 2017 non-GAAP gross profit margin was 50% and that was an increase of 120 basis points year-over-year. Higher volume and operational improvements within our NANO and CALID groups in the application of a new inventory accounting standard this year drove the year-over-year increase.
BEST margins were also favorable compared to the prior year's quarter. This was all partially offset by a negative impact from foreign exchange movement due to the weakening U.S. dollar. As a reminder, Bruker has a large cost basis denominated in euro and Swiss franc. So while weaker dollar had a large positive impact on revenue this was more than offset by a currency driven increase in our cost basis.
For the quarter changes in foreign currency translation rates, resulted in a 5.2 increase in our revenue, but a $0.03 reduction in our EPS. Q4 2017 selling, general and administrative expense of $111 million was up 11% from Q4 2016, driven largely by the increased commissions on higher orders and revenues, the addition of the acquisitions and changes in foreign currency.
Our previous announced G&A function initiatives, which include the opening of our new financial service center in Central Europe and HR streamlining are on track. Q4 2017 R&D expense at roughly $44 million increased 14% and that was driven by the inclusion of acquisitions and the changes in foreign currency.
Looking below the line, net interest and other expense was $4.6 million compared to $2.3 million of net interest and other income in Q4 2016. The difference was caused by higher year-over -year interest expense on higher debt balances and a net loss on foreign currency transactions - foreign denominated transactions.
For the fourth quarter of 2017, our non-GAAP effective tax rate was 24.5% and that compared to 21.7% in the fourth quarter of 2016. Weighted average diluted shares outstanding in the fourth quarter were $156.9 million, down approximately 3 million shares or about 2% year-over-year. This reflected our 2017 share buybacks and that was somewhat offset by stock option exercise dilution.
During the fourth quarter, we repurchased an additional 650,000 shares totaling $20.4 million. Since the initiation of our later share repurchase program in May 2017 and through the end of the fourth quarter, we repurchased 5.3 million shares and that totaled $152 million. Finally Q4 2017 non-GAAP EPS of $0.51 increased 11% from $0.46 in Q4 2016 and that was driven by the higher revenue and operating leverage.
On slide 14, I show the year-over-year revenue bridge for the full year 2017. Revenue was up $155 million or 9.6%, reflecting organic growth rate of 3.6%, M&A of 4.8% and a modest positive tailwind from foreign currency translation of 1.2%. The organic revenue increase reflects growth in our NANO and CALID groups in the BEST segment, while BioSpin revenue was only marginally above the prior year. Frank also covered the drivers of our full year revenue performance earlier in the call so, I won't expand on them now.
On slide 15, I show the revenue breakdown for our three scientific instruments groups in the BEST segment, as well as our geographic breakdown as of the end of the year. Bruker's revenue remains balanced from a group and geographic perspective and the contributions of our BEST segment have increased slightly, following the OST acquisition. And BEST now comprises 10% of our revenue and that's up from 7% to 8% in prior years.
On slide 16, our full year 2017 non-GAAP gross profit margin was on par with 2016. Volume and operating leverage in the CALID, NANO groups and the application of the new inventory account standards were roughly equally offset by the higher contribution of lower gross margin BEST revenue, negative BioSpin mix and a small negative impact from foreign currency translation.
Our full year 2017 operating expenses increased approximately $37 million or about 7%, due to the inclusion of acquisitions, the higher business volume and changes in currency. All-in our non-GAAP operating profit margin for the full year 2017 improved 80 basis points to 15.6%. This compared to 14.8% in 2016 and that result was in line with our expectations.
Our full year 2017 non-GAAP tax rate of 25% was substantially higher than the 15.7% tax rate in 2016. This was due to the unusually low tax rate in 2016 caused by the previously disclosed valuation allowance and tax reserve reversals. Finally non-GAAP EPS of $1.21 increased $0.02 or 2% as growth in revenue and operating income was partially offset by the year-over-year tax effects we just mentioned.
Turning to slide 17, we generated $111 million in free cash flow in 2017, which was $17 million or 18% higher than in 2016. This reflected higher cash earnings after adjusting for the effects of the non-cash U.S. tax reform charge we just spoke about and higher compensation and restructuring accruals.
These effects were partially offset by the working capital increase, I described earlier and an uptick in capital expenditures. Our cash conversion cycle at the end of 2017 was similar to last year with a slight increase in DSR. Our cash conversion cycle lengthened somewhat in the fourth quarter due to an increase in DSO as well, largely related to the higher volume of business at the end of the year this year, compared to last year.
Turning to our full year - our 2018 guidance on slide 19, we expect Bruker's revenue to grow approximately 7% on a reported basis. This includes approximately 3% organic revenue growth and approximately 4% from translation effects from the weaker U.S. dollar.
Embedded in these projections is our expectation for another year of modest organic revenue growth improvement in our BSI segment, partially offset by a projected low-single digit year-over-year organic decline in the BEST segment and that's net of intercompany eliminations.
We expect our fiscal 2018 non-GAAP operating margins to expand between 50 basis points and 80 basis points and this compares to the 15.6% level we achieved in 2017. While we absorb a significant foreign exchange headwind of 70 basis points on a year-over-year basis due also to the weak dollar. Our fiscal 2018 non-GAAP tax rates projected to remain at 25%. For the fully diluted share count, we assume 156 million shares. We expect to spend $50 million on CapEx this year.
For foreign currency, we assume the average foreign exchange rates for the month of January, which are listed on this slide. Adding it all up we project non-GAAP EPS in the range between $1.34 and $1.38 and this represents growth between 11% and 14% compared to 2017. As in years past, we expect the majority of our profitability and cash flow to be generated in the second half.
In summary, during the fourth quarter of 2017 Bruker delivered strong revenue growth and operating results. We continue to be encouraged by the demand tailwinds in our BSI end-markets. Our high growth initiatives are demonstrating promising early results. And with continued focus on leveraging our cost structure we expect to deliver another strong year of operating leverage and margin expansion and EPS growth in 2018. With that we look forward to updating you again in our Q1 2018 conference call in May 2018.
And now I would like to turn the call back over to Miroslava to start the Q&A secession.
Thank you, Tony. Jamie, we would like to open the call up to Q&A. In order to allow for broad participation from our analysts, please limit your questions to one and a follow-up.
Ladies and gentlemen, at this time, we will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Brandon Couillard from Jefferies. Please go ahead with your question.
Thanks. Good afternoon. Frank in terms of the fourth quarter you give us a sense of what areas of the business contributed most to the revenue upside. Anything you can share with us on how the order book developed in the fourth quarter? And as you look out to 2018, are there any areas of the business that you think decelerate meaningfully and any guidance you can share with us in terms of growth between BioSpin, NANO and CALID would be useful. Thanks.
Okay, Brandon, those are eight questions, right? Let me try to tackle I think everybody will have the same questions. So Q4 was good on the booking side for BSI, we again had solid BSI bookings growth year-over-year even compared to decent Q4 of 2016. BEST was weaker as we had begun to expect and so that's why we're believing that BEST will have a low-single digit organic decline in 2018.
Whereas we expect the continued gradual acceleration of our BSI growth rate, last year was 2.7%, this year I would expect it to be start with a 3%, I don't think it will just to 4%, I think that's got the type of 3 point something is probably what we're looking there for BSI, so gradual improvements to multiyear, the multiyear portfolio transformation will take time.
Looking around the businesses a little bit we still - we expect - we think the industrial businesses are doing really well applied and pharma markets are picking up for us. I think the bio will do better in terms of growth in 2018 and 2017 that's more of a timing issue. And if you look around the portfolio detection will slow probably be somewhat weak in 2017. It was weak in 2017 after a very strong 2016 and will be also somewhat weak and perhaps a little bit weaker in 2018.
So that gives you a little bit of granularity, mostly it's BSI gradual acceleration and BEST going from a very fast organic growth last year to a low-single digit organic decline in 2018, that's what we see right now.
Thanks. And then Tony couple for you, congratulations on hitting the 50% gross margin milestone for the first time. As you look out at 2018, how should we think about the margin expansion between the gross margin line and operating leverage? And then can you share with us on free cash flow conversion expectations for the year?
Yes, so thank you. I would look at the big picture here. We've been able to deliver this 75 to 100 basis points on what's increasing revenue growth in earlier years a very little revenue growth. So that will continue in 2018 based upon the acceleration that we're seeing. So, I think that's the way to think about the gross profit margin. So some of the volume affect that benefited us this year will also benefit us in 2018 and we will have somewhat of an offset with the BEST margins as you aware of.
From a cash flow perspective, we ended 2017 pretty much where I expected. We delivered $111 million of free cash flow, that's a little less than our GAAP net income, but we also had a big flurry of shipments at the end of the quarter, which used some working capital for receivable. So the cash generation for 2018 should look like that somewhere around our GAAP net income, which would likely be around 15 or so percent more than it is this year.
Very good, thanks.
Our next question comes from Ross Muken from Evercore ISI. Please go ahead with your question.
Good afternoon, guys. As we think about some of the emerging growth drivers you highlight a bunch that are growing above the sort of portfolio average, which are the few or which new products as we head into 2018, do you think will have the biggest impact on sort of driving? I know you highlight a few but just to sort of size it in terms of what will drive some of that acceleration and become a bigger part of the portfolio next year?
Yes, I would think - Ross, this is Frank, that I mean microbiology, semiconductor and aftermarket have already contributed nicely and we expect that they will again contribute nicely. I would highlight that in 2018 we will probably have a noticeable positive effect from pharma biopharma and from the applied markets.
As I said there are some initiatives that probably really will only begin to move the needle in a meaningful way in 2019 and so on. So I would highlight pharma, biopharma and applied as those that you'll begin to notice more in 2018 and they made very good progress in 2017.
And in terms of Europe specifically, just the cadence there and in terms of whether you're seeing anything south versus north or the like or anywhere you think it sort of relevant to cut it. That market has been sort of stronger and obviously that's a key market for you, so how are we just thinking about the sustainability there?
Well, I think you know Europe after an unusually weak 2016 caught up a bit in 2017. So the European growth rate in 2017 I think of that as higher than the long-term growth rate. Long-term growth I think where probably now the pendulum is swinging probably to a longer term steady European growth rate that's probably in the low to mid-single digits. Obviously we hope we can outperform that because of our - the product areas and the markets that we're pursuing, but we actually expect to return to a fairly steady pattern in Germany in many of the European Union countries.
Obviously still some weakness in Eastern Europe and UK wasn't that strong for us in 2017. But France and Spain and even Italy many of the smaller countries all did quite well and Germany did quite well in 2017, after a somewhat inexplicably weak 2016. So I think things are settling into more historical low to mid-single digit growth rates in Europe is my prediction.
Thank you, Frank. That's helpful.
Our next question comes from Jack Meehan from Barclays. Please go ahead with your question.
Thanks for the question. This is actually Mitch Petersen on for Jack this afternoon. I was hoping to just get some more detail on just the pacing of revenue growth in 2018, just outside of normal seasonality is there anything to call out there? And then also if you could provide us an update on the timing of 1 gigahertz order for 2018, is that still expected in the back half of the year?
Yes, we're expecting one in the back half of the year obviously there is always a digital event that either happens or doesn't happen, but right now we are aiming reasonably for one in the second half of the year that is correct. And I think the normal seasonality patterns probably will be somewhat similar again in 2018 as they have been in previous years. We obviously have a little bit more visibility into the first half than into the second half. So nothing really comes to mind that would be very significantly different than what you have seen in the past perhaps.
Yes, just expect more - just like 2017 expect more the revenue to occur in the second half and we have, always have a very strong fourth quarter that's going to continue.
Okay. And then just as follow-up Tony, if you could provide us an update just on your capital deployment priorities for 2018? And how tax reform and maybe some repatriated cash changes your thinking there?
Yes, our priorities haven't changed we still - the best investments are organic investments for us and once that are in our targeted growth areas acquisitions that fit those areas we feel that make sense for us financially and operationally we will do and will continue to do those.
We are thinking through it's early days with the opportunity that the flexibility with the U.S. tax reform gives. So we're thinking through that, which could result in some structural considerations that we need to make. So it's really early to really tell you exactly how we are going to deploy that capital.
But what we have today will likely continue the way we've been deploying capital, we have just more flexibility with the access to overseas cash.
Great, very helpful. Thanks, guys.
Our next question comes from Sung Ji Nam from BTIG. Please go ahead with your question.
Hi, thanks for taking the questions. Tony could you talk about the pricing environment and from raw material cost all the way to kind of how you guys are thinking about pricing strategies this year?
Yes, I think here pricing it's different from business to business and segment to segment, based upon our market positions and the competitive environment obviously. But we've been able to - price has been basically a net positive push for us in our margins for the last couple of years and that will continue into 2018. So we're not anticipating anything drastically different from a pricing perspective than what you have seen going forward.
Okay, thank you. And Frank I was wondering about I don't know if this is farfetched, but something like Apple cutting its iPhone production significantly near-term could that move the needle for your semi business near-term or longer term?
We are not aware of that obviously that certain companies always very secretive about its supply chain. But I would not think so at least I'm not aware of it.
Okay, thank you.
Our next question comes from Derik DeBruin from Bank of America Merrill Lynch. Please go ahead with your question.
Hey, thanks. Its Mike Ryskin on for Derik, a couple questions for you of the two of recent acquisitions that were completed over the course of 2017 and in 2017 the Hysitron InVivo, B-OST, can you talk a little bit about expectations for 2018 in terms of as the annualized contributions to organic growth and some of the progression has taken place there. With operating margin this was a headwind over the course of 2017 so how is that coming around?
Yes, directionally I mean, from the presently the - last year the M&A was a considerable growth driver one of the three growth drivers that will be much less in 2018 unless we do additional acquisitions, which we never comment on. So it will be half a percent or less whereas last year was considerable.
You are correct in the fact that BEST was a gross profit margin headwind last year because of its good growth which we are delighted by. The fact that it well actually decline in the low-single digits organically will help us to also see the other effects of our further efficiencies to improve gross margins that will become again a contributor we believe in 2018 to operating margin expansion. And remind me if there is parts of your questions that I haven't addressed yet. I apologize.
No, no that's helpful there. A quick follow on actually for the earnings growth in 2018, you commented on you're expecting a 4% FX tailwind on revenues, is that, am I am right in thinking that that should be a let's say $0.08 to $0.10 headwind on EPS for the year?
No, no. For us, I mean there is some dynamics once in a while in some of the transactional - currency transactions that cause some ups and downs, but generally that very significant revenue tailwind that we get has very little effect on the EPS line and that will be the case as well in 2018.
Okay.
So tailwind on the revenue, headwind on the margin, significant headwind on the operating margin and a minor headwind on EPS. Because between - this is - if it's mostly between euro, Swiss franc and dollars than on the EPS line where not affected as strongly as on the other lines.
Okay, that's helpful. Thanks.
Our next question comes from Tycho Peterson from JPMorgan Please go with your question.
Hey, guys. This is Tejas on for Tycho. Just one quick question on Japan, Frank I think you called out a little bit of strength there in the fourth quarter, can you just perhaps elaborate on what drove that strength? And is that what you're factoring into your baseline sort of 2018 forecast or you expecting continued weakness there and think on the growth side will be upside?
That's a good question, it was encouraging to have a little bit of an uptick and an improvement in Japan. We had not seen that in a while clearly the industrial research - industrial recovery and industrial research as part of industrial recovery made a difference there. Yes, I don't want to read too much into it yet because it was let's see how that goes whether that is sustainable for several quarters. But it is - that's a good as you point out that's not necessarily something we had expected. And so perhaps Japan coming back a little bit on the industrial and industrial research side would be nice. And I don't want to call it a trend yet, but we're somewhat encouraged.
Got it. And then along similar lines in pre-clinical imaging, I mean, obviously since 2Q you've seen some improvement in that business, are you now comfortable calling for an inflection point there? And finally any color that you can share in the U.S. academic spending trends in light of yesterday's little bit of incremental uplift in the budget. And just the customer sentiments that you are hearing about in the last couple of months would be great.
Yes, at pre-clinical imaging on the order side I would call it an inflection point, I think that's been for multiple quarters that's been clear enough. Our competitive position in nuclear, molecular imaging and pet spec particularly pet has really improved very nicely with some nice key competitive wins recently. That doesn't immediately make for a huge 2018 because some of these deals literally because the side planning very often is considerable sometimes new buildings have been finished. Some of that will actually go into 2019 but it will help in 2018.
But both MRI and microCT and then our new pet business, relatively new pet business are in particular nicely improved. So I will call an inflection point there, we are doing better and that will help both 2018 and 2019.
To U.S. academic spending, we are you very positive, I mean, the news we got yesterday on two more years of apparently reasonable good NIA spending the trickle effect - the trickledown effect that has on everyone else that university is positive, orders were reasonable. So we're optimistic about U.S. academic spending. And it's great that there seems to be by far different consensus that NIH research is really important and continues to get funding.
So obviously we haven't gotten any feedback yet there we're reading the newspapers or whatever just like you do. But I think there was a lot of negativism a year ago in U.S. academic circles about scientific spending and I think that's gone, largely gone away and it may just really evaporate now with sort of a two year budget deal apparently getting solidified. So, yes, I'm already optimistic and I think that solidifies that. So I think the U.S. will be all right.
Thanks, Frank. Appreciate it.
Our next question comes from Puneet Souda from Leerink Partners. Please go ahead with your question.
Yes, hi, Frank. Actually another follow-up on pricing, I was wondering if you can elaborate a bit on the pricing and your thoughts on the NMR segment and essentially on the magnates and what's embedded into the guidance for 2018. Do you think there are certain segments of the market, which are more amenable to price increases versus what you have in past or is it going to be more steady?
I don't want to disappoint anyone, but pricing when we took a bigger step in NMR pricing was a big driver there for a couple of years. It's now a rather modest supporting measure that we take in most businesses where we can. I wouldn't call it out as one of the bigger drivers these days. I think it's pretty steady state, which we try to improve in the low-single digits where we can some of that gets traction.
There is some other parts in the business where once in a while there is pricing pressure. It's not that pronounced right now at least not in the Scientific Instruments business. But overall I wouldn't - pricing isn't one of the big deals for 2018 maybe that sort of a very casual way of saying it. So a slight help from pricing, but it's not one of the bigger drivers.
Okay, that's very helpful. And just on the product and you've highlighted Timstaff [ph] quite a bit on the top down and then proteomics and trying to get a sense of that and a couple of other products that are really design for proteins and high molecular structure. So, what's your sense there in terms of growth in 2018, you've already seen some growth from pharma here. What's the expectation for those types of products and in biopharma specifically? Thanks.
So multiple pieces, Timstaff approach [ph] is more for academic and medical school researchers rather than for pharma, sometimes pharma buys into it as well, but it's more of an academic and government sale. I think we'll see some nice adoption there this year, but starting at a lower level so it's not going to be needle moving, but I think we are going get particularly make good progress in 2018 to where it could become needle moving in 2019 and 2020 that's why we've positioned it.
But technically in terms of demos we're very pleased, we think that's really going well and looks very promising. So we seem to be on track there, but it's not going to be needle moving in 2018. Somewhat similar structural biology intrinsically disordered proteins, gigahertz, NMR a little bit in 2018 in the second half, but really more of a 2019, 2020 story as well.
On the other hand pharma, biopharma both NMR and mass-spec solutions has done well, we think they will continue to do well and make a bigger difference in 2018, and they have actually developed quite nicely in 2017 already. That's not the team stuff so much those tend to be other solutions, multi pharma pulse, multi imaging for metabolized imaging for ultra-high throughput screening and various other mass-spec tools for biologics in particular as well as NMR tools for a number of pharma application. I think that's developing very nicely.
And I think that will begin to move the needle in 2018 as it has become bigger last year. Sorry a bit long winded answer, but I hope it's platform.
Okay, that's very helpful. Thank you.
Our next question comes from Bryan Kipp from Citigroup. Please go ahead with your question.
Hi, guys. Thanks for taking the questions. Frank, quick on the semi business, you guys assume to see some strength in books in the back half of the year and continue to strengthen in 4Q. It seems like there were significant inventory builds in 2017 that might now materialize in 2018. So just want to get a sense of where you guys think you are in the cycle? One, and then two, where you guys really play in this end market, whether it's DRAM, NAND, FLASH or analog, et cetera?
Yes, so that's all very good questions and we don't have the crystal ball either. 2017 including the back half of 2017 was very strong for us. There is now some debate will it - in fact nobody expect it to be as strong in growth in 2018 and in 2017. We are only partially exposed to the cycle, we have a lot of new technologies where it's more of the technology adoption and trying to become the tool of record with various memory and foundry logic vendors so we're making good progress on that.
I'm sure the cycle will not continue as the rapid growth that we had in 2017 and then there is just a general debate to which we really too small to have a meaningful answer, will there be - some people are predicting a slowdown or a slowdown in the second half, some people think there is a strength of the many factors that so that we will continue to have faster growth. Quite honestly our data point is too small to really be able to tell something from that.
The good news is even if the cycle is slowing down or perhaps were to reverse, we are only partially depended on that cycle and a lot of the new technologies and technology bias would still make us pretty optimistic of our multi-year progress in semiconductor because we think our X-ray and AFM tools this will be needed more and more by both memory and logic manufacturers.
So big good long-term trends and not a lot of insights beyond what you can read elsewhere into what the macro drivers are in semi we just observed those like everyone else.
All right, helpful. It's fair to characterize that you think that the semi cycle or at least be supportive of accretive growth from - your semi end market growth will be accretive to overall Bruker next year. And then a quick follow up on the PharmaPulse I think you gave the number last year pick on, on what you think contribution could be in two to three years out, is it still pacing to that number or have things slowed down a little bit?
I think, we've seen a little bit of an initial settling as a lot of these solutions are being adopted, I think there is a lot of reporting this week at the SLAS Conference in San Diego I hadn't been there personally, but I hear that a lot of our customers are showing nice results. So I think we had that first adoption - first acquisition phase of early adopters perhaps courageous early adopters. We try to make them really happy and successful and I think that's succeeding.
So it remains to be seen now whether we get now into a broader adoption cycle. So it will be not only the pioneers, but really those that now read what the pioneers have been doing and I think they've been successful. But as is often the case in these technology adoptions, it's not just one linear ramp, but I would say the first initial pioneering adopters are successful with it.
So I'm encouraged that this will continue to drive the second wave of adoption for people that don't necessarily want to be at the leading or sometimes leading edge. So it's going well, but it also - it has these dynamics that that often new technology adoptions have, early adopters seem to be getting good results and be successful.
Thank you.
Our next question comes from Amanda Murphy from William Blair. Please go ahead with your question.
Hi. Good afternoon. Thanks. So, just a question on the NEO console, I was just curious I know it's sort of early in that launch, but can you give us a sense just in terms of I know it's the right way to think about it is this install base and how many have purchased the console just trying to get a sense of where we sit in that adoption curve?
Yes, Amanda that's really - that's definitely going well. We - obviously we are hopeful on that and as we look at the number of console orders, upgrade orders, since we've launched the NEO it's clearly seen a meaningful uptick, compared to normal years when people also upgrade some older consoles, but the NEO is such a new architecture and such a new platform that obviously a more significant number of customers are trying to get funding for.
There will be a multi-year process and it's not all incremental because in normal years, we also have that some of that business, but there is a clear positive uptick and customers are excited about the NEO because it kind of opens up the next decade plus in NMR capabilities and experimental fundamental capabilities.
So that's going well we will play itself out more in 2018 and 2018, but that's clearly clear evidence of a meaningful uptick.
And I was going to ask you similar questions, just thinking about your efforts to expand service. And I think you've talked in the past about maybe kind of captions in [indiscernible] so again not sure if it's the right way to think about it, but maybe in terms of like an install base, how many of those existing platforms are sort of now have the sort of service contract and then just in terms of new platforms are they pretty much now with service or not at this point?
Well in the NMR side is that's what you are referring to?
Yes.
I think we still have a number of years of above market growth expectations there and there's still some markets that are underpenetrated will never get 100% of the academic and government customers under service contracts, but an increasing number finds it useful especially as we also offer additional services that they find valuable.
So I think we'll continue to look forward to another three to five years of pretty good growth rates in that aftermarket business in NMR and the Bio and Bio by the way we are replicating that now also in the CALID Group, in Daltonics and the mass spec business and optics. So you may see an uptick there as well as we're learning a little bit from benchmarking within the businesses or within the overall Bruker Group and between the groups.
So - and I think - and finally what I wanted to add is that one of the highlights of our growth has been the consumables growth and aftermarket growth in the microbiology business that along with some of the acquisitions in molecular biology consumables and software and so on that's really working out well. And we expect that to be an important driver of our microbiology and diagnostics business in the years to come, that's on a really good trajectory.
So if you take servicing after marketing aggregate sort of sustainably so thinking about in terms of high single-digit growth, I think you said, right?
Yes, that's not bad, not in every single business, I mean, BEST doesn't have much aftermarket NANO doesn't have the same growth rates, but yes in the life science markets and particularly of course in the diagnostic microbiology markets those numbers are good numbers.
Okay, thank you.
Our next question comes from Steve Willoughby from Cleveland Research. Please go ahead with your question.
Good evening everyone. Two questions for you. First, Tony I was wondering if you could provide us some insight, you commented that your recent acquisitions were 45 basis point headwind to margins in 2017. I was wondering how you're thinking about those acquisitions and their impact to margins in 2018? And then secondly if one of you could comment about the order push outs that you mentioned in the fourth quarter, is there any way to quantify those is how much was potentially pushed out? And also is that something you expect to see come in, in the first quarter or is that something that's pushed out longer than that? Thanks guys.
Okay, so obviously the acquisitions are fully embedded in the businesses now and we've got - we are through with the first year of integration and obviously they won't be dilutive like they were in 2017. So they will be contributing to the overall volume growth in the businesses that they are part of that will add to our profits going forward. As I mentioned most of them, the bigger ones that can have an impact are all meeting our deal model expectations, InVivo is doing very well, Hysitron doing very well, OST we have already talked about, but they will - they are embedded in the business now and they're intruding to the overall growth. So net accretive I would say.
And no margin headwind in 2018 anymore from those acquisitions.
No margin expect for…
Nothing significant.
Except for OST. And on the push outs, the push outs were - we always talk about this, we talk about a quarter doesn't make a year, NMR can be very lumpy, we can expect to have something installed in one quarter and it can be two quarters later can be the next quarter. I wouldn't - I am not prepared to quantify that because it's just - it's part of our business, it's part of the dynamics for Q4 that's why we called it out. But there will be other things that replace it as well as we move forward in the year.
So what I can say is, those push outs are in our guidance and they are expected obviously to revenue in 2018 and that will be in the first half whether it's the first quarter or not, I can't tell you right now.
It's not necessarily on the first quarter and by the way we also had a little bit of acceleration into 2017 in the BEST business and some of the big science projects there, so that might be a watch.
Okay, thanks very much.
Our next question comes from Patrick Donnelly from Goldman Sachs. Please go ahead with your question.
Hey guys, this is Charlie on for Patrick. Appreciate the acceleration in BSI going into 2018. I just wanted to get some of your thoughts around some of your prior commentary in terms of getting towards market growth rates. Could you talk about how you think about those market growth rates, and kind of how you view your progress towards that in 2018 in light of potential gigahertz sales in the back half.
Okay. So we expect to have a modest and gradual further increase in this market in the DSI organic growth rate. As I said earlier we don't expect any jumps or any big steps forward. And yes we're taking into account the plan for one of the 1 gigahertz is to probably make it into revenue in the second half of the year. And so we think by hopefully the way the things are trending with our high growth initiative we hope to get some further extra gradual acceleration in 2019 and beyond.
And so it may well be by 2019 where whatever the market growth rate will be obviously in Q4 it was pretty high. We'll see what it will be overall in 2018 and we hope to reach that in 2019. In 2018 looking what the market growth rates are likely to look like. We're still - we're making very good progress and further modest improvements. And we're probably still at the lower end of market growth rates in 2018. But with continued good margin and EPS expansion and obviously good investment organic and inorganic in our high growth initiatives that will move the needle more and more. So that's the overall plan.
Great thanks. And then so just one more on BEST, if you could give us a sense of pacing throughout the year given that there is a little bit of softer comp in Q1 where we expect that to kind of decelerate as we go out through the year? And then if you can give any color on maybe underlying growth outside of some of the bigger project accelerations that happened in 2017? Thanks very much.
Yes, I don't really have any comment on pacing - quarterly pacing on BEST there is nothing remarkable that I could share with you or that comes to mind. The underlying market for MRI and other markets are steady growth markets we're sort of in we seen an organic decline in 2016 and a significant organic growth in 2017 and maybe low-single digit organic decline in 2018. You kind of have to average that over multiple years and then you end up at low-single digit growth rates typically for that business.
And super imposed you sometimes have these big science projects, which can be bigger in one year versus another. So maybe that helps you a little bit, but it's a little bit confounding because the end markets for the MRI OEM major customers that we have, they're not going up and down so quickly. It's more that we get the second derivative of that so you have a little bit of more fluctuations in the best business, from year-to-year. But you literally almost have to take like a three year average to get a long-term growth market.
And that's a reasonable growth and then we've obviously been gaining in market share there, but more like a low-single digit to mid-single digit long-term growth.
Thanks.
Our next question comes from William March from Janney. Please go ahead with your question.
Hey, guys. How are you? I just got one quick one. Could you talk about what you're seeing in Asia specifically the slowdown in China in 4Q? Is this kind of a new growth rate to expect and then what are you seeing specifically within product segments. I know MALDI had seen a little bit of slowdown prior. So just any updates on what's going on in that end market in any product specifically. Thanks.
Just like Japan, I wouldn't - in China, the growth rate overall for the year has still been good. I have always been cautioning that nothing grows at 15% to 20% forever. So we expect China to slowdown from those very high growth rates a little bit. I wouldn't read much into a quarter that sometimes has to do with our sales cycles and whatever deals closed early in Q1 versus late in Q4. But longer term as we've been saying, we would not expect China to grow at 15% plus for us on an ongoing basis.
So we expect some moderation in our China growth just as Europe has come back and maybe settles now a little bit as the U.S. looks pretty promising. And maybe we'll get a little bit of an improvement in Japan if that become sustainable. So to the MALDI question, yes, MALDI had sort of taken it used to be a premier approach AMICS technique it isn't these days, it is now used for mass spec imaging, it is for microbiology. It has a number of specialty applications like the MALDI PharmaPulse ultra high throughput screening, which are very exciting.
But MALDI has kind of grow nicely actually but it's very different in the applications end markets today than it was five years ago. And so MALDI is healthy, but in a different way than it was five years ago, it's really serving different market niches that it has found where it has very unique capabilities that are not matched by other mass spec technologies.
And with that ladies and gentlemen, we have reached the end of the allotted time for today's question-and-answer session. At this time, I'd like to turn the conference call back over to management for any closing remarks.
Thank you for joining us this evening. During the first quarter, Bruker will participate in the Leerink Healthcare Conference in New York City, Cowen Healthcare Conference in Boston and Barclays Healthcare Conference in Miami. We invite you to meet us at these conferences or visit us at our headquarters in Billerica, Massachusetts. Thank you and have a good evening.
Ladies and gentlemen, that does conclude today's conference call. We do thank you for attending. You may now disconnect your telephone lines.